gme-20230729

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JULY 29, 2023


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NO. 1-32637

GameStop Corp.

(Exact name of registrant as specified in its charter)


Delaware		20-2733559
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

625 Westport Parkway		76051
Grapevine,	Texas
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(817) 424-2000

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A Common Stock

GME

NYSE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of $.001 par value Class A Common Stock outstanding as of August 31, 2023: 305,241,294

TABLE OF CONTENTS



Part I — FINANCIAL INFORMATION
		Page No.
Item 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets — As of July 29, 2023, July 30, 2022 and January 28, 2023	1

	Condensed Consolidated Statements of Operations — For the three and six months ended July 29, 2023 and July 30, 2022	2

	Condensed Consolidated Statements of Comprehensive Loss — For the three and six months ended July 29, 2023 and July 30, 2022	3

	Condensed Consolidated Statements of Cash Flows — For the six months ended July 29, 2023 and July 30, 2022	4

	Condensed Consolidated Statements of Stockholders’ Equity — For the three and six months ended Jul y 29, 2023 and July 30, 2022	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4.	Controls and Procedures	19

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 4.	Mine Safety Disclosures	20

Item 5.	Other Information	20

Item 6.	Exhibits	21

SIGNATURES		22

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GAMESTOP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value per share)

(unaudited)


	July 29, 2023		July 30, 2022		January 28, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	894.7	$	908.9	$	1,139.0
Marketable securities	300.0		—		251.6
Receivables, net of allowance of $2.2, $3.5 and $2.2, respectively	75.6		99.6		153.9
Merchandise inventories, net	676.9		734.8		682.9
Prepaid expenses and other current assets	58.0		275.9		96.3
Total current assets	2,005.2		2,019.2		2,323.7
Property and equipment, net of accumulated depreciation of $983.0, $990.1 and $1,006.8, respectively	119.3		146.8		136.5
Operating lease right-of-use assets	583.0		554.3		560.8
Deferred income taxes	17.6		16.7		18.3
Other noncurrent assets	78.6		62.5		74.1
Total assets	$	2,803.7	$	2,799.5	$	3,113.4

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	378.0	$	217.4	$	531.3
Accrued liabilities and other current liabilities	487.5		512.1		602.3
Current portion of operating lease liabilities	194.9		194.0		194.7
Current portion of long-term debt	11.0		8.9		10.8
Total current liabilities	1,071.4		932.4		1,339.1
Long-term debt	23.6		32.1		28.7
Operating lease liabilities	405.7		367.4		382.4
Other long-term liabilities	35.8		124.1		40.9
Total liabilities	1,536.5		1,456.0		1,791.1
Stockholders’ equity:
Class A common stock — $.001 par value; 1,000 shares authorized; 305.2, 304.0 and 304.6 shares issued and outstanding, respectively	0.1		0.1		0.1
Additional paid-in capital	1,621.1		1,593.4		1,613.6
Accumulated other comprehensive loss	(81.2)		(77.0)		(71.9)
Retained loss	(272.8)		(173.0)		(219.5)
Total stockholders’ equity	1,267.2		1,343.5		1,322.3
Total liabilities and stockholders’ equity	$	2,803.7	$	2,799.5	$	3,113.4

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)


	Three Months Ended				Six Months Ended
	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Net sales	$	1,163.8	$	1,136.0	$	2,400.9	$	2,514.4
Cost of sales	857.9		853.8		1,807.7		1,933.7
Gross profit	305.9		282.2		593.2		580.7
Selling, general and administrative expenses	322.5		387.5		668.2		839.7
Asset impairments	—		2.5		—		2.5

Operating loss	(16.6)		(107.8)		(75.0)		(261.5)
Interest (income) expense, net	(11.6)		(0.3)		(21.3)		0.4
Other income, net	(2.0)		—		(0.1)		—
Loss before income taxes	(3.0)		(107.5)		(53.6)		(261.9)
Income tax (benefit) expense	(0.2)		1.2		(0.3)		4.7
Net loss	$	(2.8)	$	(108.7)	$	(53.3)	$	(266.6)

Net loss per share:
Basic	$	(0.01)	$	(0.36)	$	(0.17)	$	(0.88)
Diluted	(0.01)		(0.36)		(0.17)		(0.88)

Weighted-average shares outstanding:
Basic	304.8		304.2		304.7		304.0
Diluted	304.8		304.2		304.7		304.0

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

(unaudited)


	Three Months Ended				Six Months Ended
	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Net loss	$	(2.8)	$	(108.7)	$	(53.3)	$	(266.6)
Other comprehensive loss:
Foreign currency translation adjustment	1.4		(4.4)		(6.7)		(8.3)
Reclassification of foreign currency gain included in net loss	(1.9)		—		(3.1)		—
Net change in unrealized loss on available-for-sale securities	(0.9)		—		(0.5)		—
Reclassification of realized loss on available-for-sale securities included in net loss	0.1		—		1.0		—
Total comprehensive loss	$	(4.1)	$	(113.1)	$	(62.6)	$	(274.9)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Six Months Ended
	July 29, 2023		July 30, 2022
Cash flows from operating activities:
Net loss	$	(53.3)	$	(266.6)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization	26.3		32.4
Stock-based compensation expense, net	7.6		18.9
Gain on sale of digital assets	—		(6.9)
Digital asset impairments	—		33.7
Asset impairments	—		2.5
Loss on disposal of property and equipment, net	0.6		1.6

Other, net	(2.9)		(5.0)
Changes in operating assets and liabilities:
Receivables, net	79.0		39.3
Merchandise inventories, net	0.4		169.6
Prepaid expenses and other assets	4.0		(27.4)
Prepaid income taxes and income taxes payable	(1.3)		0.9
Accounts payable and accrued liabilities	(267.4)		(384.0)
Operating lease right-of-use assets and lease liabilities	(3.4)		(15.8)
Changes in other long-term liabilities	(1.4)		(0.5)
Net cash flows used in operating activities	(211.8)		(407.3)
Cash flows from investing activities:
Proceeds from sale of digital assets	2.8		77.3
Purchases of marketable securities	(313.0)		—
Proceeds from maturities and sales of marketable securities	270.5		—
Capital expenditures	(19.2)		(31.3)

Net cash flows (used in) provided by investing activities	(58.9)		46.0
Cash flows from financing activities:
Settlement of stock-based awards	(0.1)		(3.0)
Repayments of debt	(5.4)		—

Net cash flows used in financing activities	(5.5)		(3.0)
Exchange rate effect on cash, cash equivalents and restricted cash	(4.6)		1.4
Decrease in cash, cash equivalents and restricted cash	(280.8)		(362.9)
Cash, cash equivalents and restricted cash at beginning of period	1,196.0		1,319.9
Cash, cash equivalents and restricted cash at end of period	$	915.2	$	957.0

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except for per share data)

(unaudited)


	Class A Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Loss		Total Stockholders' Equity
	Shares	Amount
Balance at January 28, 2023	304.6	$	0.1	$	1,613.6	$	(71.9)	$	(219.5)	$	1,322.3
Net loss	—	—		—		—		(50.5)		(50.5)
Foreign currency translation	—	—		—		(8.1)		—		(8.1)
Reclassification of foreign currency gain included in net loss	—	—		—		(1.2)		—		(1.2)
Stock-based compensation expense, net	—	—		7.9		—		—		7.9
Settlement of stock-based awards	0.1	—		(0.1)		—		—		(0.1)
Net change in unrealized gain on available-for-sale securities	—	—		—		0.4		—		0.4
Reclassification of realized loss on available-for-sale securities included in net loss	—	—		—		0.9		—		0.9
Balance at April 29, 2023	304.7	0.1		1,621.4		(79.9)		(270.0)		1,271.6
Net loss	—	—		—		—		(2.8)		(2.8)
Foreign currency translation	—	—		—		1.4		—		1.4
Reclassification of foreign currency gain included in net loss	—	—		—		(1.9)		—		(1.9)
Stock-based compensation expense, net	—	—		(0.3)		—		—		(0.3)
Settlement of stock-based awards	0.5	—		—		—		—		—
Net change in unrealized loss on available-for-sale securities	—	—		—		(0.9)		—		(0.9)
Reclassification of realized loss on available-for-sale securities included in net loss	—	—		—		0.1		—		0.1
Balance at July 29, 2023	305.2	$	0.1	$	1,621.1	$	(81.2)	$	(272.8)	$	1,267.2


	Class A Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Loss		Total Stockholders' Equity
	Shares	Amount
Balance at January 29, 2022	303.6	$	0.1	$	1,577.5	$	(68.7)	$	93.6	$	1,602.5
Net loss	—	—		—		—		(157.9)		(157.9)
Foreign currency translation	—	—		—		(3.9)		—		(3.9)
Stock-based compensation expense, net	—	—		11.1		—		—		11.1
Settlement of stock-based awards	—	—		(1.1)		—		—		(1.1)
Balance at April 30, 2022	303.6	0.1		1,587.5		(72.6)		(64.3)		1,450.7
Net loss	—	—		—		—		(108.7)		(108.7)
Foreign currency translation	—	—		—		(4.4)		—		(4.4)
Stock-based compensation expense, net	—	—		7.8		—		—		7.8
Settlement of stock-based awards	0.4	—		(1.9)		—		—		(1.9)
Balance at July 30, 2022	304.0	$	0.1	$	1,593.4	$	(77.0)	$	(173.0)	$	1,343.5

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in millions, except per share amounts)

(unaudited)

1. General Information

The Company

GameStop Corp. ("GameStop," "we," "us," "our," or the "Company"), a Delaware corporation established in 1996, is a leading specialty retailer offering games and entertainment products through its thousands of stores and ecommerce platforms.

We operate our business in four geographic segments: United States, Canada, Australia and Europe. The information contained in these condensed consolidated financial statements refers to continuing operations unless otherwise noted.

Basis of Presentation and Consolidation

The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements included herein reflect all adjustments (consisting only of normal, recurring adjustments) which are, in our opinion, necessary for a fair presentation of the information for the periods presented. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they exclude certain disclosures required under GAAP for complete consolidated financial statements.

The accompanying condensed consolidated financial statements and notes are unaudited. The condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the 52 weeks ended January 28, 2023 ("fiscal 2022"), as filed with the Securities and Exchange Commission ("SEC") on March 28, 2023 (the “2022 Annual Report on Form 10-K”). Due to the seasonal nature of our business, our results of operations for the six months ended July 29, 2023 are not indicative of our future results for the 53 weeks ending February 3, 2024 ("fiscal 2023"). Our fiscal year is composed of the 52 or 53 weeks ending on the Saturday closest to the last day of January. Fiscal 2023 consists of 53 weeks ending on February 3, 2024. Fiscal 2022 consisted of 52 weeks ended on January 28, 2023. All six month periods presented herein contain 26 weeks. All references to years, quarters and months relate to fiscal periods rather than calendar periods. Our business, like that of many retailers, is seasonal, with the major portion of the net sales realized during the fourth quarter, which includes the holiday selling season.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying footnotes. We regularly evaluate the estimates related to our assets and liabilities, contingent assets and liabilities, and the reported amounts of revenues and expenses. In preparing these condensed consolidated financial statements, we have made our best estimates and judgments of certain amounts recognized in the condensed consolidated financial statements, giving due consideration to materiality. Changes in the estimates and assumptions that we have used could have a significant impact on our financial results. Actual results could differ from those estimates.

Table of Contents

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in millions, except per share amounts)

(unaudited)

2. Summary of Significant Accounting Policies

Included below are certain updates related to policies included in Part II, Item 8 "Notes to Consolidated Financial Statements", Note 2, Summary of Significant Accounting Policies," in the 2022 Annual Report on Form 10-K.

Cash and Cash Equivalents and Restricted Cash

Our cash and cash equivalents are carried at fair value and consist primarily of cash, money market funds, cash deposits with commercial banks, and highly rated direct short-term instruments that mature in 90 days or less. Such investments with an original maturity of 90 days or less are classified as cash and cash equivalents on our Condensed Consolidated Balance Sheets. Restricted cash consists primarily of bank deposits that collateralize our obligations to vendors and landlords.

The following table presents a reconciliation of cash, cash equivalents and restricted cash in our Condensed Consolidated Balance Sheets to total cash, cash equivalents and restricted cash in our Condensed Consolidated Statements of Cash Flows:


	July 29, 2023		July 30, 2022		January 28, 2023
Cash and cash equivalents	$	894.7	$	908.9	$	1,139.0
Restricted cash(1)	5.1		33.1		41.3
Long-term restricted cash(2)	15.4		15.0		15.7
Total cash, cash equivalents and restricted cash	$	915.2	$	957.0	$	1,196.0

_________________________________________________

(1) Recognized in prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets.

(2) Recognized in other noncurrent assets on our Condensed Consolidated Balance Sheets.

Investments

We generally invest our excess cash in investment grade short-term fixed income securities, which consist of U.S. government and agency securities and time deposits. Such investments with an original maturity in excess of 90 days and less than one year are classified as marketable securities on our Condensed Consolidated Balance Sheets.

Our investments are classified as available-for-sale debt securities and reported at fair value. Unrealized holding gains and losses are recognized in accumulated other comprehensive loss on our Condensed Consolidated Balance Sheets. Realized gains and losses upon sale or extinguishment are reported in other (income) expense, net in our Condensed Consolidated Statements of Operations. Each reporting period, we evaluate whether declines in fair value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs.

Digital Assets

We account for digital assets in accordance with ASC 350, Intangibles-Goodwill and Other (Topic 350). Our digital assets are indefinite-lived intangible assets which are initially recorded at cost. Accordingly, if the fair market value at any point during the reporting period is lower than the carrying value, an impairment loss equal to the difference will be recognized in SG&A expenses in our Condensed Consolidated Statement of Operations. Impairment losses cannot be recovered for any subsequent increase in fair value until the sale or disposal of the asset. Gains on the sale of digital assets, if any, will be recognized based on the fair value upon sale or disposal of the assets in SG&A expenses in our Condensed Consolidated Statement of Operations.

In January 2022, we entered into contractual agreements with Immutable X Pty Limited (“IMX”) and Digital Worlds NFTs Ltd. pursuant to which the Company was entitled to receive up to $150 million in digital assets in the form of IMX tokens once certain contractual milestones had been achieved. Upon announcement, we achieved our first milestone under the agreement with IMX and recognized a $79.0 million noncurrent receivable and corresponding deferred income liability related to our entitlement to IMX tokens as of January 29, 2022. During fiscal 2022, we achieved our second and third milestones under our agreement with IMX, and recognized an additional $33.8 million of deferred income liability on our Condensed Consolidated Balance Sheets. The deferred income is recognized over the term of the contractual agreement. We liquidated all tokens received under our agreements with IMX in fiscal 2022 and have no IMX token assets recorded on the Condensed Consolidated Balance Sheets as of July 29, 2023. During the three months ended July 30, 2022, we recognized $13.9 million of income in SG&A expenses in our Condensed Consolidated Statements of Operations. During the six months ended July 30, 2022, we recognized a loss of $7.2 million on the noncurrent receivable, an impairment of $33.7 million on the digital assets, a gain of $6.9 million on the sale of digital assets, and deferred income of $27.8 million in SG&A expenses in our Condensed Consolidated Statements of Operations. During the three and six months ended July 29, 2023, we recognized deferred income of $14.3 million and $28.6 million, respectively, in SG&A expenses in our Condensed Consolidated Statements of Operations. As of July 29, 2023, the remaining deferred income liability related to our agreements with IMX was $28.7 million in accrued liabilities and other current liabilities on our Condensed Consolidated Balance Sheets.

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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in millions, except per share amounts)

(unaudited)

During 2022, we also launched beta versions of a non-custodial digital asset wallet and a peer-to-peer non-fungible token ("NFT") marketplace that enables the purchases, sales, and trades of NFTs. Revenues earned related to our NFT digital asset wallet and marketplace are recognized in net sales in our Condensed Consolidated Statement of Operations. Revenues earned from our digital asset wallet and NFT marketplace were not material to the condensed consolidated financial statements for the three and six months ended July 29, 2023.

Assets Held-for-Sale

During the fourth quarter of fiscal 2022, we committed to a plan to sell property in our Europe segment consisting of a warehouse building, land and other property and equipment with a total net carrying value of $7.1 million as of July 29, 2023. In April 2023, the Company entered into an agreement to sell the warehouse building and land for approximately $13.1 million. The transaction closed in August 2023.

During the first half of fiscal 2023, we committed to a plan to sell additional properties in our Europe segment consisting of buildings and land with a total net carrying value of $9.6 million. There were no impairment charges recognized on these asset groups as the estimated fair value exceeded their respective carrying values.

The building, land and other property and equipment are classified as assets held for sale in other noncurrent assets on our Condensed Consolidated Balance Sheets as of July 29, 2023.

3. Revenue

The following table presents net sales by significant product category:


	Three Months Ended				Six Months Ended
	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Hardware and accessories (1)	$	597.0	$	596.4	$	1,322.8	$	1,270.1
Software (2)	397.0		316.4		735.4		800.1
Collectibles	169.8		223.2		342.7		444.2
Total net sales	$	1,163.8	$	1,136.0	$	2,400.9	$	2,514.4

__________________________________________________

(1) Includes sales of new and pre-owned hardware, accessories, hardware bundles in which hardware and digital or physical software are sold together in a single SKU, interactive game figures, strategy guides, mobile and consumer electronics.

(2) Includes sales of new and pre-owned gaming software, digital software, and PC entertainment software.

See Note 8, "Segment Information," for net sales by geographic location.

Performance Obligations

We have arrangements with customers where our performance obligations are satisfied over time, which primarily relate to extended warranties and our GameStop ProTM rewards program, formerly known as PowerUp Rewards®. Our GameStop ProTM rewards program includes a subscription to Game Informer® magazine.

We expect to recognize revenue in future periods for remaining performance obligations we have associated with unredeemed gift cards, trade-in credits, reservation deposits and loyalty points earned as part of our GameStop ProTM rewards program (collectively, "unredeemed customer liabilities"), extended warranties, and subscriptions to our Game Informer® magazine.

Performance obligations associated with unredeemed customer liabilities are primarily satisfied at the time customers redeem gift cards, trade-in credits, customer deposits or loyalty program points for products that we offer. Unredeemed customer liabilities are generally redeemed within one year of issuance.

We offer extended warranties on certain new and pre-owned products with terms generally ranging from 12 to 24 months, depending on the product. Revenues for extended warranties sold are recognized on a straight-line basis over the life of the contract.

Revenues for subscriptions to Game Informer® magazine, included in our GameStop ProTM rewards program, are recognized on a straight-line basis over a 12-month subscription term.

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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in millions, except per share amounts)

(unaudited)

The following table presents our performance obligations recognized in accrued liabilities and other current liabilities on our Condensed Consolidated Statements of Operations:


	July 29, 2023		July 30, 2022
Unredeemed customer liabilities	$	163.4	$	199.7
Extended warranties	82.8		82.2
Subscriptions	40.5		41.2
Total performance obligations	$	286.7	$	323.1

Significant Judgments and Estimates

We accrue loyalty points related to our GameStop ProTM rewards program at the estimated retail price per point, net of estimated breakage, which can be redeemed by loyalty program members for products we offer. The estimated retail price per point is based on the actual historical retail prices of products purchased through the redemption of loyalty points. We estimate breakage of loyalty points and unredeemed gift cards based on historical redemption rates.

Contract Balances

Our contract liabilities primarily consist of unredeemed customer liabilities and deferred revenues associated with gift cards, extended warranties and subscriptions to Game Informer® magazine included as part of our GameStop ProTM rewards program.

The following table presents a rollforward of our contract liabilities:


	July 29, 2023		July 30, 2022
Contract liability beginning balance	$	338.2	$	378.3
Increase to contract liabilities (1)	320.1		361.3
Decrease to contract liabilities (2)	(371.0)		(414.0)
Other adjustments (3)	(0.6)		(2.5)
Contract liability ending balance	$	286.7	$	323.1

__________________________________________________

(1) Includes issuances of gift cards, trade-in credits and loyalty points, new reservation deposits, new subscriptions to Game Informer® and extended warranties sold.

(2) Includes redemptions of gift cards, trade-in credits, loyalty points and customer deposits and revenues recognized for Game Informer® and extended warranties. During the six months ended July 29, 2023 and July 30, 2022, there were $25.5 million and $37.4 million of gift cards redeemed that were outstanding as of January 28, 2023 and January 29, 2022, respectively.

(3) Primarily includes foreign currency translation adjustments.

4. Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Applicable accounting standards require disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Each fair value measurement is reported in one of the following three levels:

•Level 1 inputs are quoted prices in active markets for identical assets or liabilities.

•Level 2 inputs are observable inputs other than quoted prices included in Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs.

•Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market participants.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

Assets and liabilities that are measured at fair value on a recurring basis include our cash equivalents, marketable securities, foreign currency contracts, company-owned life insurance policies with a cash surrender value, and certain nonqualified deferred compensation liabilities.

We measure the fair value of cash equivalents and certain marketable securities based on quoted prices in active markets for identical assets. Other marketable securities were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in millions, except per share amounts)

(unaudited)

In August 2022, the Company opened investment portfolios consisting of U.S. government treasury notes and bills. These investments are classified as available-for-sale debt securities and reported at fair value on a recurring basis and utilize Level 1 inputs for measurement. Additionally, in the second quarter of fiscal 2023 the Company invested in time deposits, which are reported at fair value utilizing Level 1 inputs for measurement.

As of July 29, 2023, the investment portfolios aggregate balance was $301.0 million, of which $300.0 million are recognized in marketable securities and $1.0 million are recognized in cash and cash equivalents on our Condensed Consolidated Balance Sheets.

During the three and six months ended July 29, 2023, we realized a $0.1 million and $1.0 million loss on sales of U.S. government securities, which is included within other expense, net in our Condensed Consolidated Statements of Operations.

We measure the fair value of our foreign currency contracts, life insurance policies with cash surrender values and certain nonqualified deferred compensation liabilities based on Level 2 inputs using quotations provided by major market news services, such as Bloomberg, and industry-standard models that consider various assumptions, including quoted forward prices, time value, volatility factors, and contractual prices for the underlying instruments, and other relevant economic measures, all of which are observable in active markets. When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.

The following tables present our assets and liabilities measured at fair value on a recurring basis:


	July 29, 2023
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
Assets
Level 1:
U.S. government securities(1)	$	258.5	$	—	$	(0.4)	-0.4	$	258.1
Time deposits(2)	42.9		—		—			42.9
Level 2:
Company-owned life insurance(3)	0.4		—		—			0.4
Total assets	$	301.8	$	—	$	(0.4)		$	301.4
Liabilities
Level 2:
Foreign currency contracts(4)	$	6.4	$	—	$	—		$	6.4
Nonqualified deferred compensation(4)	0.4		—		—			0.4
Total liabilities	$	6.8	$	—	$	—		$	6.8

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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in millions, except per share amounts)

(unaudited)


	July 30, 2022
	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value
Assets


Level 2:
Foreign currency contracts(5)	$	1.7	$	—	$	—	$	1.7
Company-owned life insurance(3)	0.5		—		—		0.5
Total assets	$	2.2	$	—	$	—	$	2.2
Liabilities
Level 2:

Nonqualified deferred compensation(4)	0.5		—		—		0.5
Total liabilities	$	0.5	$	—	$	—	$	0.5


	January 28, 2023
	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value
Assets
Level 1:
U.S. government securities(1)	$	253.5	$	—	$	(0.9)	$	252.6
Level 2:

Company-owned life insurance(3)	0.5		—		—		0.5
Total assets	$	254.0	$	—	$	(0.9)	$	253.1
Liabilities
Level 2:
Foreign currency contracts(4)	$	5.9	$	—	$	—	$	5.9
Nonqualified deferred compensation(4)	0.4		—		—		0.4
Total liabilities	$	6.3	$	—	$	—	$	6.3

_________________________________________________

(1) Recognized in cash and cash equivalents and marketable securities on our Condensed Consolidated Balance Sheets.

(2) Recognized in marketable securities on our Condensed Consolidated Balance Sheets.

(3) Recognized in accrued liabilities and other current liabilities on our Condensed Consolidated Balance Sheets.

(4) Recognized in other noncurrent assets on our Condensed Consolidated Balance Sheets.

(5) Recognized in prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets.

Assets that are Measured at Fair Value on a Nonrecurring Basis

Assets that are measured at fair value on a nonrecurring basis relate primarily to property and equipment, operating lease right-of-use ("ROU") assets and other intangible assets, including digital assets, which are remeasured when the estimated fair value is below its carrying value. When we determine that impairment has occurred, the carrying value of the asset is reduced to its fair value. Fair value of digital assets held are based on Level 1 inputs, as described above, and impairment losses for digital assets cannot be recovered for any subsequent increase in fair value until the sale or disposal of the asset.

As of July 29, 2023, our government-guaranteed low interest French term loans due October 2022 through October 2026 ("French Term Loans") had a carrying value of $34.6 million and a fair value of $29.4 million. The fair values of our French Term Loans were estimated based on a model that discounted future principal and interest payments at interest rates available to us at the end of the period for similar debt of the same maturity, which is a Level 2 input as defined by the fair value hierarchy.

During the six months ended July 30, 2022, we recognized impairment charges of $

SEC Form 10-Q filed by GameStop Corporation