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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Barnes and Noble Education Inc | NYSE:BNED | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 8.03 | 3 | 09:16:12 |
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:
Operational highlights for the Third Quarter 2022:
*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 millionsSelected 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:
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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