BNC’s First Day® Inclusive and Equitable Access
Programs Revenue Grew 49% in the Second Quarter as Consolidated
Revenue Declines 1.6%
First Day® Complete Revenue Grew 97% in the
Second Quarter; First Day Complete Model Adopted by 111 Campus
Stores for the Fall 2022 Term, Representing Undergraduate Student
Enrollment of Over 545,000, up 85% from the Prior Year
Implements Plan to Streamline Operations and
Accelerate BNC’s First Day Complete Equitable Access Strategy
Plans To Deliver $30 million to $35 million in
Annual Operating Expense Savings; Focused on Growth and
Profitability of Retail Business
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the second quarter ended on October
29, 2022. Barnes & Noble Education is a highly seasonal
business and the second quarter includes the Fall rush period,
which is historically the largest sales period for the Company.
Financial results for the second quarter 2023:
- Consolidated second quarter GAAP sales of $617.1 million
decreased 1.6%, as compared to the prior year period.
- Consolidated second quarter GAAP gross profit of $144.8 million
compared to $145.6 million in the prior year period. Gross margin
was 23.5% of sales as compared to 23.2% in the prior year
period.
- Consolidated second quarter GAAP net income of $22.1 million,
compared to $22.5 million in the prior year period.
- Consolidated second quarter non-GAAP Adjusted Earnings of $24.0
million, compared to $25.0 million in the prior year period.
- Consolidated second quarter non-GAAP Adjusted EBITDA of $39.4
million, compared to $39.0 million in the prior year period.
Operational highlights for the second quarter 2023:
- 111 campus stores adopted BNC’s First Day® Complete course
materials delivery program for the 2022 Fall Term, representing
approximately 545,000* in total undergraduate student enrollment, a
growth rate of 85% over Fall 2021. First Day® Complete revenue
increased 97% to $89.9 million.
- Seven additional campus stores with total undergraduate student
enrollments of approximately 43,000* to launch BNC’s First Day
Complete model in the Spring Term, including the University of
Connecticut and the University of Memphis.
- Retail Gross Comparable Store Sales General Merchandise sales
were up 4.5%, with particular strength in logo and emblematic
sales. Total Retail segment gross comparable store sales for the
quarter decreased by 2.2%, as the strength in general merchandise
sales was offset by a 4.6% decrease in course material sales due to
lower course material adoptions and a shift to digital offerings,
which have a lower price point. Please see a more detailed
definition in the Results table and Retail segment discussion
below.
- DSS revenue grew 2.3% to $8.5 million. DSS has begun to adjust
its cost structure, particularly within its Bartleby organization,
to focus on enhanced profitability and sustainable growth.
*As reported by National Center for Education Statistics
(NCES)
“During the second quarter, total sales from our First Day®
Complete and First Day® by course material delivery offerings grew
49% to $143.2 million, with First Day Complete revenue increasing
97% to $89.9 million. These results were in-line with our
expectations and clearly demonstrate the profitable and predictable
nature of the First Day Complete model. However, our second quarter
consolidated financial performance fell short of our expectations,
as declines in legacy course material sales and gross profits more
than offset the gains generated by First Day Complete during the
period,” said Michael P. Huseby, Chief Executive Officer, BNED.
“Given the predictability of First Day Complete and its clear
benefits to student outcomes, faculty instruction, and the colleges
and universities we serve, we are implementing significant
strategic actions to accelerate the adoption and growth of the
First Day Complete model. We anticipate First Day Complete will be
the only model we offer to many institutional partners going
forward and we expect the vast majority of our institutional
partners and their students to implement the First Day Complete
model over the next two fiscal years.”
“We have also begun executing significant cost reduction
initiatives to better align our overall expenses and resources with
current market trends in order to bolster profitability in Fiscal
2023 and longer-term. We expect these initiatives to realize $30
million to $35 million of annualized cost savings when fully
implemented and $10 million to $15 million of cost savings in the
remainder of Fiscal 2023. We intend to invest these savings in our
highest-return initiatives, foremost of which will be the
accelerated deployment of our First Day Complete sales model and
our retail offering to colleges and universities. We are confident
in our ability to execute these strategic actions, which provide a
clear path forward to create durable, profitable growth and
increased shareholder value.”
Second Quarter and Year to Date Results for 2023
Results for the 13 and 26 weeks of Fiscal 2023 and Fiscal 2022
are as follows:
$ in millions
Selected Data (unaudited)
13
Weeks
Q2 2023
13
Weeks
Q2 2022
26
Weeks
Fiscal 2023
26
Weeks
Fiscal 2022
Total Sales
$617.1
$627.0
$881.0
$867.8
Net Income (Loss)
$22.1
$22.5
$(30.6)
$(21.1)
Non-GAAP(1)
Adjusted EBITDA
$39.4
$39.0
$5.9
$14.5
Adjusted Earnings
$24.0
$25.0
$(26.7)
$(15.1)
Retail Gross Comparable Store
Sales Variances (2)
$(14.1)
$73.5
$19.7
$147.6
(1) These non-GAAP financial measures have
been reconciled in the attached schedules to the most directly
comparable GAAP measure as required under SEC rules regarding the
use of non-GAAP financial measures.
(2) Retail Gross Comparable Store Sales
includes sales from physical and virtual stores that have been open
for an entire fiscal year period and does not include sales from
closed stores for all periods presented. In-store and online logo
and emblematic general merchandise sales fulfilled by FLC and
Fanatics, respectively, are recognized on a net commission revenue
basis, as compared to the recognition of online logo and emblematic
sales on a gross basis in the prior year period. For Retail Gross
Comparable Store Sales purposes, sales for logo and emblematic
general merchandise fulfilled by FLC, Fanatics and digital agency
sales are included on a gross basis.
The Company has three reportable segments: Retail, Wholesale and
Digital Student Solutions (“DSS”). Unallocated shared-service
costs, which include various corporate level expenses and other
governance functions, continue to be presented as Corporate
Services. All material intercompany accounts and transactions have
been eliminated in consolidation.
Retail Segment Results
Retail sales decreased by $10.3 million, or 1.7%, as compared to
the prior year period. Retail Gross Comparable Store Sales
decreased 2.2% for the quarter, with comparable course material
sales decreasing 4.6%. Rental income declined 16.7% to $41.3
million for the 13 weeks ended October 29, 2022. The declines in
course material product sales and rental income were primarily due
to the shift to more digital course materials and were offset by
increased revenue from the Company’s First Day models, which
increased by 49% to $143.2 million, as compared to $96.0 million in
the prior year period.
Retail Gross Comparable Store Sales for general merchandise
increased 4.5%, benefiting from a return to more on campus
activities.
Retail non-GAAP Adjusted EBITDA for the quarter was $39.4
million, as compared to $39.4 million in the prior year period.
Non-GAAP Adjusted EBITDA remained flat despite lower revenue due to
improved gross margins and lower selling and administrative
expenses.
Wholesale Segment Results
Wholesale second quarter sales of $21.1 million decreased by
$0.6 million, or 2.5%, as compared to the prior year period. The
decrease is primarily due to lower gross sales impacted by supply
constraints resulting from the lack of textbook purchasing
opportunities during the prior fiscal year, a decrease in customer
demand resulting from a shift in buying patterns from physical
textbooks to digital products, and lower demand from other
third-party clients, partially offset by lower returns and
allowances.
Wholesale non-GAAP Adjusted EBITDA for the quarter increased to
$1.6 million, as compared to $1.2 million in the prior year. The
increase in Wholesale non-GAAP Adjusted EBITDA is primarily related
to lower selling and administrative expenses.
DSS Segment Results
DSS second quarter sales of $8.5 million increased by 2.3%, as
compared to the prior year period. The lower than anticipated
increase in revenue is primarily driven by product offering mix as
well as lower than expected traffic experienced across our digital
offerings.
DSS non-GAAP Adjusted EBITDA was $0.2 million for the quarter,
as compared to $0.8 million in the prior year period. The decrease
in non-GAAP adjusted EBITDA is primarily related to higher selling
and administrative expenses. DSS has begun to adjust its cost
structure, particularly within its Bartleby organization, to focus
on enhanced profitability and sustainable growth.
Strategic Update
The Company is undertaking company-wide initiatives to drive
efficiencies, simplify organizational structure and further reduce
non-essential costs. These actions have commenced and are expected
to be substantially implemented within the next thirty days. These
actions are expected to provide annualized savings of $30 million
to $35 million once fully implemented. The Company expects to save
$10 million to $15 million in fiscal year 2023. The Company is
committed to pursuing additional actions to optimize longer-term
gross margin and cost structure. In connection with these
initiatives, the Company expects to recognize restructuring charges
of approximately $5 million to $6 million in the fiscal third
quarter of 2023. These restructuring charges are excluded from
non-GAAP adjusted EBITDA and from the annualized and fiscal year
2023 savings.
Outlook
For fiscal year 2023, the Company expects consolidated non-GAAP
Adjusted EBITDA to be between $20 million to $30 million,
representing non-GAAP Adjusted EBITDA growth of $25 million to $35
million compared to fiscal year 2022. The Company’s Retail segment
will be the primary driver of non-GAAP Adjusted EBITDA growth
driven by new and ongoing First Day Complete course ware model
implementations, growth within its general merchandise business,
new business margin, and cost reductions.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 8:30 a.m. Eastern Time on Tuesday,
December 6, 2022 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 2023
third quarter results in early March 2023.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED) is a
leading solutions provider for the education industry, driving
affordability, access and achievement at hundreds of academic
institutions nationwide and ensuring millions of students are
equipped for success in the classroom and beyond. Through its
family of brands, BNED offers campus retail services and academic
solutions, a digital direct-to-student learning ecosystem,
wholesale capabilities and more. BNED is a company serving all who
work to elevate their lives through education, supporting students,
faculty and institutions as they make tomorrow a better, more
inclusive and smarter world. For more information, visit
www.bned.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us or our
management, identify forward-looking statements. Moreover, we
operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make, including any statements made in regards to our
response to the COVID-19 pandemic. In light of these risks,
uncertainties and assumptions, the future events and trends
discussed in this press release may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward-looking statements. Such statements reflect
our current views with respect to future events, the outcome of
which is subject to certain risks, including, among others: risks
associated with public health crises, epidemics, and pandemics,
such as the COVID-19 pandemic, including the duration, spread,
severity, and any recurrences thereof, and the impact such public
health crises have on the overall demand for BNED products and
services, our operations, the operations of our suppliers and other
business partners, and the effectiveness of our response to these
risks; general competitive conditions, including actions our
competitors and content providers may take to grow their
businesses; a decline in college enrollment or decreased funding
available for students; decisions by colleges and universities to
outsource their physical and/or online bookstore operations or
change the operation of their bookstores; implementation of our
digital strategy may not result in the expected growth in our
digital sales and/or profitability; risk that digital sales growth
does not exceed the rate of investment spend; the performance of
our online, digital and other initiatives, integration of and
deployment of, additional products and services including new
digital channels, and enhancements to higher education digital
products, the inability to achieve the expected cost savings during
the anticipated time frame, and the inability to implement our cost
saving initiatives in a timely and efficient manner; the risk of
price reduction or change in format of course materials by
publishers, which could negatively impact revenues and margin; the
general economic environment and consumer spending patterns;
decreased consumer demand for our products, low growth or declining
sales; the strategic objectives, successful integration,
anticipated synergies, and/or other expected potential benefits of
various acquisitions may not be fully realized or may take longer
than expected; the integration of the operations of various
acquisitions into our own may also increase the risk of our
internal controls being found ineffective; changes to purchase or
rental terms, payment terms, return policies, the discount or
margin on products or other terms with our suppliers; our ability
to successfully implement our strategic initiatives including our
ability to identify, compete for and execute upon additional
acquisitions and strategic investments; risks associated with
operation or performance of MBS Textbook Exchange, LLC’s
point-of-sales systems that are sold to college bookstore
customers; technological changes; risks associated with counterfeit
and piracy of digital and print materials; our international
operations could result in additional risks; our ability to attract
and retain employees; risks associated with data privacy,
information security and intellectual property; trends and
challenges to our business and in the locations in which we have
stores; non-renewal of managed bookstore, physical and/or online
store contracts and higher-than-anticipated store closings;
disruptions to our information technology systems, infrastructure
and data due to computer malware, viruses, hacking and phishing
attacks, resulting in harm to our business and results of
operations; disruption of or interference with third party web
service providers and our own proprietary technology; work
stoppages or increases in labor costs; possible increases in
shipping rates or interruptions in shipping service; product
shortages, including decreases in the used textbook inventory
supply associated with the implementation of publishers’ digital
offerings and direct to student textbook consignment rental
programs, as well as the risks associated with the impacts that
public health crises may have on the ability of our suppliers to
manufacture or source products, particularly from outside of the
United States; changes in domestic and international laws or
regulations, including U.S. tax reform, changes in tax rates, laws
and regulations, as well as related guidance; enactment of laws or
changes in enforcement practices which may restrict or prohibit our
use of texts, emails, interest based online advertising, recurring
billing or similar marketing and sales activities; the amount of
our indebtedness and ability to comply with covenants applicable to
any future debt financing; our ability to satisfy future capital
and liquidity requirements; our ability to access the credit and
capital markets at the times and in the amounts needed and on
acceptable terms; adverse results from litigation, governmental
investigations, tax-related proceedings, or audits; changes in
accounting standards; and the other risks and uncertainties
detailed in the section titled “Risk Factors” in Part I - Item 1A
in our Annual Report on Form 10-K for the year ended April 30,
2022. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described
as anticipated, believed, estimated, expected, intended or planned.
Subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements in this paragraph. We
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise after the date of this press
release.
EXPLANATORY NOTE
We have three reportable segments: Retail, Wholesale and DSS as
follows:
- The Retail Segment operates 1,399 college, university, and K-12
school bookstores, comprised of 793 physical bookstores and 606
virtual bookstores. Our bookstores typically operate under
agreements with the college, university, or K-12 schools to be the
official bookstore and the exclusive seller of course materials and
supplies, including physical and digital products. The majority of
the physical campus bookstores have school-branded e-commerce
websites which we operate and which offer students access to
affordable course materials and affinity products, including
emblematic apparel and gifts. The Retail Segment also offers
inclusive and equitable access programs, in which course materials,
including e-content, are offered at a reduced price through a
course materials fee, and delivered to students on or before the
first day of class. Additionally, the Retail Segment offers a suite
of digital content and services to colleges and universities,
including a variety of open educational resource-based
courseware.
- The Wholesale Segment is comprised of our wholesale textbook
business and is one of the largest textbook wholesalers in the
country. The Wholesale Segment centrally sources, sells, and
distributes new and used textbooks to approximately 3,100 physical
bookstores (including our Retail Segment's 793 physical bookstores)
and sources and distributes new and used textbooks to our 606
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
350 college bookstores.
- The Digital Student Solutions ("DSS") Segment includes products
and services to assist students to study more effectively and
improve academic performance. The DSS Segment is comprised of the
operations of Student Brands, LLC, a leading direct-to-student
subscription-based writing services business, and bartleby®, an
institutional and direct-to-student subscription-based offering
providing textbook solutions, expert questions and answers, writing
and tutoring.
Corporate Services represents unallocated shared-service costs
which include corporate level expenses and other governance
functions, including executive functions, such as accounting,
legal, treasury, information technology, and human resources.
All material intercompany accounts and transactions have been
eliminated in consolidation.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(In thousands, except per
share data)
(Unaudited)
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Sales:
Product sales and other
$
575,764
$
577,329
$
828,710
$
805,099
Rental income
41,334
49,648
52,246
62,672
Total sales
617,098
626,977
880,956
867,771
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales (a)
449,322
453,070
643,427
627,231
Rental cost of sales
22,941
28,348
29,206
34,952
Total cost of sales
472,263
481,418
672,633
662,183
Gross profit
144,835
145,559
208,323
205,588
Selling and administrative expenses
107,086
107,902
205,572
194,137
Depreciation and amortization expense
10,759
11,952
23,292
24,576
Restructuring and other charges (a)
260
1,116
635
3,021
Operating income (loss)
26,730
24,589
(21,176
)
(16,146
)
Interest expense, net
4,886
2,264
8,754
4,758
Income (loss) before income taxes
21,844
22,325
(29,930
)
(20,904
)
Income tax (benefit) expense
(300
)
(203
)
633
196
Net income (loss)
$
22,144
$
22,528
$
(30,563
)
$
(21,100
)
Income (Loss) per common share:
Basic
$
0.42
$
0.43
$
(0.58
)
$
(0.41
)
Diluted
$
0.42
$
0.41
$
(0.58
)
$
(0.41
)
Weighted average common shares
outstanding:
Basic
52,438
51,666
52,305
51,570
Diluted
53,195
54,568
52,305
51,570
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Percentage of sales:
Sales:
Product sales and other
93.3
%
92.1
%
94.1
%
92.8
%
Rental income
6.7
%
7.9
%
5.9
%
7.2
%
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)
78.0
%
78.5
%
77.6
%
77.9
%
Rental cost of sales (a)
55.5
%
57.1
%
55.9
%
55.8
%
Total cost of sales
76.5
%
76.8
%
76.4
%
76.3
%
Gross profit
23.5
%
23.2
%
23.6
%
23.7
%
Selling and administrative expenses
17.4
%
17.2
%
23.3
%
22.4
%
Depreciation and amortization expense
1.7
%
1.9
%
2.6
%
2.8
%
Restructuring and other charges
—
%
0.2
%
0.1
%
0.3
%
Operating income (loss)
4.4
%
3.9
%
(2.4
)%
(1.8
)%
Interest expense, net
0.8
%
0.4
%
1.0
%
0.5
%
Income (loss) before income taxes
3.6
%
3.5
%
(3.4
)%
(2.3
)%
Income tax (benefit) expense
—
%
—
%
0.1
%
—
%
Net income (loss)
3.6
%
3.5
%
(3.5
)%
(2.3
)%
(a) Represents the percentage these costs
bear to the related sales, instead of total sales.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands, except per
share data)
(Unaudited)
October 29, 2022
October 30, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
19,129
$
10,996
Receivables, net
210,009
218,053
Merchandise inventories, net
371,570
370,529
Textbook rental inventories
49,355
50,642
Prepaid expenses and other current
assets
54,924
68,965
Total current assets
704,987
719,185
Property and equipment, net
96,096
91,875
Operating lease right-of-use assets
291,704
252,650
Intangible assets, net
121,487
141,847
Goodwill
4,700
4,700
Deferred tax assets, net
—
15,943
Other noncurrent assets
20,980
26,010
Total assets
$
1,239,954
$
1,252,210
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
326,168
$
333,099
Accrued liabilities
118,689
122,734
Current operating lease liabilities
130,802
118,434
Total current liabilities
575,659
574,267
Long-term deferred taxes, net
1,430
—
Long-term operating lease liabilities
190,758
171,341
Other long-term liabilities
19,643
51,113
Long-term borrowings
252,000
183,300
Total liabilities
1,039,490
980,021
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, 55,132 and 54,162 shares, respectively;
outstanding, 52,599 and 51,976 shares, respectively
551
541
Additional paid-in-capital
744,339
736,886
Accumulated deficit
(522,057
)
(443,737
)
Treasury stock, at cost
(22,369
)
(21,501
)
Total stockholders' equity
200,464
272,189
Total liabilities and stockholders'
equity
$
1,239,954
$
1,252,210
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flow (Unaudited)
(In thousands, except per
share data)
26 weeks ended
October 29, 2022
October 30, 2021
Cash flows from operating activities:
Net loss
$
(30,563
)
$
(21,100
)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization expense
23,292
24,576
Content amortization expense
3,195
2,586
Amortization of deferred financing
costs
1,200
725
Merchandise inventory loss (a)
—
434
Stock-based compensation expense
3,510
2,600
Changes in other long-term assets and
liabilities, net
319
1,596
Changes in operating lease right-of-use
assets and liabilities
(298
)
286
Changes in other operating assets and
liabilities, net
8,721
12,573
Net cash flow provided by operating
activities
9,376
24,276
Cash flows from investing activities:
Purchases of property and equipment
(20,573
)
(21,264
)
Net change in other noncurrent assets
255
326
Net cash flow used in investing
activities
(20,318
)
(20,938
)
Cash flows from financing activities:
Proceeds from borrowings
348,200
259,720
Repayments of borrowings
(321,900
)
(254,020
)
Payment of deferred financing costs
(1,716
)
—
Purchase of treasury shares
(857
)
(2,359
)
Proceeds from the exercise of stock
options, net
—
37
Net cash flows provided by financing
activities
23,727
3,378
Net increase in cash, cash equivalents and
restricted cash
12,785
6,716
Cash, cash equivalents and restricted cash
at beginning of period
21,934
16,814
Cash, cash equivalents and restricted cash
at end of period
$
34,719
$
23,530
Changes in other operating assets and
liabilities, net:
Receivables, net
$
(72,970
)
$
(96,981
)
Merchandise inventories
(77,716
)
(89,851
)
Textbook rental inventories
(19,743
)
(21,950
)
Prepaid expenses and other current
assets
12,538
(3,288
)
Accounts payable and accrued
liabilities
166,612
224,643
Changes in other operating assets and
liabilities, net
$
8,721
$
12,573
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information (In
thousands, except percentages) (Unaudited)
Segment Information (a)
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Sales:
Retail (b)
$
598,610
$
608,952
$
835,117
$
819,421
Wholesale
21,120
21,669
58,203
66,153
DSS
8,465
8,279
17,649
16,582
Eliminations
(11,097
)
(11,923
)
(30,013
)
(34,385
)
Total Sales
$
617,098
$
626,977
$
880,956
$
867,771
Gross Profit
Retail (c)
$
129,502
$
128,930
$
183,521
$
177,673
Wholesale
5,455
5,620
12,354
16,025
DSS (d)
8,312
8,112
17,346
16,251
Eliminations
3,184
4,208
(1,703
)
(1,341
)
Total Gross Profit
$
146,453
$
146,870
$
211,518
$
208,608
Selling and Administrative Expenses
Retail
$
90,086
$
89,486
$
169,090
$
157,851
Wholesale
3,867
4,387
7,998
8,378
DSS
8,132
7,305
16,277
13,752
Corporate Services
5,075
6,809
12,289
14,253
Eliminations
(74
)
(85
)
(82
)
(97
)
Total Selling and Administrative
Expenses
$
107,086
$
107,902
$
205,572
$
194,137
Segment Adjusted EBITDA (Non-GAAP) (e)
Retail
$
39,416
$
39,444
$
14,431
$
19,822
Wholesale
1,588
1,233
4,356
7,647
DSS
180
807
1,069
2,499
Corporate Services
(5,075
)
(6,809
)
(12,289
)
(14,253
)
Eliminations
3,258
4,293
(1,621
)
(1,244
)
Total Segment Adjusted EBITDA
(Non-GAAP)
$
39,367
$
38,968
$
5,946
$
14,471
Percentage of Segment Sales
Gross Profit
Retail (c)
21.6
%
21.2
%
22.0
%
21.7
%
Wholesale
25.8
%
25.9
%
21.2
%
24.2
%
DSS (d)
98.2
%
98.0
%
98.3
%
98.0
%
Eliminations
(28.7
)%
(35.3
)%
5.7
%
3.9
%
Total Gross Profit
23.7
%
23.4
%
24.0
%
24.0
%
Selling and Administrative Expenses
Retail
15.0
%
14.7
%
20.2
%
19.3
%
Wholesale
18.3
%
20.2
%
13.7
%
12.7
%
DSS
96.1
%
88.2
%
92.2
%
82.9
%
Corporate Services
N/A
N/A
N/A
N/A
Eliminations
N/A
N/A
N/A
N/A
Total Selling and Administrative
Expenses
17.4
%
17.2
%
23.3
%
22.4
%
(a) See Explanatory Note in this Press Release for Segment
descriptions.
(b) In December 2020, we entered into merchandising partnership
with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and
Fanatics Lids College, Inc. (“FLC”) (collectively referred to
herein as the “FLC Partnership”). Effective in April 2021, as
contemplated by the FLC Partnership's merchandising agreement and
e-commerce agreement, we began to transition the fulfillment of
logo and emblematic general merchandise sales to FLC and Fanatics.
The transition to FLC for campus stores was effective in April
2021, and the e-commerce websites transitioned to Fanatics
throughout Fiscal 2022. As the logo and emblematic general
merchandise sales are fulfilled by FLC and Fanatics, we recognize
commission revenue earned for these sales on a net basis in our
condensed consolidated financial statements, as compared to the
recognition of logo and emblematic sales on a gross basis in the
periods prior to the transition. For Retail Gross Comparable Store
Sales details, see the Sales Information disclosure of this Press
Release.
(c) For the 13 and 26 weeks ended October 29, 2022, the Retail
Segment gross margin excludes $0 and $26 respectively, of
amortization expense (non-cash) related to content development
costs. For the 13 and 26 weeks ended October 30, 2022, the Retail
Segment gross margin excludes $105 and $271 respectively, of
amortization expense (non-cash) related to content development
costs. Additionally, for the 26 weeks ended October 30, 2021, gross
margin excludes a merchandise inventory loss of $434 in the Retail
Segment related to the sale of our logo and emblematic general
merchandise inventory below cost to FLC.
(d) For the 13 and 26 weeks ended October 29, 2022, the DSS
Segment gross margin excludes $1,618 and $3,169, respectively, of
amortization expense (non-cash) related to content development
costs. For the 13 and 26 weeks ended October 30, 2022, the DSS
Segment gross margin excludes $1,206 and $2,315, respectively, of
amortization expense (non-cash) related to content development
costs.
(e) For additional information, including a reconciliation to
the most comparable financial measures presented in accordance with
GAAP, see "Non-GAAP Information" and "Use of Non-GAAP Financial
Information" in the Non-GAAP disclosure information of this Press
Release.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 week periods are as follows:
Dollars in millions
13 weeks ended
26 weeks ended
October 29, 2022
October 29, 2022
Retail Sales
New stores (b) (c)
$
40.1
$
51.9
Closed stores (b)
(19.1
)
(24.5
)
Comparable stores (c)
(16.7
)
4.8
Textbook rental deferral
(10.0
)
(11.2
)
Service revenue (d)
(1.9
)
(2.4
)
Other (d)
(2.7
)
(2.9
)
Retail Sales subtotal:
$
(10.3
)
$
15.7
Wholesale Sales:
$
(0.6
)
$
(8.0
)
DSS Sales
$
0.2
$
1.1
Eliminations (f)
$
0.8
$
4.4
Total sales variance
$
(9.9
)
$
13.2
(a) The variances for this period are primarily related to
re-opening stores that had temporarily closed due to the COVID-19
pandemic in the prior year.
(b) The following is a store count summary for physical stores
and virtual stores:
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Number of Stores:
Physical
Virtual
Total
Physical
Virtual
Total
Physical
Virtual
Total
Physical
Virtual
Total
Beginning of period
793
613
1,406
784
645
1,429
805
622
1,427
769
648
1,417
Opened
8
10
18
11
12
23
34
24
58
41
35
76
Closed
8
17
25
1
6
7
46
40
86
16
32
48
End of period
793
606
1,399
794
651
1,445
793
606
1,399
794
651
1,445
(c) In December 2020, we entered into merchandising partnership
with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and
Fanatics Lids College, Inc. (“FLC”) (collectively referred to
herein as the “FLC Partnership”). Effective in April 2021, as
contemplated by the FLC Partnership's merchandising agreement and
e-commerce agreement, we began to transition the fulfillment of
logo and emblematic general merchandise sales to FLC and Fanatics.
The transition to FLC for campus stores was effective in April
2021, and the e-commerce websites transitioned to Fanatics
throughout Fiscal 2022. As the logo and emblematic general
merchandise sales are fulfilled by FLC and Fanatics, we recognize
commission revenue earned for these sales on a net basis in our
condensed consolidated financial statements, as compared to the
recognition of logo and emblematic sales on a gross basis in the
periods prior to the transition. For Retail Gross Comparable Store
Sales details, see below.
(d) Service revenue includes brand partnerships, shipping and
handling, and revenue from other programs.
(e) Other includes inventory liquidation sales to third parties,
marketplace sales and certain accounting adjusting items related to
return reserves, and other deferred items.
(f) Eliminates Wholesale sales and service fees to Retail and
Retail commissions earned from Wholesale.
Retail Gross Comparable Store Sales
Retail Gross Comparable Store Sales variances by category for
the 13 week periods are as follows:
Dollars in millions
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021 (a)
October 29, 2022
October 30, 2021 (a)
Textbooks (Course Materials)
$ (21.8)
(4.6)%
$ (0.5)
(0.1)%
$ (19.5)
(3.2)%
$ 22.9
4.1%
General Merchandise
7.7
4.5%
74.0
76.6%
39.2
14.9%
124.7
89.5%
Total Retail Gross Comparable Store
Sales
$ (14.1)
(2.2)%
$ 73.5
13.2%
$ 19.7
2.3%
$ 147.6
21.0%
(a) The variances for this period are primarily related to
re-opening stores that had temporarily closed due to the COVID-19
pandemic in the prior year.
To supplement the Total Sales table presented above, the Company
uses Retail Gross Comparable Store Sales as a key performance
indicator. Retail Gross Comparable Store Sales includes sales from
physical and virtual stores that have been open for an entire
fiscal year period and does not include sales from permanently
closed stores for all periods presented. For Retail Gross
Comparable Store Sales, sales for logo and emblematic general
merchandise fulfilled by FLC, Fanatics and digital agency sales are
included on a gross basis for consistent year-over-year
comparison.
Effective in April 2021, as contemplated by the FLC
Partnership's merchandising agreement and e-commerce agreement, we
began to transition the fulfillment of logo and emblematic general
merchandise sales to FLC and Fanatics. The transition to FLC for
campus stores was effective in April 2021, and the e-commerce
websites transitioned to Fanatics throughout Fiscal 2022. As the
logo and emblematic general merchandise sales are fulfilled by FLC
and Fanatics, we recognize commission revenue earned for these
sales on a net basis in our condensed consolidated financial
statements, as compared to the recognition of logo and emblematic
sales on a gross basis in the periods prior to the transition.
We believe the current Retail Gross Comparable Store Sales
calculation method reflects management’s view that such comparable
store sales are an important measure of the growth in sales when
evaluating how established stores have performed over time. We
present this metric as additional useful information about the
Company’s operational and financial performance and to allow
greater transparency with respect to important metrics used by
management for operating and financial decision-making. Retail
Gross Comparable Store Sales are also referred to as "same-store"
sales by others within the retail industry and the method of
calculating comparable store sales varies across the retail
industry. As a result, our calculation of comparable store sales is
not necessarily comparable to similarly titled measures reported by
other companies and is intended only as supplemental information
and is not a substitute for net sales presented in accordance with
GAAP.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Non-GAAP Information
(a)
(In thousands)
(Unaudited)
Consolidated Adjusted Earnings (non-GAAP) (a)
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Net income (loss)
$
22,144
$
22,528
$
(30,563
)
$
(21,100
)
Reconciling items, after-tax (below)
1,878
2,427
3,830
6,041
Adjusted Earnings (non-GAAP)
$
24,022
$
24,955
$
(26,733
)
$
(15,059
)
Reconciling items, pre-tax
Merchandise inventory loss (b)
$
—
$
—
$
—
$
434
Content amortization (non-cash) (c)
1,618
1,311
3,195
2,586
Restructuring and other charges (d)
260
1,116
635
3,021
Reconciling items, pre-tax
1,878
2,427
3,830
6,041
Less: Pro forma income tax impact (e)
—
—
—
—
Reconciling items, after-tax
$
1,878
$
2,427
$
3,830
$
6,041
Consolidated Adjusted EBITDA (non-GAAP)
(a)
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Net income (loss)
$
22,144
$
22,528
$
(30,563
)
$
(21,100
)
Add:
Depreciation and amortization expense
10,759
11,952
23,292
24,576
Interest expense, net
4,886
2,264
8,754
4,758
Income tax (benefit) expense
(300
)
(203
)
633
196
Merchandise inventory loss (b)
—
—
—
434
Content amortization (non-cash) (c)
1,618
1,311
3,195
2,586
Restructuring and other charges (d)
260
1,116
635
3,021
Adjusted EBITDA (non-GAAP)
$
39,367
$
38,968
$
5,946
$
14,471
Adjusted EBITDA by Segment (non-GAAP)
(a)
The following is Adjusted EBITDA by
Segment for the 13 and 26 week periods:
13 weeks ended October 29,
2022
Retail
Wholesale
DSS
Corporate Services (f)
Eliminations
Total
Net income (loss)
$
30,547
$
218
$
(1,941
)
$
(9,938
)
$
3,258
$
22,144
Add:
Depreciation and amortization expense
8,869
1,370
503
17
—
10,759
Interest expense, net
—
—
—
4,886
—
4,886
Income tax benefit
—
—
—
(300
)
—
(300
)
Content amortization (non-cash) (c)
—
—
1,618
—
—
1,618
Restructuring and other charges (d)
—
—
—
260
—
260
Adjusted EBITDA (non-GAAP)
$
39,416
$
1,588
$
180
$
(5,075
)
$
3,258
$
39,367
13 weeks ended October 30,
2021
Retail
Wholesale
DSS
Corporate Services (f)
Eliminations
Total
Net income (loss)
$
29,595
$
(131
)
$
(2,301
)
$
(8,928
)
$
4,293
$
22,528
Add:
Depreciation and amortization expense
8,669
1,364
1,902
17
—
11,952
Interest expense, net
—
—
—
2,264
—
2,264
Income tax benefit
—
—
—
(203
)
—
(203
)
Content amortization (non-cash) (c)
105
—
1,206
—
—
1,311
Restructuring and other charges (d)
1,075
—
—
41
—
1,116
Adjusted EBITDA (non-GAAP)
$
39,444
$
1,233
$
807
$
(6,809
)
$
4,293
$
38,968
26 weeks ended October 29,
2022
Retail
Wholesale
DSS
Corporate Services (f)
Eliminations
Total
Net (loss) income
$
(3,993
)
$
1,637
$
(4,240
)
$
(22,346
)
$
(1,621
)
$
(30,563
)
Add:
Depreciation and amortization expense
18,398
2,719
2,140
35
—
23,292
Interest expense, net
—
—
—
8,754
—
8,754
Income tax expense
—
—
—
633
—
633
Content amortization (non-cash) (c)
26
—
3,169
—
—
3,195
Restructuring and other charges (d)
—
—
—
635
—
635
Adjusted EBITDA (non-GAAP)
$
14,431
$
4,356
$
1,069
$
(12,289
)
$
(1,621
)
$
5,946
26 weeks ended October 30,
2021
Retail
Wholesale
DSS
Corporate Services (f)
Eliminations
Total
Net (loss) income
$
(1,042
)
$
4,983
$
(3,617
)
$
(20,180
)
$
(1,244
)
$
(21,100
)
Add:
Depreciation and amortization expense
18,076
2,664
3,801
35
—
24,576
Interest expense, net
—
—
—
4,758
—
4,758
Income tax expense
—
—
—
196
—
196
Merchandise inventory loss (b)
434
—
—
—
—
434
Content amortization (non-cash) (c)
271
—
2,315
—
—
2,586
Restructuring and other charges (d)
2,083
—
—
938
—
3,021
Adjusted EBITDA (non-GAAP)
$
19,822
$
7,647
$
2,499
$
(14,253
)
$
(1,244
)
$
14,471
(a) For additional information, see "Use of Non-GAAP Financial
Information" in the Non-GAAP disclosure information of this Press
Release.
(b) As contemplated by the FLC Partnership's merchandising
agreement, we sold our logo and emblematic general merchandise
inventory to FLC and received proceeds of $41,773, and recognized a
merchandise inventory loss on the sale of $10,262 in cost of goods
sold during the 52 weeks ended May 1, 2021 for the Retail Segment.
The final inventory sale price was determined during the 13 weeks
ended July 31, 2021, at which time, we received additional proceeds
of $1,906, and recognized a merchandise inventory loss on the sale
of $434 in cost of goods sold for the Retail Segment.
(c) Represents amortization of content development costs
(non-cash) recorded in cost of goods sold in the condensed
consolidated financial statements.
(d) During the 26 weeks ended October 29, 2022 and October 30,
2021, we recognized restructuring and other charges totaling $635
and $3,021, 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, shareholder activist activities, and costs
related to development and integration associated with the FLC
Partnership.
(e) Represents the income tax effects 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)
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Net cash flows provided by operating
activities
$
38,374
$
41,580
$
9,376
$
24,276
Less:
Capital expenditures (b)
10,847
9,894
20,573
21,264
Cash interest paid
4,368
1,980
7,301
3,662
Cash taxes (refund) paid
(15,705
)
(8,032
)
(15,583
)
(7,778
)
Free Cash Flow (non-GAAP)
$
38,864
$
37,738
$
(2,915
)
$
7,128
(a) For additional information, see "Use of Non-GAAP Financial
Information" in the Non-GAAP disclosure information of this Press
Release.
(b) Purchases of property and equipment are also referred to as
capital expenditures. Our investing activities consist principally
of capital expenditures for contractual capital investments
associated with renewing existing contracts, new store
construction, digital initiatives and enhancements to internal
systems and our website. The following table provides the
components of total purchases of property and equipment:
Capital Expenditures
13 weeks ended
26 weeks ended
October 29, 2022
October 30, 2021
October 29, 2022
October 30, 2021
Physical store capital expenditures
$
6,052
$
3,587
$
10,548
$
7,480
Product and system development
2,947
3,856
5,612
7,480
Content development costs
1,294
1,865
3,313
4,712
Other
554
586
1,100
1,592
Total Capital Expenditures
$
10,847
$
9,894
$
20,573
$
21,264
Use of Non-GAAP Financial Information -
Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and
Free Cash Flow
To supplement the Company’s condensed
consolidated financial statements presented in accordance with
generally accepted accounting principles (“GAAP”), in the Press
Release attached hereto as Exhibit 99.1, the Company uses the
financial measures of Adjusted Earnings, Adjusted EBITDA, Adjusted
EBITDA by Segment and Free Cash Flow, which are non-GAAP financial
measures under Securities and Exchange Commission (the "SEC")
regulations. We define Adjusted Earnings as net income (loss)
adjusted for certain reconciling items that are subtracted from or
added to net income (loss). We define Adjusted EBITDA as net income
(loss) plus (1) depreciation and amortization; (2) interest expense
and (3) income taxes, (4) as adjusted for items that are subtracted
from or added to net income (loss). We define Free Cash Flow as
Cash Flows from Operating Activities less capital expenditures,
cash interest and cash taxes.
The non-GAAP measures included in the
Press Release have been reconciled to the most comparable financial
measures presented in accordance with GAAP, attached hereto as
Exhibit 99.1, as follows: the reconciliation of Adjusted Earnings
to net income (loss); the reconciliation of consolidated Adjusted
EBITDA to consolidated net income (loss); and the reconciliation of
Adjusted EBITDA by Segment to net income (loss) by segment. All of
the items included in the reconciliations are either (i) non-cash
items or (ii) items that management does not consider in assessing
our on-going operating performance.
These non-GAAP financial measures are not
intended as substitutes for and should not be considered superior
to measures of financial performance prepared in accordance with
GAAP. In addition, the Company's use of these non-GAAP financial
measures may be different from similarly named measures used by
other companies, limiting their usefulness for comparison
purposes.
We review these non-GAAP financial
measures as internal measures to evaluate our performance at a
consolidated level and at a segment level and manage our
operations. We believe that these measures are useful performance
measures which are used by us to facilitate a comparison of our
on-going operating performance on a consistent basis from
period-to-period. We believe that these non-GAAP financial measures
provide for a more complete understanding of factors and trends
affecting our business than measures under GAAP can provide alone,
as they exclude certain items that management believes do not
reflect the ordinary performance of our operations in a particular
period. Our Board of Directors and management also use Adjusted
EBITDA and Adjusted EBITDA by Segment, at a consolidated level and
at a segment level, as one of the primary methods for planning and
forecasting expected performance, for evaluating on a quarterly and
annual basis actual results against such expectations, and as a
measure for performance incentive plans. Management also uses
Adjusted EBITDA by Segment to determine segment capital
allocations. We believe that the inclusion of Adjusted Earnings,
Adjusted EBITDA, and Adjusted EBITDA by Segment results provides
investors useful and important information regarding our operating
results, in a manner that is consistent with management’s
evaluation of business performance. We believe that Free Cash Flow
provides useful additional information concerning cash flow
available to meet future debt service obligations and working
capital requirements and assists investors in their understanding
of our operating profitability and liquidity as we manage the
business to maximize margin and cash flow.
The Company urges investors to carefully
review the GAAP financial information included as part of the
Company’s Form 10-K dated April 30, 2022 filed with the SEC on June
29, 2022, which includes consolidated financial statements for each
of the three years for the period ended April 30, 2022, May 1,
2021, and May 2, 2020 (Fiscal 2022, Fiscal 2021, and Fiscal 2020,
respectively) and the Company's Quarterly Report on Form 10-Q for
the period ended July 30, 2022 filed with the SEC on August 31,
2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221206005081/en/
Media Contact: Carolyn J.
Brown Senior Vice President Corporate Communications & Public
Affairs 908-991-2967 cbrown@bned.com
Investor Contact: Hunter
Blankenbaker Vice President Investor Relations 908-991-2776
hblankenbaker@bned.com
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