Earnings Call Transcript - GME Q1 2020

Eric Cerny, Investor Relations

Thank you and welcome to GameStop's First Quarter Fiscal 2020 Earnings Conference Call. This call will include forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Any such statements should be considered in conjunction with the cautionary statements in the safe harbor statement in the earnings release and risk factors discussed in reports filed with the SEC. GameStop assumes no obligation to update any of these forward-looking statements or information. A reconciliation and other information regarding non-GAAP financial measures discussed on the call can be found in the earnings release issued earlier today as well as the Investors section of our website. With me today are GameStop's Chief Executive Officer, George Sherman; and Chief Financial Officer, Jim Bell. On today's call, George will share insights into our first quarter performance and updates regarding GameStop's strategic framework for the future. Jim will then provide more detail on our financial results and expectations for fiscal 2020. Then we will open the call to take your questions.

George Sherman, CEO

Thank you, Eric. Good afternoon, everyone, and thank you for joining us today on our first quarter earnings call. So much has changed since we last spoke to you in March, and I truly hope that you are all safe and healthy. Our thoughts are with the people who have been affected by the COVID-19 pandemic as well as the first responders, healthcare workers, and medical providers who are on the front lines. We want to extend our appreciation for all of their efforts. Our priority has been and continues to be the well-being of our employees, customers, and business partners during this unprecedented time. More recently, we have endured a period of social unrest, as following acts of cruelty have underscored the racial injustice that endures in this country. At GameStop, we stand against this injustice, and as an act of solidarity, closed our stores in each of Minneapolis, Fayetteville, and Houston during the respective memorial services in those markets. For our time today, I'd like to start by providing an overview of the company's response to the COVID-19 outbreak, a few comments regarding the company's first quarter performance, and then briefly discuss the strategic initiatives we are executing to optimize, stabilize, and transform our business. Then Jim will review our first quarter financial results and provide a framework for how we are approaching 2020. As we approach the fiscal year, we articulated that we expected sales in the first half to be challenging as we entered the final phase of a 7-year console cycle. The COVID-19 pandemic has presented us with new challenges, and we're facing them head-on. We are capitalizing on our global leadership position in gaming to support the surge in demand stemming from the change in consumer lifestyle and their need for entertainment from home and remote work activities. At the same time, we greatly increased our financial flexibility to navigate through this unprecedented time. In March, prior to the closure of all of our U.S. stores, we generated a positive 3% sales comp. Then on March 22, we temporarily closed one-third of our U.S. locations, and for the remaining two-thirds, we stopped customer access to storefronts and fulfilled orders on a digital-only basis, facilitated by a limited curbside pickup service, leveraging our enhanced omnichannel capability of buy online, pickup in-store. Beyond the U.S., we were largely closed, with our distribution centers in Europe, Canada, and New Zealand either closed or limited in their ability to maintain staffing levels, effectively leaving us unable to fulfill e-commerce orders. Across our global operations, only Australia, representing roughly 10% of our global fleet of stores, remained fully open during the final six weeks of the quarter. In that context, we are encouraged that our global comp store sales were down 17%, well above our expectations and a sequential improvement from our fourth quarter 2019 comp sales decline of 26%. Equally as encouraging is that given our strategic initiative to build a frictionless digital ecosystem for content and commerce, our e-commerce sales, included in our comparable store sales, rose 519% in Q1. I was pleased with our team's ability to adapt quickly. Despite significant disruption, stores managed to retain most of their planned sales volume to online and curbside pickup, delivering total sales for the quarter just shy of our original expectations. By category, we saw a surge in demand for hardware and for a limited number of new software titles. Although the mix shift toward hardware comes at a lower margin, the demand demonstrates that GameStop is the top destination for gaming needs. The Nintendo Switch continues to perform well, far exceeding our expectations, with sales increasing during the quarter compared to last year. In fact, we believe we sold more Nintendo Switch consoles than any other retailer or e-commerce business globally in the first quarter. With the surge in demand for gaming resulting in limited hardware in stores and OEM manufacturers not being in a position to ramp up supply chain production in the last few months of the 7-year console cycle, we are able to leverage our unique buy-sell-trade competitive advantage to supplement hardware demand from customers who are new entrants into the category. From a software perspective, we expected the category to decline given the weak title slate at the end of the console cycle. However, the decline was exacerbated by several titles that shifted into the second and third quarters due to COVID-19. For those new release titles that did launch, we experienced strong growth, far exceeding our expectations. The increased demand for gaming and entertainment has turned good title releases into great title releases as customers seek new entertainment options. In terms of SG&A, we continue to focus on our long-term expense reduction efforts, and despite the additional cost leverage pressures from closed stores, we reduced adjusted SG&A by 16% year-over-year. Importantly, our adjusted SG&A includes over $21 million of incremental COVID-19 related costs we incurred, including our decision to support our hourly associate base by paying an additional two weeks of pay or, for those eligible, paid time off to ease some of the burden of the pandemic-related mandated store closures. The quarter saw strong progress in our priorities. Typically, we share with you four strategic pillars. Today, I will focus on our pillars to optimize the core business by improving efficiency and effectiveness across the organization and building a frictionless digital ecosystem to reach GameStop customers. As it relates to optimizing the core, the first quarter saw significant financial progress. We continue to deliver on our goal to greatly improve working capital, executing a 43% reduction in inventory at quarter-end and a 54% decline in accounts payable, all while maintaining $570 million in cash at the end of the quarter. Regarding our efforts to build a frictionless digital ecosystem, we advanced this initiative by leveraging our improved fulfillment capabilities, which led to the recapture of sales through stores opened for limited curbside pickup during the quarter. During the weeks following our store closures to customers, we saw e-commerce sales surge in some weeks to over 1,500% year-over-year growth and 519% for the entire quarter compared to last year. Total e-commerce sales grew to over 50% of total company sales during the period. As we enter the second quarter, we've begun the global phase reopening of stores that were temporarily closed. As of today, we are nearly 90% reopened around the world to either safe, limited customer access or curbside pickup. We have several stores impacted by the recent social unrest in the United States, and we continue to focus on the safety of our associates and customers. We've had roughly 100 stores of our 3,500 locations in the U.S. impacted by temporary closures due to physical damage and looting. To date, we've reopened about 35% of those locations, but we anticipate another 35% or about one-third of those locations will be closed for the foreseeable future given extensive damage. While early, we are relatively pleased with the performance of the reopened locations. There’s a ramp to these stores as they reopen. We are analyzing the return of traffic to these locations using third-party mobility indices and are finding some correlation, as our experience has shown a reopening ramp of 3 to 4 weeks before sales return to our expectations. We know that our ability to reopen stores is only part of the equation. Customers need to continue to feel comfortable getting out, interacting in our stores and with our associates. To that end, we have and continue to strictly follow all published CDC and local guidelines to create a safe and enjoyable experience for the customer. I'd also like to welcome three newly appointed directors to our Board, all of whom joined us during the quarter. These appointments represent an important milestone in GameStop's transformation as we continue to evolve our business strategy for long-term success. We have already benefited from our new Board members' expertise and perspectives as we navigate the evolving gaming and omnichannel retail environments, execute on our strategic initiatives, and prepare the company to maximize value creation associated with the next-generation of console launches later this year. Before turning the call over to Jim, I'd like to share why I'm confident that GameStop has a bright future. We possess several unique competitive advantages and are developing and implementing initiatives to make us more efficient and better able to fully capitalize on the new console cycle later this year. First, we have a strong leadership position in gaming and a strong loyalty base of consumers that we can monetize through revenue-sharing partnerships. Second, we operate a global network of stores with team members who are experts in gaming. This gives us an advantage as new consoles are introduced, making us the go-to source for education on advanced technology and how to use the systems along with all the newly advanced accessories that come with them. Third, we are capitalizing on our digital capabilities and our strong and extensible omnichannel capabilities. We will continue to build on this strong foundation and advance our end-to-end customer experience. Fourth, we are more efficient across our enterprise and continue to find ways to further optimize our operations. As such, we expect to drive margin improvement as sales stabilize. As mentioned in our press release, we expect to deliver positive adjusted EBITDA in 2020. Fifth, we are strongly capitalized and have the liquidity to navigate the current macro environmental challenges and invest in our strategy. While we expect the challenges we faced in Q1 to continue into Q2, we also expect to make more progress in our strategic pillars and deliver improved performance during the second half of the year. Now let me turn the call over to Jim to discuss our financials in response to COVID-19 in more detail.

James Bell, CFO

Thank you, George. Good afternoon, everyone. I'd like to take this time to walk you through our first quarter fiscal 2020 results. I'll then share some insight into how we're approaching the remainder of the year. As George just discussed, our number one priority is the health and safety of our associates, customers, and communities during the COVID-19 pandemic. In March, we temporarily closed approximately 76% of the company's 1,802 international stores. On March 22, we closed all of our 3,526 U.S. locations, two-thirds of which were closed to any direct customer access, but offered a limited curbside pickup, leveraging our omnichannel buy online, pick-up in-store, and ship-from-store capabilities. During the remainder of the first quarter, about 10% of our global fleet, primarily our Australian business unit, remained fully open and accessible to customers. Despite the impact of store closures worldwide, our business in Q1 reflected three primary elements: first, a surge in gaming and work-from-home products; secondly, the power of GameStop's deep omnichannel engagement with its loyal customer base; and finally, our teams' ability to quickly adapt to meet increased product demand despite the limited ability to meet face-to-face with our customers. In light of that, for the first fiscal quarter, we delivered a global comp store sales decline of 17%. Consistent with other retailers, these results exclude the stores that were closed for more than two contiguous weeks during the quarter. Importantly, despite these closures and limited operations during peak pandemic weeks, our global sales comp for fiscal March was a decline of 0.7% and April was a decline of 14.4%. In the fiscal month of May, we realized a comp sales decline of approximately 4%. As you can see, in contrast to the fiscal fourth quarter last year, we believe the predominant sales decline this year represents the pandemic-related store closures across all of our operating regions. Turning back to the first quarter, total consolidated global sales declined 34% to $1.02 billion from $1.55 billion in the prior year period, attributed to the reported comp store sales decline of 17%, roughly 13% from the impact of COVID-19 related store closures, and the remaining almost 4 percentage points attributable to permanently closed stores and foreign exchange headwinds. As a reminder, these permanent store closures are a result of our ongoing efforts to either de-densify certain geographies or exit unprofitable businesses. We continue to see strong sales and profit transfer rates from the de-densification strategy and are on track for the completion of the Nordics region wind down by the end of July. In terms of category performance, hardware and accessories declined by 21.8% for Q1, the majority attributable to full store closures. Despite the decline in the overall category, Nintendo Switch has performed exceptionally well, with sales during the quarter showing a material increase compared to the first quarter last year. Software, particularly catalog and pre-owned, as well as collectibles, tend to be market basket builders in-store, which is why both categories declined approximately 43% for the quarter, reflecting customers' inability to access our storefronts. There were only a few new software titles launched in Q1, including Animal Crossing, Final Fantasy VII, and Doom Eternal, all of which far exceeded their sales plans. From a product margin standpoint, gross margin declined due to product mix, with hardware sales making up about 50% of sales, a larger penetration than the 42% from the year prior. Thus, our overall global gross margins were 27.7%, a 270 basis point contraction from the more software-led 30.4% in the fiscal first quarter last year. Now, turning to our expenses and expense management objectives. After adjusting for roughly $5.3 million in transformation, severance, and other charges associated with our GameStop reboot profit improvement initiative, our SG&A expenses were $381.2 million, reflecting a decline of approximately $72.5 million or roughly 16% versus the first quarter last year. Importantly, these results do not adjust for just over $21 million of one-time investments we made in the quarter related to COVID-19. The first was approximately $18.5 million in incremental wages for our decision to pay an additional two weeks of pay or, if eligible, two additional weeks of paid time off to our hourly associates. Secondly, we invested just over $3 million in safety and sanitary-related products and equipment in the first quarter to ensure the safety of our associates and customers. We expect some of the SG&A reductions to return in future quarters as we normalize store and distribution center operations, but a significant portion of the reduction is also directly related to our ongoing efforts to rationalize the overall cost structure of the business. As a result of the worldwide impact on our store operations due to the COVID-19 pandemic, we experienced an operating loss of $108 million compared to operating income of $17.5 million in the prior year’s first quarter. The adjusted operating loss, excluding the transformation severance and other charges, was $98.8 million compared to operating income of $17.5 million in the previous year's first quarter. Again, these results do not adjust for the over $21 million of one-time investments made in the quarter. Our effective tax rate, as reported for the first quarter, was negative 43.9% and was impacted by certain discrete tax items, primarily related to a $53 million valuation allowance on our deferred tax assets and the mix of earnings across the jurisdictions in which we operate. Excluding the $53 million noncash tax adjustment, our adjusted effective tax rate for the quarter was 1.5%. On a reported basis, our net loss was $165.7 million, which includes the noncash charge, or a loss of $2.57 per diluted share compared to net income of $6.8 million or earnings per diluted share of $0.07 in the prior year's first quarter. Adjusted net loss, excluding the tax charge, transformation, severance, and other charges associated with GameStop reboot, was $103.9 million or a loss of $1.61 per diluted share, compared to adjusted net income of $7.5 million or $0.07 per diluted share. This net loss is not adjusted for the $21 million in incremental COVID-19 related costs mentioned previously. During the first quarter, we focused on optimizing our global store fleet and strategically de-densifying certain markets. We closed a net total of 181 stores for the quarter. As we told you in March, we expect our strategic market optimization efforts to yield a similar number of store closures in 2020 compared to 2019, about 320 stores. However, given the positive sales and profit transfer rates we continue to see, we are revising that estimate upwards by roughly 100 additional closures. Turning to the balance sheet, at the end of the first fiscal quarter, we had total cash of $570.3 million, including $135 million drawn on the revolver. In response to the relatively stronger performance of the business, we paid down $35 million of the revolver and had $100 million outstanding as of June 3. Our accounts payable at the end of the quarter were $212 million, down from $458.4 million at the end of the first quarter of fiscal 2019, reflecting a 54% reduction, directly related to leveraging a flexible supply chain and reducing purchase orders worldwide at the onset of the COVID-19 pandemic. We ended the first quarter with total inventory of $654.7 million compared to $1.15 billion in the prior period, a reduction of 43%. Effective and efficient inventory management, including improved inventory turns, continues to be a significant area of focus for us and is a key driver of further improvement in working capital efficacy. We are pleased with the continued progress in working capital, specifically improving the efficiency of the cash conversion cycle on our inventory, reflected in both the 43% and 54% declines in inventory and accounts payable, respectively, all while maintaining a strong cash position of over $570 million in total cash and equivalents. This disciplined management of inventory and working capital provides us with the necessary liquidity and financial flexibility to manage the current environment and support upcoming inventory investments in new software titles and the new generation of consoles and associated accessories launching in the third and fourth quarters. Due to the ongoing potential impacts of the COVID-19 crisis, we continue to suspend our forward guidance. However, we believe our efforts to maintain the strength of our balance sheet will continue for the long term. We expect our total cash and equivalents at the end of the second fiscal quarter to be in the range of $575 million to $625 million, reflecting roughly flat to positive cash flow from operations. As of May 2, at the end of the fiscal quarter, we had $417.2 million of our outstanding notes on the balance sheet. Last week, on June 4, we announced the commencement of an exchange offer to certain holders of the remaining balance of the $414.6 million of our 6.75% senior notes, which are due in 2021. This offering aims to provide us with further financial flexibility by replacing and extending the maturity of the existing notes that are validly tendered as we continue focusing on advancing our long-term strategy and objectives. In line with our goals of maintaining a robust balance sheet, on June 5, we completed the sale of our corporate jet and continue to work to efficiently monetize certain other real estate assets. In the first quarter, we recorded $6.6 million of capital expenditures. We have lowered capital spending to focus on mandatory maintenance or near-term high-value strategic projects and now expect to invest approximately $43 million in CapEx for the year, a significant reduction from the roughly $80 million spent in 2019. As mentioned earlier, we have generally suspended guidance due to the COVID-19 impact on our business. However, in addition to the second quarter cash expectations I previously shared, we believe in three things: our performance during the peak of the pandemic, our current trajectory, and our expectations for the console launch in the back half of the year will contribute to generating positive adjusted EBITDA for the fiscal year. We remain confident that the progress against our GameStop reboot objectives is supporting us to navigate this trying time. We remain focused on executing actions to strengthen our financial architecture, including all key profit and expense levers toward a streamlined organization poised to capitalize on the significant profit flow-through improvement as we expect robust sales growth in late 2020, driven by both the expected new software title slate and the Generation 9 console launch. I will now turn the call over to the operator, and we'll take any questions you may have.

Operator, Operator

And our first question is from Steph Wissink from Jefferies.

Stephanie Schiller Wissink, Analyst

I have two quick housekeeping questions for you. And then, George, a bigger picture question, if I could. The first is just can you remind us what percentage of your leases are up for renewal over the next 12 months? And then you mentioned transfer rates in the script. I'm wondering if you could just provide a quick statistic update on what you are seeing in store closures and the transfer value.

James Bell, CFO

Yes, Steph. The average lease-up, primarily here in the U.S., remains around two years. So in a 12-month period, we are going to turn over about half the fleet from a lease perspective. In general, that's how it tracks. Regarding the second question, the transfer rate is not something that we've published publicly. Suffice it to say we're seeing stronger rates than we had originally planned. That's why we’ve accelerated some of the closure numbers by about 100 in terms of our expectations.

Stephanie Schiller Wissink, Analyst

Okay. That's helpful. My question, George, for you is you mentioned something in the script that struck me about the renewed interest in gaming that may have been inspired by the pandemic. Can you talk about what you're seeing in your customer database? Were these customers that were once gamers and have returned? Are you finding that this is a new population of gamers? And how does that play into the negotiations you are having with OEMs regarding your revenue sharing partnerships?

George Sherman, CEO

Yes, Steph. Thanks for the question. We saw this early on when the store closures began, really in late March going into April, prominently in the form of hardware sales. New game launches better than expected, such as Animal Crossing, demonstrated this. We have a significant number of new customers joining us, which we believe is predominantly new gamers rather than a return to gaming. We can see this through net new email addresses and net interest reported. This is beneficial, particularly as the overall market share size increases. Thus, it provides leverage in discussions with our partners moving forward. Our hope is to maintain close contact with these new customers and see them dive further into the gaming world as we approach the launch of new consoles. Hardware has been scarce, especially at the end of the cycle, but sales are reportedly robust, especially for the successful Switch, which we believe we are the leading exporter.

Operator, Operator

And our next question is from Ray Stochel from Consumer Edge Research.

Raymond Stochel, Analyst

On e-commerce, the growth you have seen is significant, I’m sure largely due to store closures and your omnichannel success. Can you update us on whether you are able to hit that $1 billion target much earlier than expected because of this? What changes are you making to your e-commerce platform to fulfill demands you're seeing incrementally?

George Sherman, CEO

Yes. First of all, Ray, thanks. This is indeed a step in the right direction due to our rapid growth in the last few months. We've made process improvements, starting with the hiring of a Chief Digital Officer. Moreover, this is one of our four growth pillars: frictionless digital ecosystem. A range of improvements to our supply chain has been implemented along with a more vigorous e-commerce operation. Our operations are now active seven days a week to support this growth. The significant uptick in e-commerce sales was a result of store closures, creating this unusual circumstance yet helped drive business forward.

James Bell, CFO

I’d add a color point because it's important. The e-commerce channel doesn’t operate in isolation from the physical stores. Importantly, the growth in e-commerce was driven by buy online pickup in-store and ship from store, with most orders picked up same-day or the next day. We will balance both operations, and as we open stores, we anticipate ongoing health in e-commerce driven by ordering.

George Sherman, CEO

Yes. I’ll build on that. Our e-commerce capabilities were crucial during these transitions. Curbside delivery was largely built off of our existing 'buy online pickup in-store' capability. Early steps in introducing ship-from-store played a pivotal role in fulfilling demand, demonstrating the integrated nature of operations.

Raymond Stochel, Analyst

Regarding pre-owned inventory; it’s down substantially year-over-year, yet there’s significant demand for pre-owned hardware. How are your customer rewards points trending? Are they decreasing as people buy new items with those points, potentially limiting purchasing power heading into the holiday season?

James Bell, CFO

Yes. This is Jim. Our focus on pre-owned inventory management, led by myself and our Chief Merchant Chris Homeister, has been paramount in creating efficiency. Regarding loyalty points, it’s not as you suggested. We have seen a significant wave of new entrants into gaming, most likely pushing consumer behavior towards new purchases. Our buy-sell-trade capabilities allow us to supplement the hardware scarcity for some customers who are transitioning toward gaming.

Operator, Operator

Our next question is from Curtis Nagle from Bank of America.

Curtis Nagle, Analyst

First one, just a clarification on the May down 4% comp. Is that an adjusted number excluding closures? If so, what's the all-in number? And could you comment on any category performance within that comp?

James Bell, CFO

Yes. We are not providing additional information on May, as we wanted to give insight into the business's dynamics. The adjusted number excludes stores closed for longer than two weeks. We plan to provide updates as things evolve.

Curtis Nagle, Analyst

Got it. Understood. Then as a follow-up, I want to dig deeper into the positive EBITDA forecast for the year. Are you expecting all of that to come in the fourth quarter? Could you help clarify your expectations given the historical data where console launches do not yield great EBITDA due to the sales mix?

James Bell, CFO

I'll comment. With the current management team, our focus has been on re-architecting the financial framework, placing us strategically to take advantage of this upcoming console launch. If one examines history, it’s essential to consider our lower expenses and tighter inventory management, yielding better results from subsequent sales growth.

George Sherman, CEO

As major retailers, we feel the full cycle impact both on the downside and the upside. Sell-through rates do improve when attached to new consoles, which informs a broader customer experience beyond just hardware sales. We will see more traffic from both brick-and-mortar and online platforms.

Operator, Operator

Our next question is from Seth Sigman from Crédit Suisse.

Seth Sigman, Analyst

I did want to follow up on the May trend. The down 4% comps that compares to down 14.4% in April presumably includes very different store numbers due to closures. Could you clarify what part of your store base is captured in that comp?

James Bell, CFO

It's very dynamic week to week. In the U.S. market, stores started to reopen for a limited customer access. Many moving parts complicate the ability to present a clear answer. We currently have over 500 stores still opening.

George Sherman, CEO

Indeed, it's a multifaceted situation where open versus closed and customer access evolve daily. Over 90% of our locations are open now, mostly in Europe, indicating progression as we adapt.

Seth Sigman, Analyst

Can you help model the revenue growth in the May period on a quarter-to-date basis to aid in our modeling?

James Bell, CFO

I don’t have the specific details in front of me, thus we are not prepared to discuss this today.

Seth Sigman, Analyst

My real follow-up was on positive EBITDA for the year. Just to confirm, will it only come from the fourth quarter? Given the outlook, how do expect it to compare year-over-year?

James Bell, CFO

We are not disclosing quarterly contributions. The insights we provided are general expectations considering our new software launches in the third quarter and the anticipated console launches in the fourth quarter. Sales growth will drive significant improvements, ensuring a better position than in previous eras.

Carla Casella, Analyst

Could you discuss the borrowing base and seasonality through the year? I didn’t catch your liquidity number as of the quarter. What's available under the revolver?

James Bell, CFO

The borrowing base supports our inventory and accounts receivable. It generally peaks around our fourth quarter at $430 million during November and December. For the remainder of the year, availability is around $150 million to $250 million depending on inventory levels.

Carla Casella, Analyst

Did you specify what that availability was as of 1Q? Also, considering COVID, how is your inventory likely to trend differently this year?

James Bell, CFO

I don't have that number on hand, but it is available in the Q. We’ve reduced our inventory levels, but we maintain adequate availability. We initially drew $150 million on the revolver, paying down $50 million recently. In terms of gross margins with the upcoming launches of hardware and software, expect a mixed trend leading to different margin rates. Hardware typically has lower margins than pre-owned or software.

George Sherman, CEO

Jim’s right, the product mix and market basket will reflect various dynamics based on customer interactions at stores and ease of access. As stores reopen, we anticipate a resurgence in higher-margin catalog sales.

Operator, Operator

And our next question is from William Reuter from Bank of America.

William Reuter, Analyst

Regarding timing on payables, will working capital build for inventory likely be less than historical periods around holidays, given your product timelines?

James Bell, CFO

Correct. With our payment terms in mind, yes, we plan to turn our inventory effectively within these payment windows, leading to less working capital pressure.

William Reuter, Analyst

Can you provide the potential shift in new software releases that have been delayed from 1Q to 2Q?

James Bell, CFO

We aren’t providing any further guidance due to ongoing uncertainty in the marketplace.

Bryan Hunt, Analyst

Could you touch on the sale of your corporate jet? What were the proceeds? Additionally, what are other assets for sale, and what yields do you expect?

James Bell, CFO

Yes. The jet sold last week for roughly $9 million. Regarding real estate assets, we have five sites, one each in Canada, Australia, and three in the U.S., which are both distribution centers and offices. We're treating them as potential sale-leasebacks.

Bryan Hunt, Analyst

Are those distribution centers you plan to continue using?

James Bell, CFO

Yes, we fully expect to utilize those assets. We’ve just determined that we don’t need to own real estate directly anymore.

Operator, Operator

Thank you. We have reached the end of the question-and-answer session. I will now turn the conference over to George for any closing remarks.

George Sherman, CEO

In closing, I'd like to thank our entire team across the company. I'm very proud of the resilience of our store team, distribution team, and refurbishment teams that they've shown during this unprecedented time. I'm honored to have a group of store associates that are passionate about gaming and serving our customers. This will serve us well in the rapidly changing environment. Thank you. Thanks to all of you for your interest in the stock.

Operator, Operator

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.