Expands First Day® Programs Driving Access,
Affordability and Convenience for Students Nationwide
New Fanatics and Lids College (FLC) Partnership
to Accelerate the Recovery of In-Store and Online General
Merchandise Sales
Bartleby® Posts Strong Growth; Subscriber
Experience to be Enhanced by New Wolfram / Alpha Math Solver
David Nenke Appointed President of Digital
Student Solutions (DSS)
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
2021, which ended on January 30, 2021.
BNED’s fiscal 2021 third quarter results were significantly
impacted by the ongoing COVID-19 pandemic, as many schools
continued to adjust their learning model and restrict on-campus
activities in response to the pandemic. As compared to a year ago,
substantially fewer students learned on campus, as many schools
implemented virtual/remote learning models and curtailed on-campus
classes and activities due to health and safety concerns. While
many athletic-conferences resumed sporting activities, fan
attendance at games was severely restricted or even eliminated,
which further impacted sales from Retail’s high-margin general
merchandise offerings. Additionally, year-over-year sales were
impacted by COVID-19 related enrollment declines in higher
education.
The COVID-19 impact on higher education remains a fluid
situation and BNED remains committed to supporting its campus
partners through its flexible offerings and ability to quickly
pivot to ensure uninterrupted service as institutions manage the
safety of their campuses and the Company manages the safety of its
campus stores.
Financial highlights for the third quarter 2021:
- Consolidated third quarter sales of $411.6 million decreased
18.1%, as compared to the prior year period; year to date
consolidated sales of $1,211.1 million decreased 24.0%, as compared
to the prior year period.
- Consolidated third quarter GAAP net loss of $(48.3) million,
compared to GAAP net loss of $(1.7) million in the prior year
period; year to date GAAP net loss of $(87.4) million, compared to
GAAP net income of $2.1 million in the prior year period. The third
quarter net loss includes a pre-tax non-cash impairment loss of
$27.6 million, $20.5 million after-tax, on certain store-level
long-lived assets in the Retail segment.
- Consolidated third quarter non-GAAP Adjusted Earnings of
$(25.6) million, compared to $(0.7) million in the prior year
period; year to date non-GAAP Adjusted Earnings of $(56.2) million,
compared to $7.0 million in the prior year period.
- Consolidated third quarter non-GAAP Adjusted EBITDA of $(20.8)
million, compared to $13.4 million in the prior year period; year
to date non-GAAP Adjusted EBITDA of $(34.3) million, compared to
$62.8 million in the prior year period.
Operational highlights for the third quarter 2021:
- Entered into a long-term strategic omnichannel merchandising
partnership with FLC, forging an alliance with the two online and
offline leaders in the licensed sports and emblematic merchandise
category. Under the terms of the agreement, Fanatics and Lids
together made a $15 million strategic equity investment in
BNED.
- BNC First Day® year-over-year revenue increased 107%,
benefitting from the accelerated move to digital courseware.
- Reached agreements with 31 campus stores to date, which
includes new business accounts, to support the BNC First Day®
Complete program in Fall Term 2021, representing over 160,000 in
total undergraduate enrollment; up from 12 campus stores and 43,000
in total undergraduate enrollment in Fall Term 2020.
- Continue to work with a significant number of additional
campuses to secure agreements to launch First Day Complete for Fall
Term 2021.
- Gained over 210,000 gross subscribers for the bartleby® suite
of services year to date, with DSS revenue increasing 11.8% for the
same period.
- Announced agreement with Wolfram|Alpha to develop a math solver
as a new feature in the Company’s bartleby suite of solutions.
Powered by Wolfram|Alpha’s best-in-class computation engine, the
math solver will allow students to access an interactive digital
calculator that provides real-time, step-by-step explanations for
even the most advanced math problems.
- Continued to attract new clients and generate new business
growth, signing over $84 million in net new business to date this
fiscal year and expanding BNED’s footprint by 54 BNC institutions
and 31 K-12 schools.
“As our campus partners and students nationwide navigate and
adapt to the pandemic’s impacts on education, BNED continues to
innovate and expand its capabilities and solutions to be their
partner of choice, both now and in the future,” said Michael P.
Huseby, CEO, BNED. “Traditional learning routines have been upended
resulting in increased demand for both our bartleby digital
self-study offerings, and our First Day courseware delivery models
resulting in the strong growth of these responsive solutions this
quarter. We look forward to further growing our bartleby suite of
solutions through the new math solver tool we are developing with
Wolfram|Alpha, ensuring that students have on-demand access to all
the learning support they need. For our campus partners, we
continue to support their efforts to drive affordability, access
and an improved student experience through our rapidly expanding
First Day and First Day Complete inclusive access models, which
have provided substantial savings and convenience this Spring. Our
recently announced partnership with Fanatics Lids College will help
us to further enhance the campus experience for our partners,
offering an expanded product selection, a world-class online and
mobile experience and a progressive direct-to-consumer platform.
The benefits to our customers and BNED of the FLC alliance should
turbo charge the expected recovery of Retail’s general merchandise
sales beginning in our upcoming fiscal year ’22 as we currently
expect a significant shift to on campus activities to return.”
“As expected, our Spring Rush period saw lower sales due to the
pandemic, particularly in our high-margin general merchandise
business,” said Thomas Donohue, Chief Financial Officer, BNED. “We
continue to manage expenses prudently to offset the sales
disruption and our current liquidity position remains strong
despite the challenging climate.”
Third Quarter 2021 and Year to Date Results
Results for the 13 and 39 weeks of fiscal
2021 and fiscal 2020 are as follows:
$ in millions
13 and 39 Weeks Selected Data
(unaudited)
13 Weeks
13 Weeks
39 Weeks
39 Weeks
Q3 2021
Q3 2020
2021
2020
Total Sales
$
411.6
$
502.3
$
1,211.1
$
1,594.2
Net (Loss) Income
$
(48.3
)
$
(1.7
)
$
(87.4
)
$
2.1
Non-GAAP(1)
Adjusted EBITDA
$
(20.8
)
$
13.4
$
(34.3
)
$
62.8
Adjusted Earnings
$
(25.6
)
$
(0.7
)
$
(56.2
)
$
7.0
(1) These non-GAAP financial measures have been reconciled in
the attached schedules to the most directly comparable GAAP
measures 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 in the third quarter decreased
by $70.3 million, or 15.4%, as compared to the prior year period.
Comparable store sales decreased 19.9% for the quarter, with
comparable textbook sales declining 8.1%, as compared to 9.3% a
year ago, and comparable general merchandise sales declining 45.8%,
as compared to a 0.7% decline a year ago, primarily due to fewer
students on campus, curtailed campus activities and significant
restrictions on attendance at sporting events.
Consistent with prior years, the Spring Rush
period extended beyond the quarter due to later school openings and
the continued pattern of students buying course materials later in
the semester. Factoring in the fiscal month of February, comparable
store sales for the retail segment decreased 26.7% through fiscal
February.
Retail non-GAAP Adjusted EBITDA for the
quarter decreased to $(22.2) million, as compared to non-GAAP
Adjusted EBITDA of $8.1 million in the prior year period.
Wholesale Segment Results
Wholesale sales of $39.5 million for the
quarter decreased by $27.5 million, or 41.1%, as compared to $67.0
million in the prior year period. The decrease is primarily due to
decreased gross sales, partially offset by lower returns and
allowances, both impacted by the COVID-19 pandemic.
Wholesale non-GAAP Adjusted EBITDA for the
quarter was $6.3 million, as compared to non-GAAP Adjusted EBITDA
of $9.9 million in the prior year period. This decrease was
primarily driven by lower sales, somewhat mitigated by higher gross
margins.
DSS Segment Results
DSS sales of $7.2 million for the quarter
increased by $0.8 million, or 12.0%, as compared to $6.4 million in
the prior year period. The increase is primarily due to an increase
in sales of bartleby subscriptions.
DSS non-GAAP Adjusted EBITDA was $1.0 million
for the quarter, as compared to non-GAAP Adjusted EBITDA of $1.2
million in the prior year period, declining slightly on higher
expenses, including advertising costs.
Effective March 8, 2021, David Nenke has been
appointed President of Digital Student Solutions (DSS). As
President of DSS, Mr. Nenke will be responsible for the overall
management and operations of the Company’s direct-to-consumer DSS
segment and will report directly to Michael P. Huseby. Mr.
Nenke brings more than 25 years of strategic and broad operational
experience to BNED, along with a track record of success in
building, scaling and transforming digital retail
businesses. Prior to joining BNED, Mr. Nenke held several
operational and finance roles at Amazon, where he most recently
served as General Manager of Amazon Explore, as well as senior
level finance roles at Coles Group and Cable & Wireless
Optus.
Other
Expenses for Corporate Services, which
includes unallocated shared-service costs, such as various
corporate level expenses and other governance functions, were $6.5
million for the quarter as compared to $5.2 million in the prior
period.
Intercompany gross margin eliminations were
$0.5 million for the quarter, as compared to $(0.8) million in the
prior year period, which reflect the inter-segment sales from
Wholesale to Retail.
Outlook
The Company expects COVID-19 to continue to impact performance
for the remainder of its fiscal year 2021 ending on May 1, 2021.
Looking ahead, while it is difficult to predict the trajectory of
the COVID-19 virus with any certainty, based on its current views,
the Company expects to generate positive non-GAAP Adjusted EBITDA
in fiscal year 2022, as most schools return to a traditional
on-campus environment for learning and sporting activities. The
Company expects non-GAAP adjusted EBITDA to approach annual
pre-COVID levels in fiscal year 2023, as campuses fully resume on
campus learning and sporting activities with substantially
less-restrictive COVID related policies and operating
protocols.
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 9, 2021 and can be accessed at the Barnes & Noble
Education corporate website at investor.bned.com or
www.bned.com.
Barnes & Noble Education expects to report fiscal 2021
fourth quarter results on or about July 1, 2021.
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 impact 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 1,441 college, university, and K-12
school bookstores, comprised of 765 physical bookstores and 676
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 3,300 physical
bookstores (including our Retail Segment's 765 physical bookstores)
and sources and distributes new and used textbooks to our 676
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 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Sales:
Product sales and other
$
373,502
$
453,678
$
1,118,544
$
1,474,448
Rental income
38,111
48,614
92,568
119,729
Total sales
411,613
502,292
1,211,112
1,594,177
Cost of sales:
Product and other cost of sales
315,607
354,999
933,847
1,146,400
Rental cost of sales
25,394
28,758
60,506
70,635
Total cost of sales
341,001
383,757
994,353
1,217,035
Gross profit
70,612
118,535
216,759
377,142
Selling and administrative expenses
92,708
106,184
254,723
317,279
Depreciation and amortization expense
13,307
15,117
40,563
46,542
Impairment loss (non-cash) (a)
27,630
—
27,630
433
Restructuring and other charges (a)
1,669
205
10,727
3,240
Operating (loss) income
(64,702
)
(2,971
)
(116,884
)
9,648
Interest expense, net
2,311
1,904
5,876
5,882
(Loss) income before income taxes
(67,013
)
(4,875
)
(122,760
)
3,766
Income tax (benefit) expense
(18,724
)
(3,182
)
(35,334
)
1,683
Net (loss) income
$
(48,289
)
$
(1,693
)
$
(87,426
)
$
2,083
(Loss) Income per common share:
Basic
$
(0.96
)
$
(0.04
)
$
(1.78
)
$
0.04
Diluted
$
(0.96
)
$
(0.04
)
$
(1.78
)
$
0.04
Weighted average common shares
outstanding:
Basic
50,082
48,298
49,099
47,911
Diluted
50,082
48,298
49,099
48,767
(a) For additional information, see Note
(a) - (d) in the Non-GAAP disclosure information of this Press
Release.
13 weeks ended
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Percentage of sales:
Sales:
Product sales and other
90.7
%
90.3
%
92.4
%
92.5
%
Rental income
9.3
%
9.7
%
7.6
%
7.5
%
Total sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales:
Product and other cost of sales (a)
84.5
%
78.2
%
83.5
%
77.8
%
Rental cost of sales (a)
66.6
%
59.2
%
65.4
%
59.0
%
Total cost of sales
82.8
%
76.4
%
82.1
%
76.3
%
Gross profit
17.2
%
23.6
%
17.9
%
23.7
%
Selling and administrative expenses
22.5
%
21.1
%
21.0
%
19.9
%
Depreciation and amortization expense
3.2
%
3.0
%
3.3
%
2.9
%
Impairment loss (non-cash)
6.7
%
—
%
2.3
%
—
%
Restructuring and other charges
0.4
%
—
%
0.9
%
0.2
%
Operating (loss) income
(15.6)
%
(0.5)
%
(9.6)
%
0.7
%
Interest expense, net
0.6
%
0.4
%
0.5
%
0.4
%
(Loss) income before income taxes
(16.2)
%
(0.9)
%
(10.1)
%
0.3
%
Income tax (benefit) expense
(4.5)
%
(0.6)
%
(2.9)
%
0.1
%
Net (loss) income
(11.7)
%
(0.3)
%
(7.2)
%
0.2
%
(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 30, 2021
January 25, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
9,915
$
9,798
Receivables, net
227,174
238,045
Merchandise inventories, net
452,611
530,260
Textbook rental inventories
40,720
48,474
Prepaid expenses and other current
assets
25,281
24,617
Total current assets
755,701
851,194
Property and equipment, net
87,405
101,055
Operating lease right-of-use assets
242,937
251,743
Intangible assets, net
155,536
179,596
Goodwill
4,700
4,700
Deferred tax assets, net
14,984
2,647
Other noncurrent assets
27,195
37,169
Total assets
$
1,288,458
$
1,428,104
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
318,795
$
389,050
Accrued liabilities
125,815
193,705
Current operating lease liabilities
105,624
102,247
Total current liabilities
550,234
685,002
Long-term operating lease liabilities
190,453
169,227
Other long-term liabilities
52,814
50,529
Long-term borrowings
150,800
65,900
Total liabilities
944,301
970,658
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, 53,327 and 52,139 shares, respectively;
outstanding, 51,379 and 48,297 shares, respectively
533
521
Additional paid-in-capital
733,019
732,320
Accumulated deficit
(370,253
)
(242,494
)
Treasury stock, at cost
(19,142
)
(32,901
)
Total stockholders' equity
344,157
457,446
Total liabilities and stockholders'
equity
$
1,288,458
$
1,428,104
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 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Retail Sales
New stores (a)
$
17.3
$
16.3
$
52.7
$
61.9
Closed stores (a)
(8.3
)
(18.1
)
(32.2
)
(50.8
)
Comparable stores (b)
(83.3
)
(37.9
)
(384.0
)
(99.0
)
Textbook rental deferral
1.6
0.7
11.7
3.0
Service revenue (c)
1.8
(1.4
)
(1.9
)
(3.9
)
Other (d)
0.6
0.3
2.2
(5.9
)
Retail Sales subtotal:
$
(70.3
)
$
(40.1
)
$
(351.5
)
$
(94.7
)
Wholesale Sales:
$
(27.5
)
$
(11.5
)
$
(23.4
)
$
(29.8
)
DSS Sales
$
0.8
$
1.2
$
2.0
$
1.2
Eliminations (e)
$
6.3
$
4.7
$
(10.2
)
$
17.2
Total sales variance
$
(90.7
)
$
(45.7
)
$
(383.1
)
$
(106.1
)
(a)
The following is a store count summary for
physical stores and virtual stores:
13 weeks ended
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Number of Stores:
Physical
Stores
Virtual
Stores
Physical
Stores
Virtual
Stores
Physical
Stores
Virtual
Stores
Physical
Stores
Virtual
Stores
Number of stores at beginning of
period
769
671
772
664
772
647
772
676
Stores opened
—
7
5
7
30
58
45
62
Stores closed
4
2
5
7
37
29
45
74
Number of stores at end of period
765
676
772
664
765
676
772
664
(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 and 39
week periods are as follows:
Dollars in millions
13 weeks ended
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Textbooks (Course Materials)
$
(25.0
)
(8.1
)
%
$
(31.2
)
(9.3
)
%
$
(136.1
)
(14.3
)
%
$
(85.2
)
(8.3
)
%
General Merchandise
(58.0
)
(45.8
)
%
(0.9
)
(0.7
)
%
(242.2
)
(54.9
)
%
4.7
1.1
%
Trade Books
(5.5
)
(61.1
)
%
(2.3
)
(20.2
)
%
(19.4
)
(69.3
)
%
(4.9
)
(14.7
)
%
Total Comparable Store Sales
$
(88.5
)
(19.9
)
%
$
(34.4
)
(7.3
)
%
$
(397.7
)
(28.0
)
%
$
(85.4
)
(5.7
)
%
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
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Net (loss) income
$
(48,289
)
$
(1,693
)
$
(87,426
)
$
2,083
Reconciling items, after-tax (below)
22,717
945
31,213
4,928
Adjusted Earnings (Non-GAAP)
$
(25,572
)
$
(748
)
$
(56,213
)
$
7,011
Reconciling items, pre-tax
Impairment loss (non-cash) (a)
$
27,630
$
—
$
27,630
$
433
Content amortization (non-cash) (b)
1,314
1,064
3,700
2,973
Restructuring and other charges (c)
1,669
205
10,727
3,240
Reconciling items, pre-tax
30,613
1,269
42,057
6,646
Less: Pro forma income tax impact (d)
7,896
324
10,844
1,718
Reconciling items, after-tax
$
22,717
$
945
$
31,213
$
4,928
Adjusted EBITDA
13 weeks ended
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Net (loss) income
$
(48,289
)
$
(1,693
)
$
(87,426
)
$
2,083
Add:
Depreciation and amortization expense
13,307
15,117
40,563
46,542
Interest expense, net
2,311
1,904
5,876
5,882
Income tax (benefit) expense
(18,724
)
(3,182
)
(35,334
)
1,683
Impairment loss (non-cash) (a)
27,630
—
27,630
433
Content amortization (non-cash) (b)
1,314
1,064
3,700
2,973
Restructuring and other charges (c)
1,669
205
10,727
3,240
Adjusted EBITDA (Non-GAAP)
$
(20,782
)
$
13,415
$
(34,264
)
$
62,836
(a)
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
$27.6 million, $20.5 million after-tax, comprised of $5.1 million,
$13.3 million, $6.3 million and $2.9 million of property and
equipment, operating lease right-of-use assets, amortizable
intangibles, and other noncurrent assets, respectively.
During the 39 weeks ended January 25,
2020, we recognized an impairment loss (non-cash) of $433 in the
Retail Segment related to net capitalized development costs for a
project which were 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 39 weeks ended January 30, 2021
and January 25, 2020, we recognized restructuring and other charges
totaling $10,727 and $3,240, 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 Fanatics and FLC partnership agreements.
(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
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Adjusted EBITDA (non-GAAP)
$
(20,782
)
$
13,415
$
(34,264
)
$
62,836
Less:
Capital expenditures (a)
9,713
7,586
25,910
26,841
Cash interest paid
1,685
1,282
4,885
5,311
Cash taxes paid (refund)
14
1,915
6,036
(3,962
)
Free Cash Flow (non-GAAP)
$
(32,194
)
$
2,632
$
(71,095
)
$
34,646
(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
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Physical store capital expenditures
$
1,238
$
3,005
$
7,200
$
11,122
Product and system development
4,288
3,224
9,514
10,668
Content development costs
2,260
989
5,088
3,222
Other
1,927
368
4,108
1,829
Total Capital Expenditures
$
9,713
$
7,586
$
25,910
$
26,841
BARNES & NOBLE EDUCATION,
INC. AND SUBSIDIARIES
Segment Information
(In thousands, except
percentages)
(Unaudited)
Segment Information (a)
13 weeks ended
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Sales
Retail
$
387,669
$
457,988
$
1,122,959
$
1,474,413
Wholesale
39,465
66,996
156,146
179,515
DSS
7,206
6,435
19,025
17,024
Eliminations
(22,727
)
(29,127
)
(87,018
)
(76,775
)
Total
$
411,613
$
502,292
$
1,211,112
$
1,594,177
Gross profit
Retail (b)
$
53,699
$
100,000
$
165,748
$
323,473
Wholesale
10,658
14,235
38,129
41,688
DSS (b)
7,020
6,137
18,412
16,207
Eliminations
549
(773
)
(1,830
)
(1,253
)
Total
$
71,926
$
119,599
$
220,459
$
380,115
Selling and administrative expenses
Retail
$
75,921
$
91,860
$
210,286
$
274,253
Wholesale
4,336
4,312
12,273
13,664
DSS
6,015
4,987
15,054
13,715
Corporate Services
6,491
5,154
17,236
15,829
Eliminations
(55
)
(129
)
(126
)
(182
)
Total
$
92,708
$
106,184
$
254,723
$
317,279
Adjusted EBITDA (Non-GAAP) (c)
Retail
$
(22,222
)
$
8,140
$
(44,538
)
$
49,220
Wholesale
6,322
9,923
25,856
28,024
DSS
1,005
1,150
3,358
2,492
Corporate Services
(6,491
)
(5,154
)
(17,236
)
(15,829
)
Eliminations
604
(644
)
(1,704
)
(1,071
)
Total
$
(20,782
)
$
13,415
$
(34,264
)
$
62,836
(a)
See Explanatory Note in this Press Release
for Segment descriptions.
(b)
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. 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.
For the 13 and 39 weeks ended January 25,
2020, the Retail Segment gross margin excludes $210 and $604
respectively of amortization expense (non-cash) related to content
development costs. For the 13 and 39 weeks ended January 25,2020,
the DSS Segment gross margin excludes $854 and $2,369,
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
39 weeks ended
January 30, 2021
January 25, 2020
January 30, 2021
January 25, 2020
Gross margin
Retail
13.9
%
21.8
%
14.8
%
21.9
%
Wholesale
27.0
%
21.2
%
24.4
%
23.2
%
DSS
97.4
%
95.4
%
96.8
%
95.2
%
Elimination
(2.4)
%
2.7
%
2.1
%
1.6
%
Total gross margin
17.5
%
23.8
%
18.2
%
23.8
%
Selling and administrative expenses
Retail
19.6
%
20.1
%
18.7
%
18.6
%
Wholesale
11.0
%
6.4
%
7.9
%
7.6
%
DSS
83.5
%
77.5
%
79.1
%
80.6
%
Corporate Services
N/A
N/A
N/A
N/A
Elimination
N/A
N/A
N/A
N/A
Total selling and administrative
expenses
22.5
%
21.1
%
21.0
%
19.9
%
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), the Company's Quarterly Report
on Form 10-Q for the period ended August 1, 2020 filed with the SEC
on September 3, 2020 and the Company's Quarterly Report on Form
10-Q for the period ended October 31, 2020 filed with the SEC on
December 8, 2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210309005209/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 & Investor Relations (908) 991-2776
amilevoj@bned.com
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