Consolidated Revenue Increased 11.0% to $447.1
Million
BNC’s First Day® Complete Revenue Grew 76%
Retail Gross Comparable Store Sales Increased
5.9%
Consolidated GAAP Net Loss Improved by $11.8
Million and Consolidated Adjusted EBITDA (Non-GAAP) Improved by
$19.5 Million
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the third quarter of fiscal year
2023, which ended on January 28, 2023.
Financial highlights for the Third Quarter 2023:
- Consolidated third quarter GAAP sales of $447.1 million
increased 11.0%, as compared to the prior year period. The
Company’s third quarter Fiscal 2022 results were impacted by the
effects of COVID-19 and the Omicron variant which impacted students
return to campus and on-campus activities.
- Consolidated third quarter GAAP gross profit of $104.2 million
increased 19.8%, as compared to the prior year period. GAAP gross
margin increased to 23.3%, as compared to 21.6% in the prior year
period.
- Consolidated selling and administrative expenses were down $2.0
million, as compared to the prior year period. Consolidated selling
and administrative expenses as a percent of revenue decreased to
22.3% from 25.2% in the prior year.
- Consolidated third quarter GAAP net loss of $(25.0) million,
compared to a net loss of $(36.8) million in the prior year
period.
- Consolidated third quarter non-GAAP Adjusted Earnings of
$(11.4) million, compared to $(28.9) million in the prior year
period.
- Consolidated third quarter non-GAAP Adjusted EBITDA of $6.4
million, compared to $(13.1) million in the prior year period.
Operational highlights for the Third Quarter 2023:
- BNC’s First Day® Complete offering revenue grew 76% to $67
million.
- 116 campus stores utilized BNC’s First Day Complete courseware
delivery program during the 2023 Spring Term, at institutions
representing approximately 580,000* in total undergraduate
enrollment; up from 76 campus stores and approximately 380,000* in
total undergraduate enrollment in the 2022 Spring Term.
- Total Retail segment gross comparable store sales increased by
5.9%, comprised of a 7.4% increase in course material sales due to
the strength of the Company’s First Day Complete offering and
higher digital course materials, and a 2.3% increase in general
merchandise sales. For comparable store sales reporting purposes,
logo general merchandise sales fulfilled by Lids and Fanatics are
included on a gross basis. Please see more detailed definition in
the third quarter Results table and Retail segment discussion
below.
- Wholesale revenue was $38.9 million, representing 5.2%
year-over-year growth and the first quarter of growth since the
first quarter of Fiscal 2020.
*As reported by National Center for Education Statistics
(NCES)
“We delivered solid results in the third quarter, with strong
topline growth, increased profitability, and continued progress on
our strategic initiatives. First Day Complete revenue grew 76% as
the colleges and universities we serve continue to recognize the
clear benefits to student outcomes and faculty instruction. We are
in active dialogues with hundreds of institutional partners
regarding First Day Complete and we are encouraged by the progress
we have made. We remain confident about the long-term growth of the
equitable access model and in our ability to successfully
accelerate the transition of our business model,” said Michael P.
Huseby, Chief Executive Officer, BNED. “Our profitability improved
this quarter driven by the growth of higher margin revenue streams
and the execution of our previously announced cost reduction
initiatives, which we began to see the partial benefits of in the
third quarter. We continue to focus on achieving efficiencies and
reducing costs to further improve our operating performance and
position us for sustainable EBITDA growth.”
Third Quarter 2023 and Year to Date Results
Results for the 13 and 39 weeks of fiscal 2023 and fiscal 2022
are as follows:
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.
$ in millions
Selected Data (unaudited)
13
Weeks
Q3 2023
13
Weeks
Q3 2022
39
Weeks
Fiscal 2023
39
Weeks
Fiscal 2022
Total Sales
$447.1
$402.8
$1,328.0
$1,270.6
Net Loss
$(25.0)
$(36.8)
$(55.6)
$(57.9)
Non-GAAP(1)
Adjusted EBITDA
$6.4
$(13.1)
$12.4
$1.4
Adjusted Earnings
$(11.4)
$(28.9)
$(38.1)
$(44.0)
Additional
Information
Retail Gross Comparable Store Sales
Variances (2)
$23.9
$30.9
$45.5
$186.9
(1) These non-GAAP financial measures have
been reconciled in the attached schedules to the most directly
comparable GAAP measure as required under SEC rules regarding the
use of non-GAAP financial measures.
(2) Retail Gross Comparable Store Sales
includes sales from physical and virtual stores that have been open
for an entire fiscal year period and does not include sales from
closed stores for all periods presented. In-store and online logo
general merchandise sales fulfilled by Lids and Fanatics,
respectively, are recognized on a net commission revenue basis, as
compared to the recognition of logo sales on a gross basis in the
prior year period. For Retail Gross Comparable Store Sales
purposes, sales for logo general merchandise fulfilled by Lids,
Fanatics and digital agency sales are included on a gross
basis.
The Company has three reportable segments: Retail, Wholesale and
Digital Student Solutions (“DSS”). Unallocated shared-service
costs, which include various corporate level expenses and other
governance functions, continue to be presented as Corporate
Services. All material intercompany accounts and transactions have
been eliminated in consolidation.
Retail Segment Results
Retail sales of $421.2 million increased by $46.5 million, or
12.4%, as compared to the prior year period due to increases in
course material sales and general merchandise sales.
Retail Gross Comparable Store Sales increased 5.9% for the
quarter, with comparable course material sales increasing 7.4%.
Rental income increased 76.6% to $44.3 million for the 13 weeks
ended January 28, 2023. The increases in course material product
sales and rental income were primarily due to increased revenue
from the Company’s First Day models, which increased by 58.6% to
$120.7 million. Additionally, higher-margin rental income benefited
from the improved availability of used textbook inventory, which
was impacted by supply constraints in Fiscal 2022.
Retail Gross Comparable Store Sales for general merchandise
increased 2.3%. Strong logo product sales were offset by a decline
in graduation products and supply products.
Retail non-GAAP Adjusted EBITDA for the quarter was $6.2
million, as compared to $(15.4) million in the prior year period.
Retail Non-GAAP Adjusted EBITDA increased $21.6 million due to
higher revenue and a 260 basis point increase in gross margin to
21.1%. Additionally, retail sales and administrative expenses as a
percent of revenue decreased to 19.6% compared to 22.6% in the
prior year period, due to a partial quarter benefit from the
Company’s initiatives to drive efficiencies, simplify
organizational structure, and reduce non-essential costs, and lower
incentive compensation expense.
Wholesale Segment Results
Wholesale third quarter sales of $38.9 million increased $1.9
million, or 5.2%, as compared to the prior year period. The
increase is primarily due to increased customer demand compared to
the prior year period, partially offset by higher returns and
allowances.
Wholesale non-GAAP Adjusted EBITDA for the quarter declined to
$3.1 million, as compared to $4.2 million in the prior year,
primarily due to higher markdowns, partially offset by lower
selling and administrative costs.
DSS Segment Results
DSS third quarter sales of $9.0 million decreased $0.4 million,
or 4.5%, as compared to the prior year period. During the quarter,
DSS took steps to streamline its operational structure, optimize
its go-to-market strategy and reduce its customer acquisition costs
to position itself for sustainable, profitable growth.
DSS non-GAAP Adjusted EBITDA was $1.3 million for the quarter,
as compared to $1.5 million in the prior year period. The decrease
was due primarily due to lower sales and lower gross margin, offset
by lower selling and administrative costs, including lower
incentive compensation expense.
Balance Sheet and Cash Flow
The Company’s cash and cash equivalents balance was $11.1
million and total outstanding debt was $285.6 million as of January
28, 2023. Cash flows used in operating activities during the 39
weeks ended January 28, 2023 were $(22.6) million compared to cash
flows provided by operating activities of $7.9 million during the
39 weeks ended January 29, 2022. This $30.5 million decrease in
cash flows provided by operating activities was primarily due to
changes in the Company’s working capital due to increased adoption
of its First Day inclusive and equitable access offerings. During
the 13 weeks ended January 28, 2023, First Day Complete sales
increased by $29 million to $67 million, or 76%, as compared to $38
million in the prior year period, which resulted in higher
inventory purchases and receivables, offset by higher payables and
right-of use payments during the third quarter and year to date of
Fiscal 2023.
Given the growth of First Day programs and the timing of cash
collection from the Company’s school partners, the third quarter
fiscal quarter which has been a source of cash has shifted to the
fourth quarter. When a school adopts the Company’s First Day
inclusive and equitable access offerings, cash collection from the
school generally occurs after the student drop/add dates, which is
later in the working capital cycle, particularly in the Company’s
third quarter given the timing of the Spring Term and its 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
First Day inclusive and equitable access offerings, BNED is focused
on efforts to better align the timing of its cash outflows to
course material vendors with cash inflows collected from
schools.
Amended and Extended Credit
Facility
On March 8, 2023, the Company amended its existing Credit
Agreement to, among other things, extend the maturity date by six
months to August 2024 and reduce the commitments under the Credit
Agreement by $20 million to $380 million. Additionally, the Company
amended the existing Term Loan Credit Agreement to, among other
things, extend the maturity date by six months to December
2024.
Fiscal 2023 Outlook
For fiscal year 2023, the Company expects consolidated non-GAAP
Adjusted EBITDA to be between $20 million to $30 million,
representing non-GAAP Adjusted EBITDA growth of $25 million to $35
million compared to fiscal year 2022. The Company’s Retail segment
will be the primary driver of non-GAAP Adjusted EBITDA growth
driven by new and ongoing First Day Complete course material model
implementations, growth within its general merchandise business,
new business margin, and cost reductions.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 4:30 p.m. Eastern Time on Thursday,
March 9, 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 2023
fourth quarter results in late June 2023.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED) is a
leading solutions provider for the education industry, driving
affordability, access and achievement at hundreds of academic
institutions nationwide and ensuring millions of students are
equipped for success in the classroom and beyond. Through its
family of brands, BNED offers campus retail services and academic
solutions, a digital direct-to-student learning ecosystem,
wholesale capabilities and more. BNED is a company serving all who
work to elevate their lives through education, supporting students,
faculty and institutions as they make tomorrow a better, more
inclusive and smarter world. For more information, visit
www.bned.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us or our
management, identify forward-looking statements. Moreover, we
operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make, including any statements made in regards to our
response to the COVID-19 pandemic. In light of these risks,
uncertainties and assumptions, the future events and trends
discussed in this press release may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward-looking statements. Such statements reflect
our current views with respect to future events, the outcome of
which is subject to certain risks, including, among others: risks
associated with public health crises, epidemics, and pandemics,
such as the COVID-19 pandemic, including the duration, spread,
severity, and any recurrences thereof, and the impact such public
health crises have on the overall demand for BNED products and
services, our operations, the operations of our suppliers and other
business partners, and the effectiveness of our response to these
risks; general competitive conditions, including actions our
competitors and content providers may take to grow their
businesses; a decline in college enrollment or decreased funding
available for students; decisions by colleges and universities to
outsource their physical and/or online bookstore operations or
change the operation of their bookstores; implementation of our
digital strategy may not result in the expected growth in our
digital sales and/or profitability; risk that digital sales growth
does not exceed the rate of investment spend; the performance of
our online, digital and other initiatives, integration of and
deployment of, additional products and services including new
digital channels, and enhancements to higher education digital
products, the inability to achieve the expected cost savings during
the anticipated time frame, and the inability to implement our cost
saving initiatives in a timely and efficient manner; the risk of
price reduction or change in format of course materials by
publishers, which could negatively impact revenues and margin; the
general economic environment and consumer spending patterns;
decreased consumer demand for our products, low growth or declining
sales; the strategic objectives, successful integration,
anticipated synergies, and/or other expected potential benefits of
various acquisitions may not be fully realized or may take longer
than expected; the integration of the operations of various
acquisitions into our own may also increase the risk of our
internal controls being found ineffective; changes to purchase or
rental terms, payment terms, return policies, the discount or
margin on products or other terms with our suppliers; our ability
to successfully implement our strategic initiatives including our
ability to identify, compete for and execute upon additional
acquisitions and strategic investments; risks associated with
operation or performance of MBS Textbook Exchange, LLC’s
point-of-sales systems that are sold to college bookstore
customers; technological changes; risks associated with counterfeit
and piracy of digital and print materials; our international
operations could result in additional risks; our ability to attract
and retain employees; risks associated with data privacy,
information security and intellectual property; trends and
challenges to our business and in the locations in which we have
stores; non-renewal of managed bookstore, physical and/or online
store contracts and higher-than-anticipated store closings;
disruptions to our information technology systems, infrastructure
and data due to computer malware, viruses, hacking and phishing
attacks, resulting in harm to our business and results of
operations; disruption of or interference with third party web
service providers and our own proprietary technology; work
stoppages or increases in labor costs; possible increases in
shipping rates or interruptions in shipping service; product
shortages, including decreases in the used textbook inventory
supply associated with the implementation of publishers’ digital
offerings and direct to student textbook consignment rental
programs, as well as the risks associated with the impacts that
public health crises may have on the ability of our suppliers to
manufacture or source products, particularly from outside of the
United States; changes in domestic and international laws or
regulations, including U.S. tax reform, changes in tax rates, laws
and regulations, as well as related guidance; enactment of laws or
changes in enforcement practices which may restrict or prohibit our
use of texts, emails, interest based online advertising, recurring
billing or similar marketing and sales activities; the amount of
our indebtedness and ability to comply with covenants applicable to
any future debt financing; our ability to satisfy future capital
and liquidity requirements; our ability to access the credit and
capital markets at the times and in the amounts needed and on
acceptable terms; adverse results from litigation, governmental
investigations, tax-related proceedings, or audits; changes in
accounting standards; and the other risks and uncertainties
detailed in the section titled “Risk Factors” in Part I - Item 1A
in our Annual Report on Form 10-K for the year ended April 30,
2022. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described
as anticipated, believed, estimated, expected, intended or planned.
Subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements in this paragraph. We
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise after the date of this press
release.
EXPLANATORY NOTE
We have three reportable segments: Retail, Wholesale and DSS as
follows:
- The Retail Segment operates 1,388 college, university, and K-12
school bookstores, comprised of 785 physical bookstores and 603
virtual bookstores. Our bookstores typically operate under
agreements with the college, university, or K-12 schools to be the
official bookstore and the exclusive seller of course materials and
supplies, including physical and digital products. The majority of
the physical campus bookstores have school-branded e-commerce
websites which we operate and which offer students access to
affordable course materials and affinity products, including
emblematic apparel and gifts. The Retail Segment also offers
inclusive and equitable 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 3,000 physical
bookstores (including our Retail Segment's 785 physical bookstores)
and sources and distributes new and used textbooks to our 603
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
340 college bookstores.
- The Digital Student Solutions ("DSS") Segment includes products
and services to assist students to study more effectively and
improve academic performance. The DSS Segment is comprised of the
operations of Student Brands, LLC, a leading direct-to-student
subscription-based writing services business, and bartleby®, an
institutional and direct-to-student subscription-based offering
providing textbook solutions, expert questions and answers, writing
and tutoring.
Corporate Services represents unallocated shared-service costs
which include corporate level expenses and other governance
functions, including executive functions, such as accounting,
legal, treasury, information technology, and human resources.
All material intercompany accounts and transactions have been
eliminated in consolidation.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(In thousands, except per
share data)
(Unaudited)
13 weeks ended
39 weeks ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Sales:
Product sales and other
$
402,755
$
377,713
$
1,231,465
$
1,182,812
Rental income
44,309
25,085
96,555
87,757
Total sales
447,064
402,798
1,328,020
1,270,569
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales (a)
319,644
297,693
963,071
924,924
Rental cost of sales
23,210
18,144
52,416
53,096
Total cost of sales
342,854
315,837
1,015,487
978,020
Gross profit
104,210
86,961
312,533
292,549
Selling and administrative expenses
99,473
101,460
305,045
295,597
Depreciation and amortization expense
10,618
12,179
33,910
36,755
Impairment loss (non-cash) (a)
6,008
6,411
6,008
6,411
Restructuring and other charges (a)
5,975
46
6,610
3,067
Operating loss
(17,864
)
(33,135
)
(39,040
)
(49,281
)
Interest expense, net
6,918
3,051
15,672
7,809
Loss before income taxes
(24,782
)
(36,186
)
(54,712
)
(57,090
)
Income tax expense
267
615
900
811
Net loss
$
(25,049
)
$
(36,801
)
$
(55,612
)
$
(57,901
)
Loss per common share:
Basic
$
(0.48
)
$
(0.71
)
$
(1.06
)
$
(1.12
)
Diluted
$
(0.48
)
$
(0.71
)
$
(1.06
)
$
(1.12
)
Weighted average common shares
outstanding:
Basic
52,602
52,003
52,404
51,714
Diluted
52,602
52,003
52,404
51,714
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
39 weeks ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Percentage of sales:
Sales:
Product sales and other
90.1
%
93.8
%
92.7
%
93.1
%
Rental income
9.9
%
6.2
%
7.3
%
6.9
%
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)
79.4
%
78.8
%
78.2
%
78.2
%
Rental cost of sales (a)
52.4
%
72.3
%
54.3
%
60.5
%
Total cost of sales
76.7
%
78.4
%
76.5
%
77.0
%
Gross profit
23.3
%
21.6
%
23.5
%
23.0
%
Selling and administrative expenses
22.3
%
25.2
%
23.0
%
23.3
%
Depreciation and amortization expense
2.4
%
3.0
%
2.6
%
2.9
%
Impairment loss (non-cash)
1.3
%
1.6
%
0.5
%
0.5
%
Restructuring and other charges
1.3
%
—
%
0.5
%
0.2
%
Operating loss
(4.0
)%
(8.2
)%
(3.1
)%
(3.9
)%
Interest expense, net
1.5
%
0.8
%
1.2
%
0.6
%
Loss before income taxes
(5.5
)%
(9.0
)%
(4.3
)%
(4.5
)%
Income tax expense
0.1
%
0.2
%
0.1
%
0.1
%
Net loss
(5.6
)%
(9.2
)%
(4.4
)%
(4.6
)%
(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)
January 28, 2023
January 29, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
11,137
$
9,967
Receivables, net
277,513
250,187
Merchandise inventories, net
408,924
403,646
Textbook rental inventories
35,468
40,976
Prepaid expenses and other current
assets
57,036
60,615
Total current assets
790,078
765,391
Property and equipment, net
92,225
93,752
Operating lease right-of-use assets
259,470
229,259
Intangible assets, net
114,947
133,975
Goodwill
4,700
4,700
Deferred tax assets, net
—
15,613
Other noncurrent assets
19,686
24,040
Total assets
$
1,281,106
$
1,266,730
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
355,348
$
359,743
Accrued liabilities
138,179
150,754
Current operating lease liabilities
116,051
100,773
Total current liabilities
609,578
611,270
Long-term deferred taxes, net
1,601
—
Long-term operating lease liabilities
188,466
168,924
Other long-term liabilities
19,375
48,676
Long-term borrowings
285,600
200,400
Total liabilities
1,104,620
1,029,270
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, 55,140 and 54,234 shares, respectively;
outstanding, 52,604 and 52,046 shares, respectively
551
542
Additional paid-in-capital
745,417
738,968
Accumulated deficit
(547,106
)
(480,538
)
Treasury stock, at cost
(22,376
)
(21,512
)
Total stockholders' equity
176,486
237,460
Total liabilities and stockholders'
equity
$
1,281,106
$
1,266,730
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flow (Unaudited)
(In thousands, except per
share data)
39 weeks ended
January 28, 2023
January 29, 2022
Cash flows from operating activities:
Net loss
$
(55,612
)
$
(57,901
)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization expense
33,910
36,755
Content amortization expense
4,882
3,984
Amortization of deferred financing
costs
2,058
1,087
Impairment loss (non-cash) (a)
6,008
6,411
Merchandise inventory loss (a)
—
434
Deferred taxes
171
330
Stock-based compensation expense
4,588
4,463
Changes in other long-term assets and
liabilities, net
362
260
Changes in operating lease right-of-use
assets and liabilities
13,196
1,808
Changes in other operating assets and
liabilities, net
(32,145
)
10,270
Net cash flow (used in) provided by
operating activities
(22,582
)
7,901
Cash flows from investing activities:
Purchases of property and equipment
(26,899
)
(33,393
)
Net change in other noncurrent assets
572
734
Net cash flow used in investing
activities
(26,327
)
(32,659
)
Cash flows from financing activities:
Proceeds from borrowings
512,000
463,220
Repayments of borrowings
(452,100
)
(440,420
)
Payment of deferred financing costs
(2,614
)
—
Purchase of treasury shares
(864
)
(2,370
)
Proceeds from the exercise of stock
options, net
—
256
Net cash flows provided by financing
activities
56,422
20,686
Net increase (decrease) in cash, cash
equivalents and restricted cash
7,513
(4,072
)
Cash, cash equivalents and restricted cash
at beginning of period
21,934
16,814
Cash, cash equivalents and restricted cash
at end of period
$
29,447
$
12,742
Changes in other operating assets and
liabilities, net:
Receivables, net
$
(140,474
)
$
(129,115
)
Merchandise inventories
(115,070
)
(122,968
)
Textbook rental inventories
(5,856
)
(12,284
)
Prepaid expenses and other current
assets
14,034
(4,697
)
Accounts payable and accrued
liabilities
215,221
279,334
Changes in other operating assets and
liabilities, net
$
(32,145
)
$
10,270
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information (In
thousands, except percentages) (Unaudited)
Segment Information (a)
13 weeks ended
39 weeks ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Sales:
Retail (b)
$
421,259
$
374,740
$
1,256,376
$
1,194,161
Wholesale
38,958
37,039
97,161
103,192
DSS
9,010
9,430
26,659
26,012
Eliminations
(22,163
)
(18,411
)
(52,176
)
(52,796
)
Total Sales
$
447,064
$
402,798
$
1,328,020
$
1,270,569
Gross Profit
Retail (c)
$
88,926
$
69,240
$
272,447
$
246,913
Wholesale
6,668
8,104
19,022
24,129
DSS (d)
8,885
9,251
26,231
25,502
Eliminations
1,417
1,764
(286
)
423
Total Gross Profit
$
105,896
$
88,359
$
317,414
$
296,967
Selling and Administrative Expenses
Retail
$
82,753
$
84,626
$
251,843
$
242,477
Wholesale
3,563
3,941
11,561
12,319
DSS
7,632
7,775
23,909
21,527
Corporate Services
5,572
5,154
17,861
19,407
Eliminations
(47
)
(36
)
(129
)
(133
)
Total Selling and Administrative
Expenses
$
99,473
$
101,460
$
305,045
$
295,597
Segment Adjusted EBITDA (Non-GAAP) (e)
Retail
$
6,173
$
(15,386
)
$
20,604
$
4,436
Wholesale
3,105
4,163
7,461
11,810
DSS
1,253
1,476
2,322
3,975
Corporate Services
(5,572
)
(5,154
)
(17,861
)
(19,407
)
Eliminations
1,464
1,800
(157
)
556
Total Segment Adjusted EBITDA
(Non-GAAP)
$
6,423
$
(13,101
)
$
12,369
$
1,370
Percentage of Segment Sales
Gross Profit
Retail (c)
21.1
%
18.5
%
21.7
%
20.7
%
Wholesale
17.1
%
21.9
%
19.6
%
23.4
%
DSS (d)
98.6
%
98.1
%
98.4
%
98.0
%
Eliminations
(6.4
)%
(9.6
)%
0.5
%
(0.8
)%
Total Gross Profit
23.7
%
21.9
%
23.9
%
23.4
%
Selling and Administrative Expenses
Retail
19.6
%
22.6
%
20.0
%
20.3
%
Wholesale
9.1
%
10.6
%
11.9
%
11.9
%
DSS
84.7
%
82.4
%
89.7
%
82.8
%
Corporate Services
N/A
N/A
N/A
N/A
Eliminations
N/A
N/A
N/A
N/A
Total Selling and Administrative
Expenses
22.3
%
25.2
%
23.0
%
23.3
%
(a)
See Explanatory Note in this Press Release
for Segment descriptions.
(b)
In December 2020, we entered into
merchandising partnership with Fanatics Retail Group Fulfillment,
LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. D/B/A "Lids"
(“Lids”) (collectively referred to herein as the “F/L
Partnership”). Effective in April 2021, as contemplated by the F/L
Partnership's merchandising agreement and e-commerce agreement, we
began to transition the fulfillment of logo general merchandise
sales to Lids and Fanatics. The transition to Lids for campus
stores was effective in April 2021, and the e-commerce websites
transitioned to Fanatics throughout Fiscal 2022. As the logo
general merchandise sales are fulfilled by Lids and Fanatics, we
recognize commission revenue earned for these sales on a net basis
in our condensed consolidated financial statements, as compared to
the recognition of logo general merchandise sales on a gross basis
in the periods prior to the transition. For Retail Gross Comparable
Store Sales details, see the Sales Information disclosure of this
Press Release.
(c)
For the 13 and 39 weeks ended January 28,
2023, the Retail Segment gross margin excludes $0 and $26
respectively, of amortization expense (non-cash) related to content
development costs. For the 13 and 39 weeks ended January 29, 2022,
the Retail Segment gross margin excludes $79 and $350 respectively,
of amortization expense (non-cash) related to content development
costs. Additionally, for the 39 weeks ended January 29, 2022, gross
margin excludes a merchandise inventory loss of $434 in the Retail
Segment related to the sale of our logo general merchandise
inventory below cost to Lids.
(d)
For the 13 and 39 weeks ended January 28,
2023, the DSS Segment gross margin excludes $1,686 and $4,855,
respectively, of amortization expense (non-cash) related to content
development costs. For the 13 and 39 weeks ended January 29, 2022,
the DSS Segment gross margin excludes $1,319 and $3,634,
respectively, of amortization expense (non-cash) related to content
development costs.
(e)
For additional information, including a
reconciliation to the most comparable financial measures presented
in accordance with GAAP, see "Non-GAAP Information" and "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales The components of the sales variances for
the 13 and 39 week periods are as follows:
Dollars in millions
13 weeks ended
39 weeks ended
January 28, 2023
January 28, 2023
Retail Sales
New stores (b) (c)
$
21.6
$
73.5
Closed stores (b)
(13.7
)
(39.8
)
Comparable stores (c)
22.5
28.8
Textbook rental deferral
17.7
6.5
Service revenue (d)
(1.1
)
(3.4
)
Other (d)
(0.5
)
(3.4
)
Retail Sales subtotal:
$
46.5
$
62.2
Wholesale Sales:
$
1.9
$
(6.0
)
DSS Sales
$
(0.4
)
$
0.7
Eliminations (f)
$
(3.7
)
$
0.6
Total sales variance
$
44.3
$
57.5
(a)
The variances for this period are
primarily related to re-opening stores that had temporarily closed
due to the COVID-19 pandemic in the prior year.
(b)
The following is a store count summary for
physical stores and virtual stores:
13 weeks ended
39 weeks ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Number of Stores:
Physical
Virtual
Total
Physical
Virtual
Total
Physical
Virtual
Total
Physical
Virtual
Total
Beginning of period
793
606
1,399
794
651
1,445
805
622
1,427
769
648
1,417
Opened
—
4
4
6
—
6
34
28
62
47
35
82
Closed
8
7
15
1
9
10
54
47
101
17
41
58
End of period
785
603
1,388
799
642
1,441
785
603
1,388
799
642
1,441
(c)
In December 2020, we entered into
merchandising partnership with 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
Partnership”). Effective in April 2021, as contemplated by the F/L
Partnership's merchandising agreement and e-commerce agreement, we
began to transition the fulfillment of logo general merchandise
sales to Lids and Fanatics. The transition to Lids for campus
stores was effective in April 2021, and the e-commerce websites
transitioned to Fanatics throughout Fiscal 2022. As the logo
general merchandise sales are fulfilled by Lids and Fanatics, we
recognize commission revenue earned for these sales on a net basis
in our condensed consolidated financial statements, as compared to
the recognition of logo general merchandise sales on a gross basis
in the periods prior to the transition. For Retail Gross Comparable
Store Sales details, see below.
(d)
Service revenue includes brand
partnerships, shipping and handling, and revenue from other
programs.
(e)
Other includes inventory liquidation sales
to third parties, marketplace sales and certain accounting
adjusting items related to return reserves, and other deferred
items.
(f)
Eliminates Wholesale sales and service
fees to Retail and Retail commissions earned from Wholesale.
Retail Gross Comparable Store Sales
Retail Gross Comparable Store Sales variances by category for
the 13 and 39 week periods are as follows:
Dollars in millions
13 weeks ended
39 weeks ended
January 28, 2023
October 30, 2021 (a)
January 28, 2023
October 30, 2021 (a)
Textbooks (Course Materials)
$
21.3
7.4
%
$
(11.9
)
(4.0
)%
$
2.9
0.3
%
$
17.4
2.0
%
General Merchandise
2.6
2.3
%
42.8
58.6
%
42.6
11.3
%
169.5
81.2
%
Total Retail Gross Comparable Store
Sales
$
23.9
5.9
%
$
30.9
8.4
%
$
45.5
3.6
%
$
186.9
17.6
%
(a) The variances for this period are
primarily related to re-opening stores that had temporarily closed
due to the COVID-19 pandemic in the prior year.
To supplement the Total Sales table presented above, the Company
uses Retail Gross Comparable Store Sales as a key performance
indicator. Retail Gross Comparable Store Sales includes sales from
physical and virtual stores that have been open for an entire
fiscal year period and does not include sales from permanently
closed stores for all periods presented. For Retail Gross
Comparable Store Sales, sales for logo general merchandise
fulfilled by Lids, Fanatics and digital agency sales are included
on a gross basis for consistent year-over-year comparison.
Effective in April 2021, as contemplated by the F/L
Partnership's merchandising agreement and e-commerce agreement, we
began to transition the fulfillment of logo general merchandise
sales to Lids and Fanatics. The transition to Lids for campus
stores was effective in April 2021, and the e-commerce websites
transitioned to Fanatics throughout Fiscal 2022. As the logo
general merchandise sales are fulfilled by Lids and Fanatics, we
recognize commission revenue earned for these sales on a net basis
in our condensed consolidated financial statements, as compared to
the recognition of logo general merchandise sales on a gross basis
in the periods prior to the transition.
We believe the current Retail Gross Comparable Store Sales
calculation method reflects management’s view that such comparable
store sales are an important measure of the growth in sales when
evaluating how established stores have performed over time. We
present this metric as additional useful information about the
Company’s operational and financial performance and to allow
greater transparency with respect to important metrics used by
management for operating and financial decision-making. Retail
Gross Comparable Store Sales are also referred to as "same-store"
sales by others within the retail industry and the method of
calculating comparable store sales varies across the retail
industry. As a result, our calculation of comparable store sales is
not necessarily comparable to similarly titled measures reported by
other companies and is intended only as supplemental information
and is not a substitute for net sales presented in accordance with
GAAP.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Non-GAAP Information
(a)
(In thousands)
(Unaudited)
Consolidated Adjusted Earnings
(non-GAAP) (a)
13 weeks ended
39 weeks ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Net loss
$
(25,049
)
$
(36,801
)
$
(55,612
)
$
(57,901
)
Reconciling items (below)
13,669
7,855
17,499
13,896
Adjusted Earnings (non-GAAP)
$
(11,380
)
$
(28,946
)
$
(38,113
)
$
(44,005
)
Reconciling items
Merchandise inventory loss (b)
$
—
$
—
$
—
$
434
Impairment loss (non-cash) (c)
6,008
6,411
6,008
6,411
Content amortization (non-cash) (d)
1,686
1,398
4,881
3,984
Restructuring and other charges (e)
5,975
46
6,610
3,067
Reconciling items (f)
$
13,669
$
7,855
$
17,499
$
13,896
Consolidated Adjusted EBITDA (non-GAAP)
(a)
13 weeks ended
39 weeks ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Net loss
$
(25,049
)
$
(36,801
)
$
(55,612
)
$
(57,901
)
Add:
Depreciation and amortization expense
10,618
12,179
33,910
36,755
Interest expense, net
6,918
3,051
15,672
7,809
Income tax expense
267
615
900
811
Merchandise inventory loss (b)
—
—
—
434
Impairment loss (non-cash) (c)
6,008
6,411
6,008
6,411
Content amortization (non-cash) (d)
1,686
1,398
4,881
3,984
Restructuring and other charges (e)
5,975
46
6,610
3,067
Adjusted EBITDA (non-GAAP)
$
6,423
$
(13,101
)
$
12,369
$
1,370
Adjusted EBITDA by Segment (non-GAAP)
(a)
The following is Adjusted EBITDA by
Segment for the 13 and 39 week periods:
13 weeks ended January 28,
2023
Retail
Wholesale
DSS
Corporate Services (g)
Eliminations
Total
Net (loss) income
$
(10,036
)
$
817
$
(2,787
)
$
(14,507
)
$
1,464
$
(25,049
)
Add:
Depreciation and amortization expense
8,749
1,357
506
6
—
10,618
Interest expense, net
—
—
—
6,918
—
6,918
Income tax expense
—
—
—
267
—
267
Impairment loss (non-cash) (c)
6,008
—
—
—
—
6,008
Content amortization (non-cash) (d)
—
—
1,686
—
—
1,686
Restructuring and other charges (e)
1,452
931
1,848
1,744
—
5,975
Adjusted EBITDA (non-GAAP)
$
6,173
$
3,105
$
1,253
$
(5,572
)
$
1,464
$
6,423
13 weeks ended January 29,
2022
Retail
Wholesale
DSS
Corporate Services (g)
Eliminations
Total
Net (loss) income
$
(30,845
)
$
2,767
$
(1,669
)
$
(8,854
)
$
1,800
$
(36,801
)
Add:
Depreciation and amortization expense
8,939
1,396
1,826
18
—
12,179
Interest expense, net
—
—
—
3,051
—
3,051
Income tax expense
—
—
—
615
—
615
Impairment loss (non-cash) (c)
6,411
—
—
—
—
6,411
Content amortization (non-cash) (d)
79
—
1,319
—
—
1,398
Restructuring and other charges (e)
30
—
—
16
—
46
Adjusted EBITDA (non-GAAP)
$
(15,386
)
$
4,163
$
1,476
$
(5,154
)
$
1,800
$
(13,101
)
39 weeks ended January 28,
2023
Retail
Wholesale
DSS
Corporate Services (g)
Eliminations
Total
Net (loss) income
$
(14,029
)
$
2,454
$
(7,027
)
$
(36,853
)
$
(157
)
$
(55,612
)
Add:
Depreciation and amortization expense
27,147
4,076
2,646
41
—
33,910
Interest expense, net
—
—
—
15,672
—
15,672
Income tax expense
—
—
—
900
—
900
Impairment loss (non-cash) (c)
6,008
—
—
—
—
6,008
Content amortization (non-cash) (d)
26
—
4,855
—
—
4,881
Restructuring and other charges (e)
1,452
931
1,848
2,379
—
6,610
Adjusted EBITDA (non-GAAP)
$
20,604
$
7,461
$
2,322
$
(17,861
)
$
(157
)
$
12,369
39 weeks ended January 29,
2022
Retail
Wholesale
DSS
Corporate Services (g)
Eliminations
Total
Net (loss) income
$
(31,887
)
$
7,750
$
(5,286
)
$
(29,034
)
$
556
$
(57,901
)
Add:
Depreciation and amortization expense
27,015
4,060
5,627
53
—
36,755
Interest expense, net
—
—
—
7,809
—
7,809
Income tax expense
—
—
—
811
—
811
Merchandise inventory loss (b)
434
—
—
—
—
434
Impairment loss (non-cash) (c)
6,411
—
—
—
—
6,411
Content amortization (non-cash) (d)
350
—
3,634
—
—
3,984
Restructuring and other charges (e)
2,113
—
—
954
—
3,067
Adjusted EBITDA (non-GAAP)
$
4,436
$
11,810
$
3,975
$
(19,407
)
$
556
$
1,370
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
As contemplated by the F/L Partnership's
merchandising agreement, we sold our logo general merchandise
inventory to Lids and received proceeds of $41,773, and recognized
a merchandise inventory loss on the sale of $10,262 in cost of
goods sold during the 52 weeks ended May 1, 2021 for the Retail
Segment. The final inventory sale price was determined during the
13 weeks ended July 31, 2021, at which time, we received additional
proceeds of $1,906, and recognized a merchandise inventory loss on
the sale of $434 in cost of goods sold for the Retail Segment.
(c)
During the 13 weeks ended January 28,
2023, we evaluated certain of our store-level long-lived assets in
the Retail segment for impairment. Based on the results of the
impairment tests, we recognized an impairment loss (non-cash) of
$6,008 (both pre-tax and after-tax) comprised of $708, $1,697,
$3,599 and $4 of property and equipment, operating lease
right-of-use assets, amortizable intangibles, and other noncurrent
assets, respectively.
During the 13 weeks ended January 29,
2022, we evaluated certain of our store-level long-lived assets in
the Retail segment for impairment. Based on the results of the
impairment tests, we recognized an impairment loss (non-cash) of
$6,411 (both pre-tax and after-tax) comprised of $739, $1,793,
$3,668 and $211 of property and equipment, operating lease
right-of-use assets, amortizable intangibles, and other noncurrent
assets, respectively.
(d)
Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
condensed consolidated financial statements.
(e)
During the 39 weeks ended January 28, 2023
and January 29, 2022, we recognized restructuring and other charges
totaling $6,610 and $3,607, 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 costs related to
development and integration associated with the F/L
Partnership.
(f)
There is no pro forma income effect of the
non-GAAP items.
(g)
Interest expense is reflected in Corporate
Services as it is primarily related to our Credit Agreement and
Term Loan Agreement which fund our operating and financing needs
across the organization. Income taxes are reflected in Corporate
Services as we record our income tax provision on a consolidated
basis.
Free Cash Flow (non-GAAP) (a)
13 weeks ended
39 weeks ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Net cash flows (used in) provided by
operating activities
$
(31,958
)
$
(16,375
)
$
(22,582
)
$
7,901
Less:
Capital expenditures (b)
6,326
12,129
26,899
33,393
Cash interest paid
6,105
2,320
13,406
5,982
Cash taxes (refund) paid
1
(38
)
(15,582
)
(7,816
)
Free Cash Flow (non-GAAP)
$
(44,390
)
$
(30,786
)
$
(47,305
)
$
(23,658
)
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
Purchases of property and equipment are
also referred to as capital expenditures. Our investing activities
consist principally of capital expenditures for contractual capital
investments associated with renewing existing contracts, new store
construction, digital initiatives and enhancements to internal
systems and our website. The following table provides the
components of total purchases of property and equipment:
Capital Expenditures
13 weeks ended
39 weeks ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Physical store capital expenditures
$
1,700
$
5,081
$
12,248
$
12,561
Product and system development
2,972
4,398
8,584
11,878
Content development costs
1,168
2,037
4,481
6,749
Other
486
613
1,586
2,205
Total Capital Expenditures
$
6,326
$
12,129
$
26,899
$
33,393
Use of Non-GAAP Financial Information -
Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and
Free Cash Flow
To supplement the Company’s condensed
consolidated financial statements presented in accordance with
generally accepted accounting principles (“GAAP”), in the Press
Release attached hereto as Exhibit 99.1, the Company uses the
financial measures of Adjusted Earnings, Adjusted EBITDA, Adjusted
EBITDA by Segment and Free Cash Flow, which are non-GAAP financial
measures under Securities and Exchange Commission (the "SEC")
regulations. We define Adjusted Earnings as net income (loss)
adjusted for certain reconciling items that are subtracted from or
added to net income (loss). We define Adjusted EBITDA as net income
(loss) plus (1) depreciation and amortization; (2) interest expense
and (3) income taxes, (4) as adjusted for items that are subtracted
from or added to net income (loss). We define Free Cash Flow as
Cash Flows from Operating Activities less capital expenditures,
cash interest and cash taxes.
The non-GAAP measures included in the
Press Release have been reconciled to the most comparable financial
measures presented in accordance with GAAP, attached hereto as
Exhibit 99.1, as follows: the reconciliation of Adjusted Earnings
to net income (loss); the reconciliation of consolidated Adjusted
EBITDA to consolidated net income (loss); and the reconciliation of
Adjusted EBITDA by Segment to net income (loss) by segment. All of
the items included in the reconciliations are either (i) non-cash
items or (ii) items that management does not consider in assessing
our on-going operating performance.
These non-GAAP financial measures are not
intended as substitutes for and should not be considered superior
to measures of financial performance prepared in accordance with
GAAP. In addition, the Company's use of these non-GAAP financial
measures may be different from similarly named measures used by
other companies, limiting their usefulness for comparison
purposes.
We review these non-GAAP financial
measures as internal measures to evaluate our performance at a
consolidated level and at a segment level and manage our
operations. We believe that these measures are useful performance
measures which are used by us to facilitate a comparison of our
on-going operating performance on a consistent basis from
period-to-period. We believe that these non-GAAP financial measures
provide for a more complete understanding of factors and trends
affecting our business than measures under GAAP can provide alone,
as they exclude certain items that management believes do not
reflect the ordinary performance of our operations in a particular
period. Our Board of Directors and management also use Adjusted
EBITDA and Adjusted EBITDA by Segment, at a consolidated level and
at a segment level, as one of the primary methods for planning and
forecasting expected performance, for evaluating on a quarterly and
annual basis actual results against such expectations, and as a
measure for performance incentive plans. Management also uses
Adjusted EBITDA by Segment to determine segment capital
allocations. We believe that the inclusion of Adjusted Earnings,
Adjusted EBITDA, and Adjusted EBITDA by Segment results provides
investors useful and important information regarding our operating
results, in a manner that is consistent with management’s
evaluation of business performance. We believe that Free Cash Flow
provides useful additional information concerning cash flow
available to meet future debt service obligations and working
capital requirements and assists investors in their understanding
of our operating profitability and liquidity as we manage the
business to maximize margin and cash flow.
The Company urges investors to carefully
review the GAAP financial information included as part of the
Company’s Form 10-K dated April 30, 2022 filed with the SEC on June
29, 2022, which includes consolidated financial statements for each
of the three years for the period ended April 30, 2022, May 1,
2021, and May 2, 2020 (Fiscal 2022, Fiscal 2021, and Fiscal 2020,
respectively) and the Company's Quarterly Report on Form 10-Q for
the period ended July 30, 2022 filed with the SEC on August 31,
2022 and the Company's Quarterly Report on Form 10-Q for the period
ended October 29, 2022 filed with the SEC on December 6, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230309005178/en/
Media: Carolyn J. Brown
Senior Vice President, Chief Communications Officer 908-991-2967
cbrown@bned.com
Investor: Hunter
Blankenbaker Vice President Investor Relations 908-991-2776
hblankenbaker@bned.com
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