Consolidated
Second Quarter GAAP Sales Increase 5.3% to $627.0
million
Consolidated
Second Quarter GAAP Net Income Improved $15 Million to $22.5
Million
BNC’s First
Day® Complete and First Day® Inclusive Access Offerings Revenue
Grew 80%
Retail
Segment Gross Comparable Store Sales (non-GAAP) Increase
13.2%
General
Merchandise Gross Comparable Store Sales (non-GAAP) Increase
78.3%
Barnes & Noble Education, Inc. (NYSE:BNED), a leading
solutions provider for the education industry, today reported sales
and earnings for the second quarter of fiscal year 2022, which
ended on October 30, 2021.
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. While the
Company’s fiscal 2022 second quarter results benefitted from many
students returning to in-person classes and greater attendance at
campus events and sporting activities as compared to the prior year
period when much of this activity was curtailed, as anticipated,
the Company’s performance continues to be affected by the ongoing
COVID-19 environment, including overall enrollment declines, many
community colleges continuing to offer virtual classes, in
conjunction with broader macro issues including labor challenges,
inflationary pressures and supply chain issues.
Financial highlights for the second quarter 2022:
- Consolidated second quarter GAAP sales of $627.0 million
increased 5.3%, as compared to the prior year period.
- Consolidated second quarter GAAP net income improved $15.0
million to $22.5 million, compared to GAAP net income of $7.5
million in the prior year period.
- Consolidated second quarter non-GAAP Adjusted Earnings of $25.0
million, compared to non-GAAP Adjusted Earnings of $11.1 million in
the prior year period.
- Consolidated second quarter non-GAAP Adjusted EBITDA of $39.0
million, compared to non-GAAP Adjusted EBITDA of $24.5 million in
the prior year period.
- Retail segment gross comparable store sales (non-GAAP)
increased 13.2%. For comparable store sales reporting purposes,
logo and emblematic general merchandise sales fulfilled by FLC and
Fanatics are included on a gross basis. Please see more detailed
definition in the Second Quarter Results table and Retail segment
discussion below.
Operational highlights for the second quarter 2022:
- 65 campus stores utilized BNC’s First Day® Complete courseware
delivery program during the 2021 Fall Term, representing total
undergraduate enrollment of approximately 295,000*, up from 12
campus stores with 43,000 in total undergraduate enrollment in the
2020 Fall Term.
- Signed agreements for 10 additional campus stores, with total
undergraduate enrollment of approximately 86,000*, to implement
BNC’s First Day Complete courseware delivery program for the
upcoming 2022 Spring Term, bringing the total First Day Complete
store count to 75 for the current academic year, with total
undergraduate enrollment at these First Day Complete schools of
over 380,000.
- BNC’s First Day Complete and First Day® inclusive access
offerings revenue increased 80%.
- DSS revenue grew 39% to $8.3 million, with bartleby® revenue
growing approximately 70% year-over-year.
*As reported by National Center for Education Statistics
(NCES)
“We were thrilled to welcome students back to campus for the
2021-2022 academic year and our second quarter results benefitted
from their return to on-campus, in-person learning and the
significantly increased resumption of on-campus events and sporting
activities,” said Michael P. Huseby, Chief Executive Officer and
Chairman, BNED. “Despite overall enrollment declines and many
community colleges continuing to offer virtual classes, on a gross
comparable sales basis, our textbook business was essentially flat
and, despite the global supply chain issues, our general
merchandise business grew 78%, as many of our campus partners
returned to a more traditional Fall rush experience. Our results
also benefited from the significantly increased adoption of our
First Day offerings, which provide improved student outcomes
through equitable access, enhanced convenience and improved course
material affordability. Our DSS business also continued to exhibit
strong subscriber growth as students looked for solutions to
provide additional help with their studies. While the environment
we are operating in remains challenging, we continue to execute on
our strategic initiatives that are centered on profitable
growth.”
Second Quarter 2022 and Year to Date Results Results for
the 13 and 26 weeks of fiscal 2022 and fiscal 2021 are as
follows:
$ in millions
Selected Data (unaudited)
13
Weeks
13
Weeks
26
Weeks
26
Weeks
Q2 2022
Q2 2021
Fiscal 2022
Fiscal 2021
Total Sales
$627.0
$595.5
$867.8
$799.5
Net Income (Loss)
$22.5
$7.5
$(21.8)
$(39.1)
Non-GAAP(1)
Adjusted EBITDA
$39.0
$24.5
$14.5
$(13.5)
Adjusted Earnings
$25.0
$11.1
$(15.1)
$(30.6)
Retail Gross Comparable Store Sales
Variances (2)
$73.5
$(205.1)
$147.6
$(311.3)
(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. As per our merchandising
agreement with Fanatics Lids College, Inc. (“FLC”) and Fanatics,
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
logo and emblematic sales on a gross basis in the prior year
period. For Retail Gross Comparable Store Sales (non-GAAP)
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 increased by $32.4 million, or 5.6%, as compared to
the prior year period. Gross comparable store sales (non-GAAP)
increased 13.2% for the quarter. Comparable textbook sales remained
essentially flat, as compared to a 19% decline a year ago, as
enrollment declines were mitigated by the growth of the company’s
First Day offerings. BNC’s First Day Complete and First Day by
course offerings total revenue grew 80% to $96.0 million during the
quarter. Comparable general merchandise sales increased 78.3%, as
compared to a 52.0% decline a year ago, benefitting greatly from
the return to an on campus learning experience and the resumption
of many activities and events.
As a reminder, per our merchandising agreement with Fanatics
Lids College, Inc. (“FLC”) and Fanatics, on a consolidated GAAP
sales basis, 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 logo and emblematic sales on a gross basis in the
prior year period. For comparable sales purposes, sales for logo
and emblematic general merchandise fulfilled by FLC and Fanatics
are included on a gross basis.
Retail non-GAAP Adjusted EBITDA for the quarter improved by
$21.1 million to $39.4 million, as compared to non-GAAP Adjusted
EBITDA of $18.3 million in the prior year period. Non-GAAP Adjusted
EBITDA benefited from improved sales and margin, partially offset
by higher selling and administrative expenses, which increased as a
result of the store re-openings, and higher incentive plan
compensation expense.
Wholesale Segment Results
Wholesale second quarter sales of $21.7 million decreased $14.7
million, or 40.5%, as compared to the prior year period. The
decrease is primarily due to COVID-19 related supply constraints of
used textbooks resulting from the lack of on campus textbook
buyback opportunities during the prior fiscal year and lower
customer demand, partially offset by lower returns and
allowances.
Wholesale non-GAAP Adjusted EBITDA for the quarter declined to
$1.2 million, as compared to non-GAAP Adjusted EBITDA of $6.6
million in the prior year, declining on the lower sales.
DSS Segment Results
DSS second quarter sales of $8.3 million increased $2.3 million,
or 39.2%, as compared to the prior year period. Bartleby generated
120,000 gross subscribers during the quarter, representing 33%
year-over-year growth.
DSS non-GAAP Adjusted EBITDA was $0.8 million for the quarter,
as compared to $0.7 million in the prior year period, as the
increased sales were offset by higher product development
investments and higher incentive plan compensation expense.
Other
Selling and administrative expenses for Corporate Services,
which includes unallocated shared-service costs, such as various
corporate level expenses and other governance functions, were $6.8
million for the quarter, compared to $5.5 million in the prior
period, primarily due to higher incentive plan compensation
expense.
Intercompany gross margin eliminations of $4.2 million for the
quarter were reflected in non-GAAP Adjusted EBITDA, compared to
eliminations of $4.4 million impacting non-GAAP Adjusted EBITDA in
the prior year period.
Outlook While it is difficult to predict the ongoing
effects of the COVID virus, based on its current views, the Company
expects to generate positive non-GAAP Adjusted EBITDA in fiscal
year 2022, as most schools return to a traditional on-campus
environment for learning, events and sporting activities. The
Company expects non-GAAP adjusted EBITDA to approach annual
pre-COVID levels in fiscal year 2023, based on an expectation that
campuses will be able to resume on campus learning, events and
sporting activities with substantially less-restrictive
COVID-related policies and operating protocols next year, and that
there are fewer negative impacts from the broader supply chain
issues.
Conference Call A conference call with Barnes & Noble
Education, Inc. senior management will be webcast at 8:30 a.m.
Eastern Time on Tuesday, November 30, 2021 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 2022 third
quarter results in early March 2022.
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 COVID-19 and the
governmental responses to it, including its impacts across our
businesses on demand and operations, as well as on the operations
of our suppliers and other business partners, and the effectiveness
of our actions taken in 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, and the inability to achieve the
expected cost savings; 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 May 1, 2021.
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 1,445 college, university, and K-12
school bookstores, comprised of 794 physical bookstores and 651
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 sites
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 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 3,200 physical
bookstores (including our Retail Segment's 794 physical bookstores)
and sources and distributes new and used textbooks to our 651
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
400 college bookstores.
- The Digital Student Solutions ("DSS") Segment includes
direct-to-student 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®, a 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 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Sales:
Product sales and other
$
577,329
$
551,832
$
805,099
$
745,042
Rental income
49,648
43,653
62,672
54,457
Total sales
626,977
595,485
867,771
799,499
Cost of sales:
Product and other cost of sales (a)
453,070
452,475
627,231
618,240
Rental cost of sales
28,348
27,725
34,952
35,112
Total cost of sales
481,418
480,200
662,183
653,352
Gross profit
145,559
115,285
205,588
146,147
Selling and administrative expenses
107,902
91,972
194,137
162,015
Depreciation and amortization expense
11,952
13,193
24,576
27,256
Restructuring and other charges (a)
1,116
3,387
3,739
9,058
Operating income (loss)
24,589
6,733
(16,864
)
(52,182
)
Interest expense, net
2,264
912
4,758
3,565
Income (loss) before income taxes
22,325
5,821
(21,622
)
(55,747
)
Income tax (benefit) expense
(203
)
(1,694
)
196
(16,610
)
Net income (loss)
$
22,528
$
7,515
$
(21,818
)
$
(39,137
)
Income (loss) per common share:
Basic
$
0.43
$
0.15
$
(0.42
)
$
(0.81
)
Diluted
$
0.41
$
0.15
$
(0.42
)
$
(0.81
)
Weighted average common shares
outstanding:
Basic
51,666
48,804
51,570
48,608
Diluted
54,568
49,428
51,570
48,608
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Percentage of sales:
Sales:
Product sales and other
92.1
%
92.7
%
92.8
%
93.2
%
Rental income
7.9
%
7.3
%
7.2
%
6.8
%
Total sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales:
Product and other cost of sales (a)
78.5
%
82.0
%
77.9
%
83.0
%
Rental cost of sales (a)
57.1
%
63.5
%
55.8
%
64.5
%
Total cost of sales
76.8
%
80.6
%
76.3
%
81.7
%
Gross profit
23.2
%
19.4
%
23.7
%
18.3
%
Selling and administrative expenses
17.2
%
15.4
%
22.4
%
20.3
%
Depreciation and amortization expense
1.9
%
2.2
%
2.8
%
3.4
%
Restructuring and other charges
0.2
%
0.6
%
0.4
%
1.1
%
Operating income (loss)
3.9
%
1.2
%
(1.9
)%
(6.5
)%
Interest expense, net
0.4
%
0.2
%
0.5
%
0.4
%
Income (loss) before income taxes
3.5
%
1.0
%
(2.4
)%
(6.9
)%
Income tax (benefit) expense
—
%
(0.3
)%
—
%
(2.1
)%
Net income (loss)
3.5
%
1.3
%
(2.4
)%
(4.8
)%
(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 30, 2021
October 31, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
10,996
$
7,353
Receivables, net
218,053
167,493
Merchandise inventories, net
370,529
457,677
Textbook rental inventories
50,642
50,736
Prepaid expenses and other current
assets
68,965
23,762
Total current assets
719,185
707,021
Property and equipment, net
91,875
93,130
Operating lease right-of-use assets
252,650
286,038
Intangible assets, net
141,847
166,140
Goodwill
4,700
4,700
Deferred tax assets, net
23,248
8,231
Other noncurrent assets
26,010
31,734
Total assets
$
1,259,515
$
1,296,994
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
333,099
$
314,042
Accrued liabilities
122,734
134,181
Current operating lease liabilities
118,434
121,518
Total current liabilities
574,267
569,741
Long-term operating lease liabilities
171,341
198,990
Other long-term liabilities
51,113
48,329
Long-term borrowings
183,300
99,500
Total liabilities
980,021
916,560
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, 54,162 and 53,316 shares, respectively;
outstanding, 51,976 and 49,064 shares, respectively
541
533
Additional paid-in-capital
736,886
735,647
Accumulated deficit
(436,432
)
(321,964
)
Treasury stock, at cost
(21,501
)
(33,782
)
Total stockholders' equity
279,494
380,434
Total liabilities and stockholders'
equity
$
1,259,515
$
1,296,994
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flow (Unaudited)
(In thousands, except per
share data)
26 weeks ended
October 30, 2021
October 31, 2020
Cash flows from operating activities:
Net loss
$
(21,818
)
$
(39,137
)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization expense
24,576
27,256
Content amortization expense
2,586
2,386
Amortization of deferred financing
costs
725
541
Merchandise inventory loss (a)
434
—
Deferred taxes
—
(426
)
Stock-based compensation expense
2,600
2,701
Changes in other long-term assets and
liabilities, net
1,462
5,016
Changes in operating lease right-of-use
assets and liabilities
286
6,597
Changes in other operating assets and
liabilities, net
13,291
86,452
Net cash flow provided by operating
activities
24,142
91,386
Cash flows from investing activities:
Purchases of property and equipment
(21,264
)
(16,197
)
Net change in other noncurrent assets
460
3
Net cash flow used in investing
activities
(20,804
)
(16,194
)
Cash flows from financing activities:
Proceeds from borrowings under Credit
Agreement
259,720
330,800
Repayments of borrowings under Credit
Agreement
(254,020
)
(406,000
)
Purchase of treasury shares
(2,359
)
(881
)
Proceeds from the exercise of stock
options, net
37
—
Net cash flows provided by (used in)
financing activities
3,378
(76,081
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
6,716
(889
)
Cash, cash equivalents and restricted cash
at beginning of period
16,814
9,008
Cash, cash equivalents and restricted cash
at end of period
$
23,530
$
8,119
Changes in other operating assets and
liabilities, net:
Receivables, net
$
(96,981
)
$
(76,642
)
Merchandise inventories
(89,851
)
(28,738
)
Textbook rental inventories
(21,950
)
(10,026
)
Prepaid expenses and other current
assets
(3,288
)
(7,585
)
Accounts payable and accrued
liabilities
225,361
209,443
Changes in other operating assets and
liabilities, net
$
13,291
$
86,452
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 and 26 week periods are as follows:
Dollars in millions
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Retail Sales
New stores (a) (b)
$
26.3
$
27.6
$
36.6
$
35.4
Closed stores (a)
(7.9
)
(16.4
)
(12.5
)
(21.9
)
Comparable stores (b)
14.0
(196.5
)
58.6
(302.7
)
Textbook rental deferral
3.2
16.4
3.4
10.1
Service revenue (c)
(2.1
)
1.0
0.1
(3.7
)
Other (d)
(1.1
)
2.7
(2.1
)
1.7
Retail Sales subtotal:
$
32.4
$
(165.2
)
$
84.1
$
(281.1
)
Wholesale Sales:
$
(14.7
)
$
(3.8
)
$
(50.5
)
$
4.2
DSS Sales
$
2.3
$
0.7
$
4.8
$
1.2
Eliminations (e)
$
11.5
$
(8.4
)
$
29.9
$
(16.7
)
Total sales variance
$
31.5
$
(176.7
)
$
68.3
$
(292.4
)
(a)
The following is a store count summary for
physical stores and virtual stores:
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Number of Stores:
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Number of stores at beginning of
period
784
645
772
670
769
648
772
647
Stores opened
11
12
5
11
41
35
29
51
Stores closed
1
6
9
10
16
32
33
27
Number of stores at end of period
794
651
768
671
794
651
768
671
(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 April 2021, as contemplated by the FLC Partnership's
merchandising agreement, logo and emblematic general merchandise
sales were fulfilled by FLC. During the first quarter of Fiscal
2022, as contemplated by the FLC Partnership's e-commerce
agreement, we began to transition certain of our e-commerce sites
to Fanatics e-commerce sites for logo and emblematic products. 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 prior year period. For Retail Gross
Comparable Store Sales (non-GAAP) details, see below.
(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 (non-GAAP)
Comparable store sales (non-GAAP) variances by category for the
13 and 26 week periods are as follows:
Dollars in millions
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Textbooks (Course Materials)
$
(0.5
)
(0.1
)%
$
(101.6
)
(19.0
)%
$
22.9
4.1
%
$
(112.5
)
(17.5
)%
General Merchandise
72.7
78.3
%
(97.2
)
(52.0
)%
121.5
90.6
%
(184.8
)
(58.6
)%
Trade Books
1.3
33.8
%
(6.3
)
(62.3
)%
3.2
60.7
%
(14.0
)
(73.2
)%
Total Retail Gross Comparable Store Sales
(non-GAAP)
$
73.5
13.2
%
$
(205.1
)
(28.1
)%
$
147.6
21.0
%
$
(311.3
)
(31.8
)%
To supplement the Total Sales table presented above in
accordance with generally accepted accounting principles (“GAAP”),
the Company uses the non-GAAP financial measure of Retail Gross
Comparable Store Sales. Retail Gross Comparable Store Sales
(non-GAAP) 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. As
contemplated by the FLC Partnership's merchandising agreement and
the e-commerce agreement, we began to transition the fulfillment of
logo and emblematic merchandise sales to FLC and Fanatics. 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
general merchandise sales on a gross basis in the prior year
period. For Retail Gross Comparable Store Sales (non-GAAP), sales
for logo and emblematic general merchandise fulfilled by FLC,
Fanatics and digital agency sales are included on a gross basis. We
believe the current Retail Gross Comparable Store Sales (non-GAAP)
calculation method reflects the manner in which management views
comparable sales, as well as the seasonal nature of our
business.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Adjusted Earnings (non-GAAP)
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Net income (loss)
$
22,528
$
7,515
$
(21,818
)
$
(39,137
)
Reconciling items, after-tax (below)
2,427
3,560
6,759
8,496
Adjusted Earnings (non-GAAP)
$
24,955
$
11,075
$
(15,059
)
$
(30,641
)
Reconciling items, pre-tax
Merchandise inventory loss (a)
$
—
$
—
$
434
$
—
Content amortization (non-cash) (b)
1,311
1,222
2,586
2,386
Restructuring and other charges (c)
1,116
3,387
3,739
9,058
Reconciling items, pre-tax
2,427
4,609
6,759
11,444
Less: Pro forma income tax impact (d)
—
1,049
—
2,948
Reconciling items, after-tax
$
2,427
$
3,560
$
6,759
$
8,496
Adjusted EBITDA (non-GAAP)
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Net income (loss)
$
22,528
$
7,515
$
(21,818
)
$
(39,137
)
Add:
Depreciation and amortization expense
11,952
13,193
24,576
27,256
Interest expense, net
2,264
912
4,758
3,565
Income tax (benefit) expense
(203
)
(1,694
)
196
(16,610
)
Merchandise inventory loss (a)
—
—
434
Content amortization (non-cash) (b)
1,311
1,222
2,586
2,386
Restructuring and other charges (c)
1,116
3,387
3,739
9,058
Adjusted EBITDA (non-GAAP)
$
38,968
$
24,535
$
14,471
$
(13,482
)
(a)
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 first quarter of Fiscal 2022, 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.
(b)
Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
consolidated financial statements.
(c)
During the 26 weeks ended October 30, 2021
and October 31, 2020, we recognized restructuring and other charges
totaling $3,739 and $9,058, 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.
(d)
Represents the income tax effects of the
non-GAAP items.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Free Cash Flow (non-GAAP)
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Adjusted EBITDA (non-GAAP)
$
38,968
$
24,535
$
14,471
$
(13,482
)
Less:
Capital expenditures (a)
9,894
9,142
21,264
16,197
Cash interest paid
1,980
1,240
3,662
3,200
Cash taxes (refund) paid
(8,032
)
85
(7,778
)
6,022
Free Cash Flow (non-GAAP)
$
35,126
$
14,068
$
(2,677
)
$
(38,901
)
(a)
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 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Physical store capital expenditures
$
3,587
$
2,825
$
7,480
$
5,962
Product and system development
3,856
2,901
7,480
5,226
Content development costs
1,865
1,752
4,712
2,828
Other
586
1,664
1,592
2,181
Total Capital Expenditures
$
9,894
$
9,142
$
21,264
$
16,197
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages) (Unaudited)
Segment Information (a)
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Sales
Retail (b)
$
608,952
$
576,514
$
819,421
$
735,290
Wholesale
21,669
36,387
66,153
116,681
DSS
8,279
5,947
16,582
11,819
Eliminations
(11,923
)
(23,363
)
(34,385
)
(64,291
)
Total
$
626,977
$
595,485
$
867,771
$
799,499
Gross profit
Retail (c)
$
128,930
$
95,704
$
177,673
$
112,049
Wholesale
5,620
10,714
16,025
27,471
DSS (c)
8,112
5,692
16,251
11,392
Eliminations
4,208
4,397
(1,341
)
(2,379
)
Total
$
146,870
$
116,507
$
208,608
$
148,533
Selling and administrative expenses
Retail
$
89,486
$
77,380
$
157,851
$
134,365
Wholesale
4,387
4,146
8,378
7,937
DSS
7,305
5,003
13,752
9,039
Corporate Services
6,809
5,501
14,253
10,745
Eliminations
(85
)
(58
)
(97
)
(71
)
Total
$
107,902
$
91,972
$
194,137
$
162,015
Adjusted EBITDA (non-GAAP) (d)
Retail
$
39,444
$
18,324
$
19,822
$
(22,316
)
Wholesale
1,233
6,568
7,647
19,534
DSS
807
689
2,499
2,353
Corporate Services
(6,809
)
(5,501
)
(14,253
)
(10,745
)
Eliminations
4,293
4,455
(1,244
)
(2,308
)
Total
$
38,968
$
24,535
$
14,471
$
(13,482
)
(a)
See Explanatory Note in this Press Release
for Segment descriptions.
(b)
For additional information, see the Note
(b) in the Sales Information disclosure of this Press Release.
(c)
For the 13 and 26 weeks ended October 30,
2021, 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. For additional
information, see Note (a) in the Non-GAAP disclosure information of
this Press Release. For the 13 and 26 weeks ended October 31, 2020,
the Retail Segment gross margin excludes $192 and $402,
respectively, of amortization expense (non-cash) related to content
development costs.
For the 13 and 26 weeks ended October 30,
2021, the DSS Segment gross margin excludes $1,206 and $2,315,
respectively, of amortization expense (non-cash) related to content
development costs. For the 13 and 26 weeks ended October 31, 2020,
the DSS Segment gross margin excludes $1,030 and $1,984,
respectively, of amortization expense (non-cash) related to content
development costs.
(d)
For additional information, see "Use of
Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
Percentage of Segment Sales
13 weeks ended
26 weeks ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Gross margin
Retail
21.2%
16.6%
21.7%
15.2%
Wholesale
25.9%
29.4%
24.2%
23.5%
DSS
98.0%
95.7%
98.0%
96.4%
Elimination
(35.3)%
(18.8)%
3.9%
3.7%
Total gross margin
23.4%
19.6%
24.0%
18.6%
Selling and administrative expenses
Retail
14.7%
13.4%
19.3%
18.3%
Wholesale
20.2%
11.4%
12.7%
6.8%
DSS
88.2%
84.1%
82.9%
76.5%
Corporate Services
N/A
N/A
N/A
N/A
Elimination
N/A
N/A
N/A
N/A
Total selling and administrative
expenses
17.2%
15.4%
22.4%
20.3%
Use of Non-GAAP Financial Information - Adjusted Earnings,
Adjusted EBITDA and Free Cash Flow
To supplement the Company’s 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 non-GAAP financial measures of
Adjusted Earnings (defined as net income adjusted for certain
reconciling items), Adjusted EBITDA (defined by the Company as
earnings before interest, taxes, depreciation and amortization, as
adjusted for additional items subtracted from or added to net
income) and Free Cash Flow (defined by the Company as Adjusted
EBITDA less capital expenditures, cash interest and cash
taxes).
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.
The Company's management reviews these non-GAAP financial
measures as internal measures to evaluate the Company's performance
and manage the Company's operations. The Company's management
believes that these measures are useful performance measures which
are used by the Company to facilitate a comparison of on-going
operating performance on a consistent basis from period-to-period.
The Company's management believes that these non-GAAP financial
measures provide for a more complete understanding of factors and
trends affecting the Company's business than measures under GAAP
can provide alone, as it excludes certain items that do not reflect
the ordinary earnings of its operations. The Company's Board of
Directors and management also use Adjusted EBITDA as one of the
primary methods for planning and forecasting overall expected
performance, for evaluating on a quarterly and annual basis actual
results against such expectations, and as a measure for performance
incentive plans. The Company's management believes that the
inclusion of Adjusted EBITDA and Adjusted Earnings results provides
investors useful and important information regarding the Company's
operating results. The Company believes 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 the Company’s operating profitability and liquidity as the
Company manages to the business to maximize margin and
cashflow.
The non-GAAP measures included in the Press Release attached
hereto as Exhibit 99.1 has been reconciled to the comparable GAAP
measures as required under Securities and Exchange Commission (the
“SEC”) rules regarding the use of non-GAAP financial measures. All
of the items included in the reconciliations below are either (i)
non-cash items or (ii) items that management does not consider in
assessing the Company's on-going operating performance. The Company
urges investors to carefully review the GAAP financial information
included as part of the Company’s Form 10-K dated May 1, 2021 filed
with the SEC on June 30, 2021, which includes consolidated
financial statements for each of the three years for the period
ended May 1, 2021, May 2, 2020 and April 27, 2019 (Fiscal 2021,
Fiscal 2020, and Fiscal 2019, respectively) and the Company's
Quarterly Report on Form 10-Q for the period ended July 31, 2021
filed with the SEC on September 2, 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211130005426/en/
Media: Carolyn J. Brown
Senior Vice President Corporate Communications & Public Affairs
908-991-2967 cbrown@bned.com
Investors: Andy Milevoj Vice
President Corporate Finance and Investor Relations 908-991-2776
amilevoj@bned.com
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