Shift to
Remote Learning Accelerates Growth of Digital Products, Partially
Offsetting Decline from Temporarily Closed Campus Stores
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
reported sales and earnings for the first quarter of fiscal year
2021, which ended on August 1, 2020.
The first quarter is historically a low revenue period for the
Company, and its fiscal 2021 first quarter results were
significantly impacted by the COVID-19 pandemic. As many schools
shifted from an on-campus to a remote learning model, the Company
was able to serve students through its Custom Store Solutions
(“CSS”) model, school branded eCommerce sites, virtual bookstores
and digital offerings to ensure students were equipped with their
course materials to continue their education, wherever they may be.
The COVID-19 impact on higher education remains a fluid situation,
and BNED is committed to supporting its campus partners through its
flexible offerings and its ability to quickly pivot to ensure
uninterrupted service as institutions manage the safety of their
campuses.
Financial highlights for the first quarter 2021:
- Consolidated first quarter sales of $204.0 million decreased
36.2%, as compared to the prior year period.
- Consolidated first quarter GAAP net loss of $(46.7) million,
compared to a GAAP net loss of $(32.2) million in the prior year
period. Consolidated first quarter non-GAAP Adjusted Earnings of
$(41.7) million, compared to non-GAAP Adjusted Earnings of $(30.1)
million in the prior year period.
- Consolidated first quarter non-GAAP Adjusted EBITDA of $(38.0)
million, compared to non-GAAP Adjusted EBITDA of $(25.1) million in
the prior year period.
Operational highlights for the first quarter 2021:
- Bartleby® subscribers for the quarter tripled as compared to
the prior year, with revenue increasing 100%. Peak spring traffic
increased over 10x year-over-year and almost 3x versus peak fall
traffic, demonstrating strong student demand for the bartleby
ecosystem.
- Expanded its existing strategic partnership with VitalSource®
to provide students with increased access to additional learning
opportunities through a unique bundle of its bartleby homework help
services, bartleby learn™ and bartleby write™. The VitalSource
direct-to-student channel will now offer students unique access to
the bartleby study bundle™ with the purchase of a qualifying
VitalSource eBook.
- Continued roll-out of the Company’s next generation eCommerce
platform; expected further roll-out throughout fiscal year 2021 to
grow high-margin general merchandise sales.
- Online sales of general merchandise nearly doubled over last
year and accounted for 55% of total general merchandise sales, as
compared to 9% a year ago.
- BNC First Day® year-over-year revenue increased 156%,
benefitting from the accelerated move to digital courseware.
- Increased adoption of BNC First Day Complete, with twelve
campus partners utilizing the complete access model in the Fall
Term 2020, increasing 3x over last year, with more schools expected
to transition to First Day Complete in Spring Term 2021.
- Wholesale revenues increased 11%, benefiting from the shift to
the CSS model and lower returns and allowances due to sales
mix.
- Supported campus partners in navigating the start of the
ongoing fall term, implementing additional safety measures in
stores to protect employees and customers and launching new
programs such as curbside pickup to enhance the shopping
experience.
“As our campus partners continue to navigate the ongoing impacts
of the COVID-19 pandemic, the investments we have made in each of
our businesses have enabled us to provide valuable solutions to our
campus partners during a very challenging time. While our first
quarter performance was significantly impacted by COVID-19 related
campus store closures, the strategic investments we have made to
transform BNED’s platforms and offerings to digital, enabled us to
pivot quickly and offer flexible solutions to our campus partners.
Increased and immediate demand for these solutions resulted in
growth in our BNC Virtual, MBS Wholesale and DSS businesses,” said
Michael P. Huseby, Chief Executive Officer and Chairman, BNED. “In
particular, with the increased emphasis on digital learning this
summer, we saw strong growth in the demand for our bartleby
self-study offerings, which experienced increases in subscribers,
revenue and traffic. We also leveraged our custom store solutions,
virtual bookstore and digital offerings to provide course materials
to students utilizing remote learning. This was all made possible
by the strategy we are executing, including the related investments
we’ve made during the past three years to support our digital
growth initiatives. Going forward, and in light of the current
environment, we will continue to prudently allocate our capital to
maintain the momentum of our growth initiatives, while
simultaneously managing our liquidity carefully during this very
fluid period.”
“As students begin their fall term, we are exploring new ways to
expand distribution of the bartleby ecosystem outside the BNED
footprint, as we have done with our recent VitalSource partnership,
to ensure all students have access to the on-demand learning
support they will need in the upcoming semester,” Mr. Huseby
continued. “We have worked closely with our campus partners over
the past few months as they have had to make many difficult, yet
necessary decisions regarding their campus reopening plans. Whether
they bring students back to campus, implement remote learning or a
hybrid model, as a result of the investments we have made, we have
never been better positioned to serve them through our stores,
eCommerce and digital offerings.”
First Quarter Results for 2021
Results for the 13 weeks of fiscal 2021 and fiscal 2020 are as
follows:
$ in millions
Selected Data (unaudited)
13
Weeks
Q1 2021
13
Weeks
Q1 2020
Total Sales
$204.0
$319.7
Net Loss
$(46.7)
$(32.2)
Non-GAAP(1)
Adjusted EBITDA
$(38.0)
$(25.1)
Adjusted Earnings
$(41.7)
$(30.1)
(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.
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 $115.9 million, or 42.2%, as compared
to the prior year period. Comparable store sales in the Retail
segment decreased 42.8% for the quarter representing approximately
$106.6 million in revenue. As the majority of campus bookstores
remain closed during the quarter and students shifted to remote
learning, physical textbook sales declines were partially mitigated
by the shift to digital textbook products. BNC’s First Day
offering, which offers digital textbooks, grew 156% to $9.1 million
during the quarter. The Company’s general merchandise business,
which includes clothing and food products, was significantly
impacted by the store closures and absence of students on campus,
which was somewhat offset by the growth of its online sales.
To mitigate the impact of the sales decline, the Company reduced
expenses by $26.8 million, or 32.0%, through furloughs and other
cost reduction initiatives.
Retail non-GAAP Adjusted EBITDA for the quarter declined $19.1
million to $(40.6) million, as compared to non-GAAP Adjusted EBITDA
of $(21.5) million in the prior year period.
Wholesale Segment Results
Wholesale first quarter sales of $80.3 million increased $8.0
million, or 11.0%, as compared to the prior year period. Sales
benefitted from the pivot of more than 300 stores to the MBS Custom
Store Solutions model to fill student orders through the MBS
warehouse while campus bookstores were closed, as well as fewer
returns and allowances resulting from the sales mix.
Wholesale non-GAAP Adjusted EBITDA for the quarter grew to $13.0
million, as compared to non-GAAP Adjusted EBITDA of $10.2 million
in the prior year, benefitting from higher sales and lower
expenses.
DSS Segment Results
DSS first quarter sales of $5.9 million increased $0.5 million,
or 9.3%, as compared to the prior year period. Bartleby
subscription revenue increased 100% to $1.4 million, while Student
Brands revenue declined 3.9% to $4.5 million.
DSS non-GAAP Adjusted EBITDA was $1.7 million for the quarter,
compared to non-GAAP Adjusted EBITDA of $1.0 million in the prior
year period, benefitting from sales growth and lower expenses.
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 $5.0 million in the prior
period.
Intercompany gross margin eliminations of $6.8 million for the
quarter were reflected in non-GAAP Adjusted EBITDA, compared to
non-GAAP Adjusted EBITDA of $9.8 million in the prior year
period.
Conference Call
A conference call with Barnes & Noble Education, Inc. senior
management will be webcast at 8:30 a.m. Eastern Time on Thursday,
September 3, 2020 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 2021
second quarter results on or about December 3, 2020.
ABOUT BARNES & NOBLE EDUCATION, INC.
Barnes & Noble Education, Inc. (NYSE: BNED) is a
leading solutions provider for the education industry, driving
affordability, access and achievement at hundreds of academic
institutions nationwide and ensuring millions of students are
equipped for success in the classroom and beyond. Through its
family of brands, BNED offers campus retail services and academic
solutions, a digital direct-to-student learning ecosystem,
wholesale capabilities and more. BNED is a company serving all who
work to elevate their lives through education, supporting students,
faculty and institutions as they make tomorrow a better, more
inclusive and smarter world. For more information, visit
www.bned.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us or our
management, identify forward-looking statements. Moreover, we
operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make, including any statements made in regards to our
response to the COVID-19 pandemic. In light of these risks,
uncertainties and assumptions, the future events and trends
discussed in this press release may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward-looking statements. Such statements reflect
our current views with respect to future events, the outcome of
which is subject to certain risks, including, among others: risks
associated with COVID-19 and the governmental responses to it,
including its impacts across our businesses on demand and
operations, as well as on the operations of our suppliers and other
business partners, and the effectiveness of our actions taken in
response to these risks; general competitive conditions, including
actions our competitors and content providers may take to grow
their businesses; a decline in college enrollment or decreased
funding available for students; decisions by colleges and
universities to outsource their physical and/or online bookstore
operations or change the operation of their bookstores;
implementation of our digital strategy may not result in the
expected growth in our digital sales and/or profitability; risk
that digital sales growth does not exceed the rate of investment
spend; the performance of our online, digital and other
initiatives, integration of and deployment of, additional products
and services including new digital channels, and enhancements to
higher education digital products, and the inability to achieve the
expected cost savings; the risk of price reduction or change in
format of course materials by publishers, which could negatively
impact revenues and margin; the general economic environment and
consumer spending patterns; decreased consumer demand for our
products, low growth or declining sales; the strategic objectives,
successful integration, anticipated synergies, and/or other
expected potential benefits of various acquisitions may not be
fully realized or may take longer than expected; the integration of
the operations of various acquisitions into our own may also
increase the risk of our internal controls being found ineffective;
changes to purchase or rental terms, payment terms, return
policies, the discount or margin on products or other terms with
our suppliers; our ability to successfully implement our strategic
initiatives including our ability to identify, compete for and
execute upon additional acquisitions and strategic investments;
risks associated with operation or performance of MBS Textbook
Exchange, LLC’s point-of-sales systems that are sold to college
bookstore customers; technological changes; risks associated with
counterfeit and piracy of digital and print materials; our
international operations could result in additional risks; our
ability to attract and retain employees; risks associated with data
privacy, information security and intellectual property; trends and
challenges to our business and in the locations in which we have
stores; non-renewal of managed bookstore, physical and/or online
store contracts and higher-than-anticipated store closings;
disruptions to our information technology systems, infrastructure
and data due to computer malware, viruses, hacking and phishing
attacks, resulting in harm to our business and results of
operations; disruption of or interference with third party web
service providers and our own proprietary technology; work
stoppages or increases in labor costs; possible increases in
shipping rates or interruptions in shipping service; product
shortages, including decreases in the used textbook inventory
supply associated with the implementation of publishers’ digital
offerings and direct to student textbook consignment rental
programs, as well as the risks associated with the impacts that
public health crises may have on the ability of our suppliers to
manufacture or source products, particularly from outside of the
United States; changes in domestic and international laws or
regulations, including U.S. tax reform, changes in tax rates, laws
and regulations, as well as related guidance; enactment of laws or
changes in enforcement practices which may restrict or prohibit our
use of texts, emails, interest based online advertising, recurring
billing or similar marketing and sales activities; the amount of
our indebtedness and ability to comply with covenants applicable to
any future debt financing; our ability to satisfy future capital
and liquidity requirements; our ability to access the credit and
capital markets at the times and in the amounts needed and on
acceptable terms; adverse results from litigation, governmental
investigations, tax-related proceedings, or audits; changes in
accounting standards; and the other risks and uncertainties
detailed in the section titled “Risk Factors” in Part I - Item 1A
in our Annual Report on Form 10-K for the year ended May 2, 2020.
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 1,442 college, university, and K-12
school bookstores, comprised of 772 physical bookstores and 670
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 3,400 physical
bookstores (including our Retail Segment's 772 physical bookstores)
and sources and distributes new and used textbooks to our 670
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,
tutoring and test prep services.
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
August 1, 2020
July 27, 2019
Sales:
Product sales and other
$
193,210
$
302,227
Rental income
10,804
17,430
Total sales
204,014
319,657
Cost of sales:
Product and other cost of sales
165,765
238,331
Rental cost of sales
7,387
9,669
Total cost of sales
173,152
248,000
Gross profit
30,862
71,657
Selling and administrative expenses
70,043
97,691
Depreciation and amortization expense
14,063
15,879
Impairment loss (non-cash) (a)
—
433
Restructuring and other charges (a)
5,671
1,466
Operating loss
(58,915
)
(43,812
)
Interest expense, net
2,653
2,532
Loss before income taxes
(61,568
)
(46,344
)
Income tax benefit
(14,916
)
(14,189
)
Net loss
$
(46,652
)
$
(32,155
)
Loss per common share:
Basic
$
(0.96
)
$
(0.68
)
Diluted
$
(0.96
)
$
(0.68
)
Weighted average common shares
outstanding:
Basic
48,411
47,582
Diluted
48,411
47,582
(a) For additional information,
see Note (a) - (d) in the Non-GAP disclosure information of this
Press Release.
13 weeks ended
August 1, 2020
July 27, 2019
Percentage of sales:
Sales:
Product sales and other
94.7
%
94.5
%
Rental income
5.3
%
5.5
%
Total sales
100.0
%
100.0
%
Cost of sales:
Product and other cost of sales (a)
85.8
%
78.9
%
Rental cost of sales (a)
68.4
%
55.5
%
Total cost of sales
84.9
%
77.6
%
Gross profit
15.1
%
22.4
%
Selling and administrative expenses
34.3
%
30.6
%
Depreciation and amortization expense
6.9
%
5.0
%
Impairment loss (non-cash)
—
%
0.1
%
Restructuring and other charges
2.8
%
0.5
%
Operating loss
(28.9
)%
(13.8
)%
Interest expense, net
1.3
%
0.8
%
Loss before income taxes
(30.2
)%
(14.6
)%
Income tax benefit
(7.3
)%
(4.4
)%
Net loss
(22.9
)%
(10.2
)%
(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)
August 1, 2020
July 27, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
7,471
$
8,222
Receivables, net
107,522
98,547
Merchandise inventories, net
575,246
717,765
Textbook rental inventories
16,482
5,221
Prepaid expenses and other current
assets
22,415
18,069
Total current assets
729,136
847,824
Property and equipment, net
94,102
105,902
Operating lease right-of-use assets
320,287
314,355
Intangible assets, net
170,466
189,183
Goodwill
4,700
4,700
Deferred tax assets, net
8,459
—
Other noncurrent assets
33,646
40,457
Total assets
$
1,360,796
$
1,502,421
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
291,496
$
443,134
Accrued liabilities
75,084
75,876
Current operating lease liabilities
131,525
111,155
Short-term borrowings
—
100,000
Total current liabilities
498,105
730,165
Long-term deferred taxes, net
—
598
Long-term operating lease liabilities
209,867
226,534
Other long-term liabilities
45,986
50,270
Long-term borrowings
234,560
74,100
Total liabilities
988,518
1,081,667
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, 52,654 and 51,086 shares, respectively;
outstanding, 48,633 and 47,607 shares, respectively
526
511
Additional paid-in-capital
734,474
728,651
Accumulated deficit
(329,479
)
(276,732
)
Treasury stock, at cost
(33,243
)
(31,676
)
Total stockholders' equity
372,278
420,754
Total liabilities and stockholders'
equity
$
1,360,796
$
1,502,421
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Sales Information
(Unaudited)
Total Sales
The components of the sales variances for
the 13 weeks period are as follows:
Dollars in millions
13 weeks ended
August 1, 2020
July 27, 2019
Retail Sales
New stores (a)
$
7.9
$
6.2
Closed stores (a)
(5.1
)
(5.6
)
Comparable stores (b)
(106.6
)
(10.9
)
Textbook rental deferral
(6.4
)
0.8
Service revenue (c)
(4.7
)
(0.5
)
Other (d)
(1.0
)
(2.4
)
Retail Sales subtotal:
$
(115.9
)
$
(12.4
)
Wholesale Sales:
$
8.0
$
(17.6
)
DSS Sales
$
0.5
$
(0.3
)
Eliminations (e)
$
(8.2
)
$
12.5
Total sales variance
$
(115.6
)
$
(17.8
)
(a) The following is a store count summary for physical stores
and virtual stores:
13 weeks ended
August 1, 2020
July 27, 2019
Number of Stores:
Physical Stores
Virtual Stores
Physical Stores
Virtual Stores
Number of stores at beginning of
period
772
647
772
676
Stores opened
24
40
38
46
Stores closed
24
17
33
8
Number of stores at end of period
772
670
777
714
(b)
For 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.
Comparable Sales - Retail
Segment
Comparable store sales variances by
category for the 13 week periods are as follows:
Dollars in millions
13 weeks ended
August 1, 2020
July 27, 2019
Textbooks (Course Materials)
$
(11.3)
(10.1)
%
$
(13.7)
(11.0)
%
General Merchandise
(87.6)
(68.3)
%
5.9
4.9
%
Trade Books
(7.7)
(85.2)
%
(1.2)
(11.8)
%
Total Comparable Store Sales
$
(106.6)
(42.8)
%
$
(9.0)
(3.5)
%
Comparable store sales includes sales from physical stores that
have been open for an entire fiscal year period and virtual store
sales for the period, does not include sales from closed stores for
all periods presented, and digital agency sales are included on a
gross basis. We believe the current comparable store sales
calculation method reflects the manner in which management views
comparable sales, as well as the seasonal nature of our
business.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Adjusted Earnings
13 weeks ended
August 1, 2020
July 27, 2019
Net loss
$
(46,652)
$
(32,155)
Reconciling items, after-tax (below)
4,936
2,080
Adjusted Earnings (Non-GAAP)
$
(41,716)
$
(30,075)
Reconciling items, pre-tax
Impairment loss (non-cash) (a)
$
—
$
433
Content amortization (non-cash) (b)
1,164
911
Restructuring and other charges (c)
5,671
1,466
Reconciling items, pre-tax
6,835
2,810
Less: Pro forma income tax impact (d)
1,899
730
Reconciling items, after-tax
$
4,936
$
2,080
Adjusted EBITDA
13 weeks ended
August 1, 2020
July 27, 2019
Net loss
$
(46,652)
$
(32,155)
Add:
Depreciation and amortization expense
14,063
15,879
Interest expense, net
2,653
2,532
Income tax benefit
(14,916)
(14,189)
Impairment loss (non-cash) (a)
—
433
Content amortization (non-cash) (b)
1,164
911
Restructuring and other charges (c)
5,671
1,466
Adjusted EBITDA (Non-GAAP)
$
(38,017)
$
(25,123)
(a)
During the 13 weeks ended July
27, 2019, we recognized an impairment loss (non-cash) of $433 in
the Retail Segment related to net capitalized development costs for
a project which are not recoverable.
(b)
Represents amortization of content
development costs (non-cash) recorded in cost of goods sold in the
consolidated financial statements.
(c)
During the 13 weeks ended August
1, 2020 and July 27, 2019, we recognized restructuring and other
charges totaling $5,671 and $1,466, 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, and shareholder activist
activities.
(d)
Represents the income tax effects of the
non-GAAP items.
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Consolidated Non-GAAP
Information
(In thousands)
(Unaudited)
Free Cash Flow (non-GAAP)
13 weeks ended
August 1, 2020
July 27, 2019
Adjusted EBITDA (non-GAAP)
$
(38,017
)
$
(25,123
)
Less:
Capital expenditures (a)
7,055
8,309
Cash interest paid
1,960
1,610
Cash taxes paid (refund)
5,937
(6,598
)
Free Cash Flow (non-GAAP)
$
(52,969
)
$
(28,444
)
(a)
Purchases of property and equipment are
also referred to as capital expenditures. Our investing activities
consist principally of capital expenditures for contractual capital
investments associated with renewing existing contracts, new store
construction, digital initiatives and enhancements to internal
systems and our website. The following table provides the
components of total purchases of property and equipment:
Capital Expenditures
13 weeks ended
August 1, 2020
July 27, 2019
Physical store capital expenditures
$
3,137
$
3,518
Product and system development
2,325
3,342
Content development costs
1,076
685
Other
517
764
Total Capital Expenditures
$
7,055
$
8,309
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages)
(Unaudited)
Segment Information (a)
13 weeks ended
August 1, 2020
July 27, 2019
Sales
Retail
$
158,776
$
274,656
Wholesale
80,294
72,309
DSS
5,872
5,374
Eliminations
(40,928
)
(32,682
)
Total
$
204,014
$
319,657
Gross profit
Retail (b)
$
16,345
$
62,323
Wholesale
16,757
14,918
DSS (b)
5,700
5,141
Eliminations
(6,776
)
(9,814
)
Total
$
32,026
$
72,568
Selling and administrative expenses
Retail
$
56,985
$
83,815
Wholesale
3,791
4,759
DSS
4,036
4,113
Corporate Services
5,244
5,007
Eliminations
(13
)
(3
)
Total
$
70,043
$
97,691
Adjusted EBITDA (Non-GAAP) (c)
Retail
$
(40,640
)
$
(21,492
)
Wholesale
12,966
10,159
DSS
1,664
1,028
Corporate Services
(5,244
)
(5,007
)
Eliminations
(6,763
)
(9,811
)
Total
$
(38,017
)
$
(25,123
)
(a)
See Explanatory Note in this
Press Release for Segment descriptions.
(b)
For the 13 weeks ended August 1,
2020, the Retail Segment and DSS Segment gross margin excludes $210
and $954, respectively, of amortization expense (non-cash) related
to content development costs.
For the 13 weeks ended July 27,
2019, the Retail Segment and DSS Segment gross margin excludes $184
and $727, respectively, of amortization expense (non-cash) related
to content development costs.
(c)
For additional information, see
"Use of Non-GAAP Financial Information" in the Non-GAAP disclosure
information of this Press Release.
Percentage of Segment Sales
13 weeks ended
August 1, 2020
July 27, 2019
Gross margin
Retail
10.3
%
22.7
%
Wholesale
20.9
%
20.6
%
DSS
97.1
%
95.7
%
Elimination
16.6
%
30.0
%
Total gross margin
15.7
%
22.7
%
Selling and administrative expenses
Retail
35.9
%
30.5
%
Wholesale
4.7
%
6.6
%
DSS
68.7
%
76.5
%
Corporate Services
N/A
N/A
Elimination
N/A
N/A
Total selling and administrative
expenses
34.3
%
30.6
%
Use of Non-GAAP Financial Information - Adjusted Earnings,
Adjusted EBITDA and Free Cash Flow
To supplement the Company’s consolidated financial statements
presented in accordance with generally accepted accounting
principles (“GAAP”), in the Press Release attached hereto as
Exhibit 99.1, the Company uses the non-GAAP financial measures of
Adjusted Earnings (defined as net income adjusted for certain
reconciling items), Adjusted EBITDA (defined by the Company as
earnings before interest, taxes, depreciation and amortization, as
adjusted for additional items subtracted from or added to net
income) and Free Cash Flow (defined by the Company as Adjusted
EBITDA less capital expenditures, cash interest and cash
taxes).
These non-GAAP financial measures are not intended as
substitutes for and should not be considered superior to measures
of financial performance prepared in accordance with GAAP. In
addition, the Company's use of these non-GAAP financial measures
may be different from similarly named measures used by other
companies, limiting their usefulness for comparison purposes.
The Company's management reviews these non-GAAP financial
measures as internal measures to evaluate the Company's performance
and manage the Company's operations. The Company's management
believes that these measures are useful performance measures which
are used by the Company to facilitate a comparison of on-going
operating performance on a consistent basis from period-to-period.
The Company's management believes that these non-GAAP financial
measures provide for a more complete understanding of factors and
trends affecting the Company's business than measures under GAAP
can provide alone, as it excludes certain items that do not reflect
the ordinary earnings of its operations. The Company's Board of
Directors and management also use Adjusted EBITDA as one of the
primary methods for planning and forecasting overall expected
performance, for evaluating on a quarterly and annual basis actual
results against such expectations, and as a measure for performance
incentive plans. The Company's management believes that the
inclusion of Adjusted EBITDA and Adjusted Earnings results provides
investors useful and important information regarding the Company's
operating results. The Company believes that Free Cash Flow
provides useful additional information concerning cash flow
available to meet future debt service obligations and working
capital requirements and assists investors in their understanding
of the Company’s operating profitability and liquidity as the
Company manages to the business to maximize margin and
cashflow.
The non-GAAP measures included in the Press Release attached
hereto as Exhibit 99.1 has been reconciled to the comparable GAAP
measures as required under Securities and Exchange Commission (the
“SEC”) rules regarding the use of non-GAAP financial measures. All
of the items included in the reconciliations below are either (i)
non-cash items or (ii) items that management does not consider in
assessing the Company's on-going operating performance. The Company
urges investors to carefully review the GAAP financial information
included as part of the Company’s Form 10-K dated May 2, 2020 filed
with the SEC on July 14, 2020, which includes consolidated
financial statements for each of the three years for the period
ended May 2, 2020 (Fiscal 2020, Fiscal 2019, and Fiscal 2018).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200903005277/en/
Media Contact: Carolyn J.
Brown Senior Vice President Corporate Communications & Public
Affairs 908-991-2967 cbrown@bned.com Investor Contact: Andy Milevoj Vice President
Corporate Finance and Investor Relations 908-991-2776
amilevoj@bned.com
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