Retail Segment Gross Comparable Store Sales
Increased 8.8%
First Day® Complete Revenue Increased to $110
Million from $67 Million
Consolidated GAAP Net Loss from Continuing
Operations Improved to $(9.9) Million from $(22.1) Million
Consolidated Adjusted EBITDA (Non-GAAP) from
Continuing Operations Increased to $20.3 Million from $5.2
Million
Executes Bank Amendment and Continues
Discussions to Strengthen Liquidity and Financial Position
Barnes & Noble Education, Inc.
(NYSE: BNED), a leading solutions provider for the
education industry, today reported sales and earnings for the third
quarter ended on January 27, 2024.
Financial Results for the Third Quarter Fiscal Year
2024:
- Consolidated third quarter GAAP sales of $456.7 million
increased by $18.6 million, compared to $438.1 million in the prior
year period. The third quarter sales increase is due to higher
course material sales, primarily through the Company’s BNC First
Day programs.
- Consolidated third quarter GAAP gross profit of $100.0 million
increased by $3.0 million, compared to $97.0 million in the prior
year period.
- Consolidated third quarter selling and administrative expenses
of $79.8 million decreased by $12.1 million, compared to the prior
year period.
- Consolidated third quarter GAAP net loss from continuing
operations of $(9.9) million improved by $12.2 million, compared to
a net loss from continuing operations of $(22.1) million in the
prior year period. The decrease in third quarter GAAP net loss from
continuing operations was due to a $3.0 million increase in gross
profit and a $12.1 million decrease in selling and administrative
expenses, partially offset by a $3.7 million increase in interest
expense.
- Consolidated third quarter non-GAAP Adjusted Earnings from
Continuing Operations of $(0.7) million increased by $11.3 million,
compared to $(12.0) million in the prior year period.
- Consolidated third quarter non-GAAP Adjusted EBITDA from
Continuing Operations of $20.3 million increased by $15.1 million,
compared to $5.2 million in the prior year period.
Operational Highlights for the Third Quarter Fiscal Year
2024:
- BNC First Day total revenue increased by $63 million to $184
million, compared to $121 million during the prior year
period.
- First Day® Complete revenue grew by $43 million to $110
million, compared to $67 million in the prior year period.
- 160 campus stores are utilizing First Day® Complete in the
Spring of 2024 representing enrollment of approximately 805,000
undergraduate and post graduate students*, an increase of
approximately 39% compared to Spring of 2023.
- Total Retail segment gross comparable store sales increased by
$38.1 million, or 8.8%, comprised of a 14.1% increase in course
material gross comparable store sales, offset by a 4.6% decrease in
general merchandise gross comparable store sales. For comparable
store sales reporting purposes, logo general merchandise sales
fulfilled by Lids and Fanatics are included on a gross basis.
- Ended the quarter with 1,272 physical and virtual stores, a net
decrease of 116 stores, as compared to the prior year period, as
the Company continues its focus on winding down under-performing,
less profitable stores and satellite locations.
*As reported by National Center for Education Statistics
(NCES)
Third Quarter 2024 and Year to Date Results
The Company has two reportable segments: Retail and Wholesale.
Additionally, unallocated shared-service costs, which include
various corporate level expenses and other governance functions,
are not allocated to a specific reporting segment and are presented
as “Corporate Services.” All material intercompany accounts and
transactions have been eliminated in consolidation.
Our business is highly seasonal. For example, our retail
business is seasonal, particularly with respect to textbook sales
and rentals, with the major portion of sales and operating profit
realized during the second and third fiscal quarters when college
students generally purchase and rent textbooks for the upcoming
semesters and lowest in the first and fourth fiscal quarters. Our
quarterly results also may fluctuate depending on the timing of the
start of the various schools’ semesters, the revenue impact of
accounting principles with respect to the recognition of revenue
associated with our equitable and inclusive access programs, the
ability to secure inventory on a timely basis, as well as shifts in
our fiscal calendar dates. These shifts in timing may affect the
comparability of our results across periods. Additionally, as the
concentration of digital product sales increases, revenue will be
recognized earlier during the academic term as digital textbook
revenue is recognized when the customer accesses the digital
content compared to: (i) the rental of physical textbook where
revenue is recognized over the rental period, and (ii) a la carte
courseware sales where revenue is recognized when the customer
takes physical possession of our products, which occurs either at
the point of sale for products purchased at physical locations or
upon receipt of our products by our customers for products ordered
through our websites and virtual bookstores.
Results for the 13 and 39 weeks of fiscal 2024 and fiscal 2023
are as follows:
$ in millions
Selected Data (unaudited)
13
Weeks
Q3 2024
13
Weeks
Q3 2023
39
Weeks
Fiscal 2024
39
Weeks
Fiscal 2023
Total Sales
$
456.7
$
438.1
$
1,331.2
$
1,301.4
Net Loss
$
(9.9)
$
(22.1)
$
(35.0)
$
(48.3)
Non-GAAP-Continuing
Operations (1)
Adjusted EBITDA
$
20.3
$
5.2
$
43.7
$
10.0
Adjusted Earnings
$
(0.7)
$
(12.0)
$
(16.9)
$
(37.5)
Additional
Information
Retail Gross Comparable Store Sales
Variances (2)
$
38.1
$
23.9
$
76.3
$
45.5
(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
permanently closed stores for all periods presented. For Retail
Gross Comparable Store Sales, sales for logo general merchandise
fulfilled by Lids, Fanatics and digital agency sales are included
on a gross basis in Retail Gross Comparable Store Sales compared to
a net basis as commission revenue in our condensed consolidated
financial statements.
Retail Segment Results
Third quarter Retail sales increased by $18.2 million to $439.4
million, compared to $421.2 million in the prior year period.
Retail Gross Comparable Store Sales increased 8.8% for the quarter.
Gross comparable course material sales increased 14.1% and gross
comparable general merchandise decreased 4.6%. The increase in
gross comparable course material product sales was due to growth
from the Company’s BNC First Day models, which increased by $63
million to $184 million, compared to $121 million in the prior year
period.
Third quarter Retail gross profit increased by $0.3 million to
$89.2 million, compared to $88.9 million in the prior year period.
Retail gross margin as a percentage of sales was 20.3% compared to
21.1% in the prior year period.
Retail Product and other gross margin as a percentage of sales
was flat primarily from increased sales of $63.3 million from First
Day Complete course material sales, and lower contract costs as a
percentage of sales related to our college and university contracts
as a result of the shift to digital and First Day models and lower
performing school contracts not renewed, were partially offset by
lower margin rates for course materials due to higher markdowns,
including markdowns related to closed stores, and lower general
merchandise sales, primarily from closed stores, a lower average
commission rate and an unfavorable sales mix due to the shift to
digital course materials.
Retail Rental gross margin as a percentage of sales decreased to
42.1% from 47.6% in the prior year period driven primarily by lower
rental margin rates, higher markdowns and unfavorable rental mix,
partially offset by lower contract costs as a percentage of sales
related to our college and university contracts as a result of the
shift to digital and First Day models and lower performing school
contracts not renewed.
Third quarter Retail selling and administrative expenses
decreased by $11.4 million to $71.4 million from $82.8 million in
the prior year period. This decrease was primarily due to cost
savings initiatives comprised of a $7.9 million decrease in
comparable store payroll expense, new/closed store payroll expense
and related operating costs, and a $3.4 million decrease in
corporate payroll expense, infrastructure and product development
costs.
Third quarter Retail non-GAAP Adjusted EBITDA was $17.9 million,
compared to $6.2 million in the prior year period. Non-GAAP
Adjusted EBITDA increased by $11.7 million primarily due to lower
selling and administrative expenses.
Wholesale Segment Results (Before
Intercompany Eliminations)
Wholesale third quarter sales decreased by $1.8 million to $37.2
million from $39.0 million in the prior year period. The decrease
is primarily due to lower gross sales of $4.5 million, partially
offset by lower returns and allowances of $2.7 million compared to
the prior year period.
Wholesale third quarter gross profit was $8.0 million, or 21.5%
of sales, compared to $6.7 million, or 17.1% of sales, in the third
quarter of 2023. The gross margin rate increased in the third
quarter of 2024 primarily due to lower returns and allowances and
lower warehouse costs, partially offset by higher markdowns.
Third quarter Wholesale selling and administrative expenses
decreased by $0.3 million to $3.3 million, compared to $3.6 million
in the prior year period. The decrease was primarily due to cost
savings initiatives comprised of lower payroll expense of $0.4
million, partially offset by higher operating expenses of $0.1
million.
Wholesale non-GAAP Adjusted EBITDA for the quarter increased by
$1.6 million to $4.7 million from $3.1 million in the prior year.
The increase in Wholesale non-GAAP Adjusted EBITDA is due to the
higher gross margin and lower selling and administrative expenses
in the third quarter of 2024.
Cash Flow, Balance Sheet and Refinancing
Discussions
Cash flows used in operating activities from continuing
operations during the 39 weeks ended January 27, 2024 were $(83.2)
million compared to $(21.2) million during the 39 weeks ended
January 28, 2023. This increase in cash flows used in operating
activities from continuing operations of $62.0 million was
primarily due to changes in working capital, including higher
accounts receivables of $81.7 million and higher inventory levels
of $88.2 million primarily related to our increased adoption of our
BNC First Day equitable and inclusive access sales; higher payments
for interest expense of $6.2 million; offset by higher payables of
$78.0 million due to delayed payments to vendors for inventory
purchases and expenses, as a result of borrowing capacity
limitations under our credit facility.
Given the growth of our BNC First Day programs, the timing of
cash collection from our school partners may shift to periods
subsequent to when the revenue is recognized. When a school adopts
our BNC First Day equitable and inclusive access offerings, cash
collection from the school generally occurs after the institution's
drop/add dates, which is later in the working capital cycle,
particularly in our third quarter given the timing of the Spring
Term and our 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 our sales shift to BNC First Day equitable and inclusive access
offerings, we are focused on efforts to better align the timing of
our cash outflows to course material vendors with cash inflows
collected from schools.
As of January 27, 2024, the Company’s cash and cash equivalents
were $8.1 million and total outstanding debt was $254.3 million, as
compared to cash and cash equivalents of $9.4 million and total
outstanding debt of $283.9 million in the prior year period.
The Company is engaged in advanced and ongoing discussions with
third parties to evaluate a range of options to strengthen its
liquidity and financial position. The potential options under
consideration include among other things, a refinancing, in whole
or in part, of the Company’s obligations under the Credit
Agreements, as well as a potential equity offering, which would
likely be conducted at a substantial discount to the current market
price of the Company’s common stock. There can be no assurance that
any refinancing, equity offering, or other transaction will occur
or, if any transaction occurs, that it will ultimately be
consummated, or that the Company’s effort to strengthen its
liquidity and financial position will be achieved.
On March 12, 2024, the Company entered into an amendment to its
credit agreement to amend certain financial covenants. For more
details on the amendment, please refer to the Company’s Quarterly
Report on Form 10-Q filed with the SEC on March 12, 2024.
Fiscal Year 2024 Outlook
The Company is maintaining its fiscal year 2024 guidance of
approximately $40 million of consolidated non-GAAP Adjusted EBITDA
from Continuing Operations.
Conference Call
The Company will not host an earnings conference call due to the
advanced and ongoing discussions with third parties to evaluate a
range of options to strengthen its liquidity and financial
position.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED) is a leading
solutions provider for the education industry, driving
affordability, access and achievement at hundreds of academic
institutions nationwide and ensuring millions of students are
equipped for success in the classroom and beyond. Through its
family of brands, BNED offers campus retail services and academic
solutions, wholesale capabilities and more. BNED is a company
serving all who work to elevate their lives through education,
supporting students, faculty and institutions as they make tomorrow
a better, more inclusive and smarter world. For more information,
visit www.bned.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us or our
management, identify forward-looking statements. Moreover, we
operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and
assumptions, the future events and trends discussed in this press
release may not occur and actual results could differ materially
and adversely from those anticipated or implied in the
forward-looking statements. Such statements reflect our current
views with respect to future events, the outcome of which is
subject to certain risks, including, among others: the amount of
our indebtedness and ability to comply with covenants applicable to
current and /or any future debt financing; our ability to satisfy
future capital and liquidity requirements; our ability to continue
as a going concern: our ability to access the credit and capital
markets at the times and in the amounts needed and on acceptable
terms; our ability to maintain adequate liquidity levels to support
ongoing inventory purchases and related vendor payments in a timely
manner; our ability to attract and retain employees; the pace of
equitable access adoption in the marketplace is slower than
anticipated and our ability to successfully convert the majority of
our institutions to our BNC First Day® equitable and inclusive
access course material models or successfully compete with third
parties that provide similar equitable and inclusive access
solutions; the United States Department of Education has recently
proposed regulatory changes that, if adopted as proposed, could
impact equitable and inclusive access models across the higher
education industry; the strategic objectives, successful
integration, anticipated synergies, and/or other expected potential
benefits of various strategic and restructuring initiatives, may
not be fully realized or may take longer than expected; dependency
on strategic service provider relationships, such as with
VitalSource Technologies, Inc. and the Fanatics Retail Group
Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc.
D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L
Relationship”), and the potential for adverse operational and
financial changes to these strategic service provider
relationships, may adversely impact our business; non-renewal of
managed bookstore, physical and/or online store contracts and
higher-than-anticipated store closings; decisions by colleges and
universities to outsource their physical and/or online bookstore
operations or change the operation of their bookstores; general
competitive conditions, including actions our competitors and
content providers may take to grow their businesses; the risk of
changes in price or in formats of course materials by publishers,
which could negatively impact revenues and margin; changes to
purchase or rental terms, payment terms, return policies, the
discount or margin on products or other terms with our suppliers;
product shortages, including decreases in the used textbook
inventory supply associated with the implementation of publishers’
digital offerings and direct to student textbook consignment rental
programs; work stoppages or increases in labor costs; possible
increases in shipping rates or interruptions in shipping services;
a decline in college enrollment or decreased funding available for
students; decreased consumer demand for our products, low growth or
declining sales; the general economic environment and consumer
spending patterns; trends and challenges to our business and in the
locations in which we have stores; risks associated with operation
or performance of MBS Textbook Exchange, LLC’s point-of-sales
systems that are sold to college bookstore customers; technological
changes, including the adoption of artificial intelligence
technologies for educational content; risks associated with
counterfeit and piracy of digital and print materials; risks
associated with the potential loss of control over personal
information; risks associated with the potential misappropriation
of our intellectual property; disruptions to our information
technology systems, infrastructure, data, supplier systems, and
customer ordering and payment systems due to computer malware,
viruses, hacking and phishing attacks, resulting in harm to our
business and results of operations; disruption of or interference
with third party service providers and our own proprietary
technology; risks associated with the impact that public health
crises, epidemics, and pandemics, such as the COVID-19 pandemic,
have on the overall demand for BNED products and services, our
operations, the operations of our suppliers, service providers, and
campus partners, and the effectiveness of our response to these
risks; lingering impacts that public health crises may have on the
ability of our suppliers to manufacture or source products,
particularly from outside of the United States; changes in
applicable domestic and international laws, rules or regulations,
including, without limitation, U.S. tax reform, changes in tax
rates, laws and regulations, as well as related guidance; changes
in and enactment of applicable laws, rules or regulations or
changes in enforcement practices including, without limitation,
with regard to consumer data privacy rights, which may restrict or
prohibit our use of consumer personal information for texts,
emails, interest based online advertising, or similar marketing and
sales activities; adverse results from litigation, governmental
investigations, tax-related proceedings, or audits; changes in
accounting standards; and the other risks and uncertainties
detailed in the section titled “Risk Factors” in Part I - Item 1A
in our Annual Report on Form 10-K for the fiscal year ended April
29, 2023. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described
as anticipated, believed, estimated, expected, intended or planned.
Subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements in this paragraph. We
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise after the date of this press
release.
EXPLANATORY NOTE
On May 31, 2023, we completed the sale of these assets related
to our DSS Segment. The results of operations related to the DSS
Segment are included in the condensed consolidated statements of
operations as "Loss from discontinued operations, net of tax." The
cash flows of the DSS Segment are also presented separately in our
condensed consolidated statements of cash flows.
We have two reportable segments: Retail and Wholesale as
follows:
- The Retail Segment operates 1,272 college, university, and K-12
school bookstores, comprised of 717 physical bookstores and 555
virtual bookstores. Our bookstores typically operate under
agreements with the college, university, or K-12 schools to be the
official bookstore and the exclusive seller of course materials and
supplies, including physical and digital products. The majority of
the physical campus bookstores have school-branded e-commerce
websites which we operate independently or along with our merchant
service providers, and which offer students access to affordable
course materials and affinity products, including emblematic
apparel and gifts. The Retail Segment offers our BNC First Day®
equitable and inclusive access programs, consisting of First Day
Complete and First Day, which provide faculty required course
materials on or before the first day of class at a discounted rate,
as compared to the total retail price for the same course materials
if purchased separately. The BNC First Day discounted price is
offered as a course fee or included in tuition. Additionally, the
Retail Segment offers a suite of digital content and services to
colleges and universities, including a variety of open educational
resource-based courseware.
- The Wholesale Segment is comprised of our wholesale textbook
business and is one of the largest textbook wholesalers in the
country. The Wholesale Segment centrally sources, sells, and
distributes new and used textbooks to approximately 2,900 physical
bookstores (including our Retail Segment's 717 physical bookstores)
and sources and distributes new and used textbooks to our 555
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
325 college bookstores.
Corporate Services represents unallocated shared-service costs
which include corporate level expenses and other governance
functions, including executive functions, such as accounting,
legal, treasury, information technology, and human resources.
All material intercompany accounts and transactions have been
eliminated in consolidation.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(In thousands, except per
share data)
(Unaudited)
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Sales:
Product sales and other
$
415,375
$
393,745
$
1,237,723
$
1,204,806
Rental income
41,298
44,309
93,490
96,555
Total sales
456,673
438,054
1,331,213
1,301,361
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales
332,728
317,833
991,695
957,788
Rental cost of sales
23,909
23,210
52,606
52,416
Total cost of sales
356,637
341,043
1,044,301
1,010,204
Gross profit
100,036
97,011
286,912
291,157
Selling and administrative expenses
79,756
91,841
243,193
281,136
Depreciation and amortization expense
10,148
10,112
30,576
31,264
Impairment loss (non-cash) (a)
5,798
6,008
5,798
6,008
Restructuring and other charges (a)
3,413
4,127
12,320
4,762
Operating income (loss)
921
(15,077
)
(4,975
)
(32,013
)
Interest expense, net (b)
10,620
6,918
29,538
15,672
Loss from continuing operations before
income taxes
(9,699
)
(21,995
)
(34,513
)
(47,685
)
Income tax expense
229
139
532
603
Loss from continuing operations
$
(9,928
)
$
(22,134
)
$
(35,045
)
$
(48,288
)
Income (loss) from discontinued
operations, net of tax of $0, $128, $20, and $297, respectively
$
289
$
(2,915
)
$
(802
)
$
(7,324
)
Net Loss
$
(9,639
)
$
(25,049
)
$
(35,847
)
$
(55,612
)
Loss per share of common stock:
Basic and Diluted:
Continuing operations
$
(0.19
)
$
(0.42
)
$
(0.66
)
$
(0.92
)
Discontinued operations
$
0.01
$
(0.06
)
$
(0.02
)
$
(0.14
)
Total Basic and Diluted Earnings per
share
$
(0.18
)
$
(0.48
)
$
(0.68
)
$
(1.06
)
Weighted average common shares outstanding
- Basic and Diluted
53,153
52,602
52,862
52,404
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
(b) The increase in interest expense is
primarily due to higher borrowings, higher interest rates and
increased amortization of deferred financing costs.
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Percentage of sales:
Sales:
Product sales and other
91.0
%
89.9
%
93.0
%
92.6
%
Rental income
9.0
%
10.1
%
7.0
%
7.4
%
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)
80.1
%
80.7
%
80.1
%
79.5
%
Rental cost of sales (a)
57.9
%
52.4
%
56.3
%
54.3
%
Total cost of sales
78.1
%
77.9
%
78.4
%
77.6
%
Gross profit
21.9
%
22.1
%
21.6
%
22.4
%
Selling and administrative expenses
17.5
%
21.0
%
18.3
%
21.6
%
Depreciation and amortization expense
2.2
%
2.3
%
2.3
%
2.4
%
Impairment loss (non-cash)
1.3
%
1.4
%
0.4
%
0.5
%
Restructuring and other charges
0.7
%
0.9
%
0.9
%
0.4
%
Operating income (loss)
0.2
%
(3.5
)%
(0.3
)%
(2.5
)%
Interest expense, net
2.3
%
1.6
%
2.2
%
1.2
%
Loss from continuing operations before
income taxes
(2.1
)%
(5.1
)%
(2.5
)%
(3.7
)%
Income tax expense
0.1
%
—
%
—
%
—
%
Loss from continuing operations
(2.2
)%
(5.1
)%
(2.5
)%
(3.7
)%
(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 27, 2024
January 28, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
8,123
$
9,423
Receivables, net
315,126
276,924
Merchandise inventories, net
341,544
408,924
Textbook rental inventories
44,521
35,468
Prepaid expenses and other current
assets
54,337
53,316
Assets held for sale, current
—
29,619
Total current assets
763,651
813,674
Property and equipment, net
57,273
72,075
Operating lease right-of-use assets
220,238
259,470
Intangible assets, net
97,947
114,269
Other noncurrent assets
12,488
19,875
Total assets
$
1,151,597
$
1,279,363
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
343,100
$
355,200
Accrued liabilities
156,874
132,943
Current operating lease liabilities
125,545
116,051
Short-term borrowings
224,067
—
Liabilities held for sale
—
5,384
Total current liabilities
849,586
609,578
Long-term deferred taxes, net
2,010
1,601
Long-term operating lease liabilities
155,226
188,466
Other long-term liabilities
17,451
19,375
Long-term borrowings
30,191
283,857
Total liabilities
1,054,464
1,102,877
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, 55,840 and 55,140 shares, respectively;
outstanding, 53,156 and 52,604 shares, respectively
558
551
Additional paid-in-capital
748,330
745,417
Accumulated deficit
(629,203
)
(547,106
)
Treasury stock, at cost
(22,552
)
(22,376
)
Total stockholders' equity
97,133
176,486
Total liabilities and stockholders'
equity
$
1,151,597
$
1,279,363
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flow (Unaudited)
(In thousands, except per
share data)
39 weeks ended
January 27, 2024
January 28, 2023
Cash flows from operating activities:
Net loss
$
(35,847
)
$
(55,612
)
Less: Loss from discontinued operations,
net of tax
(802
)
(7,324
)
Loss from continuing operations
(35,045
)
(48,288
)
Adjustments to reconcile net loss from
continuing operations to net cash flows from operating activities
from continuing operations:
Depreciation and amortization expense
30,576
31,264
Content amortization expense
—
26
Amortization of deferred financing
costs
8,380
2,058
Impairment loss (non-cash) (a)
5,798
6,008
Deferred taxes
171
171
Stock-based compensation expense
2,568
4,275
Non-cash interest expense
(paid-in-kind)
1,750
—
Changes in operating lease right-of-use
assets and liabilities
19,553
13,196
Changes in other long-term assets and
liabilities, net
(2,961
)
396
Changes in other operating assets and
liabilities, net:
Receivables, net
(222,614
)
(140,922
)
Merchandise inventories
(18,565
)
(115,070
)
Textbook rental inventories
(14,172
)
(5,856
)
Prepaid expenses and other current
assets
2,436
14,637
Accounts payable and accrued
liabilities
138,904
216,857
Changes in other operating assets and
liabilities, net
(114,011
)
(30,354
)
Net cash flows used in operating
activities from continuing operations (a)
(83,221
)
(21,248
)
Net cash flows used in operating
activities from discontinued operations
(3,650
)
(1,349
)
Net cash flow used in operating
activities
$
(86,871
)
$
(22,597
)
Cash flows from investing activities:
Purchases of property and equipment
$
(11,459
)
$
(21,700
)
Changes in other noncurrent assets and
other
78
572
Net cash flows used in investing
activities from continuing operations
(11,381
)
(21,128
)
Net cash flows provided by (used in)
investing activities from discontinued operations
21,395
(5,198
)
Net cash flow provided by (used in)
investing activities
$
10,014
$
(26,326
)
Cash flows from financing activities:
Proceeds from borrowings
$
454,459
$
512,000
Repayments of borrowings
(384,545
)
(452,100
)
Payment of deferred financing costs
(9,845
)
(2,614
)
Purchase of treasury shares
(176
)
(864
)
Net cash flows provided by financing
activities from continuing operations
59,893
56,422
Net cash flows provided by financing
activities from discontinued operations
—
—
Net cash flows provided by financing
activities
$
59,893
$
56,422
Net (decrease) increase in cash, cash
equivalents and restricted cash
$
(16,964
)
$
7,499
Cash, cash equivalents and restricted cash
at beginning of period
31,988
21,036
Cash, cash equivalents, and restricted
cash at end of period
15,024
28,535
Less: Cash, cash equivalents, and
restricted cash of discontinued operations at end of period
—
(802
)
Cash, cash equivalents, and restricted
cash of continuing operations at end of period
$
15,024
$
27,733
(a)
The increase in Net cash flows used in
operating activities from continuing operations is due to higher
accounts receivables and higher inventory levels primarily related
to our increased adoption of our BNC First Day equitable and
inclusive access sales; and higher payables due to delayed payments
to vendors for inventory purchases and expenses, as a result of
borrowing capacity limitations under our credit facility. Given the
growth of our BNC First Day programs, the timing of cash collection
from our school partners may shift to periods subsequent to when
the revenue is recognized. When a school adopts our BNC First Day
equitable and inclusive access offerings, cash collection from the
school generally occurs after the institution's drop/add dates,
which is later in the working capital cycle, particularly in our
third quarter given the timing of the Spring Term and our 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 our sales shift to BNC First
Day equitable and inclusive access offerings, we are focused on
efforts to better align the timing of our cash outflows to course
material vendors with cash inflows collected from schools.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Debt and Interest Expense
Information (Unaudited)
(In thousands)
Debt
As of
Maturity Date
January 27, 2024
January 28, 2023
Credit Facility
December 28, 2024
$
224,067
$
255,600
Term Loan
April 7, 2025
31,750
30,000
sub-total
255,817
285,600
Less: Deferred financing costs, Term
Loan
(1,559
)
(1,743
)
Total debt
$
254,258
$
283,857
Balance Sheet classification:
Short-term borrowings
$
224,067
$
—
Long-term borrowings
30,191
283,857
Total debt
$
254,258
$
283,857
Interest Expense
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Interest Incurred
Credit Facility
$
5,747
$
5,215
$
18,286
$
11,910
Term Loan
907
853
3,074
2,213
Total Interest Incurred
$
6,654
$
6,068
$
21,360
$
14,123
Amortization of Deferred Financing
Costs
Credit Facility
$
3,662
$
396
$
7,456
$
1,187
Term Loan
312
462
924
871
Total Amortization of Deferred Financing
Costs
$
3,974
$
858
$
8,380
$
2,058
Interest Income, net of expense
$
(8
)
$
(8
)
$
(202
)
$
(509
)
Total Interest Expense
$
10,620
$
6,918
$
29,538
$
15,672
Cash interest paid during the 39 weeks ended January 27, 2024
and January 28, 2023 was $19.6 million and $13.4 million,
respectively.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information -
Continuing Operations (In thousands, except percentages)
(Unaudited)
Segment Information (a) - Continuing
Operations
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Sales:
Retail (b)
$
439,446
$
421,259
$
1,284,242
$
1,256,376
Wholesale
37,167
38,958
96,931
97,161
Eliminations
(19,940
)
(22,163
)
(49,960
)
(52,176
)
Total Sales
$
456,673
$
438,054
$
1,331,213
$
1,301,361
Gross Profit
Retail (c)
$
89,243
$
88,926
$
265,063
$
272,447
Wholesale
7,996
6,668
19,880
19,022
Eliminations
2,797
1,417
1,969
(286
)
Total Gross Profit
$
100,036
$
97,011
$
286,912
$
291,183
Selling and Administrative Expenses
Retail
$
71,393
$
82,753
$
217,748
$
251,843
Wholesale
3,271
3,563
10,151
11,561
Corporate Services
5,092
5,572
15,297
17,861
Eliminations
—
(47
)
(3
)
(129
)
Total Selling and Administrative
Expenses
$
79,756
$
91,841
$
243,193
$
281,136
Segment Adjusted EBITDA (Non-GAAP) (d)
Retail
$
17,850
$
6,173
$
47,315
$
20,604
Wholesale
4,725
3,105
9,729
7,461
Corporate Services
(5,092
)
(5,572
)
(15,297
)
(17,861
)
Eliminations
2,797
1,464
1,972
(157
)
Total Segment Adjusted EBITDA
(Non-GAAP)
$
20,280
$
5,170
$
43,719
$
10,047
Percentage of Segment Sales
Gross Profit
Retail (c)
20.3
%
21.1
%
20.6
%
21.7
%
Wholesale
21.5
%
17.1
%
20.5
%
19.6
%
Eliminations
(14.0
)%
(6.4
)%
(3.9
)%
0.5
%
Total Gross Profit
21.9
%
22.1
%
21.6
%
22.4
%
Selling and Administrative Expenses
Retail
16.2
%
19.6
%
17.0
%
20.0
%
Wholesale
8.8
%
9.1
%
10.5
%
11.9
%
Total Selling and Administrative
Expenses
17.5
%
21.0
%
18.3
%
21.6
%
(a)
See Explanatory Note in this Press Release
for Segment descriptions.
(b)
Logo general merchandise sales for the
Retail Segment are recognized on a net basis as commission revenue
in the condensed consolidated financial statements. For Retail
Gross Comparable Store Sales details, see the Sales Information
disclosure of this Press Release.
(c)
For the 39 weeks ended January 27, 2024
and January 28, 2023, the Retail Segment gross margin excludes $0
and $26 respectively, of amortization expense (non-cash) related to
content development costs.
(d)
For additional information, including a
reconciliation to the most comparable financial measures presented
in accordance with GAAP, see "Non-GAAP Information" and "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information -
Discontinued Operations (Unaudited)
(In thousands, except
percentages)
During the fourth quarter of fiscal 2023, assets related to our
Digital Student Solutions ("DSS") Segment met the criteria for
classification as Assets Held for Sale and Discontinued Operations
and is no longer a reportable segment. Certain assets and
liabilities associated with the DSS Segment are presented in our
condensed consolidated balance sheets as "Assets Held for Sale" and
"Liabilities Held for Sale". The results of operations related to
the DSS Segment are included in the condensed consolidated
statements of operations as "Loss from discontinued operations, net
of tax." The cash flows of the DSS Segment are also presented
separately in our condensed consolidated statements of cash
flows.
On May 31, 2023, we completed the sale of these assets related
to our DSS Segment for cash proceeds of $20,000, net of certain
transaction fees, severance costs, escrow, and other
considerations. During the 39 weeks ended January 27, 2024, we
recorded a Gain on Sale of Business of $3,545 in Loss from
Discontinued Operations, Net, related to the sale. Net cash
proceeds from the sale were used for debt repayment and to provide
additional funds for working capital needs under our Credit
Facility. The following table summarizes the operating results of
the discontinued operations for the periods indicated:
Segment Information - Discontinued
Operations
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Total sales
$
—
$
9,010
$
2,784
$
26,659
Cost of sales (a)
—
1,811
76
5,283
Gross profit (a)
—
7,199
2,708
21,376
Selling and administrative expenses
177
7,632
3,101
23,909
Depreciation and amortization
—
506
3
2,646
Gain on sale of business
(477
)
—
(3,545
)
—
Impairment loss (non-cash) (b)
—
—
610
—
Restructuring costs (c)
11
1,848
3,308
1,848
Transaction costs
—
—
13
—
Operating income (loss)
289
(2,787
)
(782
)
(7,027
)
Income tax expense
—
128
20
297
Income (loss) from discontinued
operations, net of tax
$
289
$
(2,915
)
$
(802
)
$
(7,324
)
13 weeks ended
39 weeks ended
Adjusted EBITDA (non-GAAP) -
Discontinued Operations
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Income (loss) from discontinued
operations
$
289
$
(2,915
)
$
(802
)
$
(7,324
)
Add:
Depreciation and amortization expense
—
506
3
2,646
Income tax expense
—
128
20
297
Content amortization (non-cash)
—
1,686
—
4,855
Gain on sale of business
(477
)
—
(3,545
)
—
Impairment loss (non-cash) (b)
—
—
610
—
Restructuring costs (c)
11
1,848
3,308
1,848
Transaction costs
—
—
13
—
Adjusted EBITDA (Non-GAAP) - Discontinued
Operations
$
(177
)
$
1,253
$
(393
)
$
2,322
(a)
Cost of sales and Gross margin for the DSS
Segment includes amortization expense (non-cash) related to content
development costs of $0 for both the 13 and 39 weeks ended January
27, 2024 and $1,686 and $4,855 for the 13 and 39 weeks ended
January 28, 2023, respectively.
(b)
During the 39 weeks ended January 27,
2024, we recognized an impairment loss (non-cash) of $610 (both
pre-tax and after-tax), comprised of $119 and $491 of property and
equipment and operating lease right-of-use assets, respectively, on
the condensed consolidated statement of operations as part of
discontinued operations.
(c)
During the 39 weeks ended January 27,
2024, we recognized restructuring and other charges of $3,308
comprised of severance and other employee termination costs.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 and 39 week periods are as follows:
Dollars in millions
13 weeks ended
39 weeks ended
January 27, 2024
January 27, 2024
Retail Sales (a)
New stores (b)
$
10.1
$
31.0
Closed stores (b)
(25.0
)
(62.0
)
Comparable stores (a)
37.3
61.9
Textbook rental deferral
(4.4
)
(4.1
)
Service revenue (c)
0.7
0.3
Other (d)
(0.5
)
0.8
Retail Sales subtotal:
$
18.2
$
27.9
Wholesale Sales:
$
(1.8
)
$
(0.2
)
Eliminations (e)
$
2.2
$
2.2
Total sales variance
$
18.6
$
29.9
(a)
Logo general merchandise sales for the
Retail Segment are recognized on a net basis as commission revenue
in the condensed consolidated financial statements. For Retail
Gross Comparable Store Sales details, see below.
(b)
The following is a store count summary for
physical stores and virtual stores:
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Number of Stores:
Physical
Virtual
Total
Physical
Virtual
Total
Physical
Virtual
Total
Physical
Virtual
Total
Beginning of period
717
554
1,271
793
606
1,399
774
592
1,366
805
622
1,427
Stores opened
6
4
10
—
4
4
19
22
41
34
28
62
Stores closed
6
3
9
8
7
15
76
59
135
54
47
101
End of period
717
555
1,272
785
603
1,388
717
555
1,272
785
603
1,388
(c)
Service revenue includes brand partnership
marketing, shipping and handling, and revenue from other
programs.
(d)
Other includes inventory liquidation sales
to third parties, marketplace sales and certain accounting
adjusting items related to return reserves, and other deferred
items.
(e)
Eliminates Wholesale sales and service
fees to Retail and Retail commissions earned from Wholesale.
Retail Gross Comparable Store Sales
Retail Gross Comparable Store Sales variances by category for
the 13 and 39 week periods are as follows:
Dollars in millions
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Textbooks (Course Materials)
$
43.8
14.1
%
$
21.3
7.4
%
$
78.3
8.8
%
$
2.9
0.3
%
General Merchandise
(5.7
)
(4.6
)%
2.6
2.3
%
(2.0
)
(0.4
)%
42.6
11.3
%
Total Retail Gross Comparable Store
Sales
$
38.1
8.8
%
$
23.9
5.9
%
$
76.3
5.7
%
$
45.5
3.6
%
To supplement the Total Sales table presented above, the Company
uses Retail Gross Comparable Store Sales as a key performance
indicator. Retail Gross Comparable Store Sales includes sales from
physical and virtual stores that have been open for an entire
fiscal year period and does not include sales from permanently
closed stores for all periods presented. For Retail Gross
Comparable Store Sales, sales for logo general merchandise
fulfilled by Lids, Fanatics and digital agency sales are included
on a gross basis in Retail Gross Comparable Store Sales compared to
a net basis as commission revenue in our condensed consolidated
financial statements.
We believe the current Retail Gross Comparable Store Sales
calculation method reflects management’s view that such comparable
store sales are an important measure of the growth in sales when
evaluating how established stores have performed over time. We
present this metric as additional useful information about the
Company’s operational and financial performance and to allow
greater transparency with respect to important metrics used by
management for operating and financial decision-making. Retail
Gross Comparable Store Sales are also referred to as "same-store"
sales by others within the retail industry and the method of
calculating comparable store sales varies across the retail
industry. As a result, our calculation of comparable store sales is
not necessarily comparable to similarly titled measures reported by
other companies and is intended only as supplemental information
and is not a substitute for net sales presented in accordance with
GAAP.
BNC First Day Sales
The following table summarizes our BNC First Day sales for the
13 and 39 weeks ended January 27, 2024 and January 28, 2023:
Dollars in millions
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
Var $
Var %
January 27, 2024
January 28, 2023
Var $
Var %
First Day Complete Sales
$
109.5
$
66.9
$
42.6
64
%
$
271.5
$
173.4
$
98.1
57
%
First Day Sales
74.5
53.8
$
20.7
38
%
173.6
135.7
$
37.9
28
%
Total BNC First Day Sales
$
184.0
$
120.7
$
63.3
52
%
$
445.1
$
309.1
$
136.0
44
%
First Day Complete
Spring 2023
Spring 2022
Var #
Var %
Number of campus stores
160
116
44
38
%
Estimated enrollment (a)
805,000
580,000
225,000
39
%
(a) Total undergraduate and graduate
student enrollment as reported by National Center for Education
Statistics (NCES)
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Non-GAAP Information
(a)
(In thousands)
(Unaudited)
Consolidated Adjusted Earnings
(non-GAAP) (a) - Continuing Operations
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Net loss from continuing operations
$
(9,928
)
$
(22,134
)
$
(35,045
)
$
(48,288
)
Reconciling items (below)
9,211
10,135
18,118
10,796
Adjusted Earnings (non-GAAP)
$
(717
)
$
(11,999
)
$
(16,927
)
$
(37,492
)
Reconciling items
Impairment loss (non-cash) (b)
$
5,798
$
6,008
$
5,798
$
6,008
Content amortization (non-cash) (c)
—
—
—
26
Restructuring and other charges (d)
3,413
4,127
12,320
4,762
Reconciling items (e)
$
9,211
$
10,135
$
18,118
$
10,796
Consolidated Adjusted EBITDA (non-GAAP)
(a)
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Net loss from continuing operations
(9,928
)
(22,134
)
(35,045
)
(48,288
)
Add:
Depreciation and amortization expense
10,148
10,112
30,576
31,264
Interest expense, net
10,620
6,918
29,538
15,672
Income tax expense
229
139
532
603
Impairment loss (non-cash) (b)
5,798
6,008
5,798
6,008
Content amortization (non-cash) (c)
—
—
—
26
Restructuring and other charges (d)
3,413
4,127
12,320
4,762
Adjusted EBITDA (Non-GAAP) - Continuing
Operations
$
20,280
$
5,170
$
43,719
$
10,047
Adjusted EBITDA (Non-GAAP) - Discontinued
Operations
$
(177
)
$
1,253
$
(393
)
$
2,322
Adjusted EBITDA (Non-GAAP) - Total
$
20,103
$
6,423
$
43,326
$
12,369
Adjusted EBITDA by Segment (non-GAAP) (a) - Continuing
Operations
The following is Adjusted EBITDA by Segment for Continuing
Operations for the 13 and 39 week periods:
13 weeks ended January 27,
2024
Retail
Wholesale
Corporate Services (f)
Eliminations
Total
Net income (loss) from continuing
operations
$
3,235
$
3,404
$
(19,364
)
$
2,797
$
(9,928
)
Add:
Depreciation and amortization expense
8,817
1,321
10
—
10,148
Interest expense, net
—
—
10,620
—
10,620
Income tax expense
—
—
229
—
229
Impairment loss (non-cash) (b)
5,798
—
—
—
5,798
Content amortization (non-cash) (c)
—
—
—
—
—
Restructuring and other charges (d)
—
—
3,413
—
3,413
Adjusted EBITDA (non-GAAP)
$
17,850
$
4,725
$
(5,092
)
$
2,797
$
20,280
13 weeks ended January 28,
2023
Retail
Wholesale
Corporate Services (f)
Eliminations
Total
Net (loss) income from continuing
operations
$
(10,036
)
$
817
$
(14,379
)
$
1,464
$
(22,134
)
Add:
Depreciation and amortization expense
8,749
1,357
6
—
10,112
Interest expense, net
—
—
6,918
—
6,918
Income tax expense
—
—
139
—
139
Impairment loss (non-cash) (b)
6,008
—
—
—
6,008
Content amortization (non-cash) (c)
—
—
—
—
—
Restructuring and other charges (d)
1,452
931
1,744
—
4,127
Adjusted EBITDA (non-GAAP)
$
6,173
$
3,105
$
(5,572
)
$
1,464
$
5,170
39 weeks ended January 27,
2024
Retail
Wholesale
Corporate Services (f)
Eliminations
Total
Net income (loss) from continuing
operations
$
14,268
$
5,351
$
(56,636
)
$
1,972
$
(35,045
)
Add:
Depreciation and amortization expense
26,694
3,852
30
—
30,576
Interest expense, net
—
—
29,538
—
29,538
Income tax expense
—
—
532
—
532
Impairment loss (non-cash) (b)
5,798
—
—
—
5,798
Content amortization (non-cash) (c)
—
—
—
—
—
Restructuring and other charges (d)
555
526
11,239
—
12,320
Adjusted EBITDA (non-GAAP)
$
47,315
$
9,729
$
(15,297
)
$
1,972
$
43,719
39 weeks ended January 28,
2023
Retail
Wholesale
Corporate Services (f)
Eliminations
Total
Net (loss) income from continuing
operations
$
(14,029
)
$
2,454
$
(36,556
)
$
(157
)
$
(48,288
)
Add:
Depreciation and amortization expense
27,147
4,076
41
—
31,264
Interest expense, net
—
—
15,672
—
15,672
Income tax expense
—
—
603
—
603
Impairment loss (non-cash) (b)
6,008
—
—
—
6,008
Content amortization (non-cash) (c)
26
—
—
—
26
Restructuring and other charges (d)
1,452
931
2,379
—
4,762
Adjusted EBITDA (non-GAAP)
$
20,604
$
7,461
$
(17,861
)
$
(157
)
$
10,047
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
During the 13 weeks ended January 27,
2024, 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
$5,798 (both pre-tax and after-tax) comprised of $364, $2,726, and
$2,708 of property and equipment, operating lease right-of-use
assets, and amortizable intangibles, respectively. 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.
(c)
Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
condensed consolidated financial statements.
(d)
Restructuring and other charges are
comprised primarily of severance and other employee termination and
benefit costs associated with the elimination of various positions
as part of cost reduction objectives, and professional service
costs for restructuring, process improvements.
(e)
There is no pro forma income effect of the
non-GAAP items.
(f)
Interest expense is reflected in Corporate
Services as it is primarily related to our Credit Agreement and
Term Loan Agreement which fund our operating and financing needs
across the organization. Income taxes are reflected in Corporate
Services as we record our income tax provision on a consolidated
basis.
Free Cash Flow (non-GAAP) (a) - Continuing Operations
13 weeks ended
39 weeks ended
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Net cash flows used in operating
activities from continuing operations (b)
$
(36,061
)
$
(31,321
)
$
(83,221
)
$
(21,248
)
Less:
Capital expenditures (c)
3,263
4,877
11,459
21,700
Cash interest paid
5,668
6,105
19,640
13,406
Cash taxes (refund) paid
(118
)
1
270
(15,582
)
Free Cash Flow (non-GAAP)
$
(44,874
)
$
(42,304
)
$
(114,590
)
$
(40,772
)
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
The increase in Net cash flows used in
operating activities from continuing operations is due to higher
accounts receivables and higher inventory levels primarily related
to our increased adoption of our BNC First Day equitable and
inclusive access sales; higher payments for interest expense; and
higher payables due to delayed payments to vendors for inventory
purchases and expenses, as a result of borrowing capacity
limitations under our credit facility. Given the growth of our BNC
First Day programs, the timing of cash collection from our school
partners may shift to periods subsequent to when the revenue is
recognized. When a school adopts our BNC First Day equitable and
inclusive access offerings, cash collection from the school
generally occurs after the institution's drop/add dates, which is
later in the working capital cycle, particularly in our third
quarter given the timing of the Spring Term and our 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 our sales shift to BNC First
Day equitable and inclusive access offerings, we are focused on
efforts to better align the timing of our cash outflows to course
material vendors with cash inflows collected from schools.
(c)
Purchases of property and equipment are
also referred to as capital expenditures. Our investing activities
consist principally of capital expenditures for contractual capital
investments associated with renewing existing contracts, new store
construction, and enhancements to internal systems and our website.
The following table provides the components of total purchases of
property and equipment:
Capital Expenditures
13 weeks ended
39 weeks ended
- Continuing Operations
January 27, 2024
January 28, 2023
January 27, 2024
January 28, 2023
Physical store capital expenditures
$
1,158
$
1,700
$
5,106
$
12,248
Product and system development
1,588
2,691
5,048
7,866
Other
517
486
1,305
1,586
Total capital expenditures
$
3,263
$
4,877
$
11,459
$
21,700
Use of Non-GAAP Financial Information - Adjusted Earnings,
Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash
Flow
To supplement the Company’s condensed consolidated financial
statements presented in accordance with generally accepted
accounting principles (“GAAP”), in the Press Release attached
hereto as Exhibit 99.1, the Company uses the financial measures of
Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment and
Free Cash Flow, which are non-GAAP financial measures under
Securities and Exchange Commission (the "SEC") regulations. We
define Adjusted Earnings as net income (loss) from continuing
operations adjusted for certain reconciling items that are
subtracted from or added to net income (loss) from continuing
operations. We define Adjusted EBITDA as net income (loss) from
continuing operations plus (1) depreciation and amortization; (2)
interest expense and (3) income taxes, (4) as adjusted for items
that are subtracted from or added to net income (loss) from
continuing operations. We define Free Cash Flow as Cash Flows from
Operating Activities from continuing operations less capital
expenditures, cash interest and cash taxes.
The non-GAAP measures included in the Press Release have been
reconciled to the most comparable financial measures presented in
accordance with GAAP, attached hereto as Exhibit 99.1, as follows:
the reconciliation of Adjusted Earnings to net income (loss) from
continuing operations; the reconciliation of consolidated Adjusted
EBITDA to consolidated net income (loss) from continuing
operations; and the reconciliation of Adjusted EBITDA by Segment to
net income (loss) from continuing operations by segment. All of the
items included in the reconciliations are either (i) non-cash items
or (ii) items that management does not consider in assessing our
on-going operating performance.
These non-GAAP financial measures are not intended as
substitutes for and should not be considered superior to measures
of financial performance prepared in accordance with GAAP. In
addition, the Company's use of these non-GAAP financial measures
may be different from similarly named measures used by other
companies, limiting their usefulness for comparison purposes.
We review these non-GAAP financial measures as internal measures
to evaluate our performance at a consolidated level and at a
segment level and manage our operations. We believe that these
measures are useful performance measures which are used by us to
facilitate a comparison of our on-going operating performance on a
consistent basis from period-to-period. We believe that these
non-GAAP financial measures provide for a more complete
understanding of factors and trends affecting our business than
measures under GAAP can provide alone, as they exclude certain
items that management believes do not reflect the ordinary
performance of our operations in a particular period. Our Board of
Directors and management also use Adjusted EBITDA and Adjusted
EBITDA by Segment, at a consolidated level and at a segment level,
as one of the primary methods for planning and forecasting expected
performance, for evaluating on a quarterly and annual basis actual
results against such expectations, and as a measure for performance
incentive plans. Management also uses Adjusted EBITDA by Segment to
determine segment capital allocations. We believe that the
inclusion of Adjusted Earnings, Adjusted EBITDA, and Adjusted
EBITDA by Segment results provides investors useful and important
information regarding our operating results, in a manner that is
consistent with management’s evaluation of business performance. We
believe that Free Cash Flow provides useful additional information
concerning cash flow available to meet future debt service
obligations and working capital requirements and assists investors
in their understanding of our operating profitability and liquidity
as we manage the business to maximize margin and cash flow.
The Company urges investors to carefully review the GAAP
financial information included as part of the Company’s Form 10-K
dated April 29, 2023 filed with the SEC on July 31, 2023, which
includes consolidated financial statements for each of the three
years for the period ended April 29, 2023, April 30, 2022, and May
1, 2021 (Fiscal 2023, Fiscal 2022, and Fiscal 2021, respectively)
and the Company's Quarterly Report on Form 10-Q for the period
ended July 29, 2023 filed with the SEC on September 6, 2023 and the
Company's Quarterly Report on Form 10-Q for the period ended
October 28, 2023 filed with the SEC on December 6, 2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240307276715/en/
Investor Contact: Hunter
Blankenbaker Vice President Corporate Communications & Investor
Relations 908-991-2776 hblankenbaker@bned.com
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