Consolidated
GAAP Net Loss Improved by $11.5 Million and Consolidated Adjusted
EBITDA (Non-GAAP) Improved by $7.7 Million
BNC’s First
Day® Complete and First Day® Inclusive Access Offerings Revenue
Grew 64%
Retail Gross
Comparable Store Sales Increased 8.4%
General
Merchandise Retail Gross Comparable Store Sales Increased
59.1%
DSS Revenue
Increased 31%
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the third quarter of fiscal year
2022, which ended on January 29, 2022.
The Company’s fiscal 2022 third quarter results continued to be
affected by the ongoing effects of COVID-19 and the Omicron variant
which impacted students return to campus and on-campus activities.
While the majority of the Company’s institutional partners brought
students back to campus in early January, some chose to conduct
classes remotely for the beginning of the semester, while other
schools chose to delay their start dates, and some chose to both
delay their start dates and begin the semester with remote
learning.
Financial highlights for the Third Quarter 2022:
- Consolidated third quarter GAAP sales of $402.8 million
decreased 2.1%, as compared to the prior year period.
- Consolidated third quarter GAAP gross profit of $87.0 million
increased 23.2%, as compared to the prior year period.
- Consolidated third quarter GAAP net loss of $(36.8) million,
compared to a net loss of $(48.3) million in the prior year
period.
- Consolidated third quarter non-GAAP Adjusted Earnings of
$(28.9) million, compared to $(25.6) million in the prior year
period.
- Consolidated third quarter non-GAAP Adjusted EBITDA of $(13.1)
million, compared to $(20.8) million in the prior year period.
- Retail segment gross comparable store sales increased 8.4%. 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 third quarter Results table and Retail segment discussion
below.
Operational highlights for the Third Quarter 2022:
- 76 campus stores utilized BNC’s First Day® Complete courseware
delivery program during the 2022 Spring Term, at institutions
representing over 380,000* in total undergraduate enrollment; up
from 14 campus stores and approximately 62,000* in total
undergraduate enrollment in the 2021 Spring Term.
- BNC’s First Day Complete and First Day® inclusive access
offerings revenue increased 64%.
- DSS revenue increased by 31% to $9.4 million.
- Generated over 97,000 bartleby® gross subscribers during the
quarter and over 285,000 bartleby gross subscribers year-to-date,
representing year-over-year growth of 34%.
*As reported by National Center for Education Statistics
(NCES)
“Our third quarter results were negatively impacted by COVID’s
Omicron surge that coincided with our seasonally important Spring
Rush period. In response to the Omicron surge, in early January a
number of our institutional partners offered only virtual classes,
while others chose to delay their start dates; and some chose a
combination of both delaying classes and virtual only instruction,”
said Michael P. Huseby, Chief Executive Officer and Chairman, BNED.
“Despite these challenges, we continued to execute and achieve
growth in our key initiatives during the third quarter, including
First Day and First Day Complete; scaling and improving our
partnership with Fanatics Lids College and its impact on our
general merchandise business; growing our direct to student digital
business; and growing our new store footprint, including the
exciting initial opening of the new Notre Dame Hammes Bookstore
this coming week.”
Mr. Huseby continued, “Given the efficacy of COVID vaccines,
responsive protocols and evolving regulatory policies, we are
projecting a more open operating environment, and we are therefore
cautiously optimistic that COVID’s restrictive impacts on our
business will continue to dissipate; including near-term
opportunities to improve comparable annual performance such as
upcoming NCAA sporting events and graduation celebrations, and
longer-term as BNED continues to adapt and offer high-value
solutions to all of its customers.”
Third Quarter 2022 and Year to Date Results
Results for the 13 and 39 weeks of fiscal 2022 and fiscal 2021
are as follows:
$ in millions
Selected Data (unaudited)
13
Weeks Q3 2022
13
Weeks Q3 2021
39
Weeks Fiscal 2022
39
Weeks Fiscal 2021
Total Sales
$
402.8
$
411.6
$
1,270.6
$
1,211.1
Net Loss
$
(36.8
)
$
(48.3
)
$
(58.6
)
$
(87.4
)
Non-GAAP(1)
Adjusted EBITDA
$
(13.1
)
$
(20.8
)
$
1.4
$
(34.3
)
Adjusted Earnings
$
(28.9
)
$
(25.6
)
$
(44.0
)
$
(56.2
)
Additional
Information
Retail Gross Comparable Store Sales
Variances (2)
$
30.9
$
(88.5
)
$
186.9
$
(397.7
)
(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, and 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 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 $12.9 million, or 3.3%, as compared to
the prior year period due to lower course material sales and lower
logo and emblematic net revenue, as logo and emblematic sales are
now reflected on a net revenue commission basis compared to a gross
revenue basis in the prior year period.
On a gross comparable sales basis, where logo and emblematic
sales fulfilled by FLC and Fanatics are included on a gross basis,
Retail segment gross comparable store sales increased 8.4%,
consisting of a 4.0% decline in course material sales, offset by a
59.1% increase in general merchandise sales.
The course material sales decline was partially mitigated by the
growth of our First Day Complete and First Day by course inclusive
access offerings, with their revenue growing 64% to $76.1 million
during the quarter. As the Spring term extends to April and May,
rental income related to First Day Complete and First Day rental
course materials are recognized over the term and therefore a
portion of the revenue is deferred into the Company’s fiscal fourth
quarter.
Consistent with prior years and further exacerbated by some
delayed start dates, the Spring Rush period extended beyond the
quarter into the fourth quarter. Factoring in the fiscal month of
February into the third quarter, which includes rental deferred
revenue for our First Day programs, Retail gross comparable store
sales increased by approximately 18.8%.
The Retail non-GAAP Adjusted EBITDA loss for the quarter
improved by $6.8 million to $(15.4) million, as compared to $(22.2)
million in the prior year period. The non-GAAP Adjusted EBITDA loss
improved on higher gross margins benefitting from greater general
merchandise sales and improved margin rates and lower markdowns,
partially offset by higher selling and administrative expenses,
which increased primarily as a result of the store re-openings that
had temporarily closed due to the COVID-19 pandemic in the prior
year.
Wholesale Segment Results
Wholesale third quarter sales of $37.0 million decreased $2.4
million, or 6.1%, 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
$4.2 million, as compared to $6.3 million in the prior year,
declining on the lower sales.
DSS Segment Results
DSS third quarter sales of $9.4 million increased $2.2 million,
or 30.9%, as compared to the prior year period.
DSS non-GAAP Adjusted EBITDA was $1.5 million for the quarter,
as compared to $1.0 million in the prior year period.
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 $5.2
million for the quarter, compared to $6.5 million in the prior year
period, primarily due to lower incentive plan compensation
expense.
Intercompany gross margin eliminations of $1.8 million for the
quarter were reflected in non-GAAP Adjusted EBITDA, compared to
eliminations of $0.5 million impacting non-GAAP Adjusted EBITDA in
the prior year period.
Outlook
While the COVID-19 virus and its variants have had a greater
than expected impact on the Company’s business in fiscal year 2022,
based on its current views that include an improved outlook for on
campus events and activities during the Spring, the Company
continues to expect to generate positive non-GAAP Adjusted EBITDA
in fiscal year 2022. While the Company currently believes that
non-GAAP Adjusted EBITDA will significantly improve in fiscal year
2023, the Company now expects non-GAAP Adjusted EBITDA for fiscal
year 2023 to be lower than pre-COVID levels, as the direct and
ancillary impacts of the pandemic, including wholesale supply
issues and inflationary pressures, are expected to continue. The
Company expects to be in a position to provide additional insight
on its fiscal year 2023 outlook when it reports year-end earnings
in June.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 8:30 a.m. Eastern Time on Tuesday,
March 8, 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 2022
fourth quarter results in late June 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 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, 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 1,441 college, university, and K-12
school bookstores, comprised of 799 physical bookstores and 642
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 3,100 physical
bookstores (including our Retail Segment's 799 physical bookstores)
and sources and distributes new and used textbooks to our 642
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
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Sales:
Product sales and other
$
377,713
$
373,502
$
1,182,812
$
1,118,544
Rental income
25,085
38,111
87,757
92,568
Total sales
402,798
411,613
1,270,569
1,211,112
Cost of sales (exclusive of depreciation
and amortization expense):
Product and other cost of sales (a)
297,693
315,607
924,924
933,847
Rental cost of sales
18,144
25,394
53,096
60,506
Total cost of sales
315,837
341,001
978,020
994,353
Gross profit
86,961
70,612
292,549
216,759
Selling and administrative expenses
101,460
92,708
295,597
254,723
Depreciation and amortization expense
12,179
13,307
36,755
40,563
Impairment loss (non-cash) (a)
6,411
27,630
6,411
27,630
Restructuring and other charges (a)
46
1,669
3,785
10,727
Operating loss
(33,135
)
(64,702
)
(49,999
)
(116,884
)
Interest expense, net
3,051
2,311
7,809
5,876
Loss before income taxes
(36,186
)
(67,013
)
(57,808
)
(122,760
)
Income tax expense (benefit)
615
(18,724
)
811
(35,334
)
Net loss
$
(36,801
)
$
(48,289
)
$
(58,619
)
$
(87,426
)
Loss per common share:
Basic
$
(0.71
)
$
(0.96
)
$
(1.13
)
$
(1.78
)
Diluted
$
(0.71
)
$
(0.96
)
$
(1.13
)
$
(1.78
)
Weighted average common shares
outstanding:
Basic
52,003
50,082
51,714
49,099
Diluted
52,003
50,082
51,714
49,099
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Percentage of sales:
Sales:
Product sales and other
93.8 %
90.7 %
93.1 %
92.4 %
Rental income
6.2 %
9.3 %
6.9 %
7.6 %
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)
78.8 %
84.5 %
78.2 %
83.5 %
Rental cost of sales (a)
72.3 %
66.6 %
60.5 %
65.4 %
Total cost of sales
78.4 %
82.8 %
77.0 %
82.1 %
Gross profit
21.6 %
17.2 %
23.0 %
17.9 %
Selling and administrative expenses
25.2 %
22.5 %
23.3 %
21.0 %
Depreciation and amortization expense
3.0 %
3.2 %
2.9 %
3.3 %
Impairment loss (non-cash)
1.6 %
6.7 %
0.5 %
2.3 %
Restructuring and other charges
— %
0.4 %
0.3 %
0.9 %
Operating loss
(8.2) %
(15.6) %
(4.0) %
(9.6) %
Interest expense, net
0.8 %
0.6 %
0.6 %
0.5 %
Loss before income taxes
(9.0) %
(16.2) %
(4.6) %
(10.1) %
Income tax expense (benefit)
0.2 %
(4.5) %
0.1 %
(2.9) %
Net loss
(9.2) %
(11.7) %
(4.7) %
(7.2) %
(a) Represents the percentage these costs
bear to the related sales, instead of total sales.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In
thousands, except per share data) (Unaudited)
January 29, 2022
January 30, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
9,967
$
9,915
Receivables, net
250,187
227,174
Merchandise inventories, net
403,646
452,611
Textbook rental inventories
40,976
40,720
Prepaid expenses and other current
assets
60,615
25,281
Total current assets
765,391
755,701
Property and equipment, net
93,752
87,405
Operating lease right-of-use assets
229,259
242,937
Intangible assets, net
133,975
155,536
Goodwill
4,700
4,700
Deferred tax assets, net
22,918
14,984
Other noncurrent assets
24,040
27,195
Total assets
$
1,274,035
$
1,288,458
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
359,743
$
318,795
Accrued liabilities
150,754
125,815
Current operating lease liabilities
100,773
105,624
Total current liabilities
611,270
550,234
Long-term operating lease liabilities
168,924
190,453
Other long-term liabilities
48,676
52,814
Long-term borrowings
200,400
150,800
Total liabilities
1,029,270
944,301
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, 54,234 and 53,327 shares, respectively;
outstanding, 52,046 and 51,379 shares, respectively
542
533
Additional paid-in-capital
738,968
733,019
Accumulated deficit
(473,233
)
(370,253
)
Treasury stock, at cost
(21,512
)
(19,142
)
Total stockholders' equity
244,765
344,157
Total liabilities and stockholders'
equity
$
1,274,035
$
1,288,458
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash
Flow (Unaudited) (In thousands, except per share data)
39 ended
January 29, 2022
January 30, 2021
Cash flows from operating activities:
Net loss
$
(58,619
)
$
(87,426
)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization expense
36,755
40,563
Content amortization expense
3,984
3,700
Amortization of deferred financing
costs
1,087
811
Impairment loss (non-cash) (a)
6,411
27,630
Merchandise inventory loss (a)
434
—
Deferred taxes
330
(7,179
)
Stock-based compensation expense
4,463
3,857
Changes in other long-term assets and
liabilities, net
260
10,878
Changes in operating lease right-of-use
assets and liabilities
1,808
11,937
Changes in other operating assets and
liabilities, net
10,988
36,402
Net cash flow provided by operating
activities
7,901
41,173
Cash flows from investing activities:
Purchases of property and equipment
(33,393
)
(25,910
)
Net change in other noncurrent assets
734
335
Net cash flow used in investing
activities
(32,659
)
(25,575
)
Cash flows from financing activities:
Proceeds from borrowings under Credit
Agreement
463,220
547,600
Repayments of borrowings under Credit
Agreement
(440,420
)
(571,500
)
Sale of treasury shares
—
10,869
Purchase of treasury shares
(2,370
)
(894
)
Proceeds from the exercise of stock
options, net
256
—
Net cash flows provided by (used in)
financing activities
20,686
(13,925
)
Net (decrease) increase in cash, cash
equivalents and restricted cash
(4,072
)
1,673
Cash, cash equivalents and restricted cash
at beginning of period
16,814
9,008
Cash, cash equivalents and restricted cash
at end of period
$
12,742
$
10,681
Changes in other operating assets and
liabilities, net:
Receivables, net
$
(129,115
)
$
(136,323
)
Merchandise inventories
(122,968
)
(23,672
)
Textbook rental inventories
(12,284
)
(10
)
Prepaid expenses and other current
assets
(4,697
)
(9,104
)
Accounts payable and accrued
liabilities
280,052
205,511
Changes in other operating assets and
liabilities, net
$
10,988
$
36,402
(a) For additional information, see the
Notes in the Non-GAAP disclosure information of this Press
Release.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES Segment Information (In thousands, except
percentages) (Unaudited)
Segment Information (a)
13 weeks ended
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Sales:
Retail (b)
$
374,740
$
387,669
$
1,194,161
$
1,122,959
Wholesale
37,039
39,465
103,192
156,146
DSS
9,430
7,206
26,012
19,025
Eliminations
(18,411
)
(22,727
)
(52,796
)
(87,018
)
Total Sales
$
402,798
$
411,613
$
1,270,569
$
1,211,112
Gross Profit
Retail (c)
$
69,240
$
53,699
$
246,913
$
165,748
Wholesale
8,104
10,658
24,129
38,129
DSS (d)
9,251
7,020
25,502
18,412
Eliminations
1,764
549
423
(1,830
)
Total Gross Profit
$
88,359
$
71,926
$
296,967
$
220,459
Selling and Administrative Expenses
Retail
$
84,626
$
75,921
$
242,477
$
210,286
Wholesale
3,941
4,336
12,319
12,273
DSS
7,775
6,015
21,527
15,054
Corporate Services
5,154
6,491
19,407
17,236
Eliminations
(36
)
(55
)
(133
)
(126
)
Total Selling and Administrative
Expenses
$
101,460
$
92,708
$
295,597
$
254,723
Percentage of Segment Sales
Gross Profit
Retail (c)
18.5
%
13.9
%
20.7
%
14.8
%
Wholesale
21.9
%
27.0
%
23.4
%
24.4
%
DSS (d)
98.1
%
97.4
%
98.0
%
96.8
%
Eliminations
(9.6
) %
(2.4
) %
(0.8
) %
2.1
%
Total Gross Profit
21.9
%
17.5
%
23.4
%
18.2
%
Selling and Administrative Expenses
Retail
22.6
%
19.6
%
20.3
%
18.7
%
Wholesale
10.6
%
11.0
%
11.9
%
7.9
%
DSS
82.4
%
83.5
%
82.8
%
79.1
%
Corporate Services
N/A
N/A
N/A
N/A
Eliminations
N/A
N/A
N/A
N/A
Total Selling and Administrative
Expenses
25.2
%
22.5
%
23.3
%
21.0
%
(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 April 4, 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. 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 April 4, 2021. For Retail Gross Comparable
Store Sales details, see the Sales Information disclosure of this
Press Release.
(c)
For the 13 and 39 weeks ended January 29,
2022, the Retail Segment gross margin excludes $79 and $350,
respectively, of amortization expense (non-cash) related to content
development costs. Additionally, for the 39 weeks ended January 29,
2022, 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 (b) in the Non-GAAP disclosure information of
this Press Release. For the 13 and 39 weeks ended January 30, 2021,
the Retail Segment gross margin excludes $176 and $578,
respectively, of amortization expense (non-cash) related to content
development costs.
(d)
For the 13 and 39 weeks ended January 29,
2022, the DSS Segment gross margin excludes $1,319 and $3,634,
respectively, of amortization expense (non-cash) related to content
development costs. For the 13 and 39 weeks ended January 30, 2021,
the DSS Segment gross margin excludes $1,138 and $3,122,
respectively, of amortization expense (non-cash) related to content
development costs.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 and 39 week periods are as follows:
Dollars in millions
13 weeks ended
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Retail Sales
New stores (a) (b)
$
17.3
$
17.3
$
53.9
$
52.7
Closed stores (a)
(7.4
)
(8.3
)
(28.7
)
(32.2
)
Comparable stores (b)
(10.2
)
(83.3
)
57.2
(384.0
)
Textbook rental deferral
(11.5
)
1.6
(8.1
)
11.7
Service revenue (c)
(2.1
)
1.8
(2.0
)
(1.9
)
Other (d)
1.0
0.6
(1.1
)
2.2
Retail Sales subtotal:
$
(12.9
)
$
(70.3
)
$
71.2
$
(351.5
)
Wholesale Sales:
$
(2.4
)
$
(27.5
)
$
(53.0
)
$
(23.4
)
DSS Sales
$
2.2
$
0.8
$
7.0
$
2.0
Eliminations (e)
$
4.3
$
6.3
$
34.3
$
(10.2
)
Total sales variance
$
(8.8
)
$
(90.7
)
$
59.5
$
(383.1
)
(a) The following is a store count summary for physical stores
and virtual stores:
13 weeks ended
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
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
794
651
769
671
769
648
772
647
Stores opened
6
—
—
7
47
35
30
58
Stores closed
1
9
4
2
17
41
37
29
Number of stores at end of period
799
642
765
676
799
642
765
676
(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 4, 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. 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 April 4, 2021. For Retail Gross Comparable
Store Sales 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
Retail Gross Comparable Store Sales variances by category for
the 13 and 39 week periods are as follows:
Dollars in millions
13 weeks ended
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Textbooks (Course Materials)
$
(11.9
)
(4.0
) %
$
(25.0
)
(8.1
) %
$
17.4
2.0
%
$
(136.1
)
(14.3
) %
General Merchandise
41.2
59.1
%
(58.0
)
(45.8
) %
164.5
82.0
%
(242.2
)
(54.9
) %
Trade Books
1.6
48.5
%
(5.5
)
(61.1
) %
5.0
61.6
%
(19.4
)
(69.3
) %
Total Retail Gross Comparable Store
Sales
$
30.9
8.4
%
$
(88.5
)
(19.9
) %
$
186.9
17.6
%
$
(397.7
)
(28.0
) %
To supplement the Total Sales table presented above, the Company
uses Retail Gross Comparable Store Sales as a key performance
indicator. Retail Gross Comparable Store Sales includes sales from
physical and virtual stores that have been open for an entire
fiscal year period and does not include sales from permanently
closed stores for all periods presented. For Retail Gross
Comparable Store Sales, sales for logo 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 April 4, 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. 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 April 4, 2021.
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
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Net loss
$
(36,801
)
$
(48,289
)
$
(58,619
)
$
(87,426
)
Reconciling items, after-tax (below)
7,855
22,717
14,614
31,213
Adjusted Earnings (non-GAAP)
$
(28,946
)
$
(25,572
)
$
(44,005
)
$
(56,213
)
Reconciling items, pre-tax
Merchandise inventory loss (b)
$
—
$
—
$
434
$
—
Impairment loss (non-cash) (c)
6,411
27,630
6,411
27,630
Content amortization (non-cash) (d)
1,398
1,314
3,984
3,700
Restructuring and other charges (e)
46
1,669
3,785
10,727
Reconciling items, pre-tax
7,855
30,613
14,614
42,057
Less: Pro forma income tax impact (f)
—
7,896
—
10,844
Reconciling items, after-tax
$
7,855
$
22,717
$
14,614
$
31,213
Consolidated Adjusted EBITDA (non-GAAP)
(a)
13 weeks ended
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Net loss
$
(36,801
)
$
(48,289
)
$
(58,619
)
$
(87,426
)
Add:
Depreciation and amortization expense
12,179
13,307
36,755
40,563
Interest expense, net
3,051
2,311
7,809
5,876
Income tax expense (benefit)
615
(18,724
)
811
(35,334
)
Merchandise inventory loss (b)
—
—
434
—
Impairment loss (non-cash) (c)
6,411
27,630
6,411
27,630
Content amortization (non-cash) (d)
1,398
1,314
3,984
3,700
Restructuring and other charges (e)
46
1,669
3,785
10,727
Adjusted EBITDA (non-GAAP)
$
(13,101
)
$
(20,782
)
$
1,370
$
(34,264
)
Adjusted EBITDA by Segment (non-GAAP) (a)
The following is Adjusted EBITDA by Segment for the 13 and 39
week periods:
13 weeks ended January 29,
2022
Retail
Wholesale
DSS
Corporate Services (g)
Eliminations
Total
Net (loss) income
$
(30,845
)
$
2,767
$
(1,669
)
$
(8,854
)
$
1,800
$
(36,801
)
Add:
Depreciation and amortization expense
8,939
1,396
1,826
18
—
12,179
Interest expense, net
—
—
—
3,051
—
3,051
Income tax expense
—
—
—
615
—
615
Impairment loss (non-cash) (c)
6,411
—
—
—
—
6,411
Content amortization (non-cash) (d)
79
—
1,319
—
—
1,398
Restructuring and other charges (e)
30
—
—
16
—
46
Adjusted EBITDA (non-GAAP)
$
(15,386
)
$
4,163
$
1,476
$
(5,154
)
$
1,800
$
(13,101
)
13 weeks ended January 30,
2021
Retail
Wholesale
DSS
Corporate Services (g)
Eliminations
Total
Net (loss) income
$
(59,996
)
$
4,708
$
(2,567
)
$
8,962
$
604
$
(48,289
)
Add:
Depreciation and amortization expense
9,806
1,614
1,863
24
—
13,307
Interest expense, net
—
—
—
2,311
—
2,311
Income tax benefit
—
—
—
(18,724
)
—
(18,724
)
Impairment loss (non-cash) (c)
27,630
—
—
—
—
27,630
Content amortization (non-cash) (d)
176
—
1,138
—
—
1,314
Restructuring and other charges (e)
162
—
571
936
—
1,669
Adjusted EBITDA (non-GAAP)
$
(22,222
)
$
6,322
$
1,005
$
(6,491
)
$
604
$
(20,782
)
39 weeks ended January 29,
2022
Retail
Wholesale
DSS
Corporate Services (g)
Eliminations
Total
Net (loss) income
$
(32,605
)
$
7,750
$
(5,286
)
$
(29,034
)
$
556
$
(58,619
)
Add:
Depreciation and amortization expense
27,015
4,060
5,627
53
—
36,755
Interest expense, net
—
—
—
7,809
—
7,809
Income tax expense
—
—
—
811
—
811
Merchandise inventory loss (b)
434
—
—
—
—
434
Impairment loss (non-cash) (c)
6,411
—
—
—
—
6,411
Content amortization (non-cash) (d)
350
—
3,634
—
—
3,984
Restructuring and other charges (e)
2,831
—
—
954
—
3,785
Adjusted EBITDA (non-GAAP)
$
4,436
$
11,810
$
3,975
$
(19,407
)
$
556
$
1,370
39 weeks ended January 30,
2021
Retail
Wholesale
DSS
Corporate Services (g)
Eliminations
Total
Net (loss) income
$
(107,740
)
$
21,625
$
(6,218
)
$
6,611
$
(1,704
)
$
(87,426
)
Add:
Depreciation and amortization expense
30,361
4,231
5,883
88
—
40,563
Interest expense, net
—
—
—
5,876
—
5,876
Income tax benefit
—
—
—
(35,334
)
—
(35,334
)
Impairment loss (non-cash) (c)
27,630
—
—
—
—
27,630
Content amortization (non-cash) (d)
578
—
3,122
—
—
3,700
Restructuring and other charges (e)
4,633
—
571
5,523
—
10,727
Adjusted EBITDA (non-GAAP)
$
(44,538
)
$
25,856
$
3,358
$
(17,236
)
$
(1,704
)
$
(34,264
)
(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 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.
(c)
During the 13 weeks ended January 29,
2022, we evaluated certain of our store-level long-lived assets in
the Retail segment for impairment. Based on the results of the
impairment tests, we recognized an impairment loss (non-cash) of
$6,411 (both pre-tax and after-tax) comprised of $739 $1,793,
$3,668 and $211 of property and equipment, operating lease
right-of-use assets, amortizable intangibles, and other noncurrent
assets, respectively.
During the 13 weeks ended January 30,
2021, we evaluated certain of our store-level long-lived assets in
the Retail segment for impairment. Based on the results of the
impairment tests, we recognized an impairment loss (non-cash) of
$27,630, $20,506 after-tax, comprised of $5,085, $13,328, $6,278
and $2,939 million of property and equipment, operating lease
right-of-use assets, amortizable intangibles, and other noncurrent
assets, respectively.
(d)
Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
condensed consolidated financial statements.
(e)
During the 39 weeks ended January 29, 2022
and January 30, 2021, we recognized restructuring and other charges
totaling $3,785 and $10,727, 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.
(f)
Represents the income tax effects of the
non-GAAP items.
(g)
Interest expense is reflected in Corporate
Services as it is primarily related to our Credit Agreement which
funds 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
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Net cash flows (used in) provided by
operating activities
$
(16,241
)
$
(50,213
)
$
7,901
$
41,173
Less:
Capital expenditures (b)
12,129
9,713
33,393
25,910
Cash interest paid
2,320
1,685
5,982
4,885
Cash taxes (refund) paid
(38
)
14
(7,816
)
6,036
Free Cash Flow (non-GAAP)
$
(30,652
)
$
(61,625
)
$
(23,658
)
$
4,342
(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
39 weeks ended
January 29, 2022
January 30, 2021
January 29, 2022
January 30, 2021
Physical store capital expenditures
$
5,081
$
1,238
$
12,561
$
7,200
Product and system development
4,398
4,288
11,878
9,514
Content development costs
2,037
2,260
6,749
5,088
Other
613
1,927
2,205
4,108
Total Capital Expenditures
$
12,129
$
9,713
$
33,393
$
25,910
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 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 Reports on Form 10-Q for the period ended
July 31, 2021 filed with the SEC on September 2, 2021 and the
Company's Quarterly Report on Form 10-Q for the period ended
October 30, 2021 filed with the SEC on November 30, 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220308005180/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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