Expands
bartleby learn™ Content Library and Introduces bartleby
write™
General
Merchandise Comparable Sales Increase 4.9%
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading provider of educational products and services solutions for
higher education and K-12, today reported sales and earnings for
the first quarter for fiscal year 2020, which ended on July 27,
2019. BNED is a highly seasonal business, and the first quarter has
historically been a period of low sales activity for the
Company.
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.
Financial highlights for the first quarter 2020:
- Consolidated first quarter sales of $319.7 million decreased
5.3%, as compared to the prior year period.
- Consolidated first quarter GAAP net loss of $(32.2) million,
compared to net loss of $(38.6) million in the prior year period.
Consolidated first quarter non-GAAP Adjusted Earnings of $(30.1)
million, compared to $(38.6) million in the prior year period.
- Consolidated first quarter non-GAAP Adjusted EBITDA of $(25.1)
million, compared to $(32.5) million in the prior year period.
Operational highlights for the first quarter 2020:
- Continued to enhance bartleby learn™ by growing the number of
titles and subjects covered and step-by-step solutions available in
the content library. The Company expects to offer approximately two
million step-by-step solutions for the fall back-to-school
season.
- Introduced bartleby write™, the newest offering in the
bartleby® suite of student services. Bartleby write offers grammar
checks, plagiarism detection, citation assistance and AI-generated
preliminary scoring.
- Continued to demonstrate strong acceptance of the Barnes &
Noble College (BNC) inclusive access platform, BNC FirstDay™, with
revenue from BNC FirstDay increasing by 46% year over year.
- Increased net new business wins as a result of the Company’s
unified and expanded sales team and dynamic, new go-to-market
strategy.
- Continued to strengthen general merchandise business by adding
direct ship capabilities and expanding the Company’s online product
assortment.
- Enhanced value of campus retail footprint with the expansion of
previously piloted relevant and curated concept shops to more than
70 stores.
- Launched UO on Campus concept shops in partnership with Urban
Outfitters, bringing trend relevant apparel and home décor direct
to the college consumer.
- Commenced first wave of implementations of BNC Adoption &
Insights, an innovative platform that increases BNC’s value to
current and prospective partners, allowing faculty and academic
leadership to research, submit and monitor course material
selections, affordability and student success.
“We are pleased with the progress we continue to make as we
transform and grow BNED to best serve the changing education
landscape. One year after launching our digital study offering
bartleby learn, we have now expanded our bartleby suite of services
to offer a best-in-class writing product, bartleby write. The
introduction of this new offering positions BNED to provide new,
value-added services and future digital bundles both to
institutions and directly to students. We are excited about the
continued development of this learning ecosystem, and are executing
on our next in-footprint sales push for our Fall Rush,” said
Michael P. Huseby, Chief Executive Officer and Chairman, BNED.
“During the first quarter, we made important strides in
strengthening our Retail segment, enhancing our in-store retail
experience and expanding our online product assortment. We also
recently announced a new agreement with VitalSource® to further
strengthen our BNC FirstDay inclusive access platform for delivery
of digital course materials. Under the agreement, VitalSource’s
technology will power the BNC FirstDay platform, bringing together
VitalSource’s advanced technology and BNC’s unparalleled campus and
publisher relationships. We are proud of all that our teams
accomplished this quarter as we continue our Fall Rush period.”
First Quarter Results for 2020
Results for the 13 weeks of fiscal 2020 and fiscal 2019 are as
follows:
$ in millions
Selected Data (unaudited)
13
Weeks
Q1 2020
13
Weeks
Q1 2019
Total Sales
$
319.7
$
337.5
Net Loss
$
(32.2
)
$
(38.6
)
Non-GAAP(1)
Adjusted EBITDA
$
(25.1
)
$
(32.5
)
Adjusted Earnings
$
(30.1
)
$
(38.6
)
(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.
Retail Segment Results
Retail sales in the seasonally low first
quarter decreased by $12.4 million, or 4.3%, as compared to the
prior year period. Comparable store sales in the Retail segment
decreased 3.5% for the quarter representing approximately $9.0
million in revenue.
Retail non-GAAP Adjusted EBITDA for the
quarter improved by $7.2 million to $(21.5) million, as compared to
$(28.7) million in the prior year period. Higher gross margins and
decreases in selling and administrative expenses exceeded the
impact of the comparable store sales decline. These declines were
partially offset by improvements in general merchandise sales,
which increased 4.9% in the quarter.
Wholesale Segment Results
Wholesale total sales of $72.3 million for
the quarter decreased by $17.6 million, or 19.6%, as compared to
$89.9 million in the prior year period. The decrease is primarily
due to a shift in buying patterns, a decrease in supply and a
decrease in customer demand, including the Company’s Retail
segment.
Wholesale non-GAAP Adjusted EBITDA for the
quarter was $10.2 million, as compared to $13.9 million in the
prior year period. This decrease was primarily driven by lower
sales and lower gross margins, partially offset by lower selling
and administrative expenses.
DSS Segment Results
DSS sales of $5.4 million for the quarter
decreased by $0.3 million, or 5.3%, as compared to $5.7 million in
the prior year period. The decrease is primarily due to lower
subscriptions at Student Brands, partially offset by growth in
certain foreign language properties and increases in bartleby
subscription sales.
DSS non-GAAP Adjusted EBITDA was $1.0 million
for the quarter, as compared to $2.8 million in the prior year
period. The decrease is primarily due to the investments in the
development, marketing, and selling of the Company’s student hub,
bartleby.
Other
The Company recognized $1.9 million in
impairment and restructuring and other charges during the quarter.
The charges reflect severance for terminated employees,
professional services related to restructuring and process
improvements, and development costs related to a project that is no
longer recoverable.
Expenses for Corporate Services, which
includes unallocated shared-service costs, such as various
corporate level expenses and other governance functions, were $5.0
million for the quarter as compared to $5.5 million in the prior
period.
Intercompany gross margin eliminations of
$(9.8) million reflected in Adjusted EBITDA, compared to $(15.0)
million in the prior year period, are lower due to a decrease in
inter-segment sales from Wholesale to Retail and lower markdowns
for Retail inventory held at the end of the period that was
previously purchased from Wholesale.
Outlook
For fiscal year 2020, the Company expects consolidated Adjusted
EBITDA to be between $90 million to $100 million. Due to the
Company’s continued investments, capital expenditures are expected
to increase from fiscal year 2019 by approximately $10 million, and
are expected to be in a range of $50 million to $60 million. The
Company expects free cash flow to be between $25 million to $40
million, as compared to $39.7 million in fiscal year 2019. The
Company defines free cash flow as Adjusted EBITDA less capital
expenditures, cash interest and cash taxes.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 10:00 a.m. Eastern Time on Tuesday,
August 27, 2019 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 2020
second quarter results on or about December 5, 2019.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED) is a
leading provider of higher education and K-12 educational products
and solutions. Through its Retail segment, Barnes & Noble
Education operates 1,491 physical and virtual bookstores across the
U.S., serving more than 6 million students and faculty. Through its
Digital Student Solutions segment, the Company offers
direct-to-student products and services that help students study
more effectively and improve academic performance, enabling them to
gain the valuable skills necessary to succeed after college.
Through its Wholesale segment, the Company operates one of the
largest textbook wholesale distribution channels in the United
States. For more information please visit www.bned.com.
BNED companies include: Barnes & Noble College Booksellers,
LLC, MBS Textbook Exchange, LLC, BNED LoudCloud, LLC, Student
Brands, LLC, and PaperRater, LLC. General information on Barnes
& Noble Education may be obtained by visiting the Company's
corporate website: 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: 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’ direct to
student textbook consignment rental programs, as well as risks
associated with merchandise sourced indirectly from outside 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 27,
2019. 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 1,491 college, university, and
K-12 school bookstores, comprised of 777 physical bookstores and
714 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 sites
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 3,500 physical
bookstores (including our Retail Segment's 777 physical bookstores)
and sources and distributes new and used textbooks to our 714
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
400 college bookstores.
• The Digital Student Solutions ("DSS") Segment includes
direct-to-student 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®, a direct-to-student subscription-based offering
providing textbook solutions, expert questions and answers,
tutoring and test prep services.
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 27, 2019
July 28, 2018
Sales:
Product sales and other
$
302,227
$
317,845
Rental income
17,430
19,639
Total sales
319,657
337,484
Cost of sales: (a)
Product and other cost of sales
238,331
258,752
Rental cost of sales
9,669
12,122
Total cost of sales
248,000
270,874
Gross profit
71,657
66,610
Selling and administrative expenses
97,691
99,144
Depreciation and amortization expense
15,879
16,538
Impairment loss (non-cash) (a)
433
—
Restructuring and other charges (a)
1,466
—
Operating loss
(43,812
)
(49,072
)
Interest expense, net
2,532
3,522
Loss before income taxes
(46,344
)
(52,594
)
Income tax benefit
(14,189
)
(13,972
)
Net loss
$
(32,155
)
$
(38,622
)
Loss per common share:
Basic
$
(0.68
)
$
(0.82
)
Diluted
$
(0.68
)
$
(0.82
)
Weighted average common shares
outstanding:
Basic
47,582
46,917
Diluted
47,582
46,917
(a) For additional information, see Note
(a) - (d) in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
July 27, 2019
July 28, 2018
Percentage of sales:
Sales:
Product sales and other
94.5
%
94.2
%
Rental income
5.5
%
5.8
%
Total sales
100.0
%
100.0
%
Cost of sales:
Product and other cost of sales (a)
78.9
%
81.4
%
Rental cost of sales (a)
55.5
%
61.7
%
Total cost of sales
77.6
%
80.3
%
Gross profit
22.4
%
19.7
%
Selling and administrative expenses
30.6
%
29.4
%
Depreciation and amortization expense
5.0
%
4.9
%
Impairment loss (non-cash)
0.1
%
—
%
Restructuring and other charges
0.5
%
—
%
Operating loss
(13.8
)%
(14.6
)%
Interest expense, net
0.8
%
1.0
%
Loss before income taxes
(14.6
)%
(15.6
)%
Income tax benefit
(4.4
)%
(4.1
)%
Net loss
(10.2
)%
(11.5
)%
(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 27, 2019
July 28, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
8,222
$
13,258
Receivables, net
98,547
99,775
Merchandise inventories, net
717,765
729,877
Textbook rental inventories
5,221
6,237
Prepaid expenses and other current
assets
18,069
18,738
Total current assets
847,824
867,885
Property and equipment, net
105,902
108,090
Operating lease right-of-use assets
(a)
314,355
—
Intangible assets, net
189,183
213,945
Goodwill
4,700
49,282
Other noncurrent assets
40,457
41,659
Total assets
$
1,502,421
$
1,280,861
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
443,134
$
463,723
Accrued liabilities
75,876
93,232
Current operating lease liabilities
(a)
111,155
—
Short-term borrowings
100,000
100,000
Total current liabilities
730,165
656,955
Long-term deferred taxes, net
598
3,172
Long-term operating lease liabilities
(a)
226,534
—
Other long-term liabilities
50,270
58,852
Long-term borrowings
74,100
130,200
Total liabilities
1,081,667
849,179
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, 51,086 and 50,032 shares, respectively;
outstanding, 47,607 and 46,917 shares, respectively
511
501
Additional paid-in-capital
728,651
719,664
Accumulated deficit
(276,732
)
(258,825
)
Treasury stock, at cost
(31,676
)
(29,658
)
Total stockholders' equity
420,754
431,682
Total liabilities and stockholders'
equity
$
1,502,421
$
1,280,861
(a) We adopted ASC 842 Leases accounting
guidance effective April 28, 2019 which requires that we recognize
a right-of-use asset and lease liability for leases with a term
greater than twelve months.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 week period are as follows:
Dollars in millions
13 weeks ended
July 27, 2019
July 28, 2018
Retail Sales
New stores (a)
$
7.4
$
7.8
Closed stores (a)
(6.3
)
(8.8
)
Comparable stores (b)
(9.0
)
(6.4
)
Textbook rental deferral
0.7
(0.2
)
Service revenue (c)
(0.4
)
(0.1
)
Other (d)
(4.8
)
(2.5
)
Retail Sales subtotal:
$
(12.4
)
$
(10.2
)
Wholesale Sales:
$
(17.6
)
$
(2.6
)
DSS Sales
$
(0.3
)
$
5.7
Eliminations (e)
$
12.5
$
(11.1
)
Total sales variance
$
(17.8
)
$
(18.2
)
(a) The following is a store count summary for physical stores
and virtual stores:
13 weeks ended
July 27, 2019
July 28, 2018
Number of Stores:
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Number of stores at beginning of
period
772
676
768
676
Stores opened
38
46
13
17
Stores closed
33
8
28
9
Number of stores at end of period
777
714
753
684
(b) For Comparable Store Sales details, see below.
(c) Service revenue includes brand partnerships, shipping and
handling, digital content, software, services, 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, agency sales and other deferred items.
(e) Eliminates Wholesale sales and service fees to Retail and
Retail commissions earned from Wholesale.
Comparable Sales - Retail Segment
Comparable store sales variances by category for the 13 week
periods are as follows:
Dollars in millions
13 weeks ended
July 27, 2019
July 28, 2018
Textbooks (Course Materials)
$
(13.7
)
(11.0
)%
$
(6.1
)
(4.7
)%
General Merchandise
5.9
4.9
%
1.2
1.0
%
Trade Books
(1.2
)
(11.8
)%
(1.5
)
(12.9
)%
Total Comparable Store Sales
$
(9.0
)
(3.5
)%
$
(6.4
)
(2.5
)%
Comparable store sales includes sales from physical stores that
have been open for an entire fiscal year period and virtual store
sales for the period, does not include sales from closed stores for
all periods presented, and digital agency sales are included on a
gross basis. We believe the current comparable store sales
calculation method reflects the manner in which management views
comparable sales, as well as the seasonal nature of our
business.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Adjusted Earnings
13 weeks ended
July 27, 2019
July 28, 2018
Net loss
$
(32,155
)
$
(38,622
)
Reconciling items, after-tax (below)
2,080
33
Adjusted Earnings (Non-GAAP)
$
(30,075
)
$
(38,589
)
Reconciling items, pre-tax
Impairment loss (non-cash) (a)
$
433
$—
Content amortization (non-cash) (b)
911
44
Restructuring and other charges (c)
1,466
—
Reconciling items, pre-tax
2,810
44
Less: Pro forma income tax impact (d)
730
11
Reconciling items, after-tax
$
2,080
$
33
Adjusted EBITDA
13 weeks ended
July 27, 2019
July 28, 2018
Net loss
$
(32,155
)
$
(38,622
)
Add:
Depreciation and amortization expense
15,879
16,538
Interest expense, net
2,532
3,522
Income tax benefit
(14,189
)
(13,972
)
Impairment loss (non-cash) (a)
433
—
Content amortization (non-cash) (b)
911
44
Restructuring and other charges (c)
1,466
—
Adjusted EBITDA (Non-GAAP)
$
(25,123
)
$
(32,490
)
(a) During the 13 weeks ended July 27, 2019, we recognized an
impairment loss (non-cash) of $433 in the Retail Segment related to
net capitalized development costs for a project which are not
recoverable.
(b) Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
consolidated financial statements.
(c) During the 13 weeks ended July 27,
2019, we recognized expenses for severance and transition payments
related to senior management changes, other employee termination
and benefit costs, and professional service costs, for
restructuring activities and related process improvements.
(d) Represents the income tax effects of
the non-GAAP items.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Free Cash Flow (non-GAAP)
13 weeks ended
July 27, 2019
July 28, 2018
Adjusted EBITDA (non-GAAP)
$
(25,123
)
$
(32,490
)
Less:
Capital expenditures (a)
8,309
8,240
Cash interest paid
1,610
2,914
Cash taxes (refund) paid
(6,598
)
1,377
Free Cash Flow (non-GAAP)
$
(28,444
)
$
(45,021
)
(a) 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 27, 2019
July 28, 2018
Physical store capital expenditures
$
3,518
$
4,209
Product and system development
3,342
2,020
Content development costs
685
1,724
Other
764
287
Total Capital Expenditures
$
8,309
$
8,240
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages)
(Unaudited)
Segment Information (a)
13 weeks ended
July 27, 2019
July 28, 2018
Sales
Retail
$
274,656
$
287,085
Wholesale
72,309
89,944
DSS
5,374
5,677
Eliminations
(32,682
)
(45,222
)
Total
$
319,657
$
337,484
Gross profit
Retail (b)
$
62,323
$
56,565
Wholesale
14,918
19,545
DSS (b)
5,141
5,554
Eliminations
(9,814
)
(15,010
)
Total
$
72,568
$
66,654
Selling and administrative expenses
Retail
$
83,815
$
85,235
Wholesale
4,759
5,639
DSS
4,113
2,779
Corporate Services
5,007
5,493
Eliminations
(3
)
(2
)
Total
$
97,691
$
99,144
Adjusted EBITDA (Non-GAAP) (c)
Retail
$
(21,492
)
$
(28,670
)
Wholesale
10,159
13,906
DSS
1,028
2,775
Corporate Services
(5,007
)
(5,493
)
Eliminations
(9,811
)
(15,008
)
Total
$
(25,123
)
$
(32,490
)
(a) See Explanatory Note in this Press Release for Segment
descriptions.
(b) For the 13 weeks ended July 27, 2019,
the Retail Segment and DSS Segment gross margin excludes $184 and
$727, respectively, of amortization expense (non-cash) related to
content development costs. For the 13 weeks ended July 28, 2018,
the Retail Segment and DSS Segment gross margin excludes $44 and
$0, respectively, of amortization expense (non-cash) related to
content development costs.
(c) For additional information, see "Use
of Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
Percentage of Segment Sales
13 weeks ended
July 27, 2019
July 28, 2018
Gross margin
Retail
22.7
%
19.7
%
Wholesale
20.6
%
21.7
%
DSS
95.7
%
97.8
%
Elimination
30.0
%
33.2
%
Total gross margin
22.7
%
19.8
%
Selling and administrative expenses
Retail
30.5
%
29.7
%
Wholesale
6.6
%
6.3
%
DSS
76.5
%
49.0
%
Corporate Services
N/A
N/A
Elimination
N/A
N/A
Total selling and administrative
expenses
30.6
%
29.4
%
Use of Non-GAAP Financial Information -
Adjusted Earnings, Adjusted EBITDA and Free Cash Flow
To supplement the Company’s 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 non-GAAP
financial measures of Adjusted Earnings (defined as net income
adjusted for certain reconciling items), Adjusted EBITDA (defined
by the Company as earnings before interest, taxes, depreciation and
amortization, as adjusted for additional items subtracted from or
added to net income) and Free Cash Flow (defined by the Company as
Adjusted EBITDA less capital expenditures, cash interest and cash
taxes).
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.
The Company's management reviews these
non-GAAP financial measures as internal measures to evaluate the
Company's performance and manage the Company's operations. The
Company's management believes that these measures are useful
performance measures which are used by the Company to facilitate a
comparison of on-going operating performance on a consistent basis
from period-to-period. The Company's management believes that these
non-GAAP financial measures provide for a more complete
understanding of factors and trends affecting the Company's
business than measures under GAAP can provide alone, as it excludes
certain items that do not reflect the ordinary earnings of its
operations. The Company's Board of Directors and management also
use Adjusted EBITDA as one of the primary methods for planning and
forecasting overall expected performance, for evaluating on a
quarterly and annual basis actual results against such
expectations, and as a measure for performance incentive plans. The
Company's management believes that the inclusion of Adjusted EBITDA
and Adjusted Earnings results provides investors useful and
important information regarding the Company's operating results.
The Company believes 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 the Company’s operating
profitability and liquidity as the Company manages to the business
to maximize margin and cashflow.
The non-GAAP measures included in the
Press Release attached hereto as Exhibit 99.1 has been reconciled
to the comparable GAAP measures as required under Securities and
Exchange Commission (the “SEC”) rules regarding the use of non-GAAP
financial measures. All of the items included in the
reconciliations below are either (i) non-cash items or (ii) items
that management does not consider in assessing the Company's
on-going operating performance. The Company urges investors to
carefully review the GAAP financial information included as part of
the Company’s Form 10-K dated April 27, 2019 filed with the SEC on
June 25, 2019, which includes consolidated financial statements for
each of the three years for the period ended April 27, 2019 (Fiscal
2019, Fiscal 2018, and Fiscal 2017).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190827005247/en/
Media: Carolyn J. Brown
Senior Vice President Corporate Communications and Public Affairs
Barnes & Noble Education, Inc. (908) 991-2967
cbrown@bned.com
Investors: Thomas D. Donohue
Executive Vice President Chief Financial Officer Barnes & Noble
Education, Inc. (908) 991-2966 tdonohue@bned.com
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