Greetings. Welcome to the GameStop First Quarter 2020 Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Eric Cerny, Investor Relations. You may begin.

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 in 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. Now I would like to turn the call over to the company's Chief Executive Officer, George Sherman.

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, health care 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 markets during each of the respective memorial services in those markets. For our time today, I'd like to start for 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 of the year to be challenging as we are entering 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 1/3 of our U.S. locations, and for the remaining 2/3, we stopped customer access to storefronts and fulfill 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, not only the customers in our stores, but also our distribution centers in Europe, Canada and New Zealand were either closed or stay-at-home orders limited our 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, remain fully open during the final 6 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, given our strategic initiative to build a frictionless digital ecosystem for content and commerce, our e-commerce sales, which are included in our comparable store sales, rose 519% in Q1. I was pleased with our team's ability to adapt quickly. And despite significant disruption, stores managed to retain most of their planned sales volume to online and curbside pickup and delivered 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. And while the mix shift toward hardware comes at a lower margin, the demand demonstrates that GameStop is 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 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 for the quarter 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 entertainment options. In terms of SG&A, we continue to focus on our long-term expense reduction efforts, and despite the additional cost deleveraging 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 2 weeks of pay, or for those eligible, paid time off to ease some of the burden of the impact of the pandemic-related mandated store closures. Importantly, the quarter saw strong progress in our priorities. Typically, we share with you 4 strategic pillars. Today, I will focus on our pillars of 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 versus 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. Obviously, we have several stores that have been impacted by the recent social unrest in the United States, and we continue to focus on the safety of our associates and customers. We have had roughly 100 stores of our 3,500 locations in the U.S. impacted by temporary closure due to physical damage and looting. To date, we've reopened about 35% of those locations, but we anticipate another 35 or about 1/3 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 to third-party mobility indices being published, and are finding some correlation as our experience has so far shown a reopening ramp of 3 to 4 weeks before sales go back to our expectations. We know that our ability to reopen our 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 3 newly appointed directors to our Board, all of whom joined us during the quarter. These appointments represented an important milestone in GameStop's transformation as we continue to evolve the company's 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 that are experts in gaming. This gives us an advantage as new consoles are introduced as we will be the go-to source for education on the advanced technology, how to use the systems along with all the newly advanced accessories that go along with them. Third, we are capitalizing in 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 environment challenges and invest in our strategy. So 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.

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 #1 priority is the health and safety of our associates, customers and communities during the COVID-19 pandemic. And as such, in March, we temporarily closed approximately 76% of the company's 1,802 international stores. On March 22, we temporarily closed all of our 3,526 U.S. locations, 2/3 of which were closed to any direct customer access, but did conduct a limited curbside pickup offering, leveraging our omnichannel buy online, pick up in-store and ship-from-store capabilities. During the remainder of the first quarter, approximately 10% of the global fleet, which was primarily our Australian business unit, remained fully open and accessible to customers. Despite the impact of store closures around the world, our business in Q1 reflected 3 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, the ability of our teams around the world to quickly adapt to meet increased product demand despite the limited ability to meet face to face with our customers. In that light, 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 longer than 2 contiguous weeks during the quarter. Importantly, despite these closures and limited operations during the 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 comp sales decline of approximately 4%. As you can see, in contrast to the fiscal fourth quarter last year, we believe the predominance of the sales decline so far this year is represented by 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. The overall sales decline was attributed to the reported comp store sales decline of 17%, approximately 13% from the impact of COVID-19 related fully closed stores 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 21.8% for Q1, the vast majority of which was attributable to full store closures. Despite the decline in the overall category, Nintendo Switch continues to perform very well, with sales in the quarter showing a material increase compared to the first quarter last year. Software, particularly catalog and pre-owned, as well as our collectibles, tend to be market basket builders in store. And as such, both of the software and collectibles categories each declined approximately 43% for the quarter, reflecting the customers' inability to access our storefronts. There were only a few new software titles that launched in the first quarter, 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 representing approximately 50% of sales, a much larger penetration level as compared to 42% last year. As a result, our overall global gross margins were 27.7% or 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 onetime investments we made in the quarter related to COVID-19. The first of which was approximately $18.5 million of incremental wages associated with our decision to pay an additional 2 weeks of pay or, if eligible, 2 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 do anticipate some of the SG&A reductions to come back in future quarters as we return to more normalized operations of our stores and our distribution centers. However, a significant portion of the reduction is also directly related to our ongoing efforts to aggressively rationalize the overall cost structure of the business. As a result of the worldwide impact on our store operations, the COVID-19 pandemic, we realized an operating loss of $108 million compared to operating income of $17.5 million in the prior year first quarter. Adjusted operating loss, excluding the transformation severance and other charges, was $98.8 million compared to the operating income of $17.5 million in the prior year first quarter. Importantly, again, these results do not adjust for the over $21 million of onetime investments we made in the quarter that I mentioned a minute ago. 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 impact of the $53 million noncash tax adjustment in the quarter, 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 $53 million 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 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. Again, this net loss is not adjusted for the $21 million in incremental COVID-19 related costs mentioned before. During the first quarter, we continued to focus on optimizing our global store fleet and strategically de-densifying certain markets. For the quarter, we closed a net total of 181 stores. As we told you in March, we expect our strategic market optimization efforts to result in a similar number of store closures in 2020 as compared to 2019 or roughly 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. Now turning to the balance sheet. At the end of the fiscal first quarter, we had total cash of $570.3 million, including $135 million drawn on the revolver. Subsequently, given 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, which is directly related to our ability to leverage a flexible supply chain and reduced purchase orders around the world at the very onset of the viral pandemic, thus, not creating a liability drag on the business or on cash flows. We ended the first quarter with total inventory of $654.7 million compared to $1.15 billion in the prior year period, a reduction of 43%. As we have said, 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 the further improvement in working capital efficacy. We are very pleased with the continued progress we are making with regards to working capital, and specifically, the improvement on the efficiency of the cash conversion cycle on our inventory, which is reflected in both the 43% and 54% decline 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 continues to manifest itself in the balance sheet and is key to providing us the necessary liquidity and financial flexibility to manage the current environment as well as support the upcoming inventory investments in new software titles and new generation of consoles and the associated accessories upcoming in the third and fourth quarter. Due to the ongoing potential impacts of the COVID-19 crisis, as is consistent across the retail industry, we continue to suspend our forward guidance. However, we do believe that our efforts to maintain the strength of our balance sheet will continue for the long term. As an indication of that, 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, the end of the fiscal quarter, we had $417.2 million of our outstanding notes on the balance sheet. In keeping with our objective to maintain a strong and healthy 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 is intended to provide us with even further financial flexibility by replacing and extending the maturity of the existing notes that are validly tendered as we continue to focus on advancing our long-term strategy and objectives. Further to our goals of maintaining a strong balance sheet, on June 5, we completed the sale of our corporate jet, and continue to work to efficiently monetize certain other real property assets of the business. In the first quarter, we had $6.6 million of capital expenditures. It's important to note that 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 I mentioned before, we have generally suspended guidance as a result of the COVID-19 impact on our business. However, it's important to note that in addition to the second quarter cash expectations I shared earlier, we do believe in 3 things: one, our performance during the peak of the pandemic; two, our current trajectory; and three, our expectations for the back half of the year console launch will all contribute to generate positive adjusted EBITDA for the fiscal year. We remain confident that the progress against our GameStop reboot objectives is providing the key support for us to navigate this trying and unusual time. We remain intensely focused on continuing to execute actions to further strengthen our overall financial architecture, including all key profit and expense levers that will result in an organization that is efficient, streamlined and poised to capitalize on a significant profit flow-through improvement as we experienced expected robust sales growth in late 2020, led 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 that you may have.

[Operator Instructions] And our first question is from Steph Wissink from Jefferies.

I have 2 quick housekeeping questions in 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 give us a quick statistic update on what you are seeing in store closures and the transfer value.

Yes, Steph. The average lease-up primarily here in the U.S. remains around 2 years. So that would obviously, say, that in a 12-month period, then we're going to turn over about half the fleet from a lease perspective. And in general, that's kind of how it tracks. On the second one, the transfer rate is -- it's actually not something that we've published publicly. But suffice it to say that we're actually seeing a little bit even stronger rates than we had, I think, really pragmatically planned early on. And so that's why we've accelerated some of the closures numbers by about 100 in terms of our expectations. So we're seeing a little bit better than that -- than what our original expectations were.

Okay. That's helpful. My question, George, for you is you said something in the script that really struck me, which is the idea of kind of this renewed interest in gaming that was maybe inspired by the pandemic or a result of the pandemic. I'm curious if you can talk a little bit about what you're seeing in your customer database. Were these customers that were once gamers and have returned to become gamers? Are you finding that this is a new population of gamers? And how does that play into the negotiations you are having right now with the OEMs regarding your revenue sharing partnerships?

Yes, Steph. Thanks for the question. I mean we saw this early on when the store closures began. So really, the last couple of weeks of March, kind of going into April, and it really showed up in the form of hardware sales predominantly. I think we mentioned that any game that was launched in this time frame really did better than expected. And that's on a large scale basis like Animal Crossing, and then certainly smaller games perform much better as well. So we saw a lot of new interest, and we saw, obviously, a lot of hardware purchasing late in the console cycle. And we know that our core customer has long since bought second devices and is looking ahead toward the next-generation consoles in November. So we're certain that we saw new gamers come in. We don't have any reason to believe that it is a return to gaming. We think that it's net new gaming predominantly. And that shows up for us in terms of loyalty as net new e-mail addresses and net interest. So it's certainly beneficial to us. I mean any time that the overall pie gets bigger, we benefit from that given our market share. So yes, by all means, it's something that we can parlay into conversations with our partners as we look down the road. And certainly, our hope would be that we can maintain close contact, build that social interaction with these new customers, get them deeper and deeper in the gaming and have them start looking forward to new consoles as well. So yes, no doubt. I mean hardware was a pretty scarce commodity and very, very end of cycle. And then, of course, the Switch, which is still very, very viable, did amazingly well. And as we said, we think we're the largest sellers in the world of that device. And we get them in, we sell them out in 24 hours. So still big demand, which we think is largely attributable to new gamers.

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

On e-commerce, the growth that you have seen, I'm sure a lot of that is due to just your store closures and all the success that you've had with omnichannel. But can you give us an update as far as are you going to be able to hit that $1 billion target much earlier than expected as a result? And then what changes you're making to your e-commerce platform itself to drive results or fulfill demands that you're seeing incremental to your expectations?

Yes. I mean, first of all, Ray, thanks. It obviously is going to help us is a step in the right direction. It's pretty rapid for our growth that we experienced. So again, those peak periods up over 1,500% and over 500% for the quarter. By all means, we've made some process improvements. I think it all begins with the hiring of a Chief Digital Officer. So we put a stake in the ground on this. It's obviously 1 of our 4 growth pillars is frictionless digital ecosystem. We've been going after this one pretty hard. We've been improving the fulfillment process. It's changed a number of things. I mean from the amount of freight that flows through to stores versus how much is held back into distribution centers. It's had a ripple effect on our supply chain strategy. We are a 7-day a week operation now in our DCs as it applies to e-commerce. So it's been great growth. Of course, you're right. I mean a lot of that really began with the closure of stores, but there's no question that it has been an unnatural, and to a certain degree, I mean, unfortunate inflection point. But it sure drove our business in the right direction in a hurry.

I'd add a color point to that because it's important. It's not just a function of how the e-commerce channel operates by itself relative to the brick-and-mortar locations. But more importantly, how the omnichannel, the entirety of the omnichannel business works collectively. And importantly, what we saw is with the growth in e-commerce, a lot of that was driven by buy online pickup in-store and ship from store, but the vast majority of those orders are picked up in the same day or the next day. And that's important because that gives us the true omnichannel efficiency. And so we'll continue to balance both of those. But as we continue to open stores, we see some continued health in e-commerce driven ordering.

Yes. And I'll build off of what Jim said, we couldn't have done it without this e-commerce capability. I mean our ability to do -- to have contactless curbside delivery was built directly off of our "buy online pickup in-store" capability. As I mentioned, we generally would flow through more of our freight to the stores and hold it there. So early on, ship from store was a big fulfillment channel for us in terms of driving omnichannel. So it really was the fungibility of all these assets leveraging off of one another.

Got it. And then a follow-up on pre-owned inventory. So you guys have inventory down substantially year-over-year, and you've seen strong demand for some of the hardware preowned that you talked about. Is there any way to think about where your sort of total customer rewards points are trending? So are you seeing a situation where rewards points are falling as people keep buying new things with those rewards points? And then so you're sort of going to be heading into holiday with a lack of sort of money in the system to buy other products? Or is that the wrong way to think about it? You are doing well as far as a trade-in perspective as well as demand perspective?

Yes. This is Jim. First of all, from an inventory perspective, I think I'll comment more globally about our pre-owned inventory. This has been an area that Chris Homeister, our Chief Merchant, and myself have been working out with our teams extensively, not just on new inventory management, but the pre-owned as well, and creating efficiencies in how we manage that in terms of overall turn and cash conversion cycle. So that's one. Two, certainly, with respect to the way that you discussed the points with loyalty -- in the loyalty program and the engagement with our products, that isn't the right way to think about it. In fact, what we -- in particular, George mentioned the new entrants. What we saw in this last several couple of months here with the surge is really these are tend to be new entrants into the, at least from what we can see in terms of the file. So we think that's important. And again, the preowned product in the buy-sell-trade capability gave us the opportunity that we think not a lot of people have, which is be able to supplement when the new -- when there was a scarcity for new hardware, we were actually able to lean in on our pre-owned product that we have in the system.

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

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

Yes. No, we're not providing any more information on May. We just wanted to provide some direction on how May was performing relative to the months that we also disclosed, which is how do we make -- we wanted to make sure that we were giving some information and some insight into how the business was trending pre, during and as we're continuing to make the evolution out of the peak of the pandemic. I mean obviously we're still in the middle of this process, we're opening stores. So we wanted to just give some indication of that. Is that when you say it's adjusted, yes, we do not include stores that are closed for longer than 2 weeks on contiguous basis. So that's it.

Got it. Understood. And then as a follow-up, I just wanted to dig a little bit more into the comment about hitting positive EBITDA for the year. I know you guys are obviously very positive in terms of the coming cycle. But I don't know, just kind of looking back at the history, typically, at least from what I can see in quarters where you have constant launches, those aren't great in terms of EBITDA, just given the sales mix into hardware and maybe less sales for some of the higher-margin products. So are you expecting an increase in EBITDA in 4Q? And how should we think about -- are you expecting positive free cash flow for the year given that comment?

Yes. I think I'll comment specifically, and George, you might have some color here as well. But the way to think about it is we have been working in the year that this management team has been together here. The core of our activities, especially around optimizing the core of the business, have been focused on really re-architecting the financial architecture of this business. And so that we're actually in a much better place to take advantage of a console launch. So if you're looking at history, I don't think you should look at that flow through because the ability to have lower expenses, ability to have a much tighter inventory management, cash conversion cycle, all of those thing yield better results all the way through in terms of the flow-through of the sales growth. And we think that, that's actually incredibly important difference of where GameStop sits today versus in prior long cycles. George?

Yes. Look, Curtis, I'd add, I think when you're a specialty retailer, you feel the full impact of the downside of the cycle as we felt over the last year or so. You also get the benefit of the upside. It is not our intent to sell gaming consoles by themselves. That's where we're different. That's where we're -- we play a very important role to the vendor community. We attach you at a different level. So we certainly would expect it to attach games, we certainly would expect to attach accessories and we certainly would expect to attach collectibles at a higher-margin rate as part of this. So it's going to be a traffic event for both online and for our stores, no question about it. We will parlay out the traffic.

And our next question is from Seth Sigman from Crédit Suisse.

I did want to follow-up on that May trend. So the down 4% comps, that compares to down 14.4% in April, I think I heard. But presumably very different store numbers included in each of those periods, just given the store closing dynamics. So can you just help us a little bit here? What percent of your store base is captured in that comp base for May versus April?

Yes. I mean here's the way to think about it. Again, very, very dynamic week to week. So in the U.S. market, as an example, we really started to -- stores started to open up for some form of limited access. When we say limited access, what we mean is, is safe and secure or safe and sanitary access for a limited amount of customers to maintain proper social distancing. And so it really is a dynamic number. I can't give you any one binary point because it's -- and it's continuing to evolve today. And we still have roughly a little over 500 stores that are opening as we speak. So it's really difficult for me to answer that question of binary form.

Yes. It really is 3 dimensional. You have open versus closed, you have delivery at door versus limited access and you have open for 1 week versus open for 4 weeks, all rolling across the country and across the world. So as mentioned in the script, 90% open across the world right now, that includes virtually the entirety of Europe. So for all practical purposes, save 5 stores, I think it is in France around the large malls in the Paris suburbs, a few in Italy in the Milan area. Europe is open. Australia/New Zealand is 100% open. And that leaves the majority in the U.S. and Canada that we're working towards. But it's happening very, very quickly. But as Jim said, it's just too rolling in nature to really answer that 1 directly.

Yes. Okay. Okay. And this is just a clarification, then I have a real follow-up. But just to help us modeling here, since the negative 4 doesn't really flow through the model, I know it's really illustrative, right? But it's revenue that flows through the model. So can you sort of give us a sense of what the revenue growth in the May time period will look like quarter-to-date so that we can use that in the model?

You know what, I don't have it in front of me. So I don't think we're prepared to talk about that today.

Okay. Okay. So my real follow-up was around the comments around positive EBITDA for the year. Can you just help us with that a little bit more? I want to confirm, is that all expected to come in the fourth quarter? And if so, it does imply a pretty significant year-over-year increase. It doesn't seem like hardware alone gets you there. So can you kind of give us a sense of some of the other assumptions embedded there? And what gives you confidence?

Yes. Again, we're not giving any breakout of a quarterly contribution of that. So that's just meant to give some indication as to how we view the entirety of the year working together. A couple of key things I'd share on this is, in the third quarter, there are a number of key software titles, many of which were postponed from last year into this year, and some of those were originally slated for earlier in the year that were then postponed again due to the pandemic from the beginning of the year to the back half. And so there's a whole series of moving parts here that around new software launches, and then certainly, the expected console launches, which we expect to see hit the marketplace in the fourth quarter. But now remember, as George indicated in some of the earlier comments, that also entails a significant degree of attachment to those consoles, whether that's warranty levels, whether it's controllers, whether it's collectibles, whatever it might be. I mean there's a whole series of things that come along with. What is now 7 years of technological development by the OEMS, and that brings further technology and the accessories as well.

Our next question is from Carla Casella from JPMorgan.

My question is if you could talk to us about the borrowing base and the seasonality of how you expect it to trend through the year. And I'm not sure if you gave the liquidity number as of the quarter, how much was available under the revolver?

So I don't remember saying that actually specifically. But the way the borrowing base works, Carla, is that it's obviously supported by the inventory. It's an asset-backed lending revolver. The primary security factors, the inventory and the AR. And so as a function of that, it follows the high seasonality of our fourth quarter. And so the peak availability in that revolver is $430 million. But that really only is available during a couple of months, really November, December time frame, if you think about it that way, generally speaking. And so in essence, anywhere between $150 million and $250 million of availability for the rest of the year, again, depending on the inventory levels.

And so, did you give what that availability was as of 1Q? And I was just -- I understand the seasonality, but I was wondering if this year with the COVID disruption you expect any of that to be different. You've reduced your inventory pretty considerably.

Yes. And again, I just don't have that number off the top of my head, but it's in the Q. And certainly, available there in. So sorry about that, Carla, but I just don't have it off the top of my head. But suffice it to say, yes, we've reduced our inventory levels, but we do have availability. And as we mentioned, for example, we paid down about -- actually down to about $100 million. We originally borrowed about $150 million on the revolver, and we've paid down $50 million of that. So we were holding about $100 million as of about a week or 2 ago.

Okay. That's great. And then I had one question on your -- the business trends and if it will trend any different this year because of the launches. So if we look at margins on preowned versus software versus hardware, we've seen them historically, it's been a long time since there has been a new hardware launch. How do you expect margins to trend your gross margins on those categories as we're going into the launch?

Yes. So again, I think you have to think about -- so as we saw, for example, in the last couple of months, you saw a hardware shift and a lot of that was new hardware. And so that was the primary driver between, for example, the 270 basis points of year-over-year change in the margin was really due to the mix shift into the hardware. And if you're looking about it, for example, those are new entrants, it's important because then there are second, third, fourth order transactions that come from those new entrants that we enjoy here with respect to -- especially customers that come into our loyalty program. And so you'll see a change in the margin rate of that market basket at later transactions. But suffice it to say, if you think about some of the key titles, major titles that I talked about a minute ago, we'll have some velocity in the third quarter, at least expected launches. That will tend to P mix into, or product mix into software, new software. And those rates are obviously going to be better than hardware. Hardware, new products are going to be, from a rate perspective, lower than our preowned hardware and software. And pre-owned continues to be an important part of the business. Importantly, as I mentioned in my comments, pre-owned software and collectible are 2 categories that are higher-margin categories. And it's important because when the stores are closed and customers don't come and they generally have their attachments into a market basket. And so the associates in the stores are building that market basket with customers as they're coming in, and then also new software that's in the catalog. And so when we don't have customers able to walk in the stores, that does change the margin profile of the transaction. But when they come back into the stores, then we also see it shift back the other way.

Yes. I think Jim mentioned it in his script, I mean, part of the area that we do not see sales in during COVID, especially when we're in a delivery at door mode, is catalog sales. So most of the sales tend to be dominated, in this particular case, by hardware and new release software. As stores open up, customers that have access to the store, we would expect to see a different depth of shopping experience getting back into catalog software sales. Of course, there was no access to collectibles other than via the web. So unless something was a new release, a Funko Pop! or something like that is not going to have much visibility. And we would expect the reemergence of our pre-owned business going into the fall season as well. We've been closed. It's just not been, from a hygiene standpoint, something that we wanted to do, exchanging games and exchanging software via curbside. Now that stores are open and now that we have a UV cleaning process, we're putting all of our hardware through as we return it to our refurb operations center, we do expect to see trade-in as a down payment toward new gaming consoles and new games.

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

In terms of the timing of when payables are due, I would expect that given that you have a handful of software launches, which are expected to probably do fairly well, and then you've got the console, which I imagine you sell-out of those extremely quickly, will the terms be such that the working capital build for inventory should be less than we've seen maybe in historical periods around the holidays?

Look, the right way to think about it, yes. The right way to think about it is a perspective that when you're turning -- given our payment terms, which I'm not going to comment on here in terms of what our agreements are with our vendors. But suffice it to say that, yes, if you're thinking about selling the product inside of once or twice inside of those payment terms, yes, that's the right way to think about it.

Okay. And then I'm not sure if you could provide in aggregate what the shift in terms of the new software releases, which were shifted from 1Q into 2Q would be. Is there any guidance you can help us with there?

No, we're really not providing any further guidance. Again, importantly, there's just -- there's 2 -- there still remains too much uncertainty in the marketplace right now.

And our final question is from Bryan Hunt from Wells Fargo.

My first question is I was wondering if you could touch on when the plane, your corporate jet was sold, what were the proceeds? And then shifting gears, looking at the asset base, what other asset may be for sale? And what type of proceeds are you expecting to yield from asset sales during the year?

Yes. This is Jim, Bryan. On the jet we just sold last week, we were holding it for sale on -- as an asset held for sale. And so that was roughly around just short of $9 million in terms of the asset. And then we have some real estate assets that are -- that we've had out in the marketplace here over the last several weeks. And I'll just break it down for you, 1 in Canada, 1 in Australia and 3 buildings here in the U.S.

And are those all of your distribution centers?

They're distribution centers and offices as well in all 3 locations in Canada, Australia and the U.S., we co-locate offices with the distribution centers.

Okay. Are those assets you plan on continuing to use? Like are you looking to do sale leasebacks or completely exit the facility?

No, we fully expect to utilize those assets. Just we own them. They're sitting on the balance sheet as assets and we feel that as a retailer and certainly one that's making this transition that we are for some of the important growth vehicles we have on the plate that we don't need to be in the business of owning real estate, but we can deploy that capital in a much more efficient way.

Very good. So you don't have those listed as assets for sale on the 10-Q. Currently, that is...

No, because -- Yes, because the intention is to do a sale leaseback. And so therefore, the requirement doesn't provide for that.

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

Yes. Look, 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, and honored to have a group of store associates and total team that are so 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.

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