Thank you, and welcome to GameStop's Fourth Quarter Fiscal 2018 Earnings Conference Call. This conference 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 cautionary statements and 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 Company's earnings release issued earlier today as well as in the Investor section of the Company's website. I would now like to turn the call over to the Company's Executive Chairman, Mr. Dan DeMatteo. Please go ahead, sir.

Thank you for joining us this afternoon. Joining me on the call today is our COO and CFO, Rob Lloyd. I'd like to start by taking a moment on behalf of myself and the Board to thank Shane Kim for everything he has done while serving as our Interim CEO since May of last year. While Shane is not joining us today, he is on a long-planned family trip. I want to emphasize how much we all appreciate what he has done for us over the past 10 months. He stepped into this role at a critical time and very effective leading the Company through a period of transition. Shane has been determined to capitalize on the many opportunities available to GameStop in order to position the organization for long-term success. As we recently announced, we are very excited to welcome George Sherman as our new CEO starting on April 15. Most recently, George served as CEO of Victra, the largest exclusive authorized retailer for Verizon wireless products and services. He brings extensive leadership experience and retail experience having worked with several other top companies and brands such as Best Buy and Target and brands that have undergone large successful transformations, and we are confident he is the right choice to lead GameStop into the future. George will have the opportunity to work closely with the rest of our leadership team to finalize the blueprint for GameStop setting the Company's long-term strategic direction. He will finalize, prioritize and implement key initiatives to drive sustainable growth and profitability, further taking advantage of our powerful brand. With our comprehensive review of strategic and financial alternatives behind us, we are well positioned to chart a clear path for GameStop that will leverage our leadership position in the video game industry and enable us…

Thank you, Dan. Good afternoon, everyone. I'd like to take this time to walk you through our fourth quarter and full year 2018 results. I'll then share some insight into how we're approaching 2019 as we welcome George to GameStop and begin to refine the strategic direction for the Company. I'll also share additional insight around the various initiatives under development, including the profit improvement plan Dan introduced. As I review our results, please remember that our fiscal 2018 calendar included 52 weeks compared to 53 weeks in fiscal 2017. Additionally, with the sale of our Spring Mobile business completed in mid-January, the results of that business are included in discontinued operations. And as reported, the sales from our 43 Simply Mac stores are included in the other sales category. Moving on to our results for the quarter and fiscal 2018, we're pleased to have delivered fiscal 2018 results within our adjusted guidance range, which included fourth quarter and full-year sales growth across video game accessories, collectibles and digital. Excluding the impact of the 53rd week in fiscal 2017, new hardware sales for the year were comparable to last year. I'll go into more detail in a moment, but during the quarter, we incurred asset impairment charges and other items of $334.5 million or $351.6 million net of taxes. With roughly $413 million attributable to goodwill impairment, partially offset by the benefit of a $100.8 million gain on the sale of Spring Mobile. From a top-line perspective, total Company sales decreased 7.6% in the fourth quarter and 3.1% for the full year. The overall sales decline was primarily due to a decrease in the pre-owned video game sales, new software sales as key titles underperformed, and the impact of the 53rd week in fiscal 2017, which equated to roughly $130…

Thanks, Rob. I want to briefly address the agreement we reached recently with Hestia Capital and Permit Capital. As you may have seen, we announced that we will be adding two new independent directors to our board. This is a constructive and positive step forward for the Company and one that demonstrates our willingness and desire to engage with shareholders for the benefit of all. As of today, there is nothing further to comment regarding the topic. The main purpose of our call is to discuss our earnings results and operational initiatives under way, and please keep your questions focused on these topics. With that, I'll turn it over to the operator for Q&A.

[Operator Instructions] We take our first question from Colin Sebastian with Robert Baird.

Thanks, guys. Good afternoon. As you look ahead, related to your comments that the trends in the pre-owned business are expected to continue in this direction. Are there any measures within your control to stabilize that business without sacrificing too much in the way of margin? And then, secondly, I wonder if you could comment on more specifically the impact you've seen from the Apex Legends launch in the corresponding promotional activity by Apex to hold onto their user base for Fortnite, if that's having any incremental effect on the traditional console market. Thank you.

Yeah. Colin, I think, with respect to the pre-owned side of the business, I think the area that we're probably focusing on the most there is the value that brought to the pre-owned customer through our power up rewards program. I was looking hard at that program to make sure that we are providing the right kind of value to the customer and making the offerings that we have attractive to them. We continue to look at the trade side of the business as well as the sales side of the business in pre-owned to make sure that, again, we're delivering value there. In terms of Apex and Fortnite, again, those -- both of those games are continuing to drive sales and digital currency in our stores and continuing to have a positive impact on our accessories sales much like we saw last year.

And maybe just one quick follow-up on the digital side and Sony's decision to see sales of point codes and retail stores, I wonder if you could size, how much impact that might have on your digital receipts and if you have any comment on motivations behind that decision? And I'll leave it there. Thanks.

There is -- as I understand and in discussions with Sony about this, there is some effort associated with providing that what we call code to content to sell the full game download as content. Most of the sales of full game downloads whether at retail came in the form of the -- actually the currency. So, the move by Sony to go back to the currency model, we don't expect to have a material impact on our results because we'll continue to sell that currency for that customer that wants to buy it in GameStop stores whether they want to pay in cash in trades or unwilling or unable to put a credit card on the Internet.

Thank you. We will now take our next question from Steph Wissink with Jefferies.

Thanks. Good afternoon, everyone. [ph] And we plan to unpack a little bit more the eSports partnership. And I guess the curiosity question for us is really how do you monetize that hub across your network of both your stores of having this core performance center, which sounds like it's going to create a lot of excitement in content. How do you leverage that across your network of stores? How do you create the micro experiences at the store level?

In the short-term, we see that the opportunity for us is really to provide the types of content environment to the customer that drives traffic to our stores. Coming into our stores for online clinics and how to get better at playing Fortnite or Apex or whatever it is that the customer wants play would be a way for us to drive traffic and then ultimately monetize that traffic. As we continue to look at the experience in our stores, we have the opportunity to evaluate where we can provide the kind of play environment that the customer who might want to get and essentially make our stores more of a place where they want to hang out. That will lead, we believe, to increase monetization.

That's great. And then, just one follow-up on the $100 million cost for the remainder [inaudible] the savings at a net basis until 2020. But can you help us just -- see, within the P&L, where are the factors of savings likely to be concentrated? This is something more centralized headquarters or there are some savings at the store level that you expect to achieve as well?

I think most of it's going to be driven from the headquarters space, not necessarily just in terms of cost cuts but that's where things like indirect spend, our shipping program, those kinds of things are sort of centralized. And as a result of the efforts that we'll put into the initiative, we hope to be able to have a large impact on that indirect spend, on shipping cost, supply cost, things of that nature. Ultimately that finds its way into the stores as the stores can there, there's less freight attributable to stores or less supply costs, et cetera. Also, there will be looking hard at tasking that takes place inside our stores to make sure that we are as efficient as we can possibly be and making sure that the time that we give our stores to operate is dedicated to helping customers.

Thank you. We'll move on to a next question from Seth Sigman with Credit Suisse.

Hey, guys. Thanks for taking the question. Rob, given the sales outlook you provided and the evolving strategic direction under George's leadership, as we think about that $100 million profit improvement program, how do we think about how much flows to the bottom line versus gets reinvested?

The goal is to ultimately get to a run rate where we've gotten $100 million of increased profit as a result of these efforts so it's not an exercise where we generate $100 million of increased profit and then invest a chunk of that into the bottom line. Net-net, we're expecting $100 million.

Okay, understood. And then, just a follow-up question on the pre-owned business, can you guys just talk a little bit more about the state of inventory today and the markdown risk just given the sales trends that we're seeing there?

The inventory is relatively comparable to where it was last year and given the trends that we're seeing. So, I think our hardware inventory is in pretty good shape because we've seen increases in hardware and that continues to be, but the customer is increasingly interested in on the software side, it's a little lighter than it was last year, reflecting the trades and ultimately the sales. I don't think there's markdown risk there for a couple of reasons. One, we continue to adjust to the buy-sell trade pricing model as we see the demand coming in as we see the inventory position. And then, secondly, it is still a healthy margin business for us. So there's plenty of room inside of that for us to move the product that we need to move.

I guess we noticed that there was an increase in the inventory reserve, did that have anything to do with the used business or was it related to something else?

That was actually probably more related to the collectibles business.

Okay. Anything specific there to share?

I mentioned that ThinkGeek.com has not performed in the way that we had hoped that it would, and much of that reserve increase was targeted at ThinkGeek.com.

[Operator Instructions] We'll hear now from Curtis Nagle with Bank of America Merrill Lynch.

Great, Thanks very much for taking the question. So, I guess, aside from perhaps valuation, what are the criteria for buying back shares? And I guess, would you wait for some evidence that the EBITDA is starting to stabilize before you enter the market?

I think there are variety of things that the Board will consider within our capital allocation structure as we move forward. And what we can do with -- what we determine to be excess capital. As Dan mentioned, and as I mentioned, there is a number of initiatives under way that we're anxious to get George in to review, to refine and to start to implement. I think what we want to see is how those initiatives are translating into the P&L and how that is impacting our stock price.

Okay. And then, just a quick balance sheet question. It looks like AP was up a little bit year-over-year. I guess conversely accrued liabilities were down a decent bit just I guess what was driving -- [ph] which piece of it is related in anyway?

That's all tied into accounts payable to vendors that exist at the end of the year. There is a component of the accounts payable that lines up in accrued liabilities for checks that were written and having cleared in that kind of stuff. So, a lot of that has to do with timing although we have had general efforts to make sure that our inventory is better levered.

Okay. And if I can switch just one more in, I guess, how should we think about the pace of growth for collectibles, and I guess the -- your efforts to balance margin a little bit more just focus a little bit on margin, this is a business that maybe grows low single digits, do you think you can get it above that in terms of top line?

I think I said in my comments that we're continuing to look for pretty good growth in that category. We see that continuing to grow double-digits. And I think the margin profile that we're looking for there is as we improve margins slightly in 2018. We would hope to do that again in 2019. We're excited about some of the testing that we're doing inside our stores within the collectible space in order to make sure that we're merchandising it in a way that is easier for the customer to shop that's curating, the stories we're trying to tell with the product that ties into video games or other key pop culture themes.

Thank you. We'll now take our next question from Ben Schachter with Macquarie.

Hey, guys. Can you talk a little bit about what George’s strengths and background are that they're making the right CEO for going forward? Is there a particular strategy that he is well suited to drive forward? And I have couple follow-ups. Thanks.

Well, this is Dan. Obviously we interviewed a lot of people, and George really stood out. I'll give you a little bit of his background. He was a military officer in the Air Force for seven years. After he got out of the Air Force, he went into a training program at Target, he wound up running the entire Midwest, the store operations for Target, and I'm not sure exactly where we moved from there. But he has experience in merchandising with Best Buy, he has experience with the service area in Best Buy. I think this the Geek Squad and the B2B stuff. He was the key guy who developed that. He was at Advanced Auto and he was the COO at Advance Auto. So, obviously he would have had merchandising, operations, marketing, et cetera, reporting directly to him. And so -- and I think he has a very, very varied experience. And it's all been in retail except for the seven years in the military. So, all retail in many aspects of retail, including Smartbox with Advanced Auto.

And in terms of forward options, when you're talking with him, were there certain things that were kind of taken off the table already or is it completely an open fleet for him?

Well, I think by selling Spring Mobile, you can see that the diversification strategy, we refocused on that, and we are refocusing all of our energy on video gaming, whether it's eSports, new stores, a new look and feel in the store, et cetera. So, I think we've come back to our roots focused on the video gaming, and we're not spending the energy that we once did, I'm trying to see where else we could diversify.

Thank you. And then, last one, Rob, you mentioned that 99% of U.S. stores, 94% of international cash flow positive. So, obviously that's a relatively small number per store. Can you talk about sort of what the target is per store? How wide of a range it is? Do some stores do really well for a particular reason and other stores are underperforming, strip versus mall? Anything you're sort of seeing there in terms of everything being cashflow positive, but obviously some more challenged than others.

So, as you know, Ben, over the past few years, we've had a strategy that says, if we have stores that make, say, less than $50,000 in profit, we're going to take a hard look at whether or not there's an opportunity to close those stores, transfer sales and therefore profits to other nearby stores. And so, there is a wide range that exist within the store base and we continue to focus on those lower profit generating stores. It doesn't matter necessarily whether they're strips or malls, obviously strips tend to have smaller rent package than the malls do but the profitability can be very positive in both. And I can't really draw conclusion for you from strips versus malls or what have you. But we continue to focus on it, and I think if you look at the 112 stores that we closed last year, that is in excess of the numbers that we had that were cash flow negative. And so, we continue to operate on that store closing and sales transfer program we've had for the last eight years or so.

Thank you. We will hear now from Cristina Fernandez with Telsey Advisory Group.

Hi guys. It's Joe Feldman for Christina. Wanted to check in also on a bit of the cash flow but at a higher level -- at the Company level and how you guys are thinking about that or how we should think about that for 2019. Any thoughts about the dividend, I mean is there any risk to the dividend with the cash flow situation where us in good shape right now.

The balance sheet looks pretty strong in terms of cash, given the divestiture of the AT&T business. We're not giving guidance on cash flow for 2019. Again that's related to the initiatives and various things that George will be neck deep and frankly when it gets here. So, we're holding off on that. I would say that the dividend is part of the capital allocation strategy that the board will continue to evaluate quarterly as we move forward.

Okay, thank you. And then, with regard to the stores that comments you just made, there are a lot of good stores still and is part of the new strategy to make the stores more experiential like, I don't know, make create more buzz and more fun to keep kids in the store to get them to go on linger, I'm not even sure what that is. I guess, with the eSports thing, maybe they could -- that maybe testing centers if you could try out or something. But things like that, is that what we're talking about for the stores to have more fun in there.

Yeah, if you think back to the comments that we were making in the Spring and into June of last year we were talking about the need, we had to get a better understanding of our customer what the customer wants from their GameStop shopping experience and how we can create a more experiential environment inside our stores. We have done a tremendous amount of work across 2018 to -- with a variety of customer-focused studies, surveys, et cetera, et cetera, to get an understanding of that customer behavior and how we can impact it. And as a result of that, the initiatives that we talked about includes things that would make our stores more experiential and provide the kind of retail environment that our customers want to come and hang out in, that might be eSports, it might be certain other things that we try. Those are among the things that we'll be discussing in the next few weeks with George after he arrives and hopefully shedding more light on for you in the future.

Thanks. And if I could just ask one more. With Apple’s new venture, I guess any thoughts on how that might play into the business or maybe even the way you guys participate in that and partner with them in some way or sell some of the products, have you guys given thought to that?

There are a lot of changing dynamics going on with what the various technology companies are announcing with respect to the video game business and new entrants into the space and things that they established partners are looking at. We continue to have discussions with the console makers and these other technology companies about ways that we as a specialty retail leader has the best opportunity that they have to gain customer acquisition can play in those kinds of new business arrangements and new technologies.

Thank you. And that does conclude today's question-and-answer session. I would now like to turn the call back over to Mr. Robert for closing remarks.

Okay. We thank you all for your continued interest in GameStop. We thank you for your continued support. Again, we're looking forward to what's coming in 2019, including with George's arrival, and we hope to be reporting some interesting things to you in the future.

And that concludes today's question and -- that concludes today's conference. Thank you for your participation.