Consolidated GAAP Net Loss of $52.7 million
Retail Segment Gross Comparable Store Sales
Increased 15.0%
General Merchandise Gross Comparable Store
Sales Increased 34.0%
First Day® Complete Adopted by 111 Campus
Stores for the Fall 2022 Term, Representing Undergraduate Student
Enrollment of Over 545,000, up 85% from 295,000 in the Prior
Year
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the first quarter ended on July 30,
2022. Barnes & Noble Education is a highly seasonal business,
and the first quarter is historically a period of low sales
activity for the Company.
Financial results for the first quarter 2023:
- Consolidated first quarter GAAP sales of $263.9 million
increased 9.6%, as compared to the prior year period.
- Consolidated first quarter GAAP gross profit of $63.5 million
increased 5.8%, as compared to the prior year period.
- Consolidated first quarter GAAP net loss of $(52.7) million,
compared to a net loss of $(43.6) million in the prior year
period.
- Consolidated first quarter non-GAAP Adjusted Earnings of
$(50.8) million, compared to $(40.0) million in the prior year
period.
- Consolidated first quarter non-GAAP Adjusted EBITDA of $(33.4)
million, compared to $(24.5) million in the prior year period.
Operational highlights for the first quarter 2023:
- 111 campus stores have adopted BNC’s First Day® Complete
courseware delivery program for the 2022 Fall Term, representing
approximately 545,000* in total undergraduate student enrollment, a
growth rate of 85% over Fall 2021 based on undergraduate student
enrollment.
- Retail segment gross comparable store sales for the quarter
increased by 15.0% on top of a 49.8% increase a year ago. Please
see a more detailed definition in the Results table and Retail
segment discussion below.
- General merchandise gross comparable store sales increased
34.0%.
- DSS revenue grew 10.6% to $9.2 million.
*As reported by National Center for Education Statistics
(NCES)
“As we begin the 2022 – 2023 academic year, we are excited to
welcome students back to campus for a more traditional in-person
learning experience with a greater number of on-campus activities
and events,” said Michael P. Huseby, Chief Executive Officer, BNED.
“Our first quarter began with a solid start and consolidated
results were in line with our expectations, benefitting from a
strong graduation season, as many schools returned to in-person
ceremonies, and robust general merchandise sales. We expanded
staffing at stores in response to the greater on-campus activity
and to prepare for what we expect to be a strong Fall Rush period.
We are currently in the thick of our peak Fall Rush season and are
excited to provide many more students with our First Day Complete
inclusive access offering that’s designed to improve student
outcomes through access, convenience and affordability. One hundred
eleven (111) of our campus stores have implemented First Day
Complete for the Fall term, representing undergraduate enrollment
of approximately 545,000 students, representing an 85% growth rate
over Fall 2021 based on undergraduate student enrollment.
Additionally, we expect our general merchandise business to
continue to grow, benefitting from our partnership with Fanatics
and Lids and increased on campus traffic, including an increase in
the number of activities and events as schools approach a more
traditional learning experience.”
First Quarter Results for 2023
Results for the 13 weeks of fiscal 2023 and fiscal 2022 are as
follows:
$ in millions
Selected Data (unaudited)
13
Weeks
Q1 2023
13
Weeks
Q1 2022
Total Sales
$263.9
$240.8
Net Loss
$(52.7)
$(43.6)
Non-GAAP(1)
Adjusted EBITDA
$(33.4)
$(24.5)
Adjusted Earnings
$(50.8)
$(40.0)
Additional
Information:
Retail Gross Comparable Store Sales
Variances (2)
$33.5
$73.6
(1) These non-GAAP financial measures have
been reconciled in the attached schedules to the most directly
comparable GAAP measure as required under SEC rules regarding the
use of non-GAAP financial measures. (2) Retail Gross Comparable
Store Sales includes sales from physical and virtual stores that
have been open for an entire fiscal year period and does not
include sales from closed stores for all periods presented.
In-store and online logo and emblematic general merchandise sales
fulfilled by FLC and Fanatics, respectively, and are recognized on
a net commission revenue basis, as compared to the recognition of
online logo and emblematic sales on a gross basis in the prior year
period. For Retail Gross Comparable Store Sales purposes, sales for
logo and emblematic general merchandise fulfilled by FLC, Fanatics
and digital agency sales are included on a gross basis.
The Company has three reportable segments: Retail, Wholesale and
Digital Student Solutions (“DSS”). Unallocated shared-service
costs, which include various corporate level expenses and other
governance functions, continue to be presented as Corporate
Services. All material intercompany accounts and transactions have
been eliminated in consolidation.
Retail Segment Results
Retail sales increased by $26.0 million, or 12.4%, as compared
to the prior year period. Retail Gross Comparable Store Sales
(non-GAAP) increased 15.0% for the quarter, with comparable
textbook sales increasing 1.5%, on top of a 21.9% increase a year
ago. Retail Gross Comparable Store Sales for general merchandise
increased 34.0%, on top of a 119.4% increase a year ago. The growth
in general merchandise sales was led by a strong graduation season
and a rebound in café and convenience food product sales, which
benefited from greater on-campus traffic.
The Retail non-GAAP Adjusted EBITDA loss for the quarter was
$(25.0) million, as compared to a non-GAAP Adjusted EBITDA loss of
$(19.6) million in the prior year period. The non-GAAP Adjusted
EBITDA loss increased on higher selling and administrative
expenses, primarily related to the expanded staffing at stores in
response to greater on-campus activity during the quarter and in
preparation for the upcoming peak fall term, including support for
the growth in First Day programs.
Wholesale Segment Results
Wholesale first quarter sales of $37.1 million decreased $7.4
million, or 16.6%, as compared to the prior year period. The
decrease is primarily due to used textbooks supply constraints
resulting from the lack of on campus textbook buyback opportunities
over the last two years and lower customer demand, partially offset
by lower returns and allowances.
Wholesale non-GAAP Adjusted EBITDA for the quarter declined to
$2.8 million, as compared to $6.4 million in the prior year,
declining on the lower sales.
DSS Segment Results
DSS first quarter sales of $9.2 million increased $0.9 million,
or 10.6%, as compared to the prior year period.
DSS non-GAAP Adjusted EBITDA was $0.9 million for the quarter,
as compared to $1.7 million in the prior year period.
Outlook
For fiscal year 2023, the Company expects consolidated non-GAAP
Adjusted EBITDA to be between $30 million to $40 million. The
Company expects significant improvement in its Retail business
being driven by new First Day Complete implementations, growth
within its general merchandise business and new business wins. The
challenges within its wholesale business, including constrained
used book inventory and higher inflationary pressures on wages and
freight, are expected to persist. DSS non-GAAP Adjusted EBITDA is
expected to be near fiscal year 2022 levels as revenue growth is
offset by investments in product enhancements.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 8:30 a.m. Eastern Time on Wednesday,
August 31, 2022 and can be accessed at the Barnes & Noble
Education corporate website at investor.bned.com or
www.bned.com.
Barnes & Noble Education expects to report fiscal year 2023
second quarter results in December 2022.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED) is a
leading solutions provider for the education industry, driving
affordability, access and achievement at hundreds of academic
institutions nationwide and ensuring millions of students are
equipped for success in the classroom and beyond. Through its
family of brands, BNED offers campus retail services and academic
solutions, a digital direct-to-student learning ecosystem,
wholesale capabilities and more. BNED is a company serving all who
work to elevate their lives through education, supporting students,
faculty and institutions as they make tomorrow a better, more
inclusive and smarter world. For more information, visit
www.bned.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us or our
management, identify forward-looking statements. Moreover, we
operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make, including any statements made in regards to our
response to the COVID-19 pandemic. In light of these risks,
uncertainties and assumptions, the future events and trends
discussed in this press release may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward-looking statements. Such statements reflect
our current views with respect to future events, the outcome of
which is subject to certain risks, including, among others: risks
associated with public health crises, epidemics, and pandemics,
such as the COVID-19 pandemic, including the duration, spread,
severity, and any recurrences thereof, and the impact such public
health crises have on the overall demand for BNED products and
services, our operations, the operations of our suppliers and other
business partners, and the effectiveness of our response to these
risks; general competitive conditions, including actions our
competitors and content providers may take to grow their
businesses; a decline in college enrollment or decreased funding
available for students; decisions by colleges and universities to
outsource their physical and/or online bookstore operations or
change the operation of their bookstores; implementation of our
digital strategy may not result in the expected growth in our
digital sales and/or profitability; risk that digital sales growth
does not exceed the rate of investment spend; the performance of
our online, digital and other initiatives, integration of and
deployment of, additional products and services including new
digital channels, and enhancements to higher education digital
products, and the inability to achieve the expected cost savings;
the risk of price reduction or change in format of course materials
by publishers, which could negatively impact revenues and margin;
the general economic environment and consumer spending patterns;
decreased consumer demand for our products, low growth or declining
sales; the strategic objectives, successful integration,
anticipated synergies, and/or other expected potential benefits of
various acquisitions may not be fully realized or may take longer
than expected; the integration of the operations of various
acquisitions into our own may also increase the risk of our
internal controls being found ineffective; changes to purchase or
rental terms, payment terms, return policies, the discount or
margin on products or other terms with our suppliers; our ability
to successfully implement our strategic initiatives including our
ability to identify, compete for and execute upon additional
acquisitions and strategic investments; risks associated with
operation or performance of MBS Textbook Exchange, LLC’s
point-of-sales systems that are sold to college bookstore
customers; technological changes; risks associated with counterfeit
and piracy of digital and print materials; our international
operations could result in additional risks; our ability to attract
and retain employees; risks associated with data privacy,
information security and intellectual property; trends and
challenges to our business and in the locations in which we have
stores; non-renewal of managed bookstore, physical and/or online
store contracts and higher-than-anticipated store closings;
disruptions to our information technology systems, infrastructure
and data due to computer malware, viruses, hacking and phishing
attacks, resulting in harm to our business and results of
operations; disruption of or interference with third party web
service providers and our own proprietary technology; work
stoppages or increases in labor costs; possible increases in
shipping rates or interruptions in shipping service; product
shortages, including decreases in the used textbook inventory
supply associated with the implementation of publishers’ digital
offerings and direct to student textbook consignment rental
programs, as well as the risks associated with the impacts that
public health crises may have on the ability of our suppliers to
manufacture or source products, particularly from outside of the
United States; changes in domestic and international laws or
regulations, including U.S. tax reform, changes in tax rates, laws
and regulations, as well as related guidance; enactment of laws or
changes in enforcement practices which may restrict or prohibit our
use of texts, emails, interest based online advertising, recurring
billing or similar marketing and sales activities; the amount of
our indebtedness and ability to comply with covenants applicable to
any future debt financing; our ability to satisfy future capital
and liquidity requirements; our ability to access the credit and
capital markets at the times and in the amounts needed and on
acceptable terms; adverse results from litigation, governmental
investigations, tax-related proceedings, or audits; changes in
accounting standards; and the other risks and uncertainties
detailed in the section titled “Risk Factors” in Part I - Item 1A
in our Annual Report on Form 10-K for the year ended April 30,
2022. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described
as anticipated, believed, estimated, expected, intended or planned.
Subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements in this paragraph. We
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise after the date of this press
release.
EXPLANATORY NOTE
We have three reportable segments: Retail, Wholesale and DSS as
follows:
- The Retail Segment operates 1,406 college, university, and K-12
school bookstores, comprised of 793 physical bookstores and 613
virtual bookstores. Our bookstores typically operate under
agreements with the college, university, or K-12 schools to be the
official bookstore and the exclusive seller of course materials and
supplies, including physical and digital products. The majority of
the physical campus bookstores have school-branded e-commerce
websites which we operate and which offer students access to
affordable course materials and affinity products, including
emblematic apparel and gifts. The Retail Segment also offers
inclusive access programs, in which course materials, including
e-content, are offered at a reduced price through a course
materials fee, and delivered to students on or before the first day
of class. Additionally, the Retail Segment offers a suite of
digital content and services to colleges and universities,
including a variety of open educational resource-based
courseware.
- The Wholesale Segment is comprised of our wholesale textbook
business and is one of the largest textbook wholesalers in the
country. The Wholesale Segment centrally sources, sells, and
distributes new and used textbooks to approximately 3,100 physical
bookstores (including our Retail Segment's 793 physical bookstores)
and sources and distributes new and used textbooks to our 613
virtual bookstores. Additionally, the Wholesale Segment sells
hardware and a software suite of applications that provides
inventory management and point-of-sale solutions to approximately
350 college bookstores.
- The Digital Student Solutions ("DSS") Segment includes products
and services to assist students to study more effectively and
improve academic performance. The DSS Segment is comprised of the
operations of Student Brands, LLC, a leading direct-to-student
subscription-based writing services business, and bartleby®, an
institutional and direct-to-student subscription-based offering
providing textbook solutions, expert questions and answers, writing
and tutoring.
Corporate Services represents unallocated shared-service costs
which include corporate level expenses and other governance
functions, including executive functions, such as accounting,
legal, treasury, information technology, and human resources.
All material intercompany accounts and transactions have been
eliminated in consolidation.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(In thousands, except per
share data)
(Unaudited)
13 weeks ended
July 30, 2022
July 31, 2021
Sales:
Product sales and other
$
252,946
$
227,770
Rental income
10,912
13,024
Total sales
263,858
240,794
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales (a)
194,105
174,161
Rental cost of sales
6,265
6,604
Total cost of sales
200,370
180,765
Gross profit
63,488
60,029
Selling and administrative expenses
98,486
86,235
Depreciation and amortization expense
12,533
12,624
Restructuring and other charges (a)
375
1,905
Operating loss
(47,906
)
(40,735
)
Interest expense, net
3,868
2,494
Loss before income taxes
(51,774
)
(43,229
)
Income tax expense
933
399
Net loss
$
(52,707
)
$
(43,628
)
Loss per common share:
Basic
$
(1.01
)
$
(0.85
)
Diluted
$
(1.01
)
$
(0.85
)
Weighted average common shares
outstanding:
Basic
52,172
51,474
Diluted
52,172
51,474
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
July 30, 2022
July 31, 2021
Percentage of sales:
Sales:
Product sales and other
95.9
%
94.6
%
Rental income
4.1
%
5.4
%
Total sales
100.0
%
100.0
%
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales (a)
76.7
%
76.5
%
Rental cost of sales (a)
57.4
%
50.7
%
Total cost of sales
75.9
%
75.1
%
Gross profit
24.1
%
24.9
%
Selling and administrative expenses
37.3
%
35.8
%
Depreciation and amortization expense
4.7
%
5.2
%
Restructuring and other charges
0.1
%
0.8
%
Operating loss
(18.0
) %
(16.9
) %
Interest expense, net
1.5
%
1.0
%
Loss before income taxes
(19.5
) %
(17.9
) %
Income tax expense
0.4
%
0.2
%
Net loss
(19.9
) %
(18.1
) %
(a) Represents the percentage these costs
bear to the related sales, instead of total sales.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands, except per
share data)
(Unaudited)
July 30, 2022
July 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
9,147
$
7,649
Receivables, net
119,603
118,254
Merchandise inventories, net
463,555
472,461
Textbook rental inventories
8,501
6,657
Prepaid expenses and other current
assets
60,181
64,724
Total current assets
660,987
669,745
Property and equipment, net
94,638
91,080
Operating lease right-of-use assets
318,070
289,102
Intangible assets, net
124,569
146,035
Goodwill
4,700
4,700
Deferred tax assets, net
—
15,943
Other noncurrent assets
22,405
27,405
Total assets
$
1,225,369
$
1,244,010
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
324,613
$
331,055
Accrued liabilities
94,217
92,061
Current operating lease liabilities
149,587
135,937
Short-term borrowings
40,000
50,000
Total current liabilities
608,417
609,053
Long-term deferred taxes, net
1,430
—
Long-term operating lease liabilities
197,407
179,540
Other long-term liabilities
20,969
52,427
Long-term borrowings
220,300
153,700
Total liabilities
1,048,523
994,720
Commitments and contingencies
—
—
Stockholders' equity:
Preferred stock, $0.01 par value;
authorized, 5,000 shares; issued and outstanding, none
—
—
Common stock, $0.01 par value; authorized,
200,000 shares; issued, 54,774 and 53,665 shares, respectively;
outstanding, 52,348 and 51,587 shares, respectively
547
536
Additional paid-in-capital
742,624
735,376
Accumulated deficit
(544,201
)
(466,265
)
Treasury stock, at cost
(22,124
)
(20,357
)
Total stockholders' equity
176,846
249,290
Total liabilities and stockholders'
equity
$
1,225,369
$
1,244,010
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flow (Unaudited)
(In thousands, except per
share data)
13 weeks ended
July 30, 2022
July 31, 2021
Cash flows from operating activities:
Net loss
$
(52,707
)
$
(43,628
)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization expense
12,533
12,624
Content amortization expense
1,577
1,275
Amortization of deferred financing
costs
555
362
Merchandise inventory loss (a)
—
434
Stock-based compensation expense
1,791
1,122
Changes in other long-term assets and
liabilities, net
992
1,972
Changes in operating lease right-of-use
assets and liabilities
(1,230
)
(10,464
)
Changes in other operating assets and
liabilities, net
7,491
18,999
Net cash flow used in operating
activities
(28,998
)
(17,304
)
Cash flows from investing activities:
Purchases of property and equipment
(9,726
)
(11,370
)
Net change in other noncurrent assets
—
192
Net cash flow used in investing
activities
(9,726
)
(11,178
)
Cash flows from financing activities:
Proceeds from borrowings
147,200
71,720
Repayments of borrowings
(112,600
)
(45,620
)
Payment of deferred financing costs
(559
)
—
Purchase of treasury shares
(612
)
(1,215
)
Net cash flows provided by financing
activities
33,429
24,885
Net decrease in cash, cash equivalents and
restricted cash
(5,295
)
(3,597
)
Cash, cash equivalents and restricted cash
at beginning of period
21,934
16,814
Cash, cash equivalents and restricted cash
at end of period
$
16,639
$
13,217
Changes in other operating assets and
liabilities, net:
Receivables, net
$
17,436
$
2,818
Merchandise inventories
(169,701
)
(191,783
)
Textbook rental inventories
21,111
22,035
Prepaid expenses and other current
assets
(1,969
)
(6,012
)
Accounts payable and accrued
liabilities
140,614
191,941
Changes in other operating assets and
liabilities, net
$
7,491
$
18,999
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information (In
thousands, except percentages) (Unaudited)
Segment Information (a)
13 weeks ended
July 30, 2022
July 31, 2021
Sales:
Retail (b)
$
236,507
$
210,469
Wholesale
37,083
44,484
DSS
9,184
8,303
Eliminations
(18,916
)
(22,462
)
Total Sales
$
263,858
$
240,794
Gross Profit
Retail (c)
$
54,019
$
48,743
Wholesale
6,899
10,405
DSS (d)
9,034
8,139
Eliminations
(4,887
)
(5,549
)
Total Gross Profit
$
65,065
$
61,738
Selling and Administrative Expenses
Retail
$
79,004
$
68,365
Wholesale
4,131
3,991
DSS
8,145
6,447
Corporate Services
7,214
7,444
Eliminations
(8
)
(12
)
Total Selling and Administrative
Expenses
$
98,486
$
86,235
Segment Adjusted EBITDA (Non-GAAP) (e)
Retail
$
(24,985
)
$
(19,622
)
Wholesale
2,768
6,414
DSS
889
1,692
Corporate Services
(7,214
)
(7,444
)
Eliminations
(4,879
)
(5,537
)
Total Segment Adjusted EBITDA
(Non-GAAP)
$
(33,421
)
$
(24,497
)
Percentage of Segment Sales
Gross Profit
Retail (c)
22.8
%
23.2
%
Wholesale
18.6
%
23.4
%
DSS (d)
98.4
%
98.0
%
Eliminations
25.8
%
24.7
%
Total Gross Profit
24.7
%
25.6
%
Selling and Administrative Expenses
Retail
33.4
%
32.5
%
Wholesale
11.1
%
9.0
%
DSS
88.7
%
77.6
%
Corporate Services
N/A
N/A
Eliminations
N/A
N/A
Total Selling and Administrative
Expenses
37.3
%
35.8
%
(a)
See Explanatory Note in this Press Release
for Segment descriptions.
(b)
In December 2020, we entered into
merchandising partnership with Fanatics Retail Group Fulfillment,
LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. (“FLC”)
(collectively referred to herein as the “FLC Partnership”).
Effective in April 2021, as contemplated by the FLC Partnership's
merchandising agreement and e-commerce agreement, we began to
transition the fulfillment of logo and emblematic general
merchandise sales to FLC and Fanatics. The transition to FLC for
campus stores was effective in April 2021, and the e-commerce
websites transitioned to Fanatics throughout Fiscal 2022. As the
logo and emblematic general merchandise sales are fulfilled by FLC
and Fanatics, we recognize commission revenue earned for these
sales on a net basis in our condensed consolidated financial
statements, as compared to the recognition of logo and emblematic
sales on a gross basis in the periods prior to the transition. For
Retail Gross Comparable Store Sales details, see the Sales
Information disclosure of this Press Release.
(c)
For the 13 weeks ended July 30, 2022 and
July 31, 2021, the Retail Segment gross margin excludes $26 and
$166, respectively, of amortization expense (non-cash) related to
content development costs. Additionally, for the 13 weeks ended
July 31, 2021, gross margin excludes a merchandise inventory loss
of $434 in the Retail Segment related to the sale of our logo and
emblematic general merchandise inventory below cost to FLC.
(d)
For the 13 weeks ended July 30, 2022 and
July 31, 2021, the DSS Segment gross margin excludes $1,551 and
$1,109, respectively, of amortization expense (non-cash) related to
content development costs.
(e)
For additional information, including a
reconciliation to the most comparable financial measures presented
in accordance with GAAP, see "Non-GAAP Information" and "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 week periods are as follows:
Dollars in millions
13 weeks ended
July 30, 2022
July 31, 2021 (a)
Retail Sales
New stores (b) (c)
$
11.8
$
10.3
Closed stores (b)
(5.2
)
(4.5
)
Comparable stores (c)
21.2
44.6
Textbook rental deferral
(1.2
)
0.2
Service revenue (d)
(0.5
)
2.3
Other (d)
(0.1
)
(1.2
)
Retail Sales subtotal:
$
26.0
$
51.7
Wholesale Sales:
$
(7.4
)
$
(35.8
)
DSS Sales
$
0.9
$
2.4
Eliminations (f)
$
3.6
$
18.5
Total sales variance
$
23.1
$
36.8
(a)
The variances for this period are
primarily related to re-opening stores that had temporarily closed
due to the COVID-19 pandemic in the prior year.
(b)
The following is a store count summary for
physical stores and virtual stores:
13 weeks ended
July 30, 2022
July 31, 2021
Number of Stores:
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Number of stores at beginning of
period
805
622
769
648
Stores opened
26
14
30
23
Stores closed
38
23
15
26
Number of stores at end of period
793
613
784
645
(c)
In December 2020, we entered into
merchandising partnership with Fanatics Retail Group Fulfillment,
LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. (“FLC”)
(collectively referred to herein as the “FLC Partnership”).
Effective in April 2021, as contemplated by the FLC Partnership's
merchandising agreement and e-commerce agreement, we began to
transition the fulfillment of logo and emblematic general
merchandise sales to FLC and Fanatics. The transition to FLC for
campus stores was effective in April 2021, and the e-commerce
websites transitioned to Fanatics throughout Fiscal 2022. As the
logo and emblematic general merchandise sales are fulfilled by FLC
and Fanatics, we recognize commission revenue earned for these
sales on a net basis in our condensed consolidated financial
statements, as compared to the recognition of logo and emblematic
sales on a gross basis in the periods prior to the transition. For
Retail Gross Comparable Store Sales details, see below.
(d)
Service revenue includes brand
partnerships, shipping and handling, and revenue from other
programs.
(e)
Other includes inventory liquidation sales
to third parties, marketplace sales and certain accounting
adjusting items related to return reserves, and other deferred
items.
(f)
Eliminates Wholesale sales and service
fees to Retail and Retail commissions earned from Wholesale.
Retail Gross Comparable Store Sales
Retail Gross Comparable Store Sales
variances by category for the 13 week periods are as follows:
Dollars in millions
13 weeks ended
July 30, 2022
July 31, 2021 (a)
Textbooks (Course Materials)
$
1.9
1.5
%
$
23.1
21.9
%
General Merchandise
31.6
34.0
%
50.5
119.4
%
Total Retail Gross Comparable Store
Sales
$
33.5
15.0
%
$
73.6
49.8
%
(a)
The variances for this period are
primarily related to re-opening stores that had temporarily closed
due to the COVID-19 pandemic in the prior year.
To supplement the Total Sales table presented above, the Company
uses Retail Gross Comparable Store Sales as a key performance
indicator. Retail Gross Comparable Store Sales includes sales from
physical and virtual stores that have been open for an entire
fiscal year period and does not include sales from permanently
closed stores for all periods presented. For Retail Gross
Comparable Store Sales, sales for logo and emblematic general
merchandise fulfilled by FLC, Fanatics and digital agency sales are
included on a gross basis for consistent year-over-year
comparison.
Effective in April 2021, as contemplated by the FLC
Partnership's merchandising agreement and e-commerce agreement, we
began to transition the fulfillment of logo and emblematic general
merchandise sales to FLC and Fanatics. The transition to FLC for
campus stores was effective in April 2021, and the e-commerce
websites transitioned to Fanatics throughout Fiscal 2022. As the
logo and emblematic general merchandise sales are fulfilled by FLC
and Fanatics, we recognize commission revenue earned for these
sales on a net basis in our condensed consolidated financial
statements, as compared to the recognition of logo and emblematic
sales on a gross basis in the periods prior to the transition.
We believe the current Retail Gross Comparable Store Sales
calculation method reflects management’s view that such comparable
store sales are an important measure of the growth in sales when
evaluating how established stores have performed over time. We
present this metric as additional useful information about the
Company’s operational and financial performance and to allow
greater transparency with respect to important metrics used by
management for operating and financial decision-making. Retail
Gross Comparable Store Sales are also referred to as "same-store"
sales by others within the retail industry and the method of
calculating comparable store sales varies across the retail
industry. As a result, our calculation of comparable store sales is
not necessarily comparable to similarly titled measures reported by
other companies and is intended only as supplemental information
and is not a substitute for net sales presented in accordance with
GAAP.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Non-GAAP Information
(a)
(In thousands)
(Unaudited)
Consolidated Adjusted Earnings
(non-GAAP) (a)
13 weeks ended
July 30, 2022
July 31, 2021
Net loss
$
(52,707
)
$
(43,628
)
Reconciling items, after-tax (below)
1,952
3,614
Adjusted Earnings (non-GAAP)
$
(50,755
)
$
(40,014
)
Reconciling items, pre-tax
Merchandise inventory loss (b)
$
—
$
434
Content amortization (non-cash) (c)
1,577
1,275
Restructuring and other charges (d)
375
1,905
Reconciling items, pre-tax
1,952
3,614
Less: Pro forma income tax impact (e)
—
—
Reconciling items, after-tax
$
1,952
$
3,614
Consolidated Adjusted EBITDA (non-GAAP)
(a)
13 weeks ended
July 30, 2022
July 31, 2021
Net loss
$
(52,707
)
$
(43,628
)
Add:
Depreciation and amortization expense
12,533
12,624
Interest expense, net
3,868
2,494
Income tax expense
933
399
Merchandise inventory loss (b)
—
434
Content amortization (non-cash) (c)
1,577
1,275
Restructuring and other charges (d)
375
1,905
Adjusted EBITDA (non-GAAP)
$
(33,421
)
$
(24,497
)
Adjusted EBITDA by Segment (non-GAAP) (a)
The following is Adjusted EBITDA by
Segment for the 13 week periods:
13 weeks ended July 30, 2022
Retail
Wholesale
DSS
Corporate Services (f)
Eliminations
Total
Net (loss) income
$
(34,540
)
$
1,419
$
(2,299
)
$
(12,408
)
$
(4,879
)
$
(52,707
)
Add:
Depreciation and amortization expense
9,529
1,349
1,637
18
—
12,533
Interest expense, net
—
—
—
3,868
—
3,868
Income tax expense
—
—
—
933
—
933
Content amortization (non-cash) (c)
26
—
1,551
—
—
1,577
Restructuring and other charges (d)
—
—
—
375
—
375
Adjusted EBITDA (non-GAAP)
$
(24,985
)
$
2,768
$
889
$
(7,214
)
$
(4,879
)
$
(33,421
)
13 weeks ended July 31, 2021
Retail
Wholesale
DSS
Corporate Services (f)
Eliminations
Total
Net (loss) income
$
(30,637
)
$
5,114
$
(1,316
)
$
(11,252
)
$
(5,537
)
$
(43,628
)
Add:
Depreciation and amortization expense
9,407
1,300
1,899
18
—
12,624
Interest expense, net
—
—
—
2,494
—
2,494
Income tax expense
—
—
—
399
—
399
Merchandise inventory loss (b)
434
—
—
—
—
434
Content amortization (non-cash) (c)
166
—
1,109
—
—
1,275
Restructuring and other charges (d)
1,008
—
—
897
—
1,905
Adjusted EBITDA (non-GAAP)
$
(19,622
)
$
6,414
$
1,692
$
(7,444
)
$
(5,537
)
$
(24,497
)
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
As contemplated by the FLC Partnership's
merchandising agreement, we sold our logo and emblematic general
merchandise inventory to FLC and received proceeds of $41,773, and
recognized a merchandise inventory loss on the sale of $10,262 in
cost of goods sold during the 52 weeks ended May 1, 2021 for the
Retail Segment. The final inventory sale price was determined
during the 13 weeks ended July 31, 2021, at which time, we received
additional proceeds of $1,906, and recognized a merchandise
inventory loss on the sale of $434 in cost of goods sold for the
Retail Segment.
(c)
Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
condensed consolidated financial statements.
(d)
During the 13 weeks ended July 30, 2022
and July 31, 2021, we recognized restructuring and other charges
totaling $375 and $1,905, respectively, comprised primarily of
severance and other employee termination and benefit costs
associated with the elimination of various positions as part of
cost reduction objectives, and professional service costs for
restructuring, process improvements, shareholder activist
activities, and costs related to development and integration
associated with the FLC Partnership.
(e)
Represents the income tax effects of the
non-GAAP items.
(f)
Interest expense is reflected in Corporate
Services as it is primarily related to our Credit Agreement and
Term Loan Agreement which fund our operating and financing needs
across the organization. Income taxes are reflected in Corporate
Services as we record our income tax provision on a consolidated
basis.
Free Cash Flow (non-GAAP) (a)
13 weeks ended
July 30, 2022
July 31, 2021
Net cash flows used in operating
activities
$
(28,998
)
$
(17,304
)
Less:
Capital expenditures (b)
9,726
11,370
Cash interest paid
2,933
1,682
Cash taxes (refund) paid
122
254
Free Cash Flow (non-GAAP)
$
(41,779
)
$
(30,610
)
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
Purchases of property and equipment are
also referred to as capital expenditures. Our investing activities
consist principally of capital expenditures for contractual capital
investments associated with renewing existing contracts, new store
construction, digital initiatives and enhancements to internal
systems and our website. The following table provides the
components of total purchases of property and equipment:
Capital Expenditures
13 weeks ended
July 30, 2022
July 31, 2021
Physical store capital expenditures
$
4,496
$
3,893
Product and system development
2,665
3,624
Content development costs
2,019
2,847
Other
546
1,006
Total Capital Expenditures
$
9,726
$
11,370
Use of Non-GAAP Financial Information -
Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and
Free Cash Flow
To supplement the Company’s condensed
consolidated financial statements presented in accordance with
generally accepted accounting principles (“GAAP”), in the Press
Release attached hereto as Exhibit 99.1, the Company uses the
financial measures of Adjusted Earnings, Adjusted EBITDA, Adjusted
EBITDA by Segment and Free Cash Flow, which are non-GAAP financial
measures under Securities and Exchange Commission (the "SEC")
regulations. We define Adjusted Earnings as net income (loss)
adjusted for certain reconciling items that are subtracted from or
added to net income (loss). We define Adjusted EBITDA as net income
(loss) plus (1) depreciation and amortization; (2) interest expense
and (3) income taxes, (4) as adjusted for items that are subtracted
from or added to net income (loss). We define Free Cash Flow as
Cash Flows from Operating Activities less capital expenditures,
cash interest and cash taxes.
The non-GAAP measures included in the
Press Release have been reconciled to the most comparable financial
measures presented in accordance with GAAP, attached hereto as
Exhibit 99.1, as follows: the reconciliation of Adjusted Earnings
to net income (loss); the reconciliation of consolidated Adjusted
EBITDA to consolidated net income (loss); and the reconciliation of
Adjusted EBITDA by Segment to net income (loss) by segment. All of
the items included in the reconciliations are either (i) non-cash
items or (ii) items that management does not consider in assessing
our on-going operating performance.
These non-GAAP financial measures are not
intended as substitutes for and should not be considered superior
to measures of financial performance prepared in accordance with
GAAP. In addition, the Company's use of these non-GAAP financial
measures may be different from similarly named measures used by
other companies, limiting their usefulness for comparison
purposes.
We review these non-GAAP financial
measures as internal measures to evaluate our performance at a
consolidated level and at a segment level and manage our
operations. We believe that these measures are useful performance
measures which are used by us to facilitate a comparison of our
on-going operating performance on a consistent basis from
period-to-period. We believe that these non-GAAP financial measures
provide for a more complete understanding of factors and trends
affecting our business than measures under GAAP can provide alone,
as they exclude certain items that management believes do not
reflect the ordinary performance of our operations in a particular
period. Our Board of Directors and management also use Adjusted
EBITDA and Adjusted EBITDA by Segment, at a consolidated level and
at a segment level, as one of the primary methods for planning and
forecasting expected performance, for evaluating on a quarterly and
annual basis actual results against such expectations, and as a
measure for performance incentive plans. Management also uses
Adjusted EBITDA by Segment to determine segment capital
allocations. We believe that the inclusion of Adjusted Earnings,
Adjusted EBITDA, and Adjusted EBITDA by Segment results provides
investors useful and important information regarding our operating
results, in a manner that is consistent with management’s
evaluation of business performance. We believe that Free Cash Flow
provides useful additional information concerning cash flow
available to meet future debt service obligations and working
capital requirements and assists investors in their understanding
of our operating profitability and liquidity as we manage the
business to maximize margin and cash flow.
The Company urges investors to carefully
review the GAAP financial information included as part of the
Company’s Form 10-K dated April 30, 2022 filed with the SEC on June
29, 2022, which includes consolidated financial statements for each
of the three years for the period ended April 30, 2022, May 1,
2021, and May 2, 2020 (Fiscal 2022, Fiscal 2021, and Fiscal 2020,
respectively).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220831005126/en/
Media Contact: Carolyn J.
Brown Senior Vice President Corporate Communications & Public
Affairs 908-991-2967 cbrown@bned.com
Investor Contact: Andy
Milevoj Vice President Corporate Finance and Investor Relations
908-991-2776 amilevoj@bned.com
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