Consolidated Revenue Increased 3.7% to $264.2
Million
Retail Segment Gross Comparable Store Sales
Increased 5.9%
Course Material Gross Comparable Store Sales
Increased 6.5%
First Day® Complete Revenue Increased 55% to
$25.5 Million
Consolidated GAAP Net Loss from Continuing
Operations Decreased by $0.3 Million and Consolidated Adjusted
EBITDA (Non-GAAP) Increased by $7.5 Million
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the first quarter ended on July 29,
2023. Barnes & Noble Education is a highly seasonal business,
and the first quarter is historically a period of low sales
activity for the Company.
Financial Results for the First Quarter Fiscal Year
2024:
- Consolidated first quarter GAAP sales of $264.2 million
increased by $9.5 million, or 3.7%, as compared to $254.7 million
in the prior year period. The first quarter sales increase is
primarily related to higher course material sales, primarily
through the Company’s First Day programs.
- Consolidated first quarter GAAP gross profit of $50.6 million
decreased by $5.4 million, or 9.6%, as compared to $56.0 in the
prior year period.
- Consolidated first quarter selling and administrative expenses
decreased by $12.9 million, or 14.2%, as compared to the prior year
period.
- Consolidated first quarter GAAP net loss from continuing
operations of $(50.0) million decreased by $0.3 million, or 0.7%,
compared to a net loss from continuing operations of $(50.3)
million in the prior year period. The decrease in first quarter
GAAP net loss from continuing operations was due to decreases of
$12.9 million in selling and administrative expenses and $0.8
million in income tax expense, partially offset by a $5.4 million
decrease in gross profit and increases of $4.4 million in interest
expense and $4.3 million in restructuring expense.
- Consolidated first quarter non-GAAP Adjusted Earnings of
$(45.3) million increased by $4.6 million, compared to $(49.9)
million in the prior year period.
- Consolidated first quarter non-GAAP Adjusted EBITDA of $(26.8)
million increased by $7.5 million, or 21.8%, compared to $(34.3)
million in the prior year period.
Operational Highlights for the First Quarter Fiscal Year
2024:
- BNC First Day total revenue increased by $16.7 million, or 37%,
to $61.7 million compared to $45.1 million during the prior year
period.
- First Day® Complete revenue grew by $9.0 million, or 55%, to
$25.5 million, as compared to $16.5 million in the prior year
period.
- 157 campus stores are utilizing First Day® Complete in the Fall
of 2023 representing enrollment of nearly 800,000 undergraduate and
post graduate students*, an increase of approximately 46% compared
to Fall of 2022.
- Total Retail segment gross comparable store sales increased by
$15.8 million, or 5.9%, comprised of a 6.5% increase in course
material gross comparable store sales, and a 5.3% increase 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 1,289 physical and virtual stores, a net
decrease of 117 stores, as compared to the prior year period, as
the Company focuses on winding down under-performing, less
profitable stores and satellite locations.
- On July 28, 2023, the Company amended and extended the maturity
date of its credit facility to enhance its financial and operating
flexibility.
*As reported by National Center for Education Statistics
(NCES)
“Our fiscal year 2024 is off to a solid start and our first
quarter results reflect clear progress against our strategic
initiatives. Thanks to the focus of the BNED team, the impact from
our operational efficiency and cost reductions actions are taking
hold and our First Day Complete equitable access model continues to
gain momentum. Based on the significant number of new and existing
schools committed to First Day Complete for the Fall and Spring
semesters we are well positioned to deliver strong growth, in our
seasonally higher-volume second and third fiscal quarters,” said
Michael P. Huseby, Chief Executive Officer, BNED.
“Even with 117 fewer stores versus a year ago, total Retail
sales increased 3.8%, driven by a 5.9% increase in total retail
Gross comparable stores sales, led by 55% growth in First Day
Complete revenue. This sales growth, combined with our continued
focus on disciplined cost management and profitability drove
significant operating leverage. We remain focused on achieving both
in-year profitability and sustained, long-term, profitable growth
through continued execution of our business model transformation.
Accelerated adoptions of our First day Complete course material
model, improved execution of our general merchandise business, and
our ongoing cost-reduction actions are all creating operating and
financial benefits that we expect to drive improved results.”
First Quarter Fiscal Year 2024 Results
The Company has two reportable segments: Retail and Wholesale.
Additionally, unallocated shared-service costs, which include
various corporate level expenses and other governance functions,
are not allocated to any specific reporting segment and are
presented as “Corporate Services.” All material intercompany
accounts and transactions have been eliminated in
consolidation.
Retail Segment Results
First quarter Retail sales increased by $9.0 million, or 3.8%,
as compared to the prior year period. Retail Gross Comparable Store
Sales increased 5.9% for the quarter, with comparable course
material sales increasing 6.5% and gross comparable general
merchandise increasing 5.3%. The increase in course material
product sales was due to growth from the Company’s First Day
models, which increased by $16.7 million, or 37%, to $61.8 million,
as compared to $45.1 million in the prior year period.
First quarter Retail gross profit decreased by $3.7 million, or
6.9%, to $50.3 million, or 20.5% of sales, from $54.0 million, or
22.8% of sales in the prior year period. The gross profit decrease
was primarily driven by higher markdowns related to closed store
inventory and lower commissions for emblematic general merchandise
pursuant to the Fanatics and Lids Partnership agreements, under
which the commission rates adjust as the relationship matures.
These decreases were partially offset by lower contract costs as a
percentage of sales related to our college and university contracts
and a favorable sales mix due to increased general merchandise
sales primarily for graduation products. Effective August 1, 2023,
the commission rates for emblematic general merchandise increased
for an estimated one year period under the terms of the July 2023
Term Loan Credit Agreement amendment.
First quarter Retail selling and administrative expenses
decreased by $9.8 million, or 12.4%, to $69.2 million from $79.0
million in the prior year period. This decrease was primarily due
to the Company’s cost savings and productivity initiatives
comprised of a $6.0 million decrease in comparable store payroll
expense, new/closed store payroll expense and related operating
costs, a $1.6 million decrease in corporate payroll expense,
infrastructure and product development costs, and a $2.2 million
decrease in incentive plan compensation expense.
Retail non-GAAP Adjusted EBITDA for the seasonally low-volume
first quarter of fiscal year 2024 was $(18.9) million, as compared
to $(25.0) million in the prior year period. Non-GAAP Adjusted
EBITDA increased by $6.1 million due to lower selling and
administrative expenses, offset by lower gross profit.
Wholesale Segment Results (Before
Intercompany Eliminations)
Wholesale first quarter sales increased by $1.7 million, or 4.6%
to $38.8 million from $37.1 million in the prior year period. The
increase is primarily due to higher gross sales of $5.1 million
compared to the prior year period, partially offset by higher
returns and allowances of $3.4 million.
Gross profit for Wholesale was $5.8 million, or 14.9% of sales,
in the first quarter of 2024 compared to $6.9 million, or 18.6% of
sales, in the first quarter of 2023. Gross profit and the gross
margin rate decreased in the first quarter of 2024 primarily due to
higher product costs and an increase in the returns and allowances,
partially offset by lower markdowns.
First quarter Wholesale selling and administrative expenses
decreased by $0.7 million, or 18.0%, to $3.4 million compared to
$4.1 million in the prior year period. The decrease was primarily
due to cost savings initiatives of $0.7 million comprised of lower
payroll and incentive plan compensation expense.
Wholesale non-GAAP Adjusted EBITDA for the quarter decreased to
$2.4 million, as compared to $2.8 million in the prior year. The
decrease in Wholesale non-GAAP Adjusted EBITDA is due to the lower
gross margin in the first quarter of 2024.
Balance Sheet and Cash Flow
As of July 29, 2023, the Company’s cash and cash equivalents was
$7.7 million and total outstanding debt was $277.7 million, as
compared to cash and cash equivalents of $7.6 million and total
outstanding debt of $258.5 million in the prior year period.
On July 28, 2023, the Company announced that it entered into an
agreement with its financial stakeholders and strategic partners on
the terms of a refinancing that strengthened the Company’s
liquidity and overall financial positions by extending the maturity
of its debt facilities, amending certain credit facility covenants
and modifying certain other agreements. With this agreement, the
Company is well-positioned to continue supporting academic
institutions and customers nationwide through the 2023 and 2024
academic years.
Fiscal Year 2024 Outlook
For fiscal year 2024, the Company continues to expect
consolidated non-GAAP Adjusted EBITDA from Continuing Operations of
approximately $40 million. The year-over-year increase in non-GAAP
Adjusted EBITDA from Continuing Operations will be driven by growth
in the Company’s Retail Segment and the impact of cost reductions
executed in fiscal year 2023, and other cost reductions executed
in, or planned for execution in, fiscal year 2024.
Conference Call A conference call with Barnes & Noble
Education, Inc. senior management will be webcast at 8:30 a.m.
Eastern Time on Wednesday, September 6, 2023 and can be accessed at
the Barnes & Noble Education corporate website at
investor.bned.com or www.bned.com.
Barnes & Noble Education expects to report fiscal year 2024
second quarter results in early December 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, wholesale
capabilities and more. BNED is a company serving all who work to
elevate their lives through education, supporting students, faculty
and institutions as they make tomorrow a better, more inclusive and
smarter world. For more information, visit www.bned.com.
Forward-Looking Statements This press release contains
certain “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995 and information
relating to us and our business that are based on the beliefs of
our management as well as assumptions made by and information
currently available to our management. When used in this
communication, the words “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and
similar expressions, as they relate to us or our management,
identify forward-looking statements. Moreover, we operate in a very
competitive and rapidly changing environment. New risks emerge from
time to time. It is not possible for our management to predict all
risks, nor can we assess the impact of all factors on our business
or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in
any forward-looking statements we may make. In light of these
risks, uncertainties and assumptions, the future events and trends
discussed in this press release may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward-looking statements. Such statements reflect
our current views with respect to future events, the outcome of
which is subject to certain risks, including, among others: the
amount of our indebtedness and ability to comply with covenants
applicable to current and /or any future debt financing; our
ability to satisfy future capital and liquidity requirements; our
ability to access the credit and capital markets at the times and
in the amounts needed and on acceptable terms; our ability to
maintain adequate liquidity levels to support ongoing inventory
purchases and related vendor payments in a timely manner; our
ability to attract and retain employees; the pace of equitable
access adoption in the marketplace is slower than anticipated and
our ability to successfully convert the majority of our
institutions to our BNC First Day® equitable and inclusive access
course material models or successfully compete with third parties
that provide similar equitable and inclusive access solutions; the
strategic objectives, successful integration, anticipated
synergies, and/or other expected potential benefits of various
strategic and restructuring initiatives, may not be fully realized
or may take longer than expected; dependency on strategic
partnerships, 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 Partnership”), and the potential for
adverse operational and financial changes to these partnerships,
may adversely impact our business; non-renewal of managed
bookstore, physical and/or online store contracts and
higher-than-anticipated store closings; decisions by colleges and
universities to outsource their physical and/or online bookstore
operations or change the operation of their bookstores; general
competitive conditions, including actions our competitors and
content providers may take to grow their businesses; the risk of
changes in price or in formats of course materials by publishers,
which could negatively impact revenues and margin; changes to
purchase or rental terms, payment terms, return policies, the
discount or margin on products or other terms with our suppliers;
product shortages, including decreases in the used textbook
inventory supply associated with the implementation of publishers’
digital offerings and direct to student textbook consignment rental
programs; work stoppages or increases in labor costs; possible
increases in shipping rates or interruptions in shipping services;
a decline in college enrollment or decreased funding available for
students; decreased consumer demand for our products, low growth or
declining sales; the general economic environment and consumer
spending patterns; trends and challenges to our business and in the
locations in which we have stores; risks associated with operation
or performance of MBS Textbook Exchange, LLC’s point-of-sales
systems that are sold to college bookstore customers; technological
changes, including the adoption of artificial intelligence
technologies for educational content; risks associated with
counterfeit and piracy of digital and print materials; risks
associated with data privacy, information security and intellectual
property; disruptions to our information technology systems,
infrastructure, data, supplier systems, and customer ordering and
payment systems due to computer malware, viruses, hacking and
phishing attacks, resulting in harm to our business and results of
operations; disruption of or interference with third party web
service providers and our own proprietary technology; risks
associated with the impact that public health crises, epidemics,
and pandemics, such as the COVID-19 pandemic, have on the overall
demand for BNED products and services, our operations, the
operations of our suppliers and other business 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 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, or similar
marketing and sales activities; adverse results from litigation,
governmental investigations, tax-related proceedings, or audits;
changes in accounting standards; and the other risks and
uncertainties detailed in the section titled “Risk Factors” in Part
I - Item 1A in our Form 10-K for the year-ended April 29, 2023.
Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described as anticipated,
believed, estimated, expected, intended or planned. Subsequent
written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their
entirety by the cautionary statements in this paragraph. We
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise after the date of this press
release.
EXPLANATORY NOTE
On May 31, 2023, we completed the sale of these assets related
to our DSS Segment. The results of operations related to the DSS
Segment are included in the condensed consolidated statements of
operations as "Loss from discontinued operations, net of tax." The
cash flows of the DSS Segment are also presented separately in our
condensed consolidated statements of cash flows.
We have two reportable segments: Retail and Wholesale as
follows:
- The Retail Segment operates 1,289 college, university, and K-12
school bookstores, comprised of 726 physical bookstores and 563
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
partners, 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 726 physical bookstores)
and sources and distributes new and used textbooks to our 563
virtual bookstores. Additionally, the Wholesale Segment sells
hardware and a software suite of applications that provides
inventory management and point-of-sale solutions to approximately
330 college bookstores.
Corporate Services represents unallocated shared-service costs
which include corporate level expenses and other governance
functions, including executive functions, such as accounting,
legal, treasury, information technology, and human resources.
All material intercompany accounts and transactions have been
eliminated in consolidation.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(In thousands, except per
share data)
(Unaudited)
13 weeks ended
July 29, 2023
July 30, 2022
Sales:
Product sales and other
$
252,650
$
243,762
Rental income
11,511
10,912
Total sales
264,161
254,674
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales
207,014
192,404
Rental cost of sales
6,513
6,265
Total cost of sales
213,527
198,669
Gross profit
50,634
56,005
Selling and administrative expenses
77,476
90,341
Depreciation and amortization expense
10,253
10,896
Restructuring and other charges (a)
4,633
375
Operating loss
(41,728
)
(45,607
)
Interest expense, net
8,254
3,868
Loss from continuing operations before
income taxes
(49,982
)
(49,475
)
Income tax (benefit) expense
(11
)
847
Loss from continuing operations
$
(49,971
)
$
(50,322
)
Loss from discontinued operations, net of
tax of $20, and $86, respectively
$
(417
)
$
(2,385
)
Net loss
$
(50,388
)
$
(52,707
)
Loss per share of common stock:
Basic and Diluted:
Continuing operations
$
(0.95
)
$
(0.96
)
Discontinued operations
$
(0.01
)
$
(0.05
)
Total Basic and Diluted Earnings per
share
$
(0.96
)
$
(1.01
)
Weighted average common shares outstanding
- Basic and Diluted
52,642
52,172
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
July 29, 2023
July 30, 2022
Percentage of sales:
Sales:
Product sales and other
95.6
%
95.7
%
Rental income
4.4
%
4.3
%
Total sales
100.0
%
100.0
%
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales (a)
81.9
%
78.9
%
Rental cost of sales (a)
56.6
%
57.4
%
Total cost of sales
80.8
%
78.0
%
Gross profit
19.2
%
22.0
%
Selling and administrative expenses
29.3
%
35.5
%
Depreciation and amortization expense
3.9
%
4.3
%
Restructuring and other charges
1.8
%
0.1
%
Operating loss
(15.8
)%
(17.9
)%
Interest expense, net
3.1
%
1.5
%
Loss from continuing operations before
income taxes
(18.9
)%
(19.4
)%
Income tax (benefit) expense
—
%
0.3
%
Loss from continuing operations
(18.9
)%
(19.7
)%
(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)
July 29, 2023
July 30, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
7,657
$
7,615
Receivables, net
140,858
118,954
Merchandise inventories, net
384,185
463,555
Textbook rental inventories
6,860
8,501
Prepaid expenses and other current
assets
59,012
57,184
Assets held for sale, current
—
30,425
Total current assets
598,572
686,234
Property and equipment, net
64,438
73,734
Operating lease right-of-use assets
283,096
318,070
Intangible assets, net
107,413
123,339
Other noncurrent assets
17,298
22,242
Total assets
$
1,070,817
$
1,223,619
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
275,380
$
324,397
Accrued liabilities
89,792
88,982
Current operating lease liabilities
150,917
149,587
Short-term borrowings
—
40,000
Liabilities held for sale
—
5,482
Total current liabilities
516,089
608,448
Long-term deferred taxes, net
1,836
1,430
Long-term operating lease liabilities
171,154
197,407
Other long-term liabilities
23,016
20,938
Long-term borrowings
277,663
218,550
Total liabilities
989,758
1,046,773
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, 55,319 and 54,774 shares, respectively;
outstanding, 52,705 and 52,348 shares, respectively
553
547
Additional paid-in-capital
746,724
742,624
Accumulated deficit
(643,744
)
(544,201
)
Treasury stock, at cost
(22,474
)
(22,124
)
Total stockholders' equity
81,059
176,846
Total liabilities and stockholders'
equity
$
1,070,817
$
1,223,619
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flow (Unaudited)
(In thousands, except per
share data)
13 weeks ended
July 29, 2023
July 30, 2022
Cash flows from operating activities:
Net loss
$
(50,388
)
$
(52,707
)
Less: Loss from discontinued operations,
net of tax
(417
)
(2,385
)
Loss from continuing operations
(49,971
)
(50,322
)
Adjustments to reconcile net loss from
continuing operations to net cash flows from operating activities
from continuing operations:
Depreciation and amortization expense
10,253
10,896
Content amortization expense
—
26
Amortization of deferred financing
costs
1,244
555
Deferred taxes
(3
)
—
Stock-based compensation expense
957
1,576
Changes in operating lease right-of-use
assets and liabilities
721
(1,230
)
Changes in other long-term assets and
liabilities, net
4,056
1,782
Changes in other operating assets and
liabilities, net:
Receivables, net
(48,346
)
17,048
Merchandise inventories
(61,206
)
(169,701
)
Textbook rental inventories
23,489
21,110
Prepaid expenses and other current
assets
(12,168
)
(782
)
Accounts payable and accrued
liabilities
11,116
140,435
Changes in other operating assets and
liabilities, net
(87,115
)
8,110
Net cash flows used in operating
activities from continuing operations
(119,858
)
(28,607
)
Net cash flows used in operating
activities from discontinued operations
(3,266
)
(392
)
Net cash flow used in operating
activities
$
(123,124
)
$
(28,999
)
Cash flows from investing activities:
Purchases of property and equipment
$
(4,219
)
$
(7,530
)
Changes in other noncurrent assets and
other
78
—
Net cash flows used in investing
activities from continuing operations
(4,141
)
(7,530
)
Net cash flows provided by (used in)
investing activities from discontinued operations
21,395
(2,196
)
Net cash flow used in investing
activities
$
17,254
$
(9,726
)
Cash flows from financing activities:
Proceeds from borrowings
$
145,187
$
147,200
Repayments of borrowings
(49,606
)
(112,600
)
Payment of deferred financing costs
(2,307
)
(559
)
Purchase of treasury shares
—
(612
)
Proceeds from the exercise of stock
options, net
(98
)
—
Net cash flows provided by financing
activities from continuing operations
93,176
33,429
Net cash flows provided by financing
activities from discontinued operations
—
—
Net cash flows provided by financing
activities
$
93,176
$
33,429
Net decrease in cash, cash equivalents and
restricted cash
$
(12,694
)
$
(5,296
)
Cash, cash equivalents and restricted cash
at beginning of period
31,988
21,036
Cash, cash equivalents, and restricted
cash at end of period
19,294
15,740
Less: Cash, cash equivalents, and
restricted cash of discontinued operations at end of period
—
(633
)
Cash, cash equivalents, and restricted
cash of continuing operations at end of period
$
19,294
$
15,107
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information -
Continuing Operations (In thousands, except percentages)
(Unaudited)
Segment Information (a) - Continuing Operations
13 weeks ended
July 29, 2023
July 30, 2022
Sales:
Retail (b)
$
245,460
$
236,507
Wholesale
38,791
37,083
Eliminations
(20,090
)
(18,916
)
Total Sales
$
264,161
$
254,674
Gross Profit
Retail (c)
$
50,291
$
54,019
Wholesale
5,794
6,899
Eliminations
(5,451
)
(4,887
)
Total Gross Profit
$
50,634
$
56,031
Selling and Administrative Expenses
Retail
$
69,173
$
79,004
Wholesale
3,388
4,131
Corporate Services
4,918
7,214
Eliminations
(3
)
(8
)
Total Selling and Administrative
Expenses
$
77,476
$
90,341
Segment Adjusted EBITDA (Non-GAAP) (d)
Retail
$
(18,882
)
$
(24,985
)
Wholesale
2,406
2,768
Corporate Services
(4,918
)
(7,214
)
Eliminations
(5,448
)
(4,879
)
Total Segment Adjusted EBITDA
(Non-GAAP)
$
(26,842
)
$
(34,310
)
Percentage of Segment Sales
Gross Profit
Retail (c)
20.5
%
22.8
%
Wholesale
14.9
%
18.6
%
Eliminations
27.1
%
25.8
%
Total Gross Profit
19.2
%
22.0
%
Selling and Administrative Expenses
Retail
28.2
%
33.4
%
Wholesale
8.7
%
11.1
%
Total Selling and Administrative
Expenses
29.3
%
35.5
%
(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 13 weeks ended July 29, 2023 and
July 30, 2022, the Retail Segment gross margin excludes $0 and $26
respectively, of amortization expense (non-cash) related to content
development costs.
(d)
For additional information, including a
reconciliation to the most comparable financial measures presented
in accordance with GAAP, see "Non-GAAP Information" and "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES Segment Information - Discontinued
Operations (Unaudited) (In thousands, except
percentages)
During the fourth quarter of fiscal 2023, assets related to our
Digital Student Solutions ("DSS") Segment met the criteria for
classification as Assets Held for Sale and Discontinued Operations
and is no longer a reportable segment. Certain assets and
liabilities associated with the DSS Segment are presented in our
condensed consolidated balance sheets as "Assets Held for Sale" and
"Liabilities Held for Sale". The results of operations related to
the DSS Segment are included in the condensed consolidated
statements of operations as "Loss from discontinued operations, net
of tax." The cash flows of the DSS Segment are also presented
separately in our condensed consolidated statements of cash
flows.
On May 31, 2023, we completed the sale of these assets related
to our DSS Segment for cash proceeds of $20,000, net of certain
transaction fees, severance costs, escrow, and other
considerations. During the 13 weeks ended July 29, 2023, we
recorded a Gain on Sale of Business of $3,068 in Net Loss from
Discontinued Operations 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
July 29, 2023
July 30, 2022
Total sales
$
2,784
$
9,184
Cost of sales (a)
76
1,700
Gross profit (a)
2,708
7,484
Selling and administrative expenses
2,281
8,146
Depreciation and amortization
—
1,637
Gain on sale of business
(3,068
)
—
Impairment loss (non-cash) (b)
610
—
Restructuring costs (c)
3,287
—
Transaction costs
(5
)
—
Operating loss
(397
)
(2,299
)
Income tax expense
20
86
Loss from discontinued operations, net of
tax
$
(417
)
$
(2,385
)
(a)
Cost of sales and Gross margin for the DSS
Segment includes amortization expense (non-cash) related to content
development costs of $0 and $1,551 for the 13 weeks ended July 29,
2023 and July 30, 2022, respectively.
(b)
During the 13 weeks ended July 29, 2023,
we recognized an impairment loss (non-cash) of $610 (both pre-tax
and after-tax), comprised of $119 and $491 of property and
equipment and operating lease right-of-use assets, respectively, on
the condensed consolidated statement of operations as part of
discontinued operations.
(c)
During the 13 weeks ended July 29, 2023,
we recognized restructuring and other charges of $3,287 comprised
of severance and other employee termination costs.
13 weeks ended
Adjusted EBITDA (non-GAAP) -
Discontinued Operations
July 29, 2023
July 30, 2022
Loss from discontinued operations
$
(417
)
$
(2,385
)
Add:
Depreciation and amortization expense
—
1,637
Income tax expense
20
86
Content amortization (non-cash)
—
1,551
Gain on sale of business
(3,068
)
—
Impairment loss (non-cash)
610
—
Restructuring and other charges
3,287
—
Transaction costs
(5
)
—
Adjusted EBITDA (Non-GAAP) - Total
$
427
$
889
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 week periods are as follows:
Dollars in millions
13 weeks ended
July 29, 2023
Retail Sales (a)
New stores (b)
$
4.7
Closed stores (b)
(7.3
)
Comparable stores (a)
8.6
Textbook rental deferral
2.1
Service revenue (c)
(0.3
)
Other (d)
1.2
Retail Sales subtotal:
$
9.0
Wholesale Sales:
$
1.7
Eliminations (e)
$
(1.2
)
Total sales variance
$
9.5
(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
July 29, 2023
July 30, 2022
Number of Stores:
Physical
Virtual
Total
Physical
Virtual
Total
Beginning of period
774
592
1,366
805
622
1,427
Stores opened
8
12
20
26
14
40
Stores closed
56
41
97
38
23
61
End of period
726
563
1,289
793
613
1,406
(c)
Service revenue includes brand
partnerships, shipping and handling, and revenue from other
programs.
(d)
Other includes inventory liquidation sales
to third parties, marketplace sales and certain accounting
adjusting items related to return reserves, and other deferred
items.
(e)
Eliminates Wholesale sales and service
fees to Retail and Retail commissions earned from Wholesale.
Retail Gross Comparable Store Sales
Retail Gross Comparable Store Sales variances by category for
the 13 week periods are as follows:
Dollars in millions
13 weeks ended
July 29, 2023
July 30, 2022
Textbooks (Course Materials)
$
9.0
6.5
%
$
1.9
1.5
%
General Merchandise
6.8
5.3
%
31.6
34.0
%
Total Retail Gross Comparable Store
Sales
$
15.8
5.9
%
$
33.5
15.0
%
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.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Non-GAAP Information
(a)
(In thousands)
(Unaudited)
Consolidated Adjusted Earnings (non-GAAP) (a) -
Continuing Operations
13 weeks ended
July 29, 2023
July 30, 2022
Net loss from continuing operations
$
(49,971
)
$
(50,322
)
Reconciling items (below)
4,633
401
Adjusted Earnings (non-GAAP)
$
(45,338
)
$
(49,921
)
Reconciling items
Content amortization (non-cash) (b)
$
—
$
26
Restructuring and other charges (c)
4,633
375
Reconciling items (d)
$
4,633
$
401
Consolidated Adjusted EBITDA (non-GAAP)
(a)
13 weeks ended
July 29, 2023
July 30, 2022
Net loss from continuing operations
$
(49,971
)
$
(50,322
)
Add:
Depreciation and amortization expense
10,253
10,896
Interest expense, net
8,254
3,868
Income tax (benefit) expense
(11
)
847
Content amortization (non-cash) (b)
—
26
Restructuring and other charges (c)
4,633
375
Adjusted EBITDA (Non-GAAP) - Continuing
Operations
$
(26,842
)
$
(34,310
)
Adjusted EBITDA (Non-GAAP) - Discontinued
Operations
$
427
$
889
Adjusted EBITDA (Non-GAAP) - Total
$
(26,415
)
$
(33,421
)
Adjusted EBITDA by Segment (non-GAAP) (a) - Continuing
Operations
The following is Adjusted EBITDA by Segment for Continuing
Operations for the 13 week periods:
13 weeks ended July 29, 2023
Retail
Wholesale
Corporate Services (e)
Eliminations
Total
Net loss from continuing operations
$
(28,374
)
$
603
$
(16,752
)
$
(5,448
)
$
(49,971
)
Add:
Depreciation and amortization expense
8,966
1,277
10
—
10,253
Interest expense, net
—
—
8,254
—
8,254
Income tax benefit
—
—
(11
)
—
(11
)
Content amortization (non-cash) (b)
—
—
—
—
—
Restructuring and other charges (c)
526
526
3,581
—
4,633
Adjusted EBITDA (non-GAAP)
$
(18,882
)
$
2,406
$
(4,918
)
$
(5,448
)
$
(26,842
)
13 weeks ended July 30, 2022
Retail
Wholesale
Corporate Services (e)
Eliminations
Total
Net loss from continuing operations
$
(34,540
)
$
1,419
$
(12,322
)
$
(4,879
)
$
(50,322
)
Add:
Depreciation and amortization expense
9,529
1,349
18
—
10,896
Interest expense, net
—
—
3,868
—
3,868
Income tax expense
—
—
847
—
847
Content amortization (non-cash) (b)
26
—
—
—
26
Restructuring and other charges (c)
—
—
375
—
375
Adjusted EBITDA (non-GAAP)
$
(24,985
)
$
2,768
$
(7,214
)
$
(4,879
)
$
(34,310
)
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
condensed consolidated financial statements.
(c)
During the 13 weeks ended July 29, 2023
and July 30, 2022, we recognized restructuring and other charges
totaling $4,633 and $375, 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.
(d)
There is no pro forma income effect of the
non-GAAP items.
(e)
Interest expense is reflected in Corporate
Services as it is primarily related to our Credit Agreement and
Term Loan Agreement which fund our operating and financing needs
across the organization. Income taxes are reflected in Corporate
Services as we record our income tax provision on a consolidated
basis.
Free Cash Flow (non-GAAP) (a) - Continuing Operations
13 weeks ended
July 29, 2023
July 30, 2022
Net cash flows used in operating
activities from continuing operations
$
(119,858
)
$
(28,607
)
Less:
Capital expenditures (b)
4,219
7,530
Cash interest paid
5,534
2,933
Cash taxes (refund) paid
345
122
Free Cash Flow (non-GAAP)
$
(129,956
)
$
(39,192
)
(a)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
(b)
Purchases of property and equipment are
also referred to as capital expenditures. Our investing activities
consist principally of capital expenditures for contractual capital
investments associated with renewing existing contracts, new store
construction, and enhancements to internal systems and our website.
The following table provides the components of total purchases of
property and equipment:
Capital Expenditures
13 weeks ended
- Continuing Operations
July 29, 2023
July 30, 2022
Physical store capital expenditures
$
2,205
$
4,496
Product and system development
1,763
2,486
Other
251
548
Total capital expenditures
$
4,219
$
7,530
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).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230906574658/en/
Investors: Hunter
Blankenbaker Vice President Corporate Communications & Investor
Relations 908-991-2776 hblankenbaker@bned.com
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