GameStop (GME) shares powered higher Thursday after the video game retailer unveiled a new partnership with crypto exchange group FTX that offset a sixth consecutive quarterly loss.
GameStop unveiled its new business partnership with FTX, one of the world's biggest cryptocurrency and derivative exchanges, that it said will "introduce more GameStop customers to FTX’s community and its marketplaces for digital assets."
The group is also hoping its GameStop Wallet, which allows users to store, send, receive and use both NFTs and cryptocurrencies across decentralized apps, will form the lynchpin of its digital asset strategy.
The FTX agreement, which will help support its transition from a reliance on brick-and-mortar sales to a central role in the digital asset space, followed second quarter earnings data showing a narrower-than-expected loss of 35 per share on revenues of $1.136 billion.
"When it comes to accretive partnerships, we've been actively exploring opportunities to strengthen GameStop's offerings and increase brand visibility," CEO Matt Furlong told investors on a conference call late Wednesday. "The deal we just announced with FTX is a byproduct of our commerce and blockchain teams working together to establish something unique in the retail world."
GameStop shares were marked 9.7% higher in pre-market trading to indicate an opening bell price of $26.38 each, a move that would still leave the stock with a one-month decline of around 38.3%.
Expenses were on the rise again over the three months ending in July, with SG&A pegged at $378.9 million, or 32% of second quarter sales, when compared to last year. On a sequential basis, SG&A was down around 80 basis points from the prior quarter.
Capex was up $7 million from last year at $20.5 million, while the group reported a negative cashflow from operations of $103.4 million.
Those figures are crucial given its recent cash burn rate, and even more so in a declining sale environment.
New Constructs analyst David Trainer estimates GameStop has burned through around $263 million in free cash flow over the twelve months that ended in April, GameStop's fiscal first quarter, a rate that could only last for another 18 months if continued at a similar pace.
"We're working to accomplish something unprecedented in our industry: transforming a legacy brick-and-mortar retailer into a technology-led organization that meets customers' needs through stores, e-commerce properties in both digital marketplaces and new online communities," Furlong said. "Our path to becoming a more diversified and tech-centric business is one that obviously carries risk and will take time."
