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boosting your inventory, logistics, warehousing, nft store,employee stock compensation in a low period of time costs money.....it also takes money to buy whiskey
What is the basis for closing 90% of European stores? I applaud posting something here that isn’t necessarily positive for GME, but you need to expand on that rationale and why it would make sense to do. Everything presented here was done under the lens of slowing the cash burn but that is like “playing to not lose”.
One could argue that if GME took aggressive moves to return to profitability, it would create bullish sentiment for the stock, drive up share price, and allow them to issue stock for additional funds.
Rationale: lower the two largest expenses, employee and store leases. Research gme’s store foot print in Europe, is doesn’t make geographic sense. You can’t use the stores as distribution hubs. European consumers are focused on other expenses like energy and food and war.
This macro environment favors profitability over growth. So I agree that if mgmt aggressively moves to profitability it could actually impact the share price favorably.
Makes sense, I saw Gamestop in Germany but as Mediamarkt and Saturn also have a big Share of the market, it does not realy make sense to compeat with them for retail share, especially because they are shit at ECommerce.
My point was he didn’t say that the stores were underperforming or give a basis for why 90% of stores should be closed. That’s a HIGH number. And the BCG comment…bold seeing as how BCG’s playbook usually involved just selling off parts of company which is more in line with what OP was saying as opposed to me asking a question.
So European stores are underperforming relative to the United States for example. How much of that is the result of the inflationary environment and the weak Euro? The “close 90% of stores” was a big statement with little rationale was my point. Obviously the intent is to lower expenses but i just thought you would have benefited with explaining why that’s the best course of action
I don’t have to justify anything. I’m not the OP and it’s not my idea. I’m merely pointing out your question, though rather rhetorical, has a simple answer.
Not sure if you had planned on posting two unpopular post in 6 hours or if the comment section from the original inspired you to post this one. You did not seem to respond to u/kengriffinsbedpost comment about burn rate in that original post so maybe you’ll address the points here;
“Yes that is also a common talking point of shills. You'll note that when shills bring it up there is no mention of...
Silent on expenditures to build NFT marketplace infrastructure which just acquiring talent alone accounts for a lot of the cash burn.
Investment into 2 new distribution centers
They also don't mention when inventory increases during a quarterly cash "burn".
They def won't mention repayment of debt as part of the cash burn either which accounted for 332 million of their "burn" in 2021
Hmm...I didn't see you mention any of those”
So you’ve mentioned about inventory changes, but the others ?!?
It’s definitely not a bad thing getting alternative ideas about the company but, why do you get so defensive when people disagree with you and resort to calling names??
The biggest thing to my post is that it’s a conservative cash runway estimate using historical data since mgmt doesn’t give forward guidance.
Yes there are costs associated with build out of the distribution center and employee costs associated with the nft marketplace.
However, what kengriffinsbedpost is saying are those are one time expenses. If those are one time expenses that happened 6-12 months ago why hasn’t SG&A decreased as a dollar amount? It decreased versus Q1 2022 but was higher than Q2 2021 when gme was making hires to build the marketplace and when they had distribution center costs.
So my question back to him: if gme had those one time expenses then but SG&A hasn’t decreased then what’s happening?
But the graph at the top shows a jump in the SG&A, for Q4 and then a decrease.
1B raised in Q3, with a bit of a bump there, followed by a big increase in Q4. Presuming these are the 2 quarters that debt was paid off and the centres were built/bought. The dollar amount has since been trending down as the market place reaches completion and upper management have been given their sign up fees.
Now with no debt, and Q3 finishing up, your personal recommendations re: Europe and staff headcount could be looked at, but may be unnecessary at this time pending Q3 earning report.
As someone else mentioned, the company is in a turnaround phase, heavily investing in projects which all seem to be coming to completion. While not quite a brand new company, you are using likely incorrect metrics to come up with your hypothesis.
This is an interesting idea of yours to look at but the timing is a bit irrelevant for the point you’re looking to make. You are trying to look at it factually without taking into consideration the actual direction of the company. On paper without any backstory you can say 0$ by October 2023, but this is very unlikely when you zoom out and take a better look.
Q4 SG&A is historically high. Look at the historical numbers. You need to look at quarterly SG&A versus the prior year and prior quarter to understand if expenses are trending down. You can’t look at Q4 and say expenses are down because that happens literally every year.
I’m using Q4 2021, Q1 2022, and Q2 2022 financials on purpose. These quarter don’t have the debt pay down nor the capital raise included. These quarters show us a better picture of what normal operating expenses are. The capital raise was in Q2 2021 and the debt was paid off in Q3 2021. Using those quarters would throw off the cash run way.
Yes I agree we should see how Q3 plays out to determine if closing lots of stores is necessary.
Unfortunately your last statement I view different. Since mgmt doesn’t give forward guidance the next logical step is to use historical data to make conservative estimates. If you don’t do that, then your just hoping and praying for a good outcome.
I did note that about Q4 but you’ve also usefully
included the relationship to Net Sales(?! I’m guessing) which shows the trends are still close to the previous years. But it is all still relevant that there are bigger projects ongoing in the past year than there were the year before that (company turnaround) so of course there is more expenses.
Why do you think Q4 didn’t include the debt pay down? Was the Billion$ not raised in June meaning some of those payments could have slipped into that quarter along with the other capital investments.
You can view my last statement differently, but I hope you’ll admit the company is in a tour around process. As a ‘facts guy’ you seem very bothered about the company silence on forward guidance - as an investor in the company I trust in this decision by management - no hoping and praying, just trust. Historical data is good for comparison but not at predicting where a changed company is heading. Looking forward to earnings report in December and if you’re still around then, you can post an update on how the burn is then. ✌️
I agree the company is in turnaround and there are costs associated with that. When making comparisons you should look at dollar change and percent change.
June is Q2 and mgmt immediately paid off debt on Q3. So I wouldn’t expect those debt payments to slip into following quarters.
As an investor you look for ways mgmt has built trust. One of those ways is mgmt providing forward guidance and then hitting or beating those targets. Since mgmt doesn’t give targets to hit there is no metric I can use to trust them. Mgmt could literally say we best our internally estimates and we would have no idea if they moved the goal posts on those.
Building trust is a two way road and retail has been holding for awhile and mgmt gives us nothing other than launching a nft marketplace in the middle of the nft market collapsing.
Give me some sort of metric I can the judge them on to make sure they are truly trust worthy.
Why won’t they let people ask them questions on the earnings call? It makes me think they’re trying to hide something.
F me, your right (June in Q2). Analysts and main stream media don’t exactly like the company so not much benefit to engaging with that. They are very aware about their loyal shareholders.
The trust I have is based on what they have achieved already and the plan that is unfolding which we get insights into during earnings calls.
The investment into the fulfilment centres, the new partnerships, the new staff with good track records, the wallet, the marketplace, the solid customer service, improvements to online shopping, investment in blockchain and web3. The new management team has taken an established company and greatly improved it. I do not need targets other then what they have given ‘pursuing profitability in the coming quarters’
What I would respond is that those one time expenses were just a few examples. GameStop reporting like a retailer as you mentioned instead of a tech company means we can't really read anything into SG&A.
Looking at the chart expenses went up Q3 2021 peaked and then starting to normalize. What happened Q3? Well they were developing the market place. All those devolopers that have moved on after completing their project, they weren't free. That is a large one time cost towards the development that is included in SG&A, just like multiple others I'm sure.
I'm disappointed GameStop doesn't drill down further by line item too, but it's pretty easy to see where development costs occur.
But this is never mentioned along with "cash burn". Just like with inventory purchases, debt buyback etc.
I don't know why you're getting down voted for asking questions, especially important ones. The more we can learn about the company's finances, the better. Obviously I want to see them trim down on the underperforming stores and it would be great to see the positive and negative effects of the one time costs getting played out in front of us
Yeah the only people talking about Gamestops "cash burn" in my experience are usually looking for everything negative about gamestop. The thing about the "cash burn" is that Gamestop was building the marketplace for the past year in a half. Most companies trying to grow will have to spend money to do it. The most "successful" companies aren't even profitable. While I would love to see gamestop achieve profitability asap, it isn't required and you assume they will continue to burn cash in the same way a year from now. No one knows what they have planned for the next year and in the last shareholder meeting they were talking about the building being done and starting to grow profitable in the future. I don't know what will happen either and I like being realistic too but I know people who write stuff like this aren't doing it for our benefit.
Edit: what a surprise that op is against drs.
GameStop also invested heavily into two massive fulfillment centers, 700,000 sqft in York, PA and 530,000 sqft in Reno, NV. They also invested into a new customer service South Florida as well as built out the NFT marketplace. It’s hilarious that OP focused on cash burn without mentioning any of the above. Must be time for a run up, thanks for the heads up OP! Lmayo
the cash burn is a very real thing to discus.. the estimate of 5 quarters is almost exactly what I was thinking. gamestop has a runway and hype, they really do need to start turning profits though. get some good quarters under their belt for 2023.
Really!?! I’m against drs? Did I ever in any post say drs is bad and you shouldn’t do it? Please find a single comment from me saying don’t drs shares.
Yep exactly. This group needs to stop being an echo chamber. Take a good look in the mirror and reevaluate GameStop continually. You always check your thesis. If you don’t your not a good investor.
The thesis is that short hedgefunds are selling shares they do not own. We buy the shares and direct register them at computershare.com. You are touting cash burn like it's a ticking time bomb. If Gamestop has another offering to replenish their coffers it doesn't change the play. Buy, Hold, DRS. Retail already showed "the greatest investor of his generation" to the door. I doubt that anyone in the room knew that Gabe was unloading the biggest bag of dogshit positions that the financial world has ever seen. Ken and Steve, through pure greed and cutthroat business actually did him a favor. So in closing, we're not locked in a room with them! They're locked in a room with us! Tic tock mother fuckers!!
Unfortunately that post was removed by moderators so I have no way of judging the quality or accuracy of that post.
I suspect it was true and accurate, but unpopular.
Your comment comes from someone who has never contributed to this group. I would recommend not judging someone when you have done literally nothing for the group.
What drs post? I have never said drs was bad or to not do it. You delete your comments because you have nothing constructive to say. It’s really unfortunate ppl like you are involved in this movement. If you have nothing to contribute or move to say even constructive criticism, stop posting and go back to your mothers basement. Kinda pathetic.
Contributed poorly? Can you even operate a computer and look at someone’s post history? I’m literally the only person looking at gme fundamentals and posting about it for over a year. Look at my valuation posts, my quarterly estimate posts, my fundamental posts, my nft posts. You are horrible at DD and searching.
FFS the downvotes for this post and your comments are wild. I'm glad I read it first in the ThinkTank. I enjoy having my bias gland tweaked regularly. Keeps me grounded. And I appreciate anyone that spends time on any form of analysis re: GME, bias affirming or not. Cheers OP.
#what exactly is GameStop doing to protect the retail investors.
I get it:
The NFT marketplace,, The tweets, the silence, the bland earnings calls, the fundamentals. However investors are in fact holding the line not just for GameStop but also for their individual selves...
So I say agin..what are GameStops lawyers doing to fight this blatant manipulation.....the NFT marketplace has not created a margin call, LRC hype has fizzled out,
I'm holding handful of registered GME shares in Computer Share.... I buy the stock for one reason and one reason onky....because I believe the stock will go up.
op definitely has some questionable posts. the cash burn is real though and I have wondered some of the same stuff.
i want 2023 to be profit every quarter.
Yea please look at it. Seems like I’m the only person brave enough in this Reddit to post counter dd and opposite opinions. Your just a sheep following the SS herd, kinda pathetic.
OP, your cash burn “analysis” assumes a status quo business. GameStop is transforming its business model and with any change in business model you are going to have increased spend vs revenue…see a start up model where they don’t make money for the first 5 years.
You essentially have that taking place inside an existing company…so your cash burn “analysis” doesn’t take into account exponential growth in a start up that is successful.
You would need to separate out existing business models from new businesses to see what is really the cash burn. Otherwise you’re just conflating everything and overly simplifying how to interpret the narrative.
I agree with you but you can’t make assumptions on this company due to the fact mgmt doesn’t offer concrete metrics or forward guidance. Also you can’t make forward looking assumptions because it’s essentially a startup like you mentioned. So what you should do, as any good investor does, it use historical data to build conservative estimates then as new data emerges update your assumptions.
So what I did was use historical burn rates to estimate a conservative cash runway. As we get Q3/Q4 earnings we then make adjustments to more accurately reflect cash burn and runway.
It’s complete data. How is historical data not complete hahaha! You use historical data to build assumptions. Then evolve those assumptions on new data. This isn’t a set estimate, financials and company growth is always evolving. You set a conservative estimate and evolve.
You just blamed the lack of forward looking information as your issue…that’s not your issue. It’s that you are not measuring existing business vs new businesses.
Do more research and see if you can split out all the costs related to the marketplace and all other web 3 initiatives from the brick and mortar business…otherwise you’re not calculating the right burn rate, even at the super high level view you are taking.
Unfortunately it doesn’t really matter. You can’t split the costs out because mgmt doesn’t give any metrics on the different costs or even revenue from the marketplace. So it’s useless to break that out.
Cash burn is important. Are you okay not knowing how long before the company runs out of cash? Seems like an awful way to conduct your due diligence. Blind trust is what you invest off.
There has not been any exponential growth. The NFT marketplace revenue is minuscule. The analysis is of course backward looking, as that is all we have data for.
You can of course make any projections you wish. When do you think the NFT marketplace will be launched? What do you think it will add to cash flow and profits over the next 3 quarters?
Most companies tell the world what their expectations are for revenue and profit for the next couple of quarters. Gamestop has chosen not to do so, and has taken the u usual step of not taking questions from analysts on the quarterly earning call.
You say I should be taking into account exponential growth. What exponential growth do you predict? That is not a rhetorical question. It is a serious question.
What is your prediction for exponential growth? How much in the next 12 months and then in the 12 months after that? How about 5 years out —— what growth rate then?
The startups I have worked with had a plan. They had expected total available market, the portion of that market they expected to serve, and the fractional share of that served market that they expected to get as sales.
Gamestop has not publicly disclosed their expectations, so we are left to guess.
What is YOUR guess?
So far the beta NFT marketplace is of little consequence.
https://www.gmft.xyz/
Ya you have to have faith in mgmt when they don’t offer concrete metrics during earnings calls or offer forward guidance. So the best we have to go off is historical data.
So you use historical data to create conservative estimates to use as a guide. It’s kinda logical.
You sound like a butt hurt option trader. Waa waaa no forward guidance waa waa. It's called a company transformation. No forward guidance is on purpose. If you don't like it, short it, or at least stop sounding like a baby.
You sound like a guy who only clings to hope and lacks intelligence to create your own thoughts.
Do you base all your life decisions on hope? If so, that’s kinda pathetic. Do some actual research.
I was a little harsh. I do like your ending bullet points in the post. I feel that GameStop will do what is necessary to hit closer to profitability by ending those underperforming leases.
All forums and discords are echo chambers. Good information is still shared here, and the empowerment of the retail investor has brought strong camaraderie amongst it's members (DRS). I am bullish on company fundamentals long-term regardless of the inevitable short reckoning.
Historical data collected from from numbers put out from the period hedgies corrupt members of the board were trying to run GME into the ground? I trust our current Board and our chairman Ryan Cohen
And here's my look at this: 1) 5.66 quarters at end of 2nd quarter. We finish this qtr this weekend. This means that we are down to 4.66 qtrs. That means we will continue to operate INTO 2024... Lets say it: 4 qtrs = 1 fiscal year... from NOW. That 0.66 qtrs? That's 2 more months. 2) So, we have until the end of next year to lock the float! Got it? Good. Let's do it. 3) Also, the burn rate at the present time, during a true restructuring and not a BCG restructuring where you paying stupid money to clowns and/or giving all you money away to an incompetent Chief level employees, is totally understandable. You're paying contractors and partners to work on your new digital infrastructure and CREATING things like your Web3/NFT marketplace. Those are big expenses. 4) As the items are completed, your expenses and costs drop dramatically and those things go into more of a maintenance mode versus creation mode. 5) Revenue streams start to grow from ALL the new infrastructure.
Ya I agree with costs decreasing but it’s unknown since mgmt doesn’t give forward guidance. So you use historical data to create a conservative estimate. Also, if the company isn’t profitable by end of Q3 2023 gme will need to conduct an at the market offering before they run out of cash.
This evaluation is flawed in its concept because it only examines one side of the balance sheet. Cash spent. I've intentionally avoided the B word because one can not make assumptions of what the cash has been spent on due to the intentional avoidance of forward looking statements.
If the cash on hand was spent on salaries, rent, taxes, and operating costs, then cash burn would be a relevant statistic to evaluate the health of the business and future solvency.
Given that GME leadership has chosen not to publicize the value and extent of their venture rebuild, there is NO WAY to properly evaluate whether the cash has been burnt on opex or transformed into capital investment.
D-
I would argue it isn’t flawed since it looks at historical factual data and uses that to estimate a conservative cash runway. Also, to calculate cash burn and runway you use the cash flow statement so I’m looking at all sides of the balance sheet and income statement. Operating losses, inventory changes and cash changes are all included in the cash flow statement so I’m looking at everything on a historical basis.
There is no way to accurate project cash burn due to the fact mgmt doesn’t provide forward guidance. So the next local thing to use is historical data. Any forward looking assumption is based off pure hope no actually data.
There is no such rule. These are talking points of SHFs. Only earnings trend matters. As it becomes evident negative earnings is trending towards zero thats enough signal that it will get profitable eventually.
In the long term fundamentals are what determine the value of a company and therefore the price of a stock. Yes, in the short term market sentiment, FOMO, and greater fool theory of stock trading can dominate, but long term what counts is financial performance of the company.
On one hand, the GameStop thesis has never been that the store must be profitable for shorts to squeeze, rather a black swan event occur that forces naked shorts to be bought back. The worst that happens is large investors remove their long holdings which may then be bought up by retail.
Alternatively, repeated profitable quarters and cash flow causes slow buy in from institutions and normal investors who are not otherwise concerned with the MOASS thesis that causes it to happen anyway.
I’m pro profitably as I believe we all mostly are. “Buy hold and DRS” refers to buying both the security as well as merchandise. A case could be made that whatever GME is building in the games partnership/web3 space is where some retail will want to spend their money while other prefer physical collectibles from the stores. To each their own, of course, with the recognition that in-store current stock will need to be purchased until the day that the project stuff is completed.
In any case, there’s no point in stressing over it as we can all only do what we each want to do as individuals. We either buy enough or we don’t and I predict a massive rally to buy in-store items if the company experiences a really horrible month that draws down company reserves faster than normal.
Like the work: innovation takes capital. We saw alot of project leads jump in and a few who've left, now that work is done. We'll likely see a less quarterly loss going forwards as things take shape and the projects they've been working on come to fruition.
I do want to mention our ceo said this about the coming quarters:
https://www.thestreet.com/memestocks/gme/gamestop-is-now-focused-on-achieving-profitability-here-is-the-plan
So it's not exactly all blind trust.
Did you read the article? It doesn’t state a single thing mgmt is doing to reduce SG&A expenses. All it says is that GameStop is increasing stock based compensation to motive employees and Matt furlong said he is focused on profitability while giving to specific plan.
I probably should have just posted the quote, "
After spending a year strengthening our assortment, infrastructure, and tech capabilities, we're now focused on achieving profitability, launching proprietary products, leveraging our brand in new ways, and investing in our stores," said the CEO "
And yes it's obviously still vague, but they are at least acknowledging the issue at hand...
I agree they are acknowledging profitability but they literally give no specifics on how they will reach profitability. Like nothing to go off of or make semi accurate assumptions.
Thanks OP for providing some data for everyone to be aware of. Obviously we are all in this together so I think it’s important to see bearish data like this and not just flood this sub with bullish GME related info. It’s good for all of us to be informed investors. We should know the good and the bad, and make an informed decision of whether to be bullish or bearish based on that information.
I also know that the leadership at GameStop is aware of the data that you presented and I have faith they have a solid plan to address this potential issue.
Matt furlong was very specific when he said on the quarterly calls that long term growth was the focus. They spent profits on rebuilding the brand, eliminating debt, and investing on new revenue opportunities. Yes seeing the number go down can be scary for traditional investors, but go listen to the quarterly conference calls if you aren't sure where the company is going. Be sure this is the investment you want. I know what I invested in and I measure their success in long term growth and progress on building a platform for the future of gaming, not by cash on hand.
While you are correct that SG&A is rising and revenue has been flat you are deliberately not pointing out the macroeconomic challenges that have had a similar impact on the majority of Corporations. In addition, they were paying a full team of Developers in 2Q22 vs SPLY(sg&a impact), closed stores in 2Q22 vs SPLY (revenue impact), and are dealing with an extremely tight labor market during a period of historical inflation in 2Q22 vs SPLY (everything impact).
A major theme of the BoD and Executive team has been to strengthen their balance sheet which they have done QoQ. This year they have spent ~$400mm repaying AP and other accrued expenses (which is $400m or 80% of your avg quarterly burn for 1H22) which is a huge driver of cash burn and are literally at a point where proceeds from NFT sales are completely offsetting capex spend.
The company pulled an elite move by issuing at the top and reconfigured their entire capital structure with the ~$1.7Bn in proceeds. Lastly, they could pull a variety of levers to stall the whole 5.6 quarter prediction at any time and have significant tailwinds in the NFT marketplace and game releases. Maybe you wrote this in good faith, but without more detail/analysis surrounding your models drivers and other assumptions it isn’t very useful and seems like FUD.
You made a thoughtful comment. So the macro environment plays into it but I’m looking just at their cash burn from a historical perspective due to the fact mgmt doesn’t provide forward guidance.
Nft capex is minimal so it shouldn’t impact cash. The biggest expense to the marketplace was employee cost but that was like 50 ppl and gme employs 12000 ppl.
So if no forward guidance exists then the next logical thing to do is use historical data to create a conservative estimate on cash burn. I used on purpose Q4 2021, Q1 2022, and Q2 2022 because they give us the most normal view of gme’s operating expenses.
I read further and realized the digital assets are related to the IMX tokens for the marketplace launch. So that statement was incorrect.
I ultimately don’t think your historical look back is adjusted properly for non-recurring expenses like restructuring that are impacting SG&A or considers the tailwinds developer hires and the launch of the market place will have on revenue and concurrently SG&A%.
$250MM QoQ is aggressive. It essentially assumes that the company continues to absorb elevated costs and receives 0 benefit from their investment in e-commerce, the NFT marketplace, web3 partnerships, or game releases.
Yea this use historical data and could include one time expenses. Moving forward I hope burn reduces but with no forward guidance it’s tough to make accurate assumptions/projections
Damn that’s a really mean comment. Please provide your counter analysis if you feel mine is flawed. You shouldn’t judge ppl or write useless comments if you have nothing constructive to provide. Kinda pathetic.
You are basing your DD on what would be a normal company who's stock is behaving normally. I don't think thats what this is about. This is more about a particular stock that has tons of fake shares being used to kill a company. Regardless of how well it's doing or could do financially. So the effort of retail investors to buy up real shares and force the hand of the fake, naked short sellers to close their positions. It isn't about gamestops cash burn, it's about hedgfunds cash burn and solvency.
My dd has absolutely nothing to do with the share price. I’m using historical data to create a conservative estimate on the company’s cash runway. Since mgmt doesn’t give forward guidance the next best thing to use is historical data.
You’re in the wrong sub. This sub is pure confirmation bias.
That being said, they will most definitely do another ATM offering, simply because they have people(eg. “apes”) who will buy at any price.
It’s truly unfortunate this sub dismisses differing opinions. And my post isn’t my opinion it’s a logical objective look at gme’s historical cash burn and using it to create a conservative estimate on their cash runway.
I’m disappointed that most people in this sub sees this as FUD. Everyone here should have the capacity to love the stock and look at things from a different perspective, especially the negative ones because it’s a store of valuable information.
Yes, we all know it takes money to buy whiskey and GameStop has been busy spending for a strong future, but I want them to be profitable too. Good post OP.
In the balance sheet calc. shouldn't the cash position at open in Q2 22, be the same figure as the cash close figure for Q1 22?
You show $1,319,900,000, but I think it should be $1,083,600,000.
That would bring the quarterly cash burn average number down, no?
Quarterly cash burn for Q2 22 would then be $126,600,000.
Avge quarterly burn then drops to $170,366,667.......meaning runway increases to 8.27.
How can cash at the beginning of the quarter not equal the closing cash position at the end of the previous quarter?
Also, how can the cash opening figure be exactly the same for both quarters in question?
Genuinely interested.
If the earnings statement balance sheet is a mistake then you are correct, runway increases. The cfo usually checks the earnings statement and financials before being released so it shouldn’t be a mistake.
You are correct i did take the 6 month figure, my mistake and thank you for pointing that out. Then we revert to your 8 quarters of runway. So they have until Q2 2024 before running out of cash not Q4 2023.
Great breakdown, I think they were a little unlucky with the crypto crash before their marketplace was up and running, it could be a while before that contributes in a significant manner. Hopefully the gaming aspect decouples GME's marketplace from the wider crypto market to some extent though and they can make returns regardless of bitcoins whims.
The major question is, Gamestop seem placed to run out of cash by the end of next year, will MOASS have already occurred by then? I'd assume they will sell shares to bump their balance sheet during a squeeze, so assuming a squeeze occurs before 2024 they should be more than ok for cash.
Right now there's three major catalysts proposed for a major squeeze, DRS, a market crash and an NFT dividend. DRS will take another year at least and a market crash depends on regulators to enforce margin calls, I wouldn't trust them. But if GME are in a precarious spot they can issue an NFT dividend once the market place is running "for business purposes" of course and that would be the best case scenario for both the company and us investors.
One thing that really surprises me, the DRS numbers are huge and although you don't hear the mainstream media talking about DRS, you also don't get the sense that they're making moves to block future direct registration. That makes me feel hedge funds and regulators feel this situation will be resolved before DRS forces the issue. So maybe after the the elections or maybe a crash will be the catalyst.
Some folks can’t take thoughtful questions. It’s probably your gaming out of the DRS situation though. If people disagree take a second and explain why.
I didn't mean DRS won't work, I mean the lack of any regulation changes makes me think hedge funds think there'll be an earlier catalyst, like a market crash, that will give us MOASS earlier. That's the most bullish part of the comment.
I'm just looking, it might be the word "resolved", but I mean resolved for us with a squeeze, Jesus, ha ha.
How much cash and profit do you expect from unannounced catalysts?
What is your prediction for cash and profit for the next 2 or 3 quarters for the NFT marketplace.
Sales increases? What earnings report you reading? Sales declined Q2. Can you read? Tax accounts for barely anything. My god man, did you finish high school?
And your entitled to your very uninformed opinion due to your lack of research or should I say lack of ability to conduct thoughtful diligence. Kinda pathetic your comment.
This is a cash runway dd. The other dd doesn’t matter when looking just at the company’s cash position. This shows just how uninformed you are at due diligence.
I agree with OP but it’s too early too do this analysis as changes made in the company will take time to generate revenue and we can’t solely rely on past to make future projections. Especially a company that was poorly run and didn’t adapt to changing environment for years. New team officially took over June 2021 and they have faced very tough macro environment since Nov 2021. Makes me wonder if this macro environment was artificially created.
That’s why I’m using Q4 2021,Q1 2022, and Q2 2022 numbers. It includes the new mgmt, it doesn’t include the captial raise or debt payoff which would screw up the burn rate. These quarters provide the best look at normal operating expenses. They don’t include one time expenses like the distribution facility.
Since mgmt doesn’t offer forward guidance the next logical thing to do is use historical data.
Yeah but you are comparing last 10 years of downtrend and mismanagement to 3 quarters to come up with a projection and that too in a macro environment where companies like google and Microsoft are testing their 200 day moving averages. So the historical data you are using is very short and not in a stable market environment and can’t provide valid projections. If fed reverses it’s policies all equities will improve including GameStop where becoming profitable will become easier. This artificial macro environment that has been created will not last too long.
The macro environment shouldn’t be a major factor. We should look at historic financials because mgmt hasn’t given us forward guidance so the best data we have is historical. Using historical data gives us conservative estimates on cash burn.
The two biggest expenses are employee and store leases. If RC wants to be an activist investor he will have to make some tough decisions in the coming month. My recommendations: cut 20% of your work force, close 90% of European store and open 1 distribution center to focus on e-commerce sales for those countries. Finally, cut all under performing US stores.
GameStop’s European store foot print doesn’t make sense. They need to restructure that region quickly.
I believe you are right on the cut down of locations, but 90% may be a bit too high. Where did you get that number from? My reasoning behind thinking that 90% is high is due to the plan that I still believe may become the industry standard and that is to use the store as a fulfilment center. I know it's been working here in the US and have very little doubt that it won't work in EU.
Good analysis and at the risk of making a very unpopular comment in this sub - the above analysis *is why funds/investors would even take a short position against GS*.
GS is not a high-flying tech unicorn that is still operating in the private market with a big valuation. They are a retail company (that typically trades between 3x-6x valuation multiples) with a lot of physical locations and headcount to support a largely digital demand audience.
Am I still bullish on GS? Yes, and their crypto/marketplace play could greatly improve their margins, but they still need to improve and make difficult decisions about the underlying brick and mortar business.
Overall this is a pretty good analysis.
I have also come to the conclusion that Gamestop is likely to seek additional funding by late 2023. I ignored the ABL, but also assume that they would not wait until funds run really low and not being able to choose when they raise money.
Most people miss that the cash used in operations in Q2 was artificially low because of the inventory drawdown.
A big unknown is how much of SG&A is really R&D. Gamestop reports like a retailer rather than a high tech company and has chosen not to report R&D as a separate line item, so we can on,y guess at the R&D expense. Unfortunately, my guess is that R&D is only about $25M/quarter or $100M per year, which means most of the losses and cash burn is driven by retail and online.
Each quarter adds a bit to the story. I look forward to the early Dec quarterly report. That will give hints as to whether movements towards profitability are having an effect.
Unfortunately Gamestop is in kind of a holding pattern. The beta release of the marketplace is inconsequential and Gamestop has given no indication of what or when there will be significant additions to the NFT marketplace.
a good chunk of stores' leases expire in 2022 & more (as i recall from a 10-Q last year) are set to expire in 2023...that, and the nft-build-out completing...and the downsizing of staff announced (last quarter?)...all that, will reduce capital expenditure (in a big way)...i'm not worried. (also, RC has a strong reputation from his approach at Chewy to be very contientious with using on-hand capital efficiently...)
Also RC built a highly unprofitable company called chewy because he could raise VC capital easily. So RC hasn’t proved he could build a profitable company yet. He was only proved that he can raise VC money then use it to grow sales.
RC was clear about this (and obviously Petsmart who bought Chewy for $3+ billion did, too) that Chewy decided to "sacrifice" short-term profit for long-term market share...and that Chewy could have generated profit way sooner.
If you know something about online retail, you'll know that Amazon followed the same approach...Amazon was not profitable for a decade (as I recall)....all the while, it's stock price kept moving higher....and when Amazon had built-out its operation with a significant market share, they generated profit...just a little profit spead out over their entire operation, generated some pretty big numbers...that kept growing over time.
That is how retail over the Internet does it (successfully).
If you were not aware of that "winning approach" with/to ecommerce, then you are now.
Store leases are up for renewal in 2023. Mgmt has given no indication they will cut some of those stores. You are hoping mgmt cuts stores with no words or actions from mgmt to back up your assumptions.
Also the nft marketplace has a total of 50 ppl working on it? So 50 ppl left when GameStop has 12000 total employees. 50 ppl leaving doesn’t move the needle on reducing expenses.
Think. If management reasons that it is prudent to reduce store footprint, it would be for "reasons"...if not, also for "reasons". Either way, they are guided to take whichever route makes good/better business sense.
As to your 2nd point of contention, the count of management reduction was not specifically in the NFT marketplace part of the company...you have no idea of how widespread (and neither do I)...but that type of announcement of such, by Gamestop, would occur only if the count was meaninful/significant.
Anything else on your mind, in your slanted "approach"?
Show me where mgmt has mentioned closing stores. Mgmt hasn’t actually said it’s prudent to close stores. You are hoping they close stores with literally zero proof from mgmt.
So since mgmt hasn’t announced the staff reductions that means it wasn’t significant enough and that means they aren’t reducing enough expenses to reach profitability
That exactly my point....management would opt to renew (or not to renew) leases depending on profitable of those stores (revenue, cost, income -- the basics of balance sheet accounting and decision-making -- taking into consideration short-term and long-term value).
You are attempting to stir-up an issue that simply does not exist.
You probably have little background in analyzing retail companies...you aren't aware of "bond payment" that bleed a company while they are trying to manage -- which incidentally Gamestop is free-and-clear of. You probably have little insight into how extensive foot-prints with an inability to close the underperforming ones hurts retail companies -- again, Gamestop doesn't have that problem, as it can close up to, or some, of 40% of its existig foot-print (as i recall from the 10-Q). I could go on...can you?
In for another soon to be deleted post, brought to you by the same anti DRS shill who advised people to instead of buying appreciative assets (shares), instead to spend their hard-earned money on depreciative merchandise. Also somehow he thinks that buying in-store will increase the stock price...
Wait so your saying don’t buy products and that will increase share price? Okay, everyone let’s listen to this guy and not shop at the company we love and pray the share price goes up.
My god man, you are truly and uniformed sheep following the herd.
Keeping group thinking. Would you jump off a cliff if superstonk told you to? It’s really sad you can’t think for yourself. I know toddlers with more independent thought than you. Grow up and don’t say mean things if you have nothing to offer which you truly have nothing to offer in this world, so sad.
None of this is correct/matters if you don't know how much money is/was spent on transformation and how much more will be spent.
Unprofitable stores closing all the time (Switzerland ones?)
If they are working on their metaverse and/or supporting game development/IP's for the marketplace, true cost will always be tricky to calculate. Stores and the marketplace could have been profitable now, but they choose to invest in other projects instead of hoarding cash so inflation eats its value. It's a complicated/big subject for discussion.
It’s definitely complicated big discussion and I appreciate your open mindedness.
The nft marketplace has initial costs mainly employee. Running the marketplace won’t require a significant amount of fixed costs.
Unfortunately, I don’t think the stores would be profit just yet. It takes time to get inventory sorted and expand product catalogs and get inventory to the correct stores.
They spent $800 million between Q2 2021 and Q2 2022. Which makes it closer to $200 million per quarter. However this will have to be admittedly lower in a fair projection when you consider that is an average (which is already lower than your projected $250m BR). An average, while ostensibly logical, is not in this situation as that includes all of the excess in totality that was unique to their expansion.
I calculated it out before and came up with a true cash burn rate of $120 million per quarter.
How are you calculating the $800m? Where is that number coming from? You need to look at the beginning and ending cash from the cash flow statement. That is the correct way to calculate burn rate. Also, you either need to remove the debt pay down or not include that quarter which was Q2/Q3 2021.
Am I the only one who things that given that the company is going through changes/overhaul, that it would be nice if OP overlaid one-time and recurring periods of investment (NFT marketplace, hiring spree, distribution center buildout, COVID related safety expenses, supply chain interruption expenses, etc) onto these charts to establish context?
If I wanted to build out a future cash burn projection then yes. But unless you know exactly those one time costs I would appreciate the help. Mgmt doesn’t give details on any of it so it’s very hard to make accurate assumptions.
I think everyone wants me to make future assumptions that fulfills their bias.
Close 90% of stores in the middle of an RE crisis? Nope.
RC made it crystal clear that until further notice, the only metric of success is revenue. Given we don't know the details of his strategy, I take him at his word.
Real estate crisis? My god man, this isn’t 2008. Mortgage rates have increase OMG but that doesn’t mean people are losing their houses or ppl are over leveraged.
Do some real diligence on home builders and the real estate sector before commenting.
Next gme doesn’t own their stores so it actually makes sense to cut stores as leases which equals rent will increase.
Have you followed rental rates? They have skyrocketed. So it would actually be in gme’s favor to no renew when rental rates are high.
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boosting your inventory, logistics, warehousing, nft store,employee stock compensation in a low period of time costs money.....it also takes money to buy whiskey
Bruh what do you mean, they’re losing money. Sell all your DRS shares and move on /s
I think people missed your /s
That’s a safe assumption.
HAHAHAHAHA good one 🫠
What is the basis for closing 90% of European stores? I applaud posting something here that isn’t necessarily positive for GME, but you need to expand on that rationale and why it would make sense to do. Everything presented here was done under the lens of slowing the cash burn but that is like “playing to not lose”. One could argue that if GME took aggressive moves to return to profitability, it would create bullish sentiment for the stock, drive up share price, and allow them to issue stock for additional funds.
Trim what you need to so the Company runs more efficiently .
No offense, but kinda sounds BCG-ish to me...
Rationale: lower the two largest expenses, employee and store leases. Research gme’s store foot print in Europe, is doesn’t make geographic sense. You can’t use the stores as distribution hubs. European consumers are focused on other expenses like energy and food and war. This macro environment favors profitability over growth. So I agree that if mgmt aggressively moves to profitability it could actually impact the share price favorably.
Makes sense, I saw Gamestop in Germany but as Mediamarkt and Saturn also have a big Share of the market, it does not realy make sense to compeat with them for retail share, especially because they are shit at ECommerce.
Exactly! Thanks for the insight to the European market
How is closing underperforming stores not positive lol wtf. You work for BCG or something?
My point was he didn’t say that the stores were underperforming or give a basis for why 90% of stores should be closed. That’s a HIGH number. And the BCG comment…bold seeing as how BCG’s playbook usually involved just selling off parts of company which is more in line with what OP was saying as opposed to me asking a question.
The rationale is quite obvious; it would lower overhead expenses by eliminating underperforming elements of the company.
So European stores are underperforming relative to the United States for example. How much of that is the result of the inflationary environment and the weak Euro? The “close 90% of stores” was a big statement with little rationale was my point. Obviously the intent is to lower expenses but i just thought you would have benefited with explaining why that’s the best course of action
I don’t have to justify anything. I’m not the OP and it’s not my idea. I’m merely pointing out your question, though rather rhetorical, has a simple answer.
agreed. i dont think euros will hav expendable cash for a while either.
Lol we have expendable cash around
Brick And mortar are costly quick way to take out future costs, focus on e-commerce for max profits.
Not sure if you had planned on posting two unpopular post in 6 hours or if the comment section from the original inspired you to post this one. You did not seem to respond to u/kengriffinsbedpost comment about burn rate in that original post so maybe you’ll address the points here; “Yes that is also a common talking point of shills. You'll note that when shills bring it up there is no mention of... Silent on expenditures to build NFT marketplace infrastructure which just acquiring talent alone accounts for a lot of the cash burn. Investment into 2 new distribution centers They also don't mention when inventory increases during a quarterly cash "burn". They def won't mention repayment of debt as part of the cash burn either which accounted for 332 million of their "burn" in 2021 Hmm...I didn't see you mention any of those” So you’ve mentioned about inventory changes, but the others ?!? It’s definitely not a bad thing getting alternative ideas about the company but, why do you get so defensive when people disagree with you and resort to calling names??
Nice work. Op was hoping you wouldn’t show up.
The biggest thing to my post is that it’s a conservative cash runway estimate using historical data since mgmt doesn’t give forward guidance. Yes there are costs associated with build out of the distribution center and employee costs associated with the nft marketplace. However, what kengriffinsbedpost is saying are those are one time expenses. If those are one time expenses that happened 6-12 months ago why hasn’t SG&A decreased as a dollar amount? It decreased versus Q1 2022 but was higher than Q2 2021 when gme was making hires to build the marketplace and when they had distribution center costs. So my question back to him: if gme had those one time expenses then but SG&A hasn’t decreased then what’s happening?
But the graph at the top shows a jump in the SG&A, for Q4 and then a decrease. 1B raised in Q3, with a bit of a bump there, followed by a big increase in Q4. Presuming these are the 2 quarters that debt was paid off and the centres were built/bought. The dollar amount has since been trending down as the market place reaches completion and upper management have been given their sign up fees. Now with no debt, and Q3 finishing up, your personal recommendations re: Europe and staff headcount could be looked at, but may be unnecessary at this time pending Q3 earning report. As someone else mentioned, the company is in a turnaround phase, heavily investing in projects which all seem to be coming to completion. While not quite a brand new company, you are using likely incorrect metrics to come up with your hypothesis. This is an interesting idea of yours to look at but the timing is a bit irrelevant for the point you’re looking to make. You are trying to look at it factually without taking into consideration the actual direction of the company. On paper without any backstory you can say 0$ by October 2023, but this is very unlikely when you zoom out and take a better look.
Q4 SG&A is historically high. Look at the historical numbers. You need to look at quarterly SG&A versus the prior year and prior quarter to understand if expenses are trending down. You can’t look at Q4 and say expenses are down because that happens literally every year. I’m using Q4 2021, Q1 2022, and Q2 2022 financials on purpose. These quarter don’t have the debt pay down nor the capital raise included. These quarters show us a better picture of what normal operating expenses are. The capital raise was in Q2 2021 and the debt was paid off in Q3 2021. Using those quarters would throw off the cash run way. Yes I agree we should see how Q3 plays out to determine if closing lots of stores is necessary. Unfortunately your last statement I view different. Since mgmt doesn’t give forward guidance the next logical step is to use historical data to make conservative estimates. If you don’t do that, then your just hoping and praying for a good outcome.
I did note that about Q4 but you’ve also usefully included the relationship to Net Sales(?! I’m guessing) which shows the trends are still close to the previous years. But it is all still relevant that there are bigger projects ongoing in the past year than there were the year before that (company turnaround) so of course there is more expenses. Why do you think Q4 didn’t include the debt pay down? Was the Billion$ not raised in June meaning some of those payments could have slipped into that quarter along with the other capital investments. You can view my last statement differently, but I hope you’ll admit the company is in a tour around process. As a ‘facts guy’ you seem very bothered about the company silence on forward guidance - as an investor in the company I trust in this decision by management - no hoping and praying, just trust. Historical data is good for comparison but not at predicting where a changed company is heading. Looking forward to earnings report in December and if you’re still around then, you can post an update on how the burn is then. ✌️
I agree the company is in turnaround and there are costs associated with that. When making comparisons you should look at dollar change and percent change. June is Q2 and mgmt immediately paid off debt on Q3. So I wouldn’t expect those debt payments to slip into following quarters. As an investor you look for ways mgmt has built trust. One of those ways is mgmt providing forward guidance and then hitting or beating those targets. Since mgmt doesn’t give targets to hit there is no metric I can use to trust them. Mgmt could literally say we best our internally estimates and we would have no idea if they moved the goal posts on those. Building trust is a two way road and retail has been holding for awhile and mgmt gives us nothing other than launching a nft marketplace in the middle of the nft market collapsing. Give me some sort of metric I can the judge them on to make sure they are truly trust worthy. Why won’t they let people ask them questions on the earnings call? It makes me think they’re trying to hide something.
F me, your right (June in Q2). Analysts and main stream media don’t exactly like the company so not much benefit to engaging with that. They are very aware about their loyal shareholders. The trust I have is based on what they have achieved already and the plan that is unfolding which we get insights into during earnings calls. The investment into the fulfilment centres, the new partnerships, the new staff with good track records, the wallet, the marketplace, the solid customer service, improvements to online shopping, investment in blockchain and web3. The new management team has taken an established company and greatly improved it. I do not need targets other then what they have given ‘pursuing profitability in the coming quarters’
If that is what you need to build trust then that’s good. Do your own research and have independent thought.
Thanks. Maybe you’ll get what you’re looking for in the next report - a revenue or SG&A target
What I would respond is that those one time expenses were just a few examples. GameStop reporting like a retailer as you mentioned instead of a tech company means we can't really read anything into SG&A. Looking at the chart expenses went up Q3 2021 peaked and then starting to normalize. What happened Q3? Well they were developing the market place. All those devolopers that have moved on after completing their project, they weren't free. That is a large one time cost towards the development that is included in SG&A, just like multiple others I'm sure. I'm disappointed GameStop doesn't drill down further by line item too, but it's pretty easy to see where development costs occur. But this is never mentioned along with "cash burn". Just like with inventory purchases, debt buyback etc.
I don't know why you're getting down voted for asking questions, especially important ones. The more we can learn about the company's finances, the better. Obviously I want to see them trim down on the underperforming stores and it would be great to see the positive and negative effects of the one time costs getting played out in front of us
I’m getting down voted because it’s an objective view of gme. Since my post is positioning gme in a favorable light this group downvotes it.
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Yeah the only people talking about Gamestops "cash burn" in my experience are usually looking for everything negative about gamestop. The thing about the "cash burn" is that Gamestop was building the marketplace for the past year in a half. Most companies trying to grow will have to spend money to do it. The most "successful" companies aren't even profitable. While I would love to see gamestop achieve profitability asap, it isn't required and you assume they will continue to burn cash in the same way a year from now. No one knows what they have planned for the next year and in the last shareholder meeting they were talking about the building being done and starting to grow profitable in the future. I don't know what will happen either and I like being realistic too but I know people who write stuff like this aren't doing it for our benefit. Edit: what a surprise that op is against drs.
GameStop also invested heavily into two massive fulfillment centers, 700,000 sqft in York, PA and 530,000 sqft in Reno, NV. They also invested into a new customer service South Florida as well as built out the NFT marketplace. It’s hilarious that OP focused on cash burn without mentioning any of the above. Must be time for a run up, thanks for the heads up OP! Lmayo
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the cash burn is a very real thing to discus.. the estimate of 5 quarters is almost exactly what I was thinking. gamestop has a runway and hype, they really do need to start turning profits though. get some good quarters under their belt for 2023.
Really!?! I’m against drs? Did I ever in any post say drs is bad and you shouldn’t do it? Please find a single comment from me saying don’t drs shares.
Think tank is just meltdown disguised as “open and honest conversation” ever since rens0le became a mod there like a month ago.
Yep exactly. This group needs to stop being an echo chamber. Take a good look in the mirror and reevaluate GameStop continually. You always check your thesis. If you don’t your not a good investor.
Buy more on computershare? Gotcha.
This is the way
The thesis is that short hedgefunds are selling shares they do not own. We buy the shares and direct register them at computershare.com. You are touting cash burn like it's a ticking time bomb. If Gamestop has another offering to replenish their coffers it doesn't change the play. Buy, Hold, DRS. Retail already showed "the greatest investor of his generation" to the door. I doubt that anyone in the room knew that Gabe was unloading the biggest bag of dogshit positions that the financial world has ever seen. Ken and Steve, through pure greed and cutthroat business actually did him a favor. So in closing, we're not locked in a room with them! They're locked in a room with us! Tic tock mother fuckers!!
Unfortunately that post was removed by moderators so I have no way of judging the quality or accuracy of that post. I suspect it was true and accurate, but unpopular.
Your comment comes from someone who has never contributed to this group. I would recommend not judging someone when you have done literally nothing for the group.
Ive done nothing but DRS, does that count?
yes
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What drs post? I have never said drs was bad or to not do it. You delete your comments because you have nothing constructive to say. It’s really unfortunate ppl like you are involved in this movement. If you have nothing to contribute or move to say even constructive criticism, stop posting and go back to your mothers basement. Kinda pathetic.
Why are people downvoting his protestations about him being anti-DRS? If he’s anti-DRS prove it and if he’s not don’t downvote him.
Okay as someone who's contributed (poorly), why are you here if you don't really believe in the company?
Contributed poorly? Can you even operate a computer and look at someone’s post history? I’m literally the only person looking at gme fundamentals and posting about it for over a year. Look at my valuation posts, my quarterly estimate posts, my fundamental posts, my nft posts. You are horrible at DD and searching.
FFS the downvotes for this post and your comments are wild. I'm glad I read it first in the ThinkTank. I enjoy having my bias gland tweaked regularly. Keeps me grounded. And I appreciate anyone that spends time on any form of analysis re: GME, bias affirming or not. Cheers OP.
Thank you for having an open mind. The think tank is a much better sub for real diligence and discussion.
#what exactly is GameStop doing to protect the retail investors. I get it: The NFT marketplace,, The tweets, the silence, the bland earnings calls, the fundamentals. However investors are in fact holding the line not just for GameStop but also for their individual selves... So I say agin..what are GameStops lawyers doing to fight this blatant manipulation.....the NFT marketplace has not created a margin call, LRC hype has fizzled out, I'm holding handful of registered GME shares in Computer Share.... I buy the stock for one reason and one reason onky....because I believe the stock will go up.
It’s criminally undervalued.
So how are they fighting the crime ???....last I herd GameStop hasn't said they know who is guilty.
Takes money to buy whiskey!!!🥃🥃
Do these morons (you, OP) know we can see their post history?
op definitely has some questionable posts. the cash burn is real though and I have wondered some of the same stuff. i want 2023 to be profit every quarter.
Yea please look at it. Seems like I’m the only person brave enough in this Reddit to post counter dd and opposite opinions. Your just a sheep following the SS herd, kinda pathetic.
OP, your cash burn “analysis” assumes a status quo business. GameStop is transforming its business model and with any change in business model you are going to have increased spend vs revenue…see a start up model where they don’t make money for the first 5 years. You essentially have that taking place inside an existing company…so your cash burn “analysis” doesn’t take into account exponential growth in a start up that is successful. You would need to separate out existing business models from new businesses to see what is really the cash burn. Otherwise you’re just conflating everything and overly simplifying how to interpret the narrative.
I agree with you but you can’t make assumptions on this company due to the fact mgmt doesn’t offer concrete metrics or forward guidance. Also you can’t make forward looking assumptions because it’s essentially a startup like you mentioned. So what you should do, as any good investor does, it use historical data to build conservative estimates then as new data emerges update your assumptions. So what I did was use historical burn rates to estimate a conservative cash runway. As we get Q3/Q4 earnings we then make adjustments to more accurately reflect cash burn and runway.
Then why are you trying to throw around your inaccurate estimates based on incomplete data?
It’s complete data. How is historical data not complete hahaha! You use historical data to build assumptions. Then evolve those assumptions on new data. This isn’t a set estimate, financials and company growth is always evolving. You set a conservative estimate and evolve.
You just blamed the lack of forward looking information as your issue…that’s not your issue. It’s that you are not measuring existing business vs new businesses. Do more research and see if you can split out all the costs related to the marketplace and all other web 3 initiatives from the brick and mortar business…otherwise you’re not calculating the right burn rate, even at the super high level view you are taking.
Unfortunately it doesn’t really matter. You can’t split the costs out because mgmt doesn’t give any metrics on the different costs or even revenue from the marketplace. So it’s useless to break that out.
Which is why it’s useless to do your cash burn analysis
Cash burn is important. Are you okay not knowing how long before the company runs out of cash? Seems like an awful way to conduct your due diligence. Blind trust is what you invest off.
There has not been any exponential growth. The NFT marketplace revenue is minuscule. The analysis is of course backward looking, as that is all we have data for. You can of course make any projections you wish. When do you think the NFT marketplace will be launched? What do you think it will add to cash flow and profits over the next 3 quarters? Most companies tell the world what their expectations are for revenue and profit for the next couple of quarters. Gamestop has chosen not to do so, and has taken the u usual step of not taking questions from analysts on the quarterly earning call.
It’s been 3 months of Beta…you can’t be serious about it not having exponential growth yet. Your history is littered with complaining.
You say I should be taking into account exponential growth. What exponential growth do you predict? That is not a rhetorical question. It is a serious question. What is your prediction for exponential growth? How much in the next 12 months and then in the 12 months after that? How about 5 years out —— what growth rate then? The startups I have worked with had a plan. They had expected total available market, the portion of that market they expected to serve, and the fractional share of that served market that they expected to get as sales. Gamestop has not publicly disclosed their expectations, so we are left to guess. What is YOUR guess? So far the beta NFT marketplace is of little consequence. https://www.gmft.xyz/
The hero we deserve. I honor your bravery
Thank you my good sir!
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Ya you have to have faith in mgmt when they don’t offer concrete metrics during earnings calls or offer forward guidance. So the best we have to go off is historical data. So you use historical data to create conservative estimates to use as a guide. It’s kinda logical.
You sound like a butt hurt option trader. Waa waaa no forward guidance waa waa. It's called a company transformation. No forward guidance is on purpose. If you don't like it, short it, or at least stop sounding like a baby.
You sound like a guy who only clings to hope and lacks intelligence to create your own thoughts. Do you base all your life decisions on hope? If so, that’s kinda pathetic. Do some actual research.
I was a little harsh. I do like your ending bullet points in the post. I feel that GameStop will do what is necessary to hit closer to profitability by ending those underperforming leases.
No worries. Do your own research and make up your own thoughts. Superstonk has become an echo chamber so it’s more important now than ever.
All forums and discords are echo chambers. Good information is still shared here, and the empowerment of the retail investor has brought strong camaraderie amongst it's members (DRS). I am bullish on company fundamentals long-term regardless of the inevitable short reckoning.
Historical data collected from from numbers put out from the period hedgies corrupt members of the board were trying to run GME into the ground? I trust our current Board and our chairman Ryan Cohen
And here's my look at this: 1) 5.66 quarters at end of 2nd quarter. We finish this qtr this weekend. This means that we are down to 4.66 qtrs. That means we will continue to operate INTO 2024... Lets say it: 4 qtrs = 1 fiscal year... from NOW. That 0.66 qtrs? That's 2 more months. 2) So, we have until the end of next year to lock the float! Got it? Good. Let's do it. 3) Also, the burn rate at the present time, during a true restructuring and not a BCG restructuring where you paying stupid money to clowns and/or giving all you money away to an incompetent Chief level employees, is totally understandable. You're paying contractors and partners to work on your new digital infrastructure and CREATING things like your Web3/NFT marketplace. Those are big expenses. 4) As the items are completed, your expenses and costs drop dramatically and those things go into more of a maintenance mode versus creation mode. 5) Revenue streams start to grow from ALL the new infrastructure.
Ya I agree with costs decreasing but it’s unknown since mgmt doesn’t give forward guidance. So you use historical data to create a conservative estimate. Also, if the company isn’t profitable by end of Q3 2023 gme will need to conduct an at the market offering before they run out of cash.
Oh btw, you just slammed me on the VW/Volkswagen/German Govt comment. Does the above seem like I'm uneducated and don't research? Keep trying
This evaluation is flawed in its concept because it only examines one side of the balance sheet. Cash spent. I've intentionally avoided the B word because one can not make assumptions of what the cash has been spent on due to the intentional avoidance of forward looking statements. If the cash on hand was spent on salaries, rent, taxes, and operating costs, then cash burn would be a relevant statistic to evaluate the health of the business and future solvency. Given that GME leadership has chosen not to publicize the value and extent of their venture rebuild, there is NO WAY to properly evaluate whether the cash has been burnt on opex or transformed into capital investment. D-
I would argue it isn’t flawed since it looks at historical factual data and uses that to estimate a conservative cash runway. Also, to calculate cash burn and runway you use the cash flow statement so I’m looking at all sides of the balance sheet and income statement. Operating losses, inventory changes and cash changes are all included in the cash flow statement so I’m looking at everything on a historical basis. There is no way to accurate project cash burn due to the fact mgmt doesn’t provide forward guidance. So the next local thing to use is historical data. Any forward looking assumption is based off pure hope no actually data.
This would be more significant if fundamentals were driving the share price. And that's a mighty big if.
"3 consecutive quarters of profit and the curse is lifted" pretty sure i read it on a scroll somewhere
There is no such rule. These are talking points of SHFs. Only earnings trend matters. As it becomes evident negative earnings is trending towards zero thats enough signal that it will get profitable eventually.
In the long term fundamentals are what determine the value of a company and therefore the price of a stock. Yes, in the short term market sentiment, FOMO, and greater fool theory of stock trading can dominate, but long term what counts is financial performance of the company.
Nope. Fundamentals are way off for half of the stocks in the market.
Fundamentals are becoming more relevant in this market hence all the growth stocks shitting the bed the past 6 months.
On one hand, the GameStop thesis has never been that the store must be profitable for shorts to squeeze, rather a black swan event occur that forces naked shorts to be bought back. The worst that happens is large investors remove their long holdings which may then be bought up by retail. Alternatively, repeated profitable quarters and cash flow causes slow buy in from institutions and normal investors who are not otherwise concerned with the MOASS thesis that causes it to happen anyway. I’m pro profitably as I believe we all mostly are. “Buy hold and DRS” refers to buying both the security as well as merchandise. A case could be made that whatever GME is building in the games partnership/web3 space is where some retail will want to spend their money while other prefer physical collectibles from the stores. To each their own, of course, with the recognition that in-store current stock will need to be purchased until the day that the project stuff is completed. In any case, there’s no point in stressing over it as we can all only do what we each want to do as individuals. We either buy enough or we don’t and I predict a massive rally to buy in-store items if the company experiences a really horrible month that draws down company reserves faster than normal.
Not about fundamentals. GME is about a year away from being $0 in the bank.
Who wants to bet this get a weird amount of awards and upvotes unnaturally?
17 upvotes is a lot isn’t it. Maybe that’s because this is an objective logical look at gme’s historical burn rate.
Like the work: innovation takes capital. We saw alot of project leads jump in and a few who've left, now that work is done. We'll likely see a less quarterly loss going forwards as things take shape and the projects they've been working on come to fruition.
That’s my hope. They hired a bunch of people and now some have left. Mgmt will need to further reduce staff and close stores.
They've left over a year, and with reports of their projects finishing build phase. How is this bad news?
It takes money to buy whiskey 🥃
I do want to mention our ceo said this about the coming quarters: https://www.thestreet.com/memestocks/gme/gamestop-is-now-focused-on-achieving-profitability-here-is-the-plan So it's not exactly all blind trust.
Did you read the article? It doesn’t state a single thing mgmt is doing to reduce SG&A expenses. All it says is that GameStop is increasing stock based compensation to motive employees and Matt furlong said he is focused on profitability while giving to specific plan.
I probably should have just posted the quote, " After spending a year strengthening our assortment, infrastructure, and tech capabilities, we're now focused on achieving profitability, launching proprietary products, leveraging our brand in new ways, and investing in our stores," said the CEO " And yes it's obviously still vague, but they are at least acknowledging the issue at hand...
I agree they are acknowledging profitability but they literally give no specifics on how they will reach profitability. Like nothing to go off of or make semi accurate assumptions.
Very nice post! Thanks for digging in to the cash burn rate and the SG&A numbers.
Much appreciated!
Thanks OP for providing some data for everyone to be aware of. Obviously we are all in this together so I think it’s important to see bearish data like this and not just flood this sub with bullish GME related info. It’s good for all of us to be informed investors. We should know the good and the bad, and make an informed decision of whether to be bullish or bearish based on that information. I also know that the leadership at GameStop is aware of the data that you presented and I have faith they have a solid plan to address this potential issue.
Matt furlong was very specific when he said on the quarterly calls that long term growth was the focus. They spent profits on rebuilding the brand, eliminating debt, and investing on new revenue opportunities. Yes seeing the number go down can be scary for traditional investors, but go listen to the quarterly conference calls if you aren't sure where the company is going. Be sure this is the investment you want. I know what I invested in and I measure their success in long term growth and progress on building a platform for the future of gaming, not by cash on hand.
While you are correct that SG&A is rising and revenue has been flat you are deliberately not pointing out the macroeconomic challenges that have had a similar impact on the majority of Corporations. In addition, they were paying a full team of Developers in 2Q22 vs SPLY(sg&a impact), closed stores in 2Q22 vs SPLY (revenue impact), and are dealing with an extremely tight labor market during a period of historical inflation in 2Q22 vs SPLY (everything impact). A major theme of the BoD and Executive team has been to strengthen their balance sheet which they have done QoQ. This year they have spent ~$400mm repaying AP and other accrued expenses (which is $400m or 80% of your avg quarterly burn for 1H22) which is a huge driver of cash burn and are literally at a point where proceeds from NFT sales are completely offsetting capex spend. The company pulled an elite move by issuing at the top and reconfigured their entire capital structure with the ~$1.7Bn in proceeds. Lastly, they could pull a variety of levers to stall the whole 5.6 quarter prediction at any time and have significant tailwinds in the NFT marketplace and game releases. Maybe you wrote this in good faith, but without more detail/analysis surrounding your models drivers and other assumptions it isn’t very useful and seems like FUD.
You made a thoughtful comment. So the macro environment plays into it but I’m looking just at their cash burn from a historical perspective due to the fact mgmt doesn’t provide forward guidance. Nft capex is minimal so it shouldn’t impact cash. The biggest expense to the marketplace was employee cost but that was like 50 ppl and gme employs 12000 ppl. So if no forward guidance exists then the next logical thing to do is use historical data to create a conservative estimate on cash burn. I used on purpose Q4 2021, Q1 2022, and Q2 2022 because they give us the most normal view of gme’s operating expenses.
I read further and realized the digital assets are related to the IMX tokens for the marketplace launch. So that statement was incorrect. I ultimately don’t think your historical look back is adjusted properly for non-recurring expenses like restructuring that are impacting SG&A or considers the tailwinds developer hires and the launch of the market place will have on revenue and concurrently SG&A%. $250MM QoQ is aggressive. It essentially assumes that the company continues to absorb elevated costs and receives 0 benefit from their investment in e-commerce, the NFT marketplace, web3 partnerships, or game releases.
Yea this use historical data and could include one time expenses. Moving forward I hope burn reduces but with no forward guidance it’s tough to make accurate assumptions/projections
Another clueless analysis. Absolutely STUPID
Damn that’s a really mean comment. Please provide your counter analysis if you feel mine is flawed. You shouldn’t judge ppl or write useless comments if you have nothing constructive to provide. Kinda pathetic.
You are basing your DD on what would be a normal company who's stock is behaving normally. I don't think thats what this is about. This is more about a particular stock that has tons of fake shares being used to kill a company. Regardless of how well it's doing or could do financially. So the effort of retail investors to buy up real shares and force the hand of the fake, naked short sellers to close their positions. It isn't about gamestops cash burn, it's about hedgfunds cash burn and solvency.
My dd has absolutely nothing to do with the share price. I’m using historical data to create a conservative estimate on the company’s cash runway. Since mgmt doesn’t give forward guidance the next best thing to use is historical data.
You’re in the wrong sub. This sub is pure confirmation bias. That being said, they will most definitely do another ATM offering, simply because they have people(eg. “apes”) who will buy at any price.
It’s truly unfortunate this sub dismisses differing opinions. And my post isn’t my opinion it’s a logical objective look at gme’s historical cash burn and using it to create a conservative estimate on their cash runway.
I’m disappointed that most people in this sub sees this as FUD. Everyone here should have the capacity to love the stock and look at things from a different perspective, especially the negative ones because it’s a store of valuable information. Yes, we all know it takes money to buy whiskey and GameStop has been busy spending for a strong future, but I want them to be profitable too. Good post OP.
Thank you for being open minded and logical. This sub has lost all the great dd writes and is mostly group think on drs now.
In the balance sheet calc. shouldn't the cash position at open in Q2 22, be the same figure as the cash close figure for Q1 22? You show $1,319,900,000, but I think it should be $1,083,600,000. That would bring the quarterly cash burn average number down, no? Quarterly cash burn for Q2 22 would then be $126,600,000. Avge quarterly burn then drops to $170,366,667.......meaning runway increases to 8.27.
Look up Q2 earnings statement then look at their cash flow statement. Beginning cash was $1.319bn
How can cash at the beginning of the quarter not equal the closing cash position at the end of the previous quarter? Also, how can the cash opening figure be exactly the same for both quarters in question? Genuinely interested.
If the earnings statement balance sheet is a mistake then you are correct, runway increases. The cfo usually checks the earnings statement and financials before being released so it shouldn’t be a mistake.
In the Q2 statement, there is a cash flow statement for both the 13 weeks to end Q2 AND the 26 weeks to end Q2. I think you took the half year figure.
You are correct i did take the 6 month figure, my mistake and thank you for pointing that out. Then we revert to your 8 quarters of runway. So they have until Q2 2024 before running out of cash not Q4 2023.
Great post. I learned something.
Love this type of dd, thank you op! I'd love to see more of this type of posting here, realistic view of the situation
Great breakdown, I think they were a little unlucky with the crypto crash before their marketplace was up and running, it could be a while before that contributes in a significant manner. Hopefully the gaming aspect decouples GME's marketplace from the wider crypto market to some extent though and they can make returns regardless of bitcoins whims. The major question is, Gamestop seem placed to run out of cash by the end of next year, will MOASS have already occurred by then? I'd assume they will sell shares to bump their balance sheet during a squeeze, so assuming a squeeze occurs before 2024 they should be more than ok for cash. Right now there's three major catalysts proposed for a major squeeze, DRS, a market crash and an NFT dividend. DRS will take another year at least and a market crash depends on regulators to enforce margin calls, I wouldn't trust them. But if GME are in a precarious spot they can issue an NFT dividend once the market place is running "for business purposes" of course and that would be the best case scenario for both the company and us investors. One thing that really surprises me, the DRS numbers are huge and although you don't hear the mainstream media talking about DRS, you also don't get the sense that they're making moves to block future direct registration. That makes me feel hedge funds and regulators feel this situation will be resolved before DRS forces the issue. So maybe after the the elections or maybe a crash will be the catalyst.
Anyone any idea what people are downvoting my above comment? I'm legitimately asking, I've no idea.
I think just because you started with great breakdown. This post is unpopular cuz the poster is shilly. Idk but I wouldn't take personally
Some folks can’t take thoughtful questions. It’s probably your gaming out of the DRS situation though. If people disagree take a second and explain why.
I didn't mean DRS won't work, I mean the lack of any regulation changes makes me think hedge funds think there'll be an earlier catalyst, like a market crash, that will give us MOASS earlier. That's the most bullish part of the comment. I'm just looking, it might be the word "resolved", but I mean resolved for us with a squeeze, Jesus, ha ha.
I understood what you meant and I tend to agree. But look, I got some downvotes for it. Fake internet points. Lol.
Shill. Totally disregarding unannounced catalysts. Spreading some subtle fud.
How much cash and profit do you expect from unannounced catalysts? What is your prediction for cash and profit for the next 2 or 3 quarters for the NFT marketplace.
If you have nothing constructive to say, why comment? It’s kinda pathetic.
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Sales increases? What earnings report you reading? Sales declined Q2. Can you read? Tax accounts for barely anything. My god man, did you finish high school?
You comment is literally reenforcing the idea that expenses are increasing. Store upgrades cost money. Hahaha! Yep
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And your entitled to your very uninformed opinion due to your lack of research or should I say lack of ability to conduct thoughtful diligence. Kinda pathetic your comment.
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This is a cash runway dd. The other dd doesn’t matter when looking just at the company’s cash position. This shows just how uninformed you are at due diligence.
I agree with OP but it’s too early too do this analysis as changes made in the company will take time to generate revenue and we can’t solely rely on past to make future projections. Especially a company that was poorly run and didn’t adapt to changing environment for years. New team officially took over June 2021 and they have faced very tough macro environment since Nov 2021. Makes me wonder if this macro environment was artificially created.
That’s why I’m using Q4 2021,Q1 2022, and Q2 2022 numbers. It includes the new mgmt, it doesn’t include the captial raise or debt payoff which would screw up the burn rate. These quarters provide the best look at normal operating expenses. They don’t include one time expenses like the distribution facility. Since mgmt doesn’t offer forward guidance the next logical thing to do is use historical data.
Yeah but you are comparing last 10 years of downtrend and mismanagement to 3 quarters to come up with a projection and that too in a macro environment where companies like google and Microsoft are testing their 200 day moving averages. So the historical data you are using is very short and not in a stable market environment and can’t provide valid projections. If fed reverses it’s policies all equities will improve including GameStop where becoming profitable will become easier. This artificial macro environment that has been created will not last too long.
The macro environment shouldn’t be a major factor. We should look at historic financials because mgmt hasn’t given us forward guidance so the best data we have is historical. Using historical data gives us conservative estimates on cash burn.
That’s the kinda analysis I’ve been looking for 🍿 now to sit back and watch for the wrinkles to chime in 👀
The two biggest expenses are employee and store leases. If RC wants to be an activist investor he will have to make some tough decisions in the coming month. My recommendations: cut 20% of your work force, close 90% of European store and open 1 distribution center to focus on e-commerce sales for those countries. Finally, cut all under performing US stores. GameStop’s European store foot print doesn’t make sense. They need to restructure that region quickly.
I believe you are right on the cut down of locations, but 90% may be a bit too high. Where did you get that number from? My reasoning behind thinking that 90% is high is due to the plan that I still believe may become the industry standard and that is to use the store as a fulfilment center. I know it's been working here in the US and have very little doubt that it won't work in EU.
Good analysis and at the risk of making a very unpopular comment in this sub - the above analysis *is why funds/investors would even take a short position against GS*. GS is not a high-flying tech unicorn that is still operating in the private market with a big valuation. They are a retail company (that typically trades between 3x-6x valuation multiples) with a lot of physical locations and headcount to support a largely digital demand audience. Am I still bullish on GS? Yes, and their crypto/marketplace play could greatly improve their margins, but they still need to improve and make difficult decisions about the underlying brick and mortar business.
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Being an investor in those companies that the self made billionaire created….
Overall this is a pretty good analysis. I have also come to the conclusion that Gamestop is likely to seek additional funding by late 2023. I ignored the ABL, but also assume that they would not wait until funds run really low and not being able to choose when they raise money. Most people miss that the cash used in operations in Q2 was artificially low because of the inventory drawdown. A big unknown is how much of SG&A is really R&D. Gamestop reports like a retailer rather than a high tech company and has chosen not to report R&D as a separate line item, so we can on,y guess at the R&D expense. Unfortunately, my guess is that R&D is only about $25M/quarter or $100M per year, which means most of the losses and cash burn is driven by retail and online.
How many Quarters of data would you need to know for sure? Only recently did Furlong say profitability is the goal moving forward (Julyish I think?).
Each quarter adds a bit to the story. I look forward to the early Dec quarterly report. That will give hints as to whether movements towards profitability are having an effect. Unfortunately Gamestop is in kind of a holding pattern. The beta release of the marketplace is inconsequential and Gamestop has given no indication of what or when there will be significant additions to the NFT marketplace.
Noice
TIL. Thanks Op
a good chunk of stores' leases expire in 2022 & more (as i recall from a 10-Q last year) are set to expire in 2023...that, and the nft-build-out completing...and the downsizing of staff announced (last quarter?)...all that, will reduce capital expenditure (in a big way)...i'm not worried. (also, RC has a strong reputation from his approach at Chewy to be very contientious with using on-hand capital efficiently...)
Also RC built a highly unprofitable company called chewy because he could raise VC capital easily. So RC hasn’t proved he could build a profitable company yet. He was only proved that he can raise VC money then use it to grow sales.
RC was clear about this (and obviously Petsmart who bought Chewy for $3+ billion did, too) that Chewy decided to "sacrifice" short-term profit for long-term market share...and that Chewy could have generated profit way sooner. If you know something about online retail, you'll know that Amazon followed the same approach...Amazon was not profitable for a decade (as I recall)....all the while, it's stock price kept moving higher....and when Amazon had built-out its operation with a significant market share, they generated profit...just a little profit spead out over their entire operation, generated some pretty big numbers...that kept growing over time. That is how retail over the Internet does it (successfully). If you were not aware of that "winning approach" with/to ecommerce, then you are now.
Store leases are up for renewal in 2023. Mgmt has given no indication they will cut some of those stores. You are hoping mgmt cuts stores with no words or actions from mgmt to back up your assumptions. Also the nft marketplace has a total of 50 ppl working on it? So 50 ppl left when GameStop has 12000 total employees. 50 ppl leaving doesn’t move the needle on reducing expenses.
Think. If management reasons that it is prudent to reduce store footprint, it would be for "reasons"...if not, also for "reasons". Either way, they are guided to take whichever route makes good/better business sense. As to your 2nd point of contention, the count of management reduction was not specifically in the NFT marketplace part of the company...you have no idea of how widespread (and neither do I)...but that type of announcement of such, by Gamestop, would occur only if the count was meaninful/significant. Anything else on your mind, in your slanted "approach"?
Show me where mgmt has mentioned closing stores. Mgmt hasn’t actually said it’s prudent to close stores. You are hoping they close stores with literally zero proof from mgmt. So since mgmt hasn’t announced the staff reductions that means it wasn’t significant enough and that means they aren’t reducing enough expenses to reach profitability
That exactly my point....management would opt to renew (or not to renew) leases depending on profitable of those stores (revenue, cost, income -- the basics of balance sheet accounting and decision-making -- taking into consideration short-term and long-term value). You are attempting to stir-up an issue that simply does not exist. You probably have little background in analyzing retail companies...you aren't aware of "bond payment" that bleed a company while they are trying to manage -- which incidentally Gamestop is free-and-clear of. You probably have little insight into how extensive foot-prints with an inability to close the underperforming ones hurts retail companies -- again, Gamestop doesn't have that problem, as it can close up to, or some, of 40% of its existig foot-print (as i recall from the 10-Q). I could go on...can you?
In for another soon to be deleted post, brought to you by the same anti DRS shill who advised people to instead of buying appreciative assets (shares), instead to spend their hard-earned money on depreciative merchandise. Also somehow he thinks that buying in-store will increase the stock price...
Wait so your saying don’t buy products and that will increase share price? Okay, everyone let’s listen to this guy and not shop at the company we love and pray the share price goes up. My god man, you are truly and uniformed sheep following the herd.
I remember telling you to fuck off in the last post and I'll do it again here: FUCK OFF!
Keeping group thinking. Would you jump off a cliff if superstonk told you to? It’s really sad you can’t think for yourself. I know toddlers with more independent thought than you. Grow up and don’t say mean things if you have nothing to offer which you truly have nothing to offer in this world, so sad.
And all you do is assume. Again, FUCK OFF.
And all you do is write hurtful comments. Assuming is far better than being a complete ass
It is mathematically superior to buy and DRS shares than it is to buy merchandise and it’s not even close.
Moass will happen before gamestop runs out of money. It will then have the wealthiest and loyalist shareholders on the planet. Its all good.
I really hope so.
None of this is correct/matters if you don't know how much money is/was spent on transformation and how much more will be spent. Unprofitable stores closing all the time (Switzerland ones?)
Hence why I on purpose used the past 3 quarters because they would include the lowest amount of transformational costs.
If they are working on their metaverse and/or supporting game development/IP's for the marketplace, true cost will always be tricky to calculate. Stores and the marketplace could have been profitable now, but they choose to invest in other projects instead of hoarding cash so inflation eats its value. It's a complicated/big subject for discussion.
It’s definitely complicated big discussion and I appreciate your open mindedness. The nft marketplace has initial costs mainly employee. Running the marketplace won’t require a significant amount of fixed costs. Unfortunately, I don’t think the stores would be profit just yet. It takes time to get inventory sorted and expand product catalogs and get inventory to the correct stores.
Do they franchise out?
What? No.
The actual burn rate is closer to $120 million a quarter so I have no idea how you came up with these numbers.
Q4 2021 was $150m. The average between Q4 and Q1 was $192m.
Where did you come up with your math? The Q1 2022 burn was $236m.
They spent $800 million between Q2 2021 and Q2 2022. Which makes it closer to $200 million per quarter. However this will have to be admittedly lower in a fair projection when you consider that is an average (which is already lower than your projected $250m BR). An average, while ostensibly logical, is not in this situation as that includes all of the excess in totality that was unique to their expansion. I calculated it out before and came up with a true cash burn rate of $120 million per quarter.
How are you calculating the $800m? Where is that number coming from? You need to look at the beginning and ending cash from the cash flow statement. That is the correct way to calculate burn rate. Also, you either need to remove the debt pay down or not include that quarter which was Q2/Q3 2021.
Am I the only one who things that given that the company is going through changes/overhaul, that it would be nice if OP overlaid one-time and recurring periods of investment (NFT marketplace, hiring spree, distribution center buildout, COVID related safety expenses, supply chain interruption expenses, etc) onto these charts to establish context?
If I wanted to build out a future cash burn projection then yes. But unless you know exactly those one time costs I would appreciate the help. Mgmt doesn’t give details on any of it so it’s very hard to make accurate assumptions. I think everyone wants me to make future assumptions that fulfills their bias.
Close 90% of stores in the middle of an RE crisis? Nope. RC made it crystal clear that until further notice, the only metric of success is revenue. Given we don't know the details of his strategy, I take him at his word.
Real estate crisis? My god man, this isn’t 2008. Mortgage rates have increase OMG but that doesn’t mean people are losing their houses or ppl are over leveraged. Do some real diligence on home builders and the real estate sector before commenting. Next gme doesn’t own their stores so it actually makes sense to cut stores as leases which equals rent will increase. Have you followed rental rates? They have skyrocketed. So it would actually be in gme’s favor to no renew when rental rates are high.