Direct-to-Student Offering Expands BNED’s
Digital Portfolio
Financially Accretive Transaction Benefits
Support Growth Strategy
Enhances Both BNED’s and Student Brands’ Market
Reach
Barnes & Noble Education, Inc. (NYSE: BNED)
(“the Company” or “BNED”), a leading provider of educational
products and services solutions for higher education and K-12
institutions, announced today that it has completed the acquisition
of Student Brands, a leading direct-to-student subscription-based
writing skills services business, for $58.5 million in cash.
Student Brands is an education technology company that operates
multiple direct-to-student businesses focused on Study Tools,
Writing Help, and Literary Research, all centered around assisting
students with the writing process. Student Brands has a substantial
and growing community of online learners, with over 20 million
unique monthly users across its digital properties, which include
123HelpMe.com, Bartleby.com and StudyMode.com in the United States
and TrabalhosFeitos.com, Etudier.com and Monografias.com in Brazil,
France and Mexico, respectively. Student Brands utilizes deep data
analytics and artificial intelligence to drive its proprietary
content management system, the Content Brain. The Content Brain
sifts through millions of pieces of content and provides the best
answer for virtually any assignment a student is tackling. Student
Brands generates revenue predominantly through its
subscription-based services and digital advertisements.
Kanuj Malhotra, Chief Operating Officer, Digital Education,
Barnes & Noble Education, said: “The acquisition of Student
Brands enables BNED to maintain and expand our leadership position
in the distribution and provision of educational services and
content. The lack of writing proficiency is one of the most
significant challenges in our education system, and Student Brands
provides a significant opportunity to serve this market with
solutions that improve student performance. BNED serves one in
four higher education students every year, and through our recent
acquisition of MBS, we have expanded our market reach to even more
students in both higher education and K-12. The addition of Student
Brands and its nearly 100,000 subscribers will enable us to offer
products and services directly to our current student base and
beyond.”
Transaction Benefits
The transaction builds on the Company’s strong growth momentum
in digital learning, and will further enhance its ability to
support partner schools’ retention efforts by helping students and
teachers embrace technology tools that improve writing proficiency.
The experienced management team at Student Brands provides deep
online and customer monetization experience. BNED serves more than
six million students, as well as parents and alumni. With this
acquisition, BNED extends its industry-leading reach and deepens
its relationships with students and faculty by adding a
direct-to-student digital channel. By leveraging the BNED footprint
among students and faculty, K-12 schools and higher education
institutions, Student Brands will have substantially more
opportunities to market the services students need to improve
performance in the classroom and secure jobs after graduation.
“We help millions of students every month with the critical
skills that they need to succeed – whether it’s writing a paper for
class or drafting a college application essay. As student demand
for extra help with writing and study tools continues to grow, we
are delighted to be joining forces with a company whose scale,
resources and expertise will help drive further innovation in our
products and expand our addressable market,” said Thomas Swalla,
Chief Executive Officer, Student Brands. “Barnes & Noble
Education shares our mission to provide students with innovative
solutions to solve a growing range of academic challenges. We are
confident that this is an ideal combination and we are thrilled to
begin working with our new colleagues.”
Market Opportunity
Writing proficiency is one of the most critical skills needed by
graduates across all industries, and students in the U.S. spend
more than $3 billion dollars annually on remedial education,
including remedial writing instruction1. The writing proficiency
deficit is widespread, negatively impacting students, new graduates
and employers:
- 82% of high school students and 96% of
college students require extra help and more than 20 million
students consider writing help an ongoing need2;
- New graduates are struggling to find
work3 or accept jobs that do not require degrees4; and employers
are struggling to find qualified graduates to hire5.
Transaction Details
The Company utilized cash on hand and availability under its
current credit facility to finance the acquisition. Student Brands
is expected to contribute over $10 million of EBITDA to BNED’s
consolidated operation results over the next twelve months. Student
Brands has negligible recurring capital expenditures, resulting in
strong free cash flow generation. The acquisition will be accretive
to BNED’s EBITDA, Net Income and Cash Flow in FY2018. Additionally,
the acquisition is structured to "step up" the tax basis of Student
Brands’ assets and is expected to result in significant future tax
savings.
Student Brands will operate as a part of BNED’s digital
operations and will serve as its initial anchor asset for BNED’s
direct-to-student growth strategy. Mr. Swalla will remain CEO of
Student Brands and the current Student Brands leadership team will
join BNED as full-time employees. Student Brands will retain its
offices in Los Angeles, CA and India.
Advisors
Cyndx Advisors LLC acted as exclusive financial advisor and
Gibson, Dunn & Crutcher, LLP served as legal counsel to Barnes
& Noble Education in connection with the transaction. Vaquero
Capital LLC acted as exclusive financial advisor and LKP Global
Law, LLP served as legal counsel to Student Brands in connection
with the transaction.
Conference Call Information
BNED will host an investor call to discuss this transaction on
Monday, August 7, 2017, at 10:00 a.m. ET. The conference call can
be accessed via a live webcast at www.bned.com/investor or by
dialing 888-510-1767 and entering passcode 236805. A replay of the
call will be available through Monday, August 14 via webcast at
www.bned.com/investor or by dialing 866-375-1919 and entering
passcode 9916801. An investor presentation will be posted to the
Barnes & Noble Education, Inc. website (www.bned.com/investor)
prior to the conference call.
About Barnes & Noble Education, Inc.
Barnes & Noble Education, Inc. (NYSE: BNED), one of the
largest contract operators of physical and virtual bookstores for
higher education and K-12 institutions across the United States,
one of the largest textbook wholesalers, and a leading provider of
digital education services, enhances the academic and social
purpose of educational institutions. Through its Barnes & Noble
College and MBS subsidiaries, Barnes & Noble Education operates
1,481 physical and virtual bookstores and serves more than 6
million students, delivering essential educational content and
tools within a dynamic retail environment. Through LoudCloud, its
digital education platform, Barnes & Noble Education offers a
suite of digital software, content and services that include
predictive analytics, OER courseware, competency-based solutions
and a learning management system. Barnes & Noble Education acts
as a strategic partner to drive student success; provide value and
support to students and faculty; and create loyalty and improve
retention, all while supporting the financial goals of college and
university partners.
General information on Barnes & Noble Education, Inc. can be
obtained by visiting the Company’s corporate website:
www.bned.com.
About Student Brands
Student Brands is an education technology company that operates
multiple direct-to-student businesses focused on Study Tools,
Writing Help, and Literary Research. The Student Brand network of
sites provides real tools and answers for students around the
globe. With more than 20 direct-to-student sites in more than 10
countries, Student Brands provides writing and study tools that
help millions of students succeed in high school, college, and
post-graduate studies.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us
or our management, identify forward-looking statements. Moreover,
we operate in a very competitive and rapidly changing environment.
New risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and
assumptions, the future events and trends discussed in this press
release may not occur and actual results could differ materially
and adversely from those anticipated or implied in the
forward-looking statements. Such statements reflect our current
views with respect to future events, the outcome of which is
subject to certain risks, including, among others: general
competitive conditions, including actions our competitors may take
to grow their businesses; a decline in college enrollment or
decreased funding available for students; decisions by colleges and
universities to outsource their bookstore operations or change the
operation of their bookstores; the general economic environment and
consumer spending patterns; decreased consumer demand for our
products, low growth or declining sales; the anticipated benefits
of the Student Brands acquisition may not be fully realized or may
take longer than expected; restructuring of our digital strategy
may not result in the expected growth in our digital sales and/or
profitability; risk that digital sales growth does not exceed the
rate of investment spend; the performance of our online, digital
and other initiatives, integration of and deployment of, additional
products and services including new digital channels, and further
enhancements to Yuzu® and any future higher education digital
products, and the inability to achieve the expected cost savings;
our ability to successfully implement our strategic initiatives
including our ability to identify and execute upon additional
acquisitions and strategic investments; technological changes; our
international expansion could result in additional risks; our
ability to attract and retain employees; changes to payment terms,
return policies, the discount or margin on products or other terms
with our suppliers; risks associated with data privacy, information
security and intellectual property; trends and challenges to our
business and in the locations in which we have stores; non-renewal
of contracts and higher-than-anticipated store closings;
disruptions to our computer systems, data lines, telephone systems
or supply chain, including the loss of suppliers; work stoppages or
increases in labor costs; possible increases in shipping rates or
interruptions in shipping service, effects of competition; obsolete
or excessive inventory; product shortages; changes in law or
regulation; the amount of our indebtedness and ability to comply
with covenants applicable to any future debt financing; our ability
to satisfy future capital and liquidity requirements; our ability
to access the credit and capital markets at the times and in the
amounts needed and on acceptable terms; adverse results from
litigation, governmental investigations or tax-related proceedings
or audits; changes in accounting standards; challenges to running
our company independently from Barnes & Noble, Inc. following
the Spin-Off; the potential adverse impact on our business
resulting from the Spin-Off; and the other risks and uncertainties
detailed in the section titled “Risk Factors” in Part I - Item 1A
in our Annual Report on Form 10-K for the year ended April 29,
2017. 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.
1 Complete College America, 2014
2 Factworks Survey, May 2016
3 Baccalaureate and Beyond Longitudinal Study, 2006-2014,
NCES
4 Economic Policy Institute, 2015
5 National Chronicle of Higher Ed, Employment Perception
Survey
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version on businesswire.com: http://www.businesswire.com/news/home/20170804005402/en/
Media:Barnes & Noble Education, Inc.Carolyn J. Brown,
908-991-2967Vice PresidentCorporate
Communicationscbrown@bned.comorInvestors:Barnes & Noble
Education, Inc.Thomas Donohue, 908-991-2966Vice PresidentTreasurer
and Investor Relationstdonohue@bned.com
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