Retail Segment Gross Comparable Store Sales
Increased 3.6%
First Day® Complete Revenue Increased 52% to
$136 Million
Consolidated GAAP Net Income from Continuing
Operations Increased 2.8% to $24.9 Million
Consolidated Adjusted EBITDA (Non-GAAP) from
Continuing Operations Increased by $11.1 million or 28.3% to $50.3
Million
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the second quarter ended on October
28, 2023. Barnes & Noble Education is a highly seasonal
business, and the second quarter includes the Fall rush period,
which is historically the largest sales period for the Company.
“Our second quarter results demonstrate that the execution of
our transformation initiatives is working. The accelerated
adoptions of First Day Complete, our innovative equitable access
program, and our ongoing operating efficiency and cost-reduction
actions are benefiting our financial results. In the second
quarter, even with 128 fewer stores than a year ago, we grew the
top line, driven by a 3.6% increase in total retail Gross
comparable stores sales. This sales growth combined with a $13.0
million reduction in selling and administrative expenses drove a
28% increase in consolidated Adjusted EBITDA to $50.3 million,”
said Michael P. Huseby, Chief Executive Officer, BNED.
“The tremendous value proposition that First Day Complete
provides for institutions, faculty and student outcomes, is driving
rapid growth of our First Day models across colleges and
universities. First Day Complete revenue grew 52% year-over-year
driven by the addition of 46 institutions to the program and
increased student participation rates within existing schools. Our
results also benefited from our team's commitment to operational
efficiency and disciplined cost management. I'd like to thank all
of BNED’s employees, in particular our store teams, for their
agility, tireless efforts, and dedication to delivering excellent
service to our students and institutions in a rapidly changing and
dynamic environment. We believe the actions we have taken, and
continue to take, position us to deliver more consistent,
sustainable, and profitable growth in the near-term and years
ahead.”
Financial Results for the Second Quarter Fiscal Year
2024:
- Consolidated second quarter GAAP sales of $610.4 million
increased by $1.7 million, or 0.3%, compared to $608.6 million in
the prior year period. The second quarter sales increase is
primarily related to higher course material sales, primarily
through the Company’s First Day programs.
- Consolidated second quarter GAAP gross profit of $136.2 million
decreased by $1.9 million, or 1.4%, compared to $138.1 in the prior
year period.
- Consolidated second quarter selling and administrative expenses
of $86.0 million decreased by $13.0 million, or 13.1%, compared to
the prior year period.
- Consolidated second quarter GAAP net income from continuing
operations of $24.9 million increased by $0.7 million, or 2.8%,
compared to a net income from continuing operations of $24.2
million in the prior year period. The increase in second quarter
GAAP net income from continuing operations was due to decreases of
$13.0 million in selling and administrative expenses, partially
offset by increases of $5.8 million in interest expense, $4.0
million in restructuring expense, and a $1.9 million decrease in
gross profit.
- Consolidated second quarter non-GAAP Adjusted Earnings of $29.1
million increased by $4.7 million, or 19.2%, compared to $24.4
million in the prior year period.
- Consolidated second quarter non-GAAP Adjusted EBITDA of $50.3
million increased by $11.1 million, or 28.3%, compared to $39.2
million in the prior year period.
Operational Highlights for the Second Quarter Fiscal Year
2024:
- BNC First Day total revenue increased by $56 million, or 39%,
to $199 million compared to $143 million during the prior year
period.
- First Day® Complete revenue grew by $46 million, or 52%, to
$136 million, compared to $90 million in the prior year
period.
- 157 campus stores are utilizing First Day® Complete in the Fall
of 2023 representing enrollment of approximately 800,000
undergraduate and post graduate students*, an increase of
approximately 47% compared to Fall of 2022.
- 6 additional campus stores with total undergraduate student
enrollment of approximately 13,500* to launch BNC’s First Day
Complete model in the Spring Term.
- Total Retail segment gross comparable store sales increased by
$22.9 million, or 3.6%, comprised of a 5.8% increase in course
material gross comparable store sales, and a 1.7% decrease in
general merchandise gross comparable store sales. For comparable
store sales reporting purposes, logo general merchandise sales
fulfilled by Lids and Fanatics are included on a gross basis.
- Ended the quarter with 1,271 physical and virtual stores, a net
decrease of 128 stores, as compared to the prior year period, as
the Company continues its focus on winding down under-performing,
less profitable stores and satellite locations.
*As reported by National Center for Education Statistics
(NCES)
Second Quarter Fiscal Year 2024 Results
The Company has two reportable segments: Retail and Wholesale.
Additionally, unallocated shared-service costs, which include
various corporate level expenses and other governance functions,
are not allocated to a specific reporting segment and are presented
as “Corporate Services.” All material intercompany accounts and
transactions have been eliminated in consolidation.
Retail Segment Results
Second quarter Retail sales increased by $0.7 million, or 0.1%,
to $599.3 million, as compared to the prior year period. Retail
Gross Comparable Store Sales increased 3.6% for the quarter. Gross
comparable course material sales increased 5.8% and gross
comparable general merchandise decreased 1.7%. The increase in
gross comparable course material product sales was due to growth
from the Company’s First Day models, which increased by $56
million, or 39%, to $199 million, compared to $143 million in the
prior year period.
Second quarter Retail gross profit decreased by $4.0 million, or
3.1%, to $125.5 million, or 20.9% of sales, from $129.5 million, or
21.6% of sales in the prior year period. The decline in gross
profit was driven primarily by lower margin rates for course
materials due to higher markdowns, including markdowns related to
closed stores, an unfavorable sales mix due to the shift to digital
course materials, and lower general merchandise sales, primarily
from closed stores. These decreases in gross margin rates were
partially offset by lower contract costs as a result of the shift
to digital course materials and First Day models and the growth of
higher-margin First Day Complete revenue.
Second quarter Retail selling and administrative expenses
decreased by $12.9 million, or 14.3%, to $77.2 million from $90.1
million in the prior year period. This decrease was primarily due
to the Company’s cost savings and productivity initiatives
comprised of a $11.9 million reduction in comparable store payroll
expense, new/closed store payroll expense and related store
operating costs, a $4.1 million decrease in corporate payroll
expense, infrastructure, and product development costs, partially
offset by a $3.1 million increase in incentive plan compensation
expense due to the reversal of the incentive accrual in the prior
year.
Second quarter Retail non-GAAP Adjusted EBITDA was $48.3
million, as compared to $39.4 million in the prior year period.
Non-GAAP Adjusted EBITDA increased by $8.9 million due to lower
selling and administrative expenses, offset by lower gross
profit.
Wholesale Segment Results (Before
Intercompany Eliminations)
Wholesale second quarter sales decreased by $0.2 million, or
0.7% to $20.9 million from $21.1 million in the prior year period.
The decrease is primarily due to higher returns and allowances of
$0.3 million, partially offset by higher gross sales of $0.1
million compared to the prior year period.
Wholesale second quarter gross profit was $6.1 million, or 29.0%
of sales, compared to $5.5 million, or 25.8% of sales, in the
second quarter of 2023. Gross profit and the gross margin rate
increased in the second quarter of 2024 primarily due to lower
markdowns, lower product costs, and lower warehouse costs,
partially offset by an increase in returns and allowances.
Second quarter Wholesale selling and administrative expenses
decreased by $0.4 million, or 9.7%, to $3.5 million compared to
$3.9 million in the prior year period. The decrease was primarily
due to cost savings initiatives comprised of lower payroll expense
of $0.5 million, partially offset by higher operating expenses of
$0.1 million.
Wholesale non-GAAP Adjusted EBITDA for the quarter increased to
$2.6 million, as compared to $1.6 million in the prior year. The
increase in Wholesale non-GAAP Adjusted EBITDA is due to the higher
gross margin and lower selling and administrative expenses in the
second quarter of 2024.
Balance Sheet and Cash Flow
As of October 28, 2023, the Company’s cash and cash equivalents
was $15.0 million and total outstanding debt was $233.9 million, as
compared to cash and cash equivalents of $17.3 million and total
outstanding debt of $250.4 million in the prior year period.
Cash flows used in operating activities from continuing
operations during the 26 weeks ended October 28, 2023 were $(47.2)
million compared to cash flows provided by operating activities of
$10.1 million during the 26 weeks ended October 29, 2022. This
increase in cash flows used in operating activities from continuing
operations of $57.3 million was primarily due to timing of payables
due to higher accounts receivables related to our increased
adoption of our BNC First Day equitable and inclusive access sales
for Fall term; higher payments for interest expense; partially
offset by higher payables due to delayed payments to vendors for
inventory purchases and expenses, which were delayed due to lower
borrowing base availability.
Given the growth of the Company’s BNC First Day programs, the
timing of cash collection from the Company’s school partners may
shift to periods subsequent to when the revenue is recognized. When
a school adopts the Company’s BNC First Day equitable and inclusive
access offerings, cash collection from the school generally occurs
after the institution's add/drop dates, which is later in the
working capital cycle, particularly in the third quarter given the
timing of the Spring Term and the quarterly reporting period, as
compared to direct-to-student point-of-sale transactions where cash
is generally collected during the point-of-sale transaction or
within a few days from the credit card processor. As a higher
percentage of the Company’s sales shift to BNC First Day equitable
and inclusive access offerings, the Company is focused on efforts
to better align the timing of its cash outflows to course material
vendors with cash inflows collected from schools, including
modifying payment terms in existing and future school
contracts.
Strategic Review
As previously announced, the Board of Directors continues its
ongoing review of a broad range of strategic alternatives available
to the Company, including but not limited to potential capital
raises, asset divestitures, a sale of the business, and pursuit of
standalone growth plans. The Board has not set a timetable for the
conclusion of this review, nor has it made any decisions related to
any further actions at this time. There can be no assurance that
the review will result in any transaction or other strategic change
or outcome.
Fiscal Year 2024 Outlook
The Company is maintaining its guidance for fiscal year 2024
consolidated non-GAAP Adjusted EBITDA from Continuing Operations of
approximately $40 million. The year-over-year increase is expected
to be driven by growth in the Company’s Retail Segment, primarily
due to growth in the Company’s BNC First Day programs, and the
impact of the cost reduction actions the Company has executed and
expects to continue to implement.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 4:30 p.m. Eastern Time on Wednesday,
December 6, 2023 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 2024
third quarter results in early March 2024.
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, 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. 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: the amount of
our indebtedness and ability to comply with covenants applicable to
current and /or 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; our ability to maintain adequate
liquidity levels to support ongoing inventory purchases and related
vendor payments in a timely manner; our ability to attract and
retain employees; the pace of equitable access adoption in the
marketplace is slower than anticipated and our ability to
successfully convert the majority of our institutions to our BNC
First Day® equitable and inclusive access course material models or
successfully compete with third parties that provide similar
equitable and inclusive access solutions; the strategic objectives,
successful integration, anticipated synergies, and/or other
expected potential benefits of various strategic and restructuring
initiatives, may not be fully realized or may take longer than
expected; dependency on strategic relationships, such as with
VitalSource Technologies, Inc. and the Fanatics Retail Group
Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc.
D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L
Relationship”), and the potential for adverse operational and
financial changes to these relationships, may adversely impact our
business; non-renewal of managed bookstore, physical and/or online
store contracts and higher-than-anticipated store closings;
decisions by colleges and universities to outsource their physical
and/or online bookstore operations or change the operation of their
bookstores; general competitive conditions, including actions our
competitors and content providers may take to grow their
businesses; the risk of changes in price or in formats of course
materials by publishers, which could negatively impact revenues and
margin; changes to purchase or rental terms, payment terms, return
policies, the discount or margin on products or other terms with
our suppliers; 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; work stoppages or increases in labor
costs; possible increases in shipping rates or interruptions in
shipping services; a decline in college enrollment or decreased
funding available for students; decreased consumer demand for our
products, low growth or declining sales; the general economic
environment and consumer spending patterns; trends and challenges
to our business and in the locations in which we have stores; 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, including the adoption of
artificial intelligence technologies for educational content; risks
associated with counterfeit and piracy of digital and print
materials; risks associated with data privacy, information security
and intellectual property; disruptions to our information
technology systems, infrastructure, data, supplier systems, and
customer ordering and payment systems 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; risks associated with the impact that public health
crises, epidemics, and pandemics, such as the COVID-19 pandemic,
have on the overall demand for BNED products and services, our
operations, the operations of our suppliers, service providers, and
campus partners, and the effectiveness of our response to these
risks; lingering 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
applicable domestic and international laws, rules or regulations,
including, without limitation, U.S. tax reform, changes in tax
rates, laws and regulations, as well as related guidance; changes
in and enactment of applicable laws, or rules or regulations or
changes in enforcement practices including, without limitation,
with regard to consumer data privacy rights, which may restrict or
prohibit our use of consumer personal information for texts,
emails, interest based online advertising, or similar marketing and
sales activities; 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 Form 10-K for the year-ended April 29, 2023. 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
On May 31, 2023, we completed the sale of these assets related
to our DSS Segment. The results of operations related to the DSS
Segment are included in the condensed consolidated statements of
operations as "Loss from discontinued operations, net of tax." The
cash flows of the DSS Segment are also presented separately in our
condensed consolidated statements of cash flows.
We have two reportable segments: Retail and Wholesale as
follows:
- The Retail Segment operates 1,271 college, university, and K-12
school bookstores, comprised of 717 physical bookstores and 554
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 independently or along with our merchant
service providers, and which offer students access to affordable
course materials and affinity products, including emblematic
apparel and gifts. The Retail Segment offers our BNC First Day®
equitable and inclusive access programs, consisting of First Day
Complete and First Day, which provide faculty required course
materials on or before the first day of class at a discounted rate,
as compared to the total retail price for the same course materials
if purchased separately. The BNC First Day discounted price is
offered as a course fee or included in tuition. 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 2,900 physical
bookstores (including our Retail Segment's 717 physical bookstores)
and sources and distributes new and used textbooks to our 554
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
330 college bookstores.
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
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Sales:
Product sales and other
$
569,698
$
567,299
$
822,348
$
811,061
Rental income
40,681
41,334
52,192
52,246
Total sales
610,379
608,633
874,540
863,307
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales
451,953
447,551
658,967
639,955
Rental cost of sales
22,184
22,941
28,697
29,206
Total cost of sales
474,137
470,492
687,664
669,161
Gross profit
136,242
138,141
186,876
194,146
Selling and administrative expenses
85,961
98,954
163,437
189,295
Depreciation and amortization expense
10,175
10,256
20,428
21,152
Restructuring and other charges (a)
4,274
260
8,907
635
Operating income (loss)
35,832
28,671
(5,896
)
(16,936
)
Interest expense, net
10,664
4,886
18,918
8,754
Income (loss) from continuing operations
before income taxes
25,168
23,785
(24,814
)
(25,690
)
Income tax expense (benefit)
314
(383
)
303
464
Income (loss) from continuing
operations
$
24,854
$
24,168
$
(25,117
)
$
(26,154
)
Loss from discontinued operations, net of
tax of $0, $83, $20, and $169, respectively
$
(674
)
$
(2,024
)
$
(1,091
)
$
(4,409
)
Net income (loss)
$
24,180
$
22,144
$
(26,208
)
$
(30,563
)
Earnings (loss) per share of common
stock:
Basic:
Continuing operations
$
0.47
$
0.46
$
(0.48
)
$
(0.50
)
Discontinued operations
$
(0.01
)
$
(0.04
)
$
(0.02
)
$
(0.08
)
Total Basic Earnings per share
$
0.46
$
0.42
$
(0.50
)
$
(0.58
)
Weighted average common shares outstanding
- Basic
52,791
52,438
52,716
52,305
Diluted:
Continuing operations
$
0.47
$
0.46
$
(0.48
)
$
(0.50
)
Discontinued operations
$
(0.01
)
$
(0.04
)
$
(0.02
)
$
(0.08
)
Total Diluted Earnings per share
$
0.46
$
0.42
$
(0.50
)
$
(0.58
)
Weighted average common shares outstanding
- Diluted
52,870
53,195
52,716
52,305
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Percentage of sales:
Sales:
Product sales and other
93.3
%
93.2
%
94.0
%
93.9
%
Rental income
6.7
%
6.8
%
6.0
%
6.1
%
Total sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales (a)
79.3
%
78.9
%
80.1
%
78.9
%
Rental cost of sales (a)
54.5
%
55.5
%
55.0
%
55.9
%
Total cost of sales
77.7
%
77.3
%
78.6
%
77.5
%
Gross profit
22.3
%
22.7
%
21.4
%
22.5
%
Selling and administrative expenses
14.1
%
16.3
%
18.7
%
21.9
%
Depreciation and amortization expense
1.7
%
1.7
%
2.3
%
2.5
%
Restructuring and other charges
0.7
%
—
%
1.0
%
0.1
%
Operating income (loss)
5.8
%
4.7
%
(0.6
)%
(2.0
)%
Interest expense, net
1.7
%
0.8
%
2.2
%
1.0
%
Income (loss) from continuing operations
before income taxes
4.1
%
3.9
%
(2.8
)%
(3.0
)%
Income tax expense (benefit)
0.1
%
(0.1
)%
—
%
0.1
%
Income (loss) from continuing
operations
4.0
%
4.0
%
(2.8
)%
(3.1
)%
(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)
October 28, 2023
October 29, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
15,008
$
17,296
Receivables, net
221,805
209,288
Merchandise inventories, net
364,292
371,570
Textbook rental inventories
51,840
49,355
Prepaid expenses and other current
assets
63,410
51,520
Assets held for sale, current
—
30,558
Total current assets
716,355
729,587
Property and equipment, net
61,403
75,475
Operating lease right-of-use assets
246,531
291,704
Intangible assets, net
104,026
120,533
Other noncurrent assets
16,664
21,100
Total assets
$
1,144,979
$
1,238,399
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
385,895
$
326,007
Accrued liabilities
112,075
113,628
Current operating lease liabilities
126,426
130,802
Liabilities held for sale
—
5,243
Total current liabilities
624,396
575,680
Long-term deferred taxes, net
1,936
1,430
Long-term operating lease liabilities
160,185
190,758
Other long-term liabilities
18,625
19,622
Long-term borrowings
233,873
250,445
Total liabilities
1,039,015
1,037,935
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, 55,818 and 55,132 shares, respectively;
outstanding, 53,137 and 52,599 shares, respectively
558
551
Additional paid-in-capital
747,518
744,339
Accumulated deficit
(619,564
)
(522,057
)
Treasury stock, at cost
(22,548
)
(22,369
)
Total stockholders' equity
105,964
200,464
Total liabilities and stockholders'
equity
$
1,144,979
$
1,238,399
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flow (Unaudited)
(In thousands, except per
share data)
26 weeks ended
October 28, 2023
October 29, 2022
Cash flows from operating activities:
Net loss
$
(26,208
)
$
(30,563
)
Less: Loss from discontinued operations,
net of tax
(1,091
)
(4,409
)
Loss from continuing operations
(25,117
)
(26,154
)
Adjustments to reconcile net loss from
continuing operations to net cash flows from operating activities
from continuing operations:
Depreciation and amortization expense
20,428
21,152
Content amortization expense
—
26
Amortization of deferred financing
costs
4,406
1,200
Deferred taxes
97
—
Stock-based compensation expense
1,756
3,066
Non-cash interest expense
(paid-in-kind)
863
—
Changes in operating lease right-of-use
assets and liabilities
1,826
(298
)
Changes in other long-term assets and
liabilities, net
(2,311
)
265
Changes in other operating assets and
liabilities, net:
Receivables, net
(129,293
)
(73,287
)
Merchandise inventories
(41,313
)
(77,716
)
Textbook rental inventories
(21,491
)
(19,743
)
Prepaid expenses and other current
assets
2,756
13,149
Accounts payable and accrued
liabilities
140,233
168,413
Changes in other operating assets and
liabilities, net
(49,108
)
10,816
Net cash flows (used in) provided by
operating activities from continuing operations
(47,160
)
10,073
Net cash flows used in operating
activities from discontinued operations
(3,939
)
(703
)
Net cash flow (used in) provided by
operating activities
$
(51,099
)
$
9,370
Cash flows from investing activities:
Purchases of property and equipment
$
(8,196
)
$
(16,823
)
Changes in other noncurrent assets and
other
78
255
Net cash flows used in investing
activities from continuing operations
(8,118
)
(16,568
)
Net cash flows provided by (used in)
investing activities from discontinued operations
21,395
(3,750
)
Net cash flow provided by (used in)
investing activities
$
13,277
$
(20,318
)
Cash flows from financing activities:
Proceeds from borrowings
$
284,698
$
348,200
Repayments of borrowings
(233,970
)
(321,900
)
Payment of deferred financing costs
(9,381
)
(1,716
)
Purchase of treasury shares
(172
)
(857
)
Net cash flows provided by financing
activities from continuing operations
41,175
23,727
Net cash flows provided by financing
activities from discontinued operations
—
—
Net cash flows provided by financing
activities
$
41,175
$
23,727
Net increase in cash, cash equivalents and
restricted cash
$
3,353
$
12,779
Cash, cash equivalents and restricted cash
at beginning of period
31,988
21,036
Cash, cash equivalents, and restricted
cash at end of period
35,341
33,815
Less: Cash, cash equivalents, and
restricted cash of discontinued operations at end of period
—
(929
)
Cash, cash equivalents, and restricted
cash of continuing operations at end of period
$
35,341
$
32,886
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information -
Continuing Operations (In thousands, except percentages)
(Unaudited)
Segment Information (a) - Continuing
Operations
13 weeks ended
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Sales:
Retail (b)
$
599,336
$
598,610
$
844,796
$
835,117
Wholesale
20,973
21,120
59,764
58,203
Eliminations
(9,930
)
(11,097
)
(30,020
)
(30,013
)
Total Sales
$
610,379
$
608,633
$
874,540
$
863,307
Gross Profit
Retail (c)
$
125,529
$
129,502
$
175,820
$
183,521
Wholesale
6,090
5,455
11,884
12,354
Eliminations
4,623
3,184
(828
)
(1,703
)
Total Gross Profit
$
136,242
$
138,141
$
186,876
$
194,172
Selling and Administrative Expenses
Retail
$
77,182
$
90,086
$
146,355
$
169,090
Wholesale
3,492
3,867
6,880
7,998
Corporate Services
5,287
5,075
10,205
12,289
Eliminations
—
(74
)
(3
)
(82
)
Total Selling and Administrative
Expenses
$
85,961
$
98,954
$
163,437
$
189,295
Segment Adjusted EBITDA (Non-GAAP) (d)
Retail
$
48,347
$
39,416
$
29,465
$
14,431
Wholesale
2,598
1,588
5,004
4,356
Corporate Services
(5,287
)
(5,075
)
(10,205
)
(12,289
)
Eliminations
4,623
3,258
(825
)
(1,621
)
Total Segment Adjusted EBITDA
(Non-GAAP)
$
50,281
$
39,187
$
23,439
$
4,877
Percentage of Segment Sales
Gross Profit
Retail (c)
20.9
%
21.6
%
20.8
%
22.0
%
Wholesale
29.0
%
25.8
%
19.9
%
21.2
%
Eliminations
(46.6
)%
(28.7
)%
2.8
%
5.7
%
Total Gross Profit
22.3
%
22.7
%
21.4
%
22.5
%
Selling and Administrative Expenses
Retail
12.9
%
15.0
%
17.3
%
20.2
%
Wholesale
16.6
%
18.3
%
11.5
%
13.7
%
Total Selling and Administrative
Expenses
14.1
%
16.3
%
18.7
%
21.9
%
(a)
See Explanatory Note in this Press Release
for Segment descriptions.
(b)
Logo general merchandise sales for the
Retail Segment are recognized on a net basis as commission revenue
in the condensed consolidated financial statements. For Retail
Gross Comparable Store Sales details, see the Sales Information
disclosure of this Press Release.
(c)
For the 26 weeks ended October 28, 2023
and October 29, 2022, the Retail Segment gross margin excludes $0
and $26 respectively, of amortization expense (non-cash) related to
content development costs.
(d)
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
Segment Information -
Discontinued Operations (Unaudited)
(In thousands, except
percentages)
During the fourth quarter of fiscal 2023, assets related to our
Digital Student Solutions ("DSS") Segment met the criteria for
classification as Assets Held for Sale and Discontinued Operations
and is no longer a reportable segment. Certain assets and
liabilities associated with the DSS Segment are presented in our
condensed consolidated balance sheets as "Assets Held for Sale" and
"Liabilities Held for Sale". The results of operations related to
the DSS Segment are included in the condensed consolidated
statements of operations as "Loss from discontinued operations, net
of tax." The cash flows of the DSS Segment are also presented
separately in our condensed consolidated statements of cash
flows.
On May 31, 2023, we completed the sale of these assets related
to our DSS Segment for cash proceeds of $20,000, net of certain
transaction fees, severance costs, escrow, and other
considerations. During the 13 weeks ended July 29, 2023, we
recorded a Gain on Sale of Business of $3,068 in Loss from
Discontinued Operations, Net, related to the sale. Net cash
proceeds from the sale were used for debt repayment and to provide
additional funds for working capital needs under our Credit
Facility.
The following table summarizes the operating results of the
discontinued operations for the periods indicated:
Segment Information - Discontinued
Operations
13 weeks ended
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Total sales
$
—
$
8,465
$
2,784
$
17,649
Cost of sales (a)
—
1,771
76
3,472
Gross profit (a)
—
6,694
2,708
14,177
Selling and administrative expenses
643
8,132
2,924
16,277
Depreciation and amortization
3
503
3
2,140
Gain on sale of business
—
—
(3,068
)
—
Impairment loss (non-cash) (b)
—
—
610
—
Restructuring costs (c)
10
—
3,297
—
Transaction costs
18
—
13
—
Operating loss
(674
)
(1,941
)
(1,071
)
(4,240
)
Income tax expense
—
83
20
169
Loss from discontinued operations, net of
tax
$
(674
)
$
(2,024
)
$
(1,091
)
$
(4,409
)
13 weeks ended
26 weeks ended
Adjusted EBITDA (non-GAAP) -
Discontinued Operations
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Loss from discontinued operations
$
(674)
$
(2,024)
$
(1,091)
$
(4,409)
Add:
Depreciation and amortization expense
3
503
3
2,140
Income tax expense
—
83
20
169
Content amortization (non-cash)
—
1,618
—
3,169
Gain on sale of business
—
—
(3,068)
—
Impairment loss (non-cash) (b)
—
—
610
—
Restructuring costs (c)
10
—
3,297
—
Transaction costs
18
—
13
—
Adjusted EBITDA (Non-GAAP) - Total
$
(643)
$
180
$
(216)
$
1,069
(a)
Cost of sales and Gross margin for the DSS
Segment includes amortization expense (non-cash) related to content
development costs of $0 for both the 13 and 26 weeks ended October
28, 2023 and $1,618 and $3,169 for the 13 and 26 weeks ended
October 29, 2022, respectively.
(b)
During the 26 weeks ended October 28,
2023, we recognized an impairment loss (non-cash) of $610 (both
pre-tax and after-tax), comprised of $119 and $491 of property and
equipment and operating lease right-of-use assets, respectively, on
the condensed consolidated statement of operations as part of
discontinued operations.
(c)
During the 26 weeks ended October 28,
2023, we recognized restructuring and other charges of $3,297
comprised of severance and other employee termination costs.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 and 26 week periods are as follows:
Dollars in millions
13 weeks ended
26 weeks ended
October 28, 2023
October 28, 2023
Retail Sales (a)
New stores (b)
$
16.3
$
21.0
Closed stores (b)
(30.3
)
(37.8
)
Comparable stores (a)
16.5
25.3
Textbook rental deferral
(1.8
)
0.3
Service revenue (c)
(0.1
)
(0.4
)
Other (d)
0.1
1.3
Retail Sales subtotal:
$
0.7
$
9.7
Wholesale Sales:
$
(0.2
)
$
1.6
Eliminations (e)
$
1.2
$
(0.1
)
Total sales variance
$
1.7
$
11.2
(a)
Logo general merchandise sales for the
Retail Segment are recognized on a net basis as commission revenue
in the condensed consolidated financial statements. For Retail
Gross Comparable Store Sales details, see below.
(b)
The following is a store count summary for
physical stores and virtual stores:
13 weeks ended
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Number of Stores:
Physical
Virtual
Total
Physical
Virtual
Total
Physical
Virtual
Total
Physical
Virtual
Total
Beginning of period
726
563
1,289
793
613
1,406
774
592
1,366
805
622
1,427
Stores opened
5
6
11
8
10
18
13
18
31
34
24
58
Stores closed
14
15
29
8
17
25
70
56
126
46
40
86
End of period
717
554
1,271
793
606
1,399
717
554
1,271
793
606
1,399
(c)
Service revenue includes brand partnership
marketing, shipping and handling, and revenue from other
programs.
(d)
Other includes inventory liquidation sales
to third parties, marketplace sales and certain accounting
adjusting items related to return reserves, and other deferred
items.
(e)
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
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Textbooks (Course Materials)
$
26.0
5.8
%
$
(21.8
)
(4.6
)%
$
35.2
6.0
%
$
(19.5
)
(3.2
)%
General Merchandise
(3.1
)
(1.7
)%
7.7
4.5
%
3.6
1.1
%
39.2
14.9
%
Total Retail Gross Comparable Store
Sales
$
22.9
3.6
%
$
(14.1
)
(2.2
)%
$
38.8
4.3
%
$
19.7
2.3
%
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 general merchandise
fulfilled by Lids, Fanatics and digital agency sales are included
on a gross basis in Retail Gross Comparable Store Sales compared to
a net basis as commission revenue in our condensed consolidated
financial statements.
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.
BNC First Day Sales
The following table summarizes our BNC First Day sales for the
13 and 26 weeks ended October 28, 2023 and October 29, 2022:
Dollars in millions
13 weeks ended
26 weeks ended
October 28, 2023
October 29, 2022
Var $
Var %
October 28, 2023
October 29, 2022
Var $
Var %
First Day Complete Sales
$
136.4
$
90.0
$
46.4
52
%
$
161.9
$
106.5
$
55.4
52
%
First Day Sales
62.8
53.3
$
9.5
18
%
99.1
81.9
$
17.2
21
%
Total BNC First Day Sales
$
199.2
$
143.3
$
55.9
39
%
$
261.0
$
188.4
$
72.6
39
%
First Day Complete
Fall 2023
Fall 2022
Var #
Var %
Number of campus stores
157
111
46
41
%
Estimated enrollment (a)
800,000
545,000
255,000
47
%
(a) Total undergraduate and graduate
student enrollment as reported by National Center for Education
Statistics (NCES)
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Non-GAAP Information
(a)
(In thousands)
(Unaudited)
Consolidated Adjusted Earnings
(non-GAAP) (a) - Continuing Operations
13 weeks ended
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Net income (loss) from continuing
operations
$
24,854
$
24,168
$
(25,117
)
$
(26,154
)
Reconciling items (below)
4,274
260
8,907
661
Adjusted Earnings (non-GAAP)
$
29,128
$
24,428
$
(16,210
)
$
(25,493
)
Reconciling items
Content amortization (non-cash) (b)
$
—
$
—
$
—
$
26
Restructuring and other charges (c)
4,274
260
8,907
635
Reconciling items (d)
$
4,274
$
260
$
8,907
$
661
Consolidated Adjusted EBITDA (non-GAAP)
(a)
13 weeks ended
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Net income (loss) from continuing
operations
24,854
24,168
(25,117
)
(26,154
)
Add:
Depreciation and amortization expense
10,175
10,256
20,428
21,152
Interest expense, net
10,664
4,886
18,918
8,754
Income tax expense (benefit)
314
(383
)
303
464
Content amortization (non-cash) (b)
—
—
—
26
Restructuring and other charges (c)
4,274
260
8,907
635
Adjusted EBITDA (Non-GAAP) - Continuing
Operations
$
50,281
$
39,187
$
23,439
$
4,877
Adjusted EBITDA (Non-GAAP) - Discontinued
Operations
$
(643
)
$
180
$
(216
)
$
1,069
Adjusted EBITDA (Non-GAAP) - Total
$
49,638
$
39,367
$
23,223
$
5,946
Adjusted EBITDA by Segment (non-GAAP) (a) - Continuing
Operations
The following is Adjusted EBITDA by Segment for Continuing
Operations for the 13 and 26 week periods:
13 weeks ended October 28,
2023
Retail
Wholesale
Corporate Services (e)
Eliminations
Total
Net loss from continuing operations
$
39,407
$
1,344
$
(20,520
)
$
4,623
$
24,854
Add:
Depreciation and amortization expense
8,911
1,254
10
—
10,175
Interest expense, net
—
—
10,664
—
10,664
Income tax expense
—
—
314
—
314
Content amortization (non-cash) (b)
—
—
—
—
—
Restructuring and other charges (c)
29
—
4,245
—
4,274
Adjusted EBITDA (non-GAAP)
$
48,347
$
2,598
$
(5,287
)
$
4,623
$
50,281
13 weeks ended October 29,
2022
Retail
Wholesale
Corporate Services (e)
Eliminations
Total
Net income (loss) from continuing
operations
$
30,547
$
218
$
(9,855
)
$
3,258
$
24,168
Add:
Depreciation and amortization expense
8,869
1,370
17
—
10,256
Interest expense, net
—
—
4,886
—
4,886
Income tax benefit
—
—
(383
)
—
(383
)
Content amortization (non-cash) (b)
—
—
—
—
—
Restructuring and other charges (c)
—
—
260
—
260
Adjusted EBITDA (non-GAAP)
$
39,416
$
1,588
$
(5,075
)
$
3,258
$
39,187
26 weeks ended October 28,
2023
Retail
Wholesale
Corporate Services (e)
Eliminations
Total
Net income (loss) from continuing
operations
$
11,033
$
1,947
$
(37,272
)
$
(825
)
$
(25,117
)
Add:
Depreciation and amortization expense
17,877
2,531
20
—
20,428
Interest expense, net
—
—
18,918
—
18,918
Income tax expense
—
—
303
—
303
Content amortization (non-cash) (b)
—
—
—
—
—
Restructuring and other charges (c)
555
526
7,826
—
8,907
Adjusted EBITDA (non-GAAP)
$
29,465
$
5,004
$
(10,205
)
$
(825
)
$
23,439
26 weeks ended October 29,
2022
Retail
Wholesale
Corporate Services (e)
Eliminations
Total
Net (loss) income from continuing
operations
$
(3,993
)
$
1,637
$
(22,177
)
$
(1,621
)
$
(26,154
)
Add:
Depreciation and amortization expense
18,398
2,719
35
—
21,152
Interest expense, net
—
—
8,754
—
8,754
Income tax expense
—
—
464
—
464
Content amortization (non-cash) (b)
26
—
—
—
26
Restructuring and other charges (c)
—
—
635
—
635
Adjusted EBITDA (non-GAAP)
$
14,431
$
4,356
$
(12,289
)
$
(1,621
)
$
4,877
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
condensed consolidated financial statements.
(c)
During the 13 weeks ended October 28, 2023
and October 29, 2022, we recognized restructuring and other charges
totaling $4,274 and $260, respectively. During the 26 weeks ended
October 28, 2023 and October 29, 2022, we recognized restructuring
and other charges totaling $8,907 and $635, respectively.
Restructuring and other charges are 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.
(d)
There is no pro forma income effect of the
non-GAAP items.
(e)
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) - Continuing Operations
13 weeks ended
26 weeks ended
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Net cash flows provided by (used in)
operating activities from continuing operations
$
72,698
$
38,680
$
(47,160
)
$
10,073
Less:
Capital expenditures (b)
3,977
9,293
8,196
16,823
Cash interest paid
7,576
4,368
13,972
7,301
Cash taxes paid (refund)
43
(15,705
)
388
(15,583
)
Free Cash Flow (non-GAAP)
$
61,102
$
40,724
$
(69,716
)
$
1,532
(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, 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
26 weeks ended
- Continuing Operations
October 28, 2023
October 29, 2022
October 28, 2023
October 29, 2022
Physical store capital expenditures
$
1,743
$
6,052
$
3,948
$
10,548
Product and system development
1,697
2,689
3,460
5,175
Other
537
552
788
1,100
Total capital expenditures
$
3,977
$
9,293
$
8,196
$
16,823
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) from continuing
operations adjusted for certain reconciling items that are
subtracted from or added to net income (loss) from continuing
operations. We define Adjusted EBITDA as net income (loss) from
continuing operations 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) from
continuing operations. We define Free Cash Flow as Cash Flows from
Operating Activities from continuing operations 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) from
continuing operations; the reconciliation of consolidated Adjusted
EBITDA to consolidated net income (loss) from continuing
operations; and the reconciliation of Adjusted EBITDA by Segment to
net income (loss) from continuing operations 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 29, 2023 filed with the SEC on July 31, 2023, which
includes consolidated financial statements for each of the three
years for the period ended April 29, 2023, April 30, 2022, and May
1, 2021 (Fiscal 2023, Fiscal 2022, and Fiscal 2021, respectively)
and the Company's Quarterly Report on Form 10-Q for the period
ended July 29, 2023 filed with the SEC on September 6, 2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231206784251/en/
Investor Contact:
Hunter Blankenbaker Vice President Corporate Communications
& Investor Relations 908-991-2776 hblankenbaker@bned.com
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