Barnes & Noble Education Reports Fourth Quarter and Fiscal Year 2021 Financial Results
Barnes & Noble Education (NYSE: BNED) reported a challenging fiscal year 2021 due to the COVID-19 pandemic, resulting in significant revenue declines. Fourth quarter sales were $222.8 million, down 13.3%, while annual sales fell 22.5% to $1,433.9 million. The company faced a net loss of $(131.8) million for the year, an increase from $(38.3) million in the prior year. However, digital initiatives like the BNC First Day® model saw 94% revenue growth, and bartleby® subscriptions grew by over 300,000. Looking ahead, BNED anticipates a return to positive EBITDA in fiscal 2022.
- BNC First Day® digital course delivery revenue up 94%.
- Gained over 300,000 gross subscribers for bartleby® services.
- Secured over $103 million in new business contracts.
- Fourth quarter sales down 13.3% year-over-year.
- Fiscal year sales decreased by 22.5%.
- GAAP net loss increased to $(131.8) million compared to $(38.3) million last year.
Barnes & Noble Education, Inc. (NYSE: BNED), a leading solutions provider for the education industry, today reported sales and earnings for the fourth quarter and fiscal year 2021. The fourth quarter and full year ended May 1, 2021, consisted of 13 weeks and 52 weeks, respectively, as compared to 14 weeks and 53 weeks in the prior year. Comparable sales data in this release excludes the impact of the additional week in Fiscal Year 2020.
BNED’s fiscal 2021 results were significantly impacted by the COVID-19 pandemic. Many schools adjusted their learning model and restricted on-campus activities in response to the pandemic, including the implementation of virtual/remote learning models to curtail on-campus classes and activities due to health and safety concerns. While many athletic-conferences resumed sporting activities during fiscal 2021, 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.
Financial results for the fourth quarter and fiscal year 2021:
-
Consolidated fourth quarter sales of
$222.8 million decreased13.3% as compared to the prior year period; consolidated fiscal year sales of$1,433.9 million decreased22.5% as compared to the prior year. -
Consolidated fourth quarter GAAP net loss was
$(44.4) million , compared to a net loss of$(40.3) million in the prior year period. Consolidated fiscal year GAAP net loss was$(131.8) million , compared to a net loss of$(38.3) million in the prior year. -
Consolidated fourth quarter non-GAAP Adjusted EBITDA loss was
$(31.4) million , compared to a non-GAAP Adjusted EBITDA loss of$(20.7) million in the prior year; consolidated fiscal year non-GAAP Adjusted EBITDA loss was$(65.6) million , as compared to non-GAAP Adjusted EBITDA of$42.2 million in the prior year. -
Consolidated fourth quarter non-GAAP Adjusted Earnings was
$(32.8) million , compared to non-GAAP Adjusted Earnings of$(28.1) million in the prior year period; consolidated fiscal year non-GAAP Adjusted Earnings was$(89.0) million , compared to non-GAAP Adjusted Earnings of$(21.1) million in the prior year. -
Total fiscal year 2021 borrowings increased by only
$2.9 million to$177.6 million as compared to the prior year period, led by working capital improvements, the sale of logo and emblematic merchandise inventory to Lids, and the strategic equity investment in BNED by Fanatics and Lids.
Operational highlights for fiscal year 2021:
-
BNC First Day® digital course delivery model year-over-year revenue increased
94% , benefitting from the accelerated move to digital courseware. - Reached agreements for 64 campus stores to support the BNC First Day® Complete courseware delivery program in Fall Term 2021, representing approximately 300,000 in total undergraduate enrollment; up from 12 campus stores and 43,000 in total undergraduate enrollment in Fall Term 2020.
-
Gained over 300,000 gross subscribers for the bartleby® suite of services in fiscal 2021, with DSS revenue increasing
15.7% for the same period. - Launched beta release of bartleby Expert Live Chat, a text-based tutoring offering that connects students to our expert network for students who have follow-up questions on a bartleby solution, need more clarity on a textbook question, or want to speak to a tutor as soon as possible.
-
Continued to attract new clients and generate new business growth, signing over
$103 million in gross new business in fiscal year 2021 and expanding BNED’s footprint by 52 institutions and 31 K-12 schools. - Entered into a long-term strategic omnichannel merchandising partnership with Fanatics and Lids (FLC), forging an alliance with the two retail and ecommerce leaders in the licensed sports and emblematic merchandise category. Significant joint go-to-market activity planned with Fanatics and Lids to attract new business through enhanced offering.
“COVID-19 had a profound impact on the world over the past sixteen months and presented many challenges for the education industry. Institutions implemented remote and hybrid learning models, seemingly overnight. Our teams at BNED quickly pivoted to support our campus partners and provide valuable solutions. Their efforts have been remarkable, and I could not be prouder,” said Michael P. Huseby, Chairman and CEO, BNED. “We ensured students had their course materials wherever they were studying, and our DSS offerings provided on-demand digital tutoring and learning services to students at a time when their traditional resources were not as readily available. In addition to providing uninterrupted service, we also continued to execute and make significant progress on our strategic initiatives, including the expansion of our footprint through new school contracts, growing the number of schools and students served through our First Day inclusive access models, significantly growing our gross bartleby subscriber count to over 300,000, and forging a partnership with Fanatics and Lids (FLC), which will both bolster our logo and emblematic offerings and, as we have already started to experience, provide us with a significant advantage in competing for new business and renewing existing contracts.
“The education industry has been evolving rapidly – and while the COVID-19 pandemic shut down campuses nationwide and upended the traditional learning model, it did not stop the industry’s evolution. Rather, we believe the pandemic has further accelerated higher education’s transformation. As we look ahead to fiscal 2022 and beyond, we are focused on scaling our strategic initiatives,” continued Mr. Huseby. “We expect these initiatives to make our offerings for our campus partners even more relevant and to generate new business growth as more schools look to implement our valuable solutions. We look forward to reviewing these initiatives in further detail at our Investor Day on June 30.”
Fourth Quarter and Fiscal Year Results for 2021
Results for the 13 weeks and 52 weeks of fiscal year 2021 and the 14 weeks and 53 weeks of fiscal year 2020 are as follows:
$ in millions |
Selected Data (unaudited) |
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13 Weeks Q4 2021 |
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14 Weeks Q4 2020 |
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52 Weeks 2021 |
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53 Weeks 2020 |
Total Sales |
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Net Loss |
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Non-GAAP(1) |
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Adjusted EBITDA |
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Adjusted Earnings |
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(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
Fourth quarter Retail sales decreased by
Fiscal year 2021 retail sales were
Wholesale Segment Results
Wholesale fourth quarter sales of
Wholesale non-GAAP Adjusted EBITDA for the quarter was
DSS Segment Results
DSS fourth quarter sales of
DSS non-GAAP Adjusted EBITDA was
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
Outlook
While it is difficult to predict the ongoing effects 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.
Investor Day Webcast
The Company’s senior management will host a virtual investor conference beginning at 9:00 am ET on Wednesday, June 30, 2021 to discuss the Company's financial results and long-term strategic initiatives. The webcast of this investor conference can be accessed on BNED’s corporate website at investor.bned.com.
Barnes & Noble Education expects to report fiscal year 2022 first quarter results in early September 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, unparalleled best-in-class assortment of school apparel through a strategic alliance with Fanatics and Lids, wholesale capabilities and more. BNED is a company serving all who work to elevate their lives through education, supporting students, faculty and institutions as they make tomorrow a better, more inclusive and smarter world. For more information, visit www.bned.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and information relating to us and our business that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and similar expressions, as they relate to us or our management, identify forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make, including any statements made in regards to our response to the COVID-19 pandemic. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others: risks associated with COVID-19 and the governmental responses to it, including its impacts across our businesses on demand and operations, as well as on the operations of our suppliers and other business partners, and the effectiveness of our actions taken in response to these risks; general competitive conditions, including actions our competitors and content providers may take to grow their businesses; a decline in college enrollment or decreased funding available for students; decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores; implementation of our digital strategy may not result in the expected growth in our digital sales and/or profitability; risk that digital sales growth does not exceed the rate of investment spend; the performance of our online, digital and other initiatives, integration of and deployment of, additional products and services including new digital channels, and enhancements to higher education digital products, and the inability to achieve the expected cost savings; the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues and margin; the general economic environment and consumer spending patterns; decreased consumer demand for our products, low growth or declining sales; the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various acquisitions may not be fully realized or may take longer than expected; the integration of the operations of various acquisitions into our own may also increase the risk of our internal controls being found ineffective; changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers; our ability to successfully implement our strategic initiatives including our ability to identify, compete for and execute upon additional acquisitions and strategic investments; risks associated with operation or performance of MBS Textbook Exchange, LLC’s point-of-sales systems that are sold to college bookstore customers; technological changes; risks associated with counterfeit and piracy of digital and print materials; our international operations could result in additional risks; our ability to attract and retain employees; risks associated with data privacy, information security and intellectual property; trends and challenges to our business and in the locations in which we have stores; non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings; disruptions to our information technology systems, infrastructure and data due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations; disruption of or interference with third party web service providers and our own proprietary technology; work stoppages or increases in labor costs; possible increases in shipping rates or interruptions in shipping service; product shortages, including decreases in the used textbook inventory supply associated with the implementation of publishers’ digital offerings and direct to student textbook consignment rental programs, as well as the risks associated with the impacts that public health crises may have on the ability of our suppliers to manufacture or source products, particularly from outside of the United States; changes in domestic and international laws or regulations, including U.S. tax reform, changes in tax rates, laws and regulations, as well as related guidance; enactment of laws or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest based online advertising, recurring billing or similar marketing and sales activities; the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing; our ability to satisfy future capital and liquidity requirements; our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms; adverse results from litigation, governmental investigations, tax-related proceedings, or audits; changes in accounting standards; and the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I - Item 1A in our Annual Report on Form 10-K for the year ended May 1, 2021. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release.
EXPLANATORY NOTE
We have three reportable segments: Retail, Wholesale and DSS as follows:
- The Retail Segment operates 1,417 college, university, and K-12 school bookstores, comprised of 769 physical bookstores and 648 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 independently or along with our merchant partners, 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 are offered at a reduced price through a fee charged by the institution or included in tuition, 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 769 physical bookstores) and sources and distributes new and used textbooks to our 648 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 Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) |
|||||||||||||||
13 weeks ended May 1, 2021 |
|
14 weeks ended May 2, 2020 |
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
|||||||||
Sales: |
|
|
|
|
|
|
|
||||||||
Product sales and other |
$ |
181,196 |
|
|
$ |
196,752 |
|
|
$ |
1,299,740 |
|
|
$ |
1,671,200 |
|
Rental income |
|
41,582 |
|
|
|
60,134 |
|
|
|
134,150 |
|
|
|
179,863 |
|
Total sales |
|
222,778 |
|
|
|
256,886 |
|
|
|
1,433,890 |
|
|
|
1,851,063 |
|
Cost of sales: |
|
|
|
|
|
|
|
||||||||
Product and other cost of sales (a) |
|
160,142 |
|
|
|
157,302 |
|
|
|
1,093,989 |
|
|
|
1,303,702 |
|
Rental cost of sales |
|
26,734 |
|
|
|
34,177 |
|
|
|
87,240 |
|
|
|
104,812 |
|
Total cost of sales |
|
186,876 |
|
|
|
191,479 |
|
|
|
1,181,229 |
|
|
|
1,408,514 |
|
Gross profit |
|
35,902 |
|
|
|
65,407 |
|
|
|
252,661 |
|
|
|
442,549 |
|
Selling and administrative expenses |
|
83,557 |
|
|
|
87,193 |
|
|
|
338,280 |
|
|
|
404,472 |
|
Depreciation and amortization expense |
|
12,404 |
|
|
|
15,318 |
|
|
|
52,967 |
|
|
|
61,860 |
|
Impairment loss (non-cash) (a) |
|
— |
|
|
|
— |
|
|
|
27,630 |
|
|
|
433 |
|
Restructuring and other charges (a) |
|
(767 |
) |
|
|
15,327 |
|
|
|
9,960 |
|
|
|
18,567 |
|
Operating loss |
|
(59,292 |
) |
|
|
(52,431 |
) |
|
|
(176,176 |
) |
|
|
(42,783 |
) |
Interest expense, net |
|
2,211 |
|
|
|
1,563 |
|
|
|
8,087 |
|
|
|
7,445 |
|
Loss before income taxes |
|
(61,503 |
) |
|
|
(53,994 |
) |
|
|
(184,263 |
) |
|
|
(50,228 |
) |
Income tax benefit |
|
(17,142 |
) |
|
|
(13,661 |
) |
|
|
(52,476 |
) |
|
|
(11,978 |
) |
Net loss |
$ |
(44,361 |
) |
|
$ |
(40,333 |
) |
|
$ |
(131,787 |
) |
|
$ |
(38,250 |
) |
|
|
|
|
|
|
|
|
||||||||
Loss per common share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
(0.86 |
) |
|
$ |
(0.84 |
) |
|
$ |
(2.65 |
) |
|
$ |
(0.80 |
) |
Diluted |
$ |
(0.86 |
) |
|
$ |
(0.84 |
) |
|
$ |
(2.65 |
) |
|
$ |
(0.80 |
) |
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
51,379 |
|
|
|
48,298 |
|
|
|
49,669 |
|
|
|
48,013 |
|
Diluted |
|
51,379 |
|
|
|
48,298 |
|
|
|
49,669 |
|
|
|
48,013 |
|
(a) For additional information, see Note (a) - (d) in the Non-GAAP disclosure information of this Press Release. |
|||||||||||||||
|
13 weeks ended May 1, 2021 |
|
14 weeks ended May 2, 2020 |
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
||||
Percentage of sales: |
|
|
|
|
|
|
|
||||
Sales: |
|
|
|
|
|
|
|
||||
Product sales and other |
81.3 |
% |
|
76.6 |
% |
|
90.6 |
% |
|
90.3 |
% |
Rental income |
18.7 |
% |
|
23.4 |
% |
|
9.4 |
% |
|
9.7 |
% |
Total sales |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
Cost of sales: |
|
|
|
|
|
|
|
||||
Product and other cost of sales (a) |
88.4 |
% |
|
79.9 |
% |
|
84.2 |
% |
|
78.0 |
% |
Rental cost of sales (a) |
64.3 |
% |
|
56.8 |
% |
|
65.0 |
% |
|
58.3 |
% |
Total cost of sales |
83.9 |
% |
|
74.5 |
% |
|
82.4 |
% |
|
76.1 |
% |
Gross profit |
16.1 |
% |
|
25.5 |
% |
|
17.6 |
% |
|
23.9 |
% |
Selling and administrative expenses |
37.5 |
% |
|
33.9 |
% |
|
23.6 |
% |
|
21.9 |
% |
Depreciation and amortization |
5.6 |
% |
|
6.0 |
% |
|
3.7 |
% |
|
3.3 |
% |
Impairment loss (non-cash) |
— |
% |
|
— |
% |
|
1.9 |
% |
|
— |
% |
Restructuring and other charges |
(0.3) |
% |
|
6.0 |
% |
|
0.7 |
% |
|
1.0 |
% |
Operating loss |
(26.6) |
% |
|
(20.4) |
% |
|
(12.3) |
% |
|
(2.3) |
% |
Interest expense, net |
1.0 |
% |
|
0.6 |
% |
|
0.6 |
% |
|
0.4 |
% |
Loss before income taxes |
(27.6) |
% |
|
(21.0) |
% |
|
(12.9) |
% |
|
(2.7) |
% |
Income tax benefit |
(7.7) |
% |
|
(5.3) |
% |
|
(3.7) |
% |
|
(0.6) |
% |
Net loss |
(19.9) |
% |
|
(15.7) |
% |
|
(9.2) |
% |
|
(2.1) |
% |
(a) Represents the percentage these costs bear to the related sales, instead of total sales. |
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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share data) (Unaudited) |
|||||||
May 1, 2021 |
|
May 2, 2020 |
|||||
ASSETS |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
8,024 |
|
|
$ |
8,242 |
|
Receivables, net |
|
121,072 |
|
|
|
90,851 |
|
Merchandise inventories, net |
|
281,112 |
|
|
|
428,939 |
|
Textbook rental inventories |
|
28,692 |
|
|
|
40,710 |
|
Prepaid expenses and other current assets |
|
61,933 |
|
|
|
16,177 |
|
Total current assets |
|
500,833 |
|
|
|
584,919 |
|
Property and equipment, net |
|
89,172 |
|
|
|
97,739 |
|
Operating lease right-of-use assets |
|
240,456 |
|
|
|
250,837 |
|
Intangible assets, net |
|
150,904 |
|
|
|
175,125 |
|
Goodwill |
|
4,700 |
|
|
|
4,700 |
|
Deferred tax assets, net |
|
23,248 |
|
|
|
7,805 |
|
Other noncurrent assets |
|
29,105 |
|
|
|
35,307 |
|
Total assets |
$ |
1,038,418 |
|
|
$ |
1,156,432 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
137,578 |
|
|
$ |
143,678 |
|
Accrued liabilities |
|
92,871 |
|
|
|
95,420 |
|
Current operating lease liabilities |
|
92,513 |
|
|
|
92,571 |
|
Short-term borrowings |
|
50,000 |
|
|
|
75,000 |
|
Total current liabilities |
|
372,962 |
|
|
|
406,669 |
|
Long-term operating lease liabilities |
|
184,780 |
|
|
|
186,142 |
|
Other long-term liabilities |
|
52,042 |
|
|
|
46,170 |
|
Long-term borrowings |
|
127,600 |
|
|
|
99,700 |
|
Total liabilities |
|
737,384 |
|
|
|
738,681 |
|
Commitments and contingencies |
|
— |
|
|
|
— |
|
Stockholders' equity: |
|
|
|
||||
Preferred stock, |
|
— |
|
|
|
— |
|
Common stock, |
|
533 |
|
|
|
521 |
|
Additional paid-in-capital |
|
734,257 |
|
|
|
732,958 |
|
Accumulated deficit |
|
(414,614 |
) |
|
|
(282,827 |
) |
Treasury stock, at cost |
|
(19,142 |
) |
|
|
(32,901 |
) |
Total stockholders' equity |
|
301,034 |
|
|
|
417,751 |
|
Total liabilities and stockholders' equity |
$ |
1,038,418 |
|
|
$ |
1,156,432 |
|
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flow (Unaudited) (In thousands, except per share data) |
||||||||
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
|||||
Cash flows from operating activities: |
|
|
|
|
||||
Net loss |
|
$ |
(131,787 |
) |
|
$ |
(38,250 |
) |
Adjustments to reconcile net loss to net cash flows from operating activities: |
|
|
|
|
||||
Depreciation and amortization expense |
|
|
52,967 |
|
|
|
61,860 |
|
Content amortization expense |
|
|
5,034 |
|
|
|
4,082 |
|
Amortization of deferred financing costs |
|
|
1,112 |
|
|
|
1,095 |
|
Impairment loss (non-cash) (a) |
|
|
27,630 |
|
|
|
433 |
|
Merchandise inventory loss and write-off (a) |
|
|
14,960 |
|
|
|
— |
|
Deferred taxes |
|
|
(15,443 |
) |
|
|
(5,380 |
) |
Stock-based compensation expense |
|
|
5,095 |
|
|
|
6,638 |
|
Changes in operating lease right-of-use assets and liabilities |
|
|
(4,367 |
) |
|
|
18,399 |
|
Changes in other long-term assets and liabilities and other, net |
|
|
9,238 |
|
|
|
947 |
|
Changes in other operating assets and liabilities, net |
|
|
68,443 |
|
|
|
(58,500 |
) |
Net cash flow provided by (used in) operating activities |
|
|
32,882 |
|
|
|
(8,676 |
) |
Cash flows from investing activities: |
|
|
|
|
||||
Purchases of property and equipment |
|
|
(37,223 |
) |
|
|
(36,192 |
) |
Changes in other noncurrent assets and other |
|
|
348 |
|
|
|
(827 |
) |
Net cash flow used in investing activities |
|
|
(36,875 |
) |
|
|
(37,019 |
) |
Cash flows from financing activities: |
|
|
|
|
||||
Proceeds from borrowings under Credit Agreement |
|
|
722,600 |
|
|
|
600,900 |
|
Repayments of borrowings under Credit Agreement |
|
|
(719,700 |
) |
|
|
(559,700 |
) |
Payment of deferred financing costs |
|
|
(1,076 |
) |
|
|
— |
|
Sales of treasury shares |
|
|
10,869 |
|
|
|
— |
|
Purchase of treasury shares |
|
|
(894 |
) |
|
|
(1,265 |
) |
Net cash flows provided by financing activities |
|
|
11,799 |
|
|
|
39,935 |
|
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
|
7,806 |
|
|
|
(5,760 |
) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
9,008 |
|
|
|
14,768 |
|
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
16,814 |
|
|
$ |
9,008 |
|
Changes in other operating assets and liabilities, net: |
|
|
|
|
||||
Receivables, net |
|
$ |
(30,221 |
) |
|
$ |
7,320 |
|
Merchandise inventories |
|
|
132,867 |
|
|
|
(8,617 |
) |
Textbook rental inventories |
|
|
12,018 |
|
|
|
6,291 |
|
Prepaid expenses and other current assets |
|
|
(37,492 |
) |
|
|
(4,399 |
) |
Accounts payable and accrued liabilities |
|
|
(8,729 |
) |
|
|
(59,095 |
) |
Changes in other operating assets and liabilities, net |
|
$ |
68,443 |
|
|
$ |
(58,500 |
) |
|
|
|
|
|
||||
Supplemental cash flow information: |
|
|
|
|
||||
Cash paid during the period for: |
|
|
|
|
||||
Interest paid |
|
$ |
6,778 |
|
|
$ |
6,796 |
|
Income taxes paid (net of refunds) |
|
$ |
6,008 |
|
|
$ |
(4,141 |
) |
(a) For additional information, see Note (a) - (b) in the Non-GAAP disclosure information of this Press Release. |
||||||||
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Sales Information (Unaudited) |
|
Total Sales
The results of operations for the fourth quarter and full-year ended May 1, 2021 consisted of 13 weeks and 52 weeks, respectively, as compared to 14 weeks and 53 weeks in the prior year. The components of the sales variances are as follows:
Dollars in millions |
|
May 1, 2021 |
||||||
|
|
13 weeks ended |
|
52 weeks ended |
||||
Retail Sales |
|
|
|
|
||||
New stores (a) (b) |
|
$ |
6.1 |
|
|
$ |
64.2 |
|
Closed stores (a) (b) |
|
|
(2.9 |
) |
|
|
(35.4 |
) |
Comparable stores (b) |
|
|
(20.1 |
) |
|
|
(409.2 |
) |
Textbook rental deferral |
|
|
(15.0 |
) |
|
|
(3.3 |
) |
Service revenue (c) |
|
|
1.1 |
|
|
|
(0.7 |
) |
Other (d) |
|
|
(0.2 |
) |
|
|
2.0 |
|
Retail Sales subtotal: |
|
$ |
(31.0 |
) |
|
$ |
(382.4 |
) |
Wholesale Sales |
|
$ |
(9.1 |
) |
|
$ |
(32.5 |
) |
DSS Sales |
|
$ |
1.7 |
|
|
$ |
3.7 |
|
Eliminations (e) |
|
$ |
4.3 |
|
|
$ |
(6.0 |
) |
Total sales variance |
|
$ |
(34.1 |
) |
|
$ |
(417.2 |
) |
(a) The following is a store count summary for physical stores and virtual stores: |
|||||||||||||||||||||||
|
13 weeks ended |
|
14 weeks ended |
|
52 weeks ended |
|
53 weeks ended |
||||||||||||||||
|
May 1, 2021 |
|
May 2, 2020 |
|
May 1, 2021 |
|
May 2, 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 |
765 |
|
|
676 |
|
|
772 |
|
|
664 |
|
|
772 |
|
|
647 |
|
|
772 |
|
|
676 |
|
Stores opened |
8 |
|
|
— |
|
|
5 |
|
|
9 |
|
|
40 |
|
|
58 |
|
|
50 |
|
|
71 |
|
Stores closed |
4 |
|
|
28 |
|
|
5 |
|
|
26 |
|
|
43 |
|
|
57 |
|
|
50 |
|
|
100 |
|
Number of stores at end of period |
769 |
|
|
648 |
|
|
772 |
|
|
647 |
|
|
769 |
|
|
648 |
|
|
772 |
|
|
647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(b) |
|
Effective April 4, 2021, as per the FLC merchandising partnership agreement, logo and emblematic general merchandise sales were fulfilled by FLC and we recognized commission revenue earned for these sales on a net basis. For Comparable 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 are as follows:
| Dollars in millions |
|
May 1, 2021 |
||||||||||||||
|
|
13 weeks ended (a) |
|
52 weeks ended (a) |
||||||||||||
| Textbooks (Course Materials) |
|
$ |
(17.1 |
) |
|
(17.9) |
% |
|
$ |
(158.4 |
) |
|
(15.2) |
% |
||
| General Merchandise |
|
|
6.9 |
|
|
9.6 |
% |
|
|
(235.3 |
) |
|
(45.9) |
% |
||
| Trade Books |
|
|
(1.5 |
) |
|
(33.2) |
% |
|
|
(20.9 |
) |
|
(64.3) |
% |
||
| Total Comparable Store Sales |
|
$ |
(11.7 |
) |
|
(6.9) |
% |
|
$ |
(414.6 |
) |
|
(26.1) |
% |
||
|
|
|
|
|
|
|
|
|
|
|
||||||
(a) |
The results of operations for the fourth quarter and full-year ended May 1, 2021 and consisted of 13 weeks and 52 weeks, respectively, as compared to 14 weeks and 53 weeks in the prior year. Comparable sales data in this release exclude the impact of the additional week for fiscal 2020. |
|||||||||||||||
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. Sales for logo and emblematic general merchandise fulfilled by FLC 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 (Unaudited) (In thousands) |
|
Adjusted Earnings |
13 weeks ended May 1, 2021 |
|
14 weeks ended May 2, 2020 |
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
||||||||
Net loss |
$ |
(44,361 |
) |
|
$ |
(40,333 |
) |
|
$ |
(131,787 |
) |
|
$ |
(38,250 |
) |
Reconciling items, after-tax (below) |
|
11,541 |
|
|
|
12,196 |
|
|
|
42,754 |
|
|
|
17,124 |
|
Adjusted Earnings (Non-GAAP) |
$ |
(32,820 |
) |
|
$ |
(28,137 |
) |
|
$ |
(89,033 |
) |
|
$ |
(21,126 |
) |
|
|
|
|
|
|
|
|
||||||||
Reconciling items, pre-tax |
|
|
|
|
|
|
|
||||||||
Impairment loss (non-cash) (a) |
$ |
— |
|
|
$ |
— |
|
|
$ |
27,630 |
|
|
$ |
433 |
|
Merchandise inventory loss and write-off (b) |
|
14,960 |
|
|
|
— |
|
|
|
14,960 |
|
|
|
— |
|
Content amortization (non-cash) (c) |
|
1,334 |
|
|
|
1,109 |
|
|
|
5,034 |
|
|
|
4,082 |
|
Restructuring and other charges (d) |
|
(767 |
) |
|
|
15,327 |
|
|
|
9,960 |
|
|
|
18,567 |
|
Reconciling items, pre-tax |
|
15,527 |
|
|
|
16,436 |
|
|
|
57,584 |
|
|
|
23,082 |
|
Less: Pro forma income tax impact (e) |
|
3,986 |
|
|
|
4,240 |
|
|
|
14,830 |
|
|
|
5,958 |
|
Reconciling items, after-tax |
$ |
11,541 |
|
|
$ |
12,196 |
|
|
$ |
42,754 |
|
|
$ |
17,124 |
|
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA |
13 weeks ended May 1, 2021 |
|
14 weeks ended May 2, 2020 |
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
||||||||
Net loss |
$ |
(44,361 |
) |
|
$ |
(40,333 |
) |
|
$ |
(131,787 |
) |
|
$ |
(38,250 |
) |
Add: |
|
|
|
|
|
|
|
||||||||
Depreciation and amortization expense |
|
12,404 |
|
|
|
15,318 |
|
|
|
52,967 |
|
|
|
61,860 |
|
Interest expense, net |
|
2,211 |
|
|
|
1,563 |
|
|
|
8,087 |
|
|
|
7,445 |
|
Income tax benefit |
|
(17,142 |
) |
|
|
(13,661 |
) |
|
|
(52,476 |
) |
|
|
(11,978 |
) |
Impairment loss (non-cash) (a) |
|
— |
|
|
|
— |
|
|
|
27,630 |
|
|
|
433 |
|
Merchandise inventory loss and write-off (b) |
|
14,960 |
|
|
|
— |
|
|
|
14,960 |
|
|
|
— |
|
Content amortization (non-cash) (c) |
|
1,334 |
|
|
|
1,109 |
|
|
|
5,034 |
|
|
|
4,082 |
|
Restructuring and other charges (d) |
|
(767 |
) |
|
|
15,327 |
|
|
|
9,960 |
|
|
|
18,567 |
|
Adjusted EBITDA (Non-GAAP) |
$ |
(31,361 |
) |
|
$ |
(20,677 |
) |
|
$ |
(65,625 |
) |
|
$ |
42,159 |
|
|
|
|
|
|
|
|
|
||||||||
(a) |
|
During the 52 weeks ended May 1, 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 |
|
|
|
(b) |
|
During the 52 weeks ended May 1, 2021, we recognized a merchandise inventory loss and write-off of |
|
|
|
(c) |
|
Represents amortization of content development costs (non-cash) recorded in cost of goods sold in the consolidated financial statements. |
|
|
|
(d) |
|
During the 52 weeks ended May 1, 2021, we recognized restructuring and other charges totaling |
|
|
|
|
|
During the 53 weeks ended May 2, 2020, we recognized restructuring and other charges totaling |
|
|
|
(e) |
|
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) |
|
|
|
||||
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
||||
Adjusted EBITDA (non-GAAP) |
$ |
(65,625 |
) |
|
$ |
42,159 |
|
Less: |
|
|
|
||||
Capital expenditures (a) |
|
37,223 |
|
|
|
36,192 |
|
Cash interest |
|
6,778 |
|
|
|
6,796 |
|
Cash taxes |
|
6,008 |
|
|
|
(4,141 |
) |
Free Cash Flow (non-GAAP) |
$ |
(115,634 |
) |
|
$ |
3,312 |
|
(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 |
|
||||||
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
||||
Physical store capital expenditures |
$ |
10,382 |
|
|
$ |
13,926 |
|
Product and system development |
11,747 |
|
|
15,710 |
|
||
Content development costs |
8,741 |
|
|
4,335 |
|
||
Other |
6,353 |
|
|
2,221 |
|
||
Total Capital Expenditures |
$ |
37,223 |
|
|
$ |
36,192 |
|
|
|
|
|
||||
BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Segment Information (Unaudited) (In thousands, except percentages) |
|
Segment Information (a) |
13 weeks ended May 1, 2021 |
|
14 weeks ended May 2, 2020 |
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
||||||||
Sales |
|
|
|
|
|
|
|
||||||||
Retail (b) |
$ |
207,511 |
|
|
$ |
238,479 |
|
|
$ |
1,330,470 |
|
|
$ |
1,712,892 |
|
Wholesale |
|
9,679 |
|
|
|
18,838 |
|
|
|
165,825 |
|
|
|
198,353 |
|
DSS |
|
8,349 |
|
|
|
6,637 |
|
|
|
27,374 |
|
|
|
23,661 |
|
Eliminations |
|
(2,761 |
) |
|
|
(7,068 |
) |
|
|
(89,779 |
) |
|
|
(83,843 |
) |
Total |
$ |
222,778 |
|
|
$ |
256,886 |
|
|
$ |
1,433,890 |
|
|
$ |
1,851,063 |
|
|
|
|
|
|
|
|
|
||||||||
Gross profit |
|
|
|
|
|
|
|
||||||||
Retail (c) |
$ |
45,574 |
|
|
$ |
60,623 |
|
|
$ |
211,322 |
|
|
$ |
384,096 |
|
Wholesale |
|
(3,446 |
) |
|
|
(1,883 |
) |
|
|
34,683 |
|
|
|
39,805 |
|
DSS (c) |
|
8,195 |
|
|
|
6,374 |
|
|
|
26,607 |
|
|
|
22,581 |
|
Eliminations |
|
1,873 |
|
|
|
1,402 |
|
|
|
43 |
|
|
|
149 |
|
Total |
$ |
52,196 |
|
|
$ |
66,516 |
|
|
$ |
272,655 |
|
|
$ |
446,631 |
|
|
|
|
|
|
|
|
|
||||||||
Selling and administrative expenses |
|
|
|
|
|
|
|
||||||||
Retail |
$ |
67,863 |
|
|
$ |
73,616 |
|
|
$ |
278,149 |
|
|
$ |
347,869 |
|
Wholesale |
|
3,812 |
|
|
|
4,574 |
|
|
|
16,085 |
|
|
|
18,238 |
|
DSS |
|
7,062 |
|
|
|
5,457 |
|
|
|
22,116 |
|
|
|
19,172 |
|
Corporate Services |
|
4,843 |
|
|
|
3,574 |
|
|
|
22,079 |
|
|
|
19,403 |
|
Eliminations |
|
(23 |
) |
|
|
(28 |
) |
|
|
(149 |
) |
|
|
(210 |
) |
Total |
$ |
83,557 |
|
|
$ |
87,193 |
|
|
$ |
338,280 |
|
|
$ |
404,472 |
|
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA (Non-GAAP) (d) |
|
|
|
|
|
|
|
||||||||
Retail |
$ |
(22,289 |
) |
|
$ |
(12,993 |
) |
|
$ |
(66,827 |
) |
|
$ |
36,227 |
|
Wholesale |
|
(7,258 |
) |
|
|
(6,457 |
) |
|
|
18,598 |
|
|
|
21,567 |
|
DSS |
|
1,133 |
|
|
|
917 |
|
|
|
4,491 |
|
|
|
3,409 |
|
Corporate Services |
|
(4,843 |
) |
|
|
(3,574 |
) |
|
|
(22,079 |
) |
|
|
(19,403 |
) |
Eliminations |
|
1,896 |
|
|
|
1,430 |
|
|
|
192 |
|
|
|
359 |
|
Total |
$ |
(31,361 |
) |
|
$ |
(20,677 |
) |
|
$ |
(65,625 |
) |
|
$ |
42,159 |
|
(a) |
|
See Explanatory Note in this Press Release for Segment descriptions and consolidation information. |
|
|
|
(b) |
|
Effective April 4, 2021, as per the FLC merchandising partnership agreement, logo and emblematic general merchandise sales were fulfilled by FLC and we recognized commission revenue earned for these sales on a net basis. |
|
|
|
(c) |
|
For the 13 and 52 weeks ended May 1, 2021, gross margin excludes a merchandise inventory loss and write-off of |
|
|
|
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|
Gross margin for the DSS Segment excludes amortization expense (non-cash) related to content development costs of |
|
|
|
(d) |
|
For additional information, see "Use of Non-GAAP Financial Information" in the Non-GAAP disclosure information of this Press Release. |
| Percentage of Segment Sales |
|
|
|
||||
|
13 weeks ended May 1, 2021 |
|
14 weeks ended May 2, 2020 |
|
52 weeks ended May 1, 2021 |
|
53 weeks ended May 2, 2020 |
Gross margin |
|
|
|
|
|
|
|
Retail |
|
|
|
|
|
|
|
Wholesale |
(35.6)% |
|
(10.0)% |
|
|
|
|
DSS |
|
|
|
|
|
|
|
Eliminations |
N/A |
|
N/A |
|
N/A |
|
N/A |
Total gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
|
|
|
|
|
|
Retail |
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
|
|
DSS |
|
|
|
|
|
|
|
Corporate and Other |
N/A |
|
N/A |
|
N/A |
|
N/A |
Total selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 cash flow.
The non-GAAP measures included in the Press Release attached hereto as Exhibit 99.1 has been reconciled to the comparable GAAP measures as required under Securities and Exchange Commission (the “SEC”) rules regarding the use of non-GAAP financial measures. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing the Company's on-going operating performance. The Company urges investors to carefully review the GAAP financial information included as part of the Company’s Form 10-K dated May 1, 2021 expected to be 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 (Fiscal 2021, Fiscal 2020, and Fiscal 2019) and the Company's Quarterly Report on Form 10-Q for the period ended August 1, 2020 filed with the SEC on September 3, 2020, the Company's Quarterly Report on Form 10-Q for the period ended October 31, 2020 filed with the SEC on December 8, 2020, and the Company's Quarterly Report on Form 10-Q for the period ended January 30, 2021 filed with the SEC on March 9, 2021.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210629006010/en/
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