Company’s
Flexible Solutions Help Schools and Students Adapt to Blended and
Virtual Learning Environment
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the second quarter of fiscal year
2021, which ended on October 31, 2020.
BNED’s fiscal 2021 second quarter results were significantly
impacted by the ongoing COVID-19 pandemic, as many schools
continued to adjust their learning model and restrict on-campus
activities in response to the pandemic. Fewer students returned to
campus this fall, as many schools implemented a remote learning
model and curtailed on-campus classes and activities. While many
big-conferences resumed their sport activities, fan attendance at
the games was either eliminated or severely restricted, which
further impacted the Company’s high-margin general merchandise
business. Additionally, sales were impacted by overall enrollment
declines in higher education.
The COVID-19 impact on higher education remains a fluid
situation and BNED remains committed to supporting its campus
partners through its flexible offerings and ability to quickly
pivot to ensure uninterrupted service as institutions manage the
safety of their campuses and the Company manages the safety of its
campus stores.
Financial highlights for the second quarter 2021:
- Consolidated second quarter sales of $595.5 million decreased
22.9%, as compared to the prior year period; year to date
consolidated sales of $799.5 million decreased 26.8%, as compared
to the prior year period.
- Consolidated second quarter GAAP net income of $7.5 million,
compared to GAAP net income of $35.9 million in the prior year
period; year to date GAAP net loss of $39.1 million, compared to
GAAP net income of $3.8 million in the prior year period.
- Consolidated second quarter non-GAAP Adjusted Earnings of $11.1
million, compared to non-GAAP Adjusted Earnings of $37.8 million in
the prior year period; year to date non-GAAP Adjusted Earnings of
$(30.6) million, compared to non-GAAP Adjusted Earnings of $7.8
million in the prior year period.
- Consolidated second quarter non-GAAP Adjusted EBITDA of $24.5
million, compared to non-GAAP Adjusted EBITDA of $74.5 million in
the prior year period; year to date non-GAAP Adjusted EBITDA loss
of $13.5 million, compared to non-GAAP Adjusted EBITDA $49.4
million in the prior year period.
Operational highlights for the second quarter 2021:
- BNC First Day® year-over-year revenue increased 77%,
benefitting from the accelerated move to digital courseware.
- Successfully launched BNC First Day Complete at twelve campuses
for the Fall 2020 term. The Company expects to transition
additional colleges and universities to the First Day Complete
model for Spring 2021.
- Gained over 120,000 gross subscribers for the bartleby® suite
of services year to date, with DSS revenue increasing 14%.
- Continued to drive bartleby growth through search engine
optimization (SEO) and partnerships with Blackboard and
VitalSource, demonstrating a strong channel for growth to
supplement fewer in-person selling opportunities caused by the
COVID-19 pandemic.
- Continued to attract new clients and generate new business
growth, signing over $70 million in net new business to date this
fiscal year and expanding BNED’s footprint by 47 BNC institutions
and 31 K-12 schools.
- Continued development of the Company’s next generation
eCommerce platform; expected phased roll-out throughout calendar
year 2021 to grow high-margin general merchandise sales.
“Our teams continued to make tremendous progress in growing and
enhancing our offerings and services this quarter, despite the many
challenges presented by the ongoing COVID-19 pandemic. As students
adjusted to a blended learning environment on campuses nationwide
this fall, our flexible offerings ensured that students were
equipped with their course materials regardless of whether their
schools resumed classes on campus, remotely or adopted a hybrid
learning model,” said Michael P. Huseby, Chief Executive Officer
and Chairman, BNED. “Our bartleby direct-to-student offerings
became increasingly relevant in this environment, providing
students with the academic support they need. We continue to scale
our bartleby solutions through our existing channels, such as
in-store sales and SEO, in addition to leveraging new channels,
such as our recently announced Blackboard Assist partnership, to
ensure we are providing widespread access to digital learning
support at a time when students need it most.”
“As anticipated, we experienced lower physical textbook
revenues, as well as a substantial year over year decline in our
higher margin general merchandise business this quarter due to the
pandemic. In addition to fewer students on campus, our general
merchandise business was impacted by the cancellation of many
athletic and in-store social events,” continued Mr. Huseby. “We
expect the impacts of COVID-19 to extend into the new year, and as
such, we are continuing to manage expenses and liquidity prudently.
Our current liquidity position remains strong despite the
challenging climate. As students, faculty and institutions continue
to adapt to an educational landscape that is changing each day, we
remain well-positioned to provide invaluable services and support
to ensure all of our customers have the tools they need for
success.”
Second Quarter 2021 and Year to Date Results
Results for the 13 and 26 weeks of fiscal 2021 and fiscal 2020
are as follows:
$ in millions
13 and 26 Weeks Selected Data
(unaudited)
13
Weeks
Q2 2021
13
Weeks
Q2 2020
26
Weeks 2021
26
Weeks 2020
Total Sales
$595.5
$772.2
$799.5
$1,091.9
Net Income (Loss)
$7.5
$35.9
($39.1)
$3.8
Non-GAAP(1)
Adjusted EBITDA
$24.5
$74.5
($13.5)
$49.4
Adjusted Earnings
$11.1
$37.8
($30.6)
$7.8
(1) These non-GAAP financial measures have
been reconciled in the attached schedules to the most directly
comparable GAAP measures as required under SEC rules regarding the
use of non-GAAP financial measures.
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 in the second quarter decreased
by $165.2 million, or 22.3%, as compared to the prior year period.
Comparable store sales in the Retail segment decreased 28.1% for
the quarter, inclusive of a 52% general merchandise comparable
sales decline, primarily due to fewer students on campus, curtailed
campus activities and significant restrictions on attendance at
sporting events.
Retail non-GAAP Adjusted EBITDA for the
quarter decreased by $44.2 million to $18.3 million, as compared to
non-GAAP Adjusted EBITDA of $62.6 million in the prior year period.
The decrease is primarily due to lower textbook sales and lower
sales of higher-margin general merchandise products, partially
offset by lower selling and administrative expenses.
Wholesale Segment Results
Wholesale sales of $36.4 million for the
quarter decreased by $3.8 million, or 9.5%, as compared to $40.2
million in the prior year period. The decrease is primarily due to
decreased gross sales, partially offset by lower returns and
allowances, both impacted by the COVID-19 pandemic.
Wholesale non-GAAP Adjusted EBITDA for the
quarter was $6.6 million, as compared to non-GAAP Adjusted EBITDA
of $7.9 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 $5.9 million for the quarter
increased by $0.7 million, or 14.0%, as compared to $5.2 million in
the prior year period. The increase is primarily due to an increase
in sales of bartleby subscriptions.
DSS non-GAAP Adjusted EBITDA was $0.7 million
for the quarter, as compared to non-GAAP Adjusted EBITDA of $0.3
million in the prior year period, benefitting from the increase in
bartleby subscriptions.
Other
Expenses for Corporate Services, which
includes unallocated shared-service costs, such as various
corporate level expenses and other governance functions, were $5.5
million for the quarter as compared to $5.7 million in the prior
period.
Intercompany gross margin eliminations of
$4.4 million reflected in non-GAAP Adjusted EBITDA, compared to
$9.3 million in the prior year period, are lower due to a decrease
in inter-segment sales from Wholesale to Retail.
Additional Events
Pursuant to BNED’s cooperation agreement with Outerbridge, the
Company nominated, and stockholders approved Zachary Levenick as an
independent director at the Company’s 2020 Annual Meeting that was
held on October 22, 2020.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 8:30 a.m. Eastern Time on Tuesday,
December 8, 2020 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 2021 third
quarter results on or about March 4, 2021.
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 COVID-19 and the governmental responses to it,
including its impact across our businesses on demand and
operations, as well as on the operations of our suppliers and other
business partners, and the effectiveness of our actions taken in
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 May 2, 2020.
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 1,439 college, university, and K-12
school bookstores, comprised of 768 physical bookstores and 671
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 3,400 physical
bookstores (including our Retail Segment's 768 physical bookstores)
and sources and distributes new and used textbooks to our 671
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
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Sales:
Product sales and other
$
551,832
$
718,543
$
745,042
$
1,020,770
Rental income
43,653
53,685
54,457
71,115
Total sales
595,485
772,228
799,499
1,091,885
Cost of sales:
Product and other cost of sales
452,475
553,070
618,240
791,401
Rental cost of sales
27,725
32,208
35,112
41,877
Total cost of sales
480,200
585,278
653,352
833,278
Gross profit
115,285
186,950
146,147
258,607
Selling and administrative expenses
91,972
113,404
162,015
211,095
Depreciation and amortization expense
13,193
15,546
27,256
31,425
Impairment loss (non-cash) (a)
—
—
—
433
Restructuring and other charges (a)
3,387
1,569
9,058
3,035
Operating income (loss)
6,733
56,431
(52,182)
12,619
Interest expense, net
912
1,446
3,565
3,978
Income before income taxes
5,821
54,985
(55,747)
8,641
Income tax (benefit) expense
(1,694)
19,054
(16,610)
4,865
Net income (loss)
$
7,515
$
35,931
$
(39,137)
$
3,776
Income (Loss) per common share:
Basic
$
0.15
$
0.75
$
(0.81)
$
0.08
Diluted
$
0.15
$
0.74
$
(0.81)
$
0.08
Weighted average common shares
outstanding:
Basic
48,804
47,853
48,608
47,717
Diluted
49,428
48,758
48,608
48,412
(a)
For additional information, see Note (a) -
(d) in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Percentage of sales:
Sales:
Product sales and other
92.7
%
93.0
%
93.2
%
93.5
%
Rental income
7.3
%
7.0
%
6.8
%
6.5
%
Total sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales:
Product and other cost of sales (a)
82.0
%
77.0
%
83.0
%
77.5
%
Rental cost of sales (a)
63.5
%
60.0
%
64.5
%
58.9
%
Total cost of sales
80.6
%
75.8
%
81.7
%
76.3
%
Gross profit
19.4
%
24.2
%
18.3
%
23.7
%
Selling and administrative expenses
15.4
%
14.7
%
20.3
%
19.3
%
Depreciation and amortization expense
2.2
%
2.0
%
3.4
%
2.9
%
Impairment loss (non-cash)
—
%
—
%
—
%
—
%
Restructuring and other charges
0.6
%
0.2
%
1.1
%
0.3
%
Operating income (loss)
1.2
%
7.3
%
(6.5)
%
1.2
%
Interest expense, net
0.2
%
0.2
%
0.4
%
0.4
%
Income before income taxes
1.0
%
7.1
%
(6.9)
%
0.8
%
Income tax (benefit) expense
(0.3)
%
2.5
%
(2.1)
%
0.4
%
Net income (loss)
1.3
%
4.6
%
(4.8)
%
0.4
%
(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 31, 2020
October 26, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
7,353
$
24,594
Receivables, net
167,493
162,538
Merchandise inventories, net
457,677
475,422
Textbook rental inventories
50,736
68,167
Prepaid expenses and other current
assets
23,762
18,494
Total current assets
707,021
749,215
Property and equipment, net
93,130
105,156
Operating lease right-of-use assets
286,038
289,722
Intangible assets, net
166,140
184,188
Goodwill
4,700
4,700
Deferred tax assets, net
8,231
8,039
Other noncurrent assets
31,734
39,235
Total assets
$
1,296,994
$
1,380,255
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
314,042
$
387,704
Accrued liabilities
134,181
197,220
Current operating lease liabilities
121,518
107,721
Total current liabilities
569,741
692,645
Long-term operating lease liabilities
198,990
179,613
Other long-term liabilities
48,329
50,677
Long-term borrowings
99,500
—
Total liabilities
916,560
922,935
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, 53,316 and 52,139 shares, respectively;
outstanding, 49,064 and 48,298 shares, respectively
533
521
Additional paid-in-capital
735,647
730,501
Accumulated deficit
(321,964)
(240,801)
Treasury stock, at cost
(33,782)
(32,901)
Total stockholders' equity
380,434
457,320
Total liabilities and stockholders'
equity
$
1,296,994
$
1,380,255
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 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Retail Sales
New stores (a)
$
27.6
$
39.3
$
35.4
$
46.7
Closed stores (a)
(16.4
)
(24.5
)
(21.9
)
(32.9
)
Comparable stores (b)
(196.5
)
(45.5
)
(302.7
)
(52.3
)
Textbook rental deferral
16.4
1.5
10.1
2.3
Service revenue (c)
1.0
(2.0
)
(3.7
)
(2.5
)
Other (d)
2.7
(10.9
)
1.7
(15.9
)
Retail Sales subtotal:
$
(165.2
)
$
(42.1
)
$
(281.1
)
$
(54.6
)
Wholesale Sales:
$
(3.8
)
$
(0.6
)
$
4.2
$
(18.3
)
DSS Sales
$
0.7
$
0.3
$
1.2
$
—
Eliminations (e)
$
(8.4
)
$
(0.1
)
$
(16.7
)
$
12.5
Total sales variance
$
(176.7
)
$
(42.5
)
$
(292.4
)
$
(60.4
)
(a)
The following is a store count summary for
physical stores and virtual stores:
13 weeks ended
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Number of Stores:
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Number of stores at beginning of
period
772
670
777
714
772
647
772
676
Stores opened
5
11
2
9
29
51
40
55
Stores closed
9
10
7
59
33
27
40
67
Number of stores at end of period
768
671
772
664
768
671
772
664
(b)
For Comparable Store Sales details, see
below.
(c)
Service revenue includes brand
partnerships, 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.
Comparable Sales - Retail Segment
Comparable store sales variances by category for the 13 and 26
week periods are as follows:
Dollars in millions
13 weeks ended
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Textbooks (Course Materials)
$
(101.6)
(19.0)
%
$
(43.9)
(7.7)
%
$
(112.5)
(17.5)
%
$
(55.4)
(8.0)
%
General Merchandise
(97.2)
(52.0)
%
(0.2)
(10.0)
%
(184.8)
(58.6)
%
5.7
1.9
%
Trade Books
(6.3)
(62.3)
%
(1.4)
(12.1)
%
(14.0)
(73.2)
%
(2.6)
(11.9)
%
Total Comparable Store Sales
$
(205.1)
(28.1)
%
$
(45.5)
(5.9)
%
$
(311.3)
(31.8)
%
$
(52.3)
(5.1)
%
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
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Net income (loss)
$
7,515
$
35,931
$
(39,137)
$
3,776
Reconciling items, after-tax (below)
3,560
1,903
8,496
3,983
Adjusted Earnings (Non-GAAP)
$
11,075
$
37,834
$
(30,641)
$
7,759
Reconciling items, pre-tax
Impairment loss (non-cash) (a)
$
—
$
—
$
—
$
433
Content amortization (non-cash) (b)
1,222
998
2,386
1,909
Restructuring and other charges (c)
3,387
1,569
9,058
3,035
Reconciling items, pre-tax
4,609
2,567
11,444
5,377
Less: Pro forma income tax impact (d)
1,049
664
2,948
1,394
Reconciling items, after-tax
$
3,560
$
1,903
$
8,496
$
3,983
Adjusted EBITDA
13 weeks ended
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Net income (loss)
$
7,515
$
35,931
$
(39,137)
$
3,776
Add:
Depreciation and amortization expense
13,193
15,546
27,256
31,425
Interest expense, net
912
1,446
3,565
3,978
Income tax (benefit) expense
(1,694)
19,054
(16,610)
4,865
Impairment loss (non-cash) (a)
—
—
—
433
Content amortization (non-cash) (b)
1,222
998
2,386
1,909
Restructuring and other charges (c)
3,387
1,569
9,058
3,035
Adjusted EBITDA (Non-GAAP)
$
24,535
$
74,544
$
(13,482)
$
49,421
(a)
During the 26 weeks ended October 26,
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 26 weeks ended October 31, 2020
and October 26, 2019, we recognized restructuring and other charges
totaling $9,058 and $3,035, 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, and shareholder activist
activities.
(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
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Adjusted EBITDA (non-GAAP)
$
24,535
$
74,544
$
(13,482)
$
49,421
Less:
Capital expenditures (a)
9,142
10,946
16,197
19,255
Cash interest paid
1,240
2,419
3,200
4,029
Cash taxes paid (refund)
85
721
6,022
(5,877)
Free Cash Flow (non-GAAP)
$
14,068
$
60,458
$
(38,901)
$
32,014
(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
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Physical store capital expenditures
$
2,825
$
4,599
$
5,962
$
8,117
Product and system development
2,901
4,102
5,226
7,444
Content development costs
1,752
1,548
2,828
2,233
Other
1,664
697
2,181
1,461
Total Capital Expenditures
$
9,142
$
10,946
$
16,197
$
19,255
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages)
(Unaudited)
Segment Information (a)
13 weeks ended
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Sales
Retail
$
576,514
$
741,769
$
735,290
$
1,016,425
Wholesale
36,387
40,210
116,681
112,519
DSS
5,947
5,215
11,819
10,589
Eliminations
(23,363)
(14,966)
(64,291)
(47,648)
Total
$
595,485
$
772,228
$
799,499
$
1,091,885
Gross profit
Retail (b)
$
95,704
$
161,150
$
112,049
$
223,473
Wholesale
10,714
12,535
27,471
27,453
DSS (b)
5,692
4,929
11,392
10,070
Eliminations
4,397
9,334
(2,379)
(480)
Total
$
116,507
$
187,948
$
148,533
$
260,516
Selling and administrative expenses
Retail
$
77,380
$
98,578
$
134,365
$
182,393
Wholesale
4,146
4,593
7,937
9,352
DSS
5,003
4,615
9,039
8,728
Corporate Services
5,501
5,668
10,745
10,675
Eliminations
(58)
(50)
(71)
(53)
Total
$
91,972
$
113,404
$
162,015
$
211,095
Adjusted EBITDA (Non-GAAP) (c)
Retail
$
18,324
$
62,572
$
(22,316)
$
41,080
Wholesale
6,568
7,942
19,534
18,101
DSS
689
314
2,353
1,342
Corporate Services
(5,501)
(5,668)
(10,745)
(10,675)
Eliminations
4,455
9,384
(2,308)
(427)
Total
$
24,535
$
74,544
$
(13,482)
$
49,421
(a)
See Explanatory Note in this Press Release
for Segment descriptions.
(b)
For the 13 and 26 weeks ended October 31,
2020, the Retail Segment gross margin excludes $192 and $402,
respectively of amortization expense (non-cash) related to content
development costs. For the 13 and 26 weeks ended October 31, 2020,
the DSS Segment gross margin excludes $1,030 and $1,984,
respectively, of amortization expense (non-cash) related to content
development costs.
For the 13 and 26 weeks ended October 26,
2019, the Retail Segment gross margin excludes $210 and $394
respectively of amortization expense (non-cash) related to content
development costs. For the 13 and 26 weeks ended October 26, 2019,
the DSS Segment gross margin excludes $788 and $1,515,
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
26 weeks ended
October 31, 2020
October 26, 2019
October 31, 2020
October 26, 2019
Gross margin
Retail
16.6
%
21.7
%
15.2
%
22.0
%
Wholesale
29.4
%
31.2
%
23.5
%
24.4
%
DSS
95.7
%
94.5
%
96.4
%
95.1
%
Elimination
(18.8
)%
(62.4
)%
3.7
%
1.0
%
Total gross margin
19.6
%
24.3
%
18.6
%
23.9
%
Selling and administrative expenses
Retail
13.4
%
13.3
%
18.3
%
17.9
%
Wholesale
11.4
%
11.4
%
6.8
%
8.3
%
DSS
84.1
%
88.5
%
76.5
%
82.4
%
Corporate Services
N/A
N/A
N/A
N/A
Elimination
N/A
N/A
N/A
N/A
Total selling and administrative
expenses
15.4
%
14.7
%
20.3
%
19.3
%
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 May 2, 2020 filed
with the SEC on July 14, 2020, which includes consolidated
financial statements for each of the three years for the period
ended May 2, 2020 (Fiscal 2020, Fiscal 2019, and Fiscal 2018) and
the Company's Quarterly Report on Form 10-Q for the period ended
August 1, 2020 filed with the SEC on September 3, 2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201208005268/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 & Investor Relations (908) 991-2776
amilevoj@bned.com
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