2Q BNC First Day® Program Revenues Increased ∼18% YOY to $235 million

Basking Ridge, NJ, December 9, 2024 - Barnes & Noble Education, Inc. (NYSE: BNED), a leading solutions provider for the education industry, today reported sales and earnings for the second quarter ended on October 26, 2024. The following figures are GAAP results from continuing operations on a consolidated basis, unless noted otherwise. Note that Adjusted EBITDA is a non-GAAP calculation. Full quarterly financial tables and a reconciliation of non-GAAP measures to the most applicable GAAP measures can be found in the Investor Relations section of BNED’s website at https://investors.bned.com and its Current Report on Form 8-K filed with the SEC on the date of this release.

Barnes & Noble Education is a highly seasonal business, and the second quarter is the most significant quarter from a revenue perspective because it includes a majority of the fall back-to-school period.

Second quarter fiscal year 2025 total revenue decreased by $(8.3) million, or -1.4%, from last year to $602.1 million, primarily driven by a net decrease of 109 physical and virtual locations, many of which were closures of underperforming stores, which has helped to improve profitability. Gross Comparable Store Sales increased by $24.4 million, or 3.8%, during the quarter, helping to offset much of the decline from closed stores.

Revenues from BNC First Day® programs increased by $36.2 million, or ∼18%, as First Day® Complete continues to see rapid growth in institutional adoption, with a total of 183 campus stores utilizing First Day Complete in the fall 2024 term with a total enrollment of approximately 925,000* undergraduate and graduate students, up from 800,000 in the prior year.

Overall net income doubled, increasing by $24.9 million, or 100.1%, to $49.7 million, compared to $24.9 million in the prior year, due to improved operating income, lower interest expense, and reduced restructuring and other charges. Adjusted EBITDA improved by $14.9 million, or 29.1%, to $66.0 million from $51.1 million last year, primarily due to lower selling and administrative expenses of $13.0 million as the result of cost-saving and productivity initiatives and closed stores.

Year-to-date fiscal year 2025 net loss was $(49.7) million, inclusive of a $55.2 million non-cash loss on extinguishment of debt, compared to a net loss of $(25.1) million in the prior year. Adjusted EBITDA improved by $20.1 million, or 79.7%, to $45.3 million from $25.2 million last year. Notably, interest costs were $5.8 million lower than a year ago due to materially lower borrowings under our bank ABL agreement.

Jonathan Shar, CEO, noted, “Our second-quarter performance during the pivotal fall back-to-school season underscores the exciting progress we’re making in our business transformation. Strong adoption of our First Day affordable access programs, exceptional retail execution supporting our client institutions, and a disciplined focus on operational efficiency are reflected in our outstanding results. We are confident in our improving momentum and the opportunities ahead.”

Barnes & Noble Education is focused on driving material improvements in its profitability and further improving its already strong financial foundation. Management is working on simplifying its operations to better focus on its core physical and virtual bookstore businesses. Go-forward savings from recently completed and in-progress initiatives are now estimated at over $20 million.

The Company recently completed a $40 million At-the-Market sales agreement with BTIG, LLC. The proceeds of this capital raise will reduce go-forward annual interest expense by nearly $4 million per year, reduce risk, accelerate our ability to win new customers, and enhance our strategic and balance sheet optionality. In the medium-term, management is seeking to reduce annual interest expenses to around $10 million or less.

The Company’s budget goals continue to target a material improvement in fiscal year 2025 GAAP operating results and Adjusted EBITDA versus last year. Based on current estimates of capital expenditures and significantly reduced interest costs from last fiscal year, BNED believes it can drive meaningful operating free cash flow, which will be used to further de-lever its balance sheet.

* Total undergraduate and graduate student enrollment as reported by National Center for Education Statistics (NCES) as of January 16, 2024.

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, 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 and smarter world. For more information, visit www.bned.com.

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. Actual results could differ materially from those projected in the forward-looking statements, which include but are not limited to the anticipated savings and benefits of our expense management initiatives, anticipated growth in our BNC First Day program, future capital expenditures, expected trends in financial results, including forward-looking Adjusted EBITDA and operating free cash flow. We caution you not to place undue reliance on these forward-looking statements. Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, but not limited to: the amount of our indebtedness and ability to comply with covenants contained in our credit agreement; our ability to maintain adequate liquidity levels to support ongoing inventory purchases and related vendor payments in a timely manner; slower than anticipated pace of adoption of our BNC First Day® equitable and inclusive access course material models; our dependency on strategic service provider relationships and the potential for adverse operational and financial changes to these strategic service provider relationships; non-renewal of our managed bookstore, physical and/or online store contracts; general competitive conditions; a decline in college enrollment or decreased funding available for students; technological changes, including the adoption of artificial intelligence technologies for educational content; disruptions to our information technology systems, infrastructure, data, supplier systems, and customer ordering and payment systems due to computer malware, viruses, hacking and phishing attacks; disruption of or interference with third party service providers and our own proprietary technology; impacts that public health crises may have on the overall demand for BNED products and services, our operations, the operations of our suppliers, service providers, and campus partners as well as the ability of our suppliers to manufacture or source products, particularly from outside of the United States; and changes in applicable domestic and international laws, rules or regulations or changes in enforcement practices, including, without limitation, the impact of recently proposed regulatory changes by the United States Department of Education, U.S. tax reform, or changes to consumer data privacy rights legislation, as well as related guidance. Moreover, we operate in a very competitive and rapidly changing environment and new risks may 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.

For a more detailed discussion of these factors, and other factors that could cause actual results to vary materially, interested parties should review the risk factors listed in the Company’s Annual Report on Form 10-K for the year ended April 27, 2024 as filed with the SEC. Any forward-looking statements made by us in this press release speak only as of the date of this press release, and we do not intend to update these forward-looking statements after the date of this press release, except as required by law.

 

			13 weeks ended												26 weeks ended
			October 26, 2024						October 28, 2023						October 26, 2024						October 28, 2023
Sales:
Product sales and other			$	559,674					$	569,698					$	810,600					$	822,348
Rental income			42,448						40,681						54,953						52,192
Total sales			602,122						610,379						865,553						874,540
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales			442,092						451,953						651,517						658,967
Rental cost of sales			22,387						22,184						29,187						28,697
Total cost of sales			464,479						474,137						680,704						687,664
Gross profit			137,643						136,242						184,849						186,876
Selling and administrative expenses			72,940						85,961						139,963						163,437
Depreciation and amortization expense			8,530						10,175						21,587						20,428
Loss on extinguishment of debt (a)			—						—						55,233						—
Restructuring and other charges (a)			(150)						4,274						3,468						8,907
Operating income (loss)			56,323						35,832						(35,402)						(5,896)
Interest expense, net			5,463						10,664						13,081						18,918
Income (loss) from continuing operations before income taxes			50,860						25,168						(48,483)						(24,814)
Income tax expense (benefit)			1,125						314						1,261						303
Income (loss) from continuing operations			$	49,735					$	24,854					$	(49,744)					$	(25,117)
Loss from discontinued operations, net of tax of $0, $0, $0 and $20, respectively			$	—					$	(674)					$	—					$	(1,091)
Net income (loss)			$	49,735					$	24,180					$	(49,744)					$	(26,208)
Earnings (loss) per Common Stock:
Basic:
Continuing operations			$	1.87					$	9.36					$	(2.48)					$	(9.47)
Discontinued operations			$	—					$	(0.25)					$	—					$	(0.41)
Total Basic Earnings (Loss) per share			$	1.87					$	9.11					$	(2.48)					$	(9.88)
Weighted average common shares outstanding - Basic			26,527						2,655						20,019						2,651
Diluted:
Continuing operations			$	1.87					$	9.36					$	(2.48)					$	(9.47)
Discontinued operations			$	—					$	(0.25)					$	—					$	(0.41)
Total Diluted Earnings (Loss) per share			$	1.87					$	9.11					$	(2.48)					$	(9.88)
Weighted average common shares outstanding - Diluted			26,542						2,655						20,019						2,651

(a)     For additional information, see the Notes in the Non-GAAP disclosure information of this Press Release.

(a)     Represents the percentage these costs bear to the related sales, instead of total sales.

Non-GAAP Information (a)

Consolidated Adjusted Earnings (non-GAAP) (a) - Continuing Operations			13 weeks ended												26 weeks ended
			October 26, 2024						October 28, 2023						October 26, 2024						October 28, 2023
Net income (loss) from continuing operations			$	49,735					$	24,854					$	(49,744)					$	(25,117)
Reconciling items (below)			1,105						5,073						59,093						10,663
Adjusted Earnings (non-GAAP)			$	50,840					$	29,927					$	9,349					$	(14,454)
Reconciling items
Loss on extinguishment of debt (b)			$	—					$	—					$	55,233					$	—
Restructuring and other charges (c)			(150)						4,274						3,468						8,907
Stock-based compensation expense (non-cash)			1,255						799						392						1,756
Reconciling items (d)			$	1,105					$	5,073					$	59,093					$	10,663
Consolidated Adjusted EBITDA (non-GAAP) (a) - Continuing Operations			13 weeks ended												26 weeks ended
			October 26, 2024						October 28, 2023						October 26, 2024						October 28, 2023
Net income (loss) from continuing operations			$	49,735					$	24,854					$	(49,744)					$	(25,117)
Add:
Depreciation and amortization expense			8,530						10,175						21,587						20,428
Interest expense, net			5,463						10,664						13,081						18,918
Income tax expense (benefit)			1,125						314						1,261						303
Loss on extinguishment of debt (b)			—						—						55,233						—
Restructuring and other charges (c)			(150)						4,274						3,468						8,907
Stock-based compensation expense (non-cash)			1,255						799						392						1,756
Adjusted EBITDA (Non-GAAP) - Continuing Operations			$	65,958					$	51,080					$	45,278					$	25,195

(a)    For additional information, see "Use of Non-GAAP Financial Information" in the Non-GAAP disclosure information of this Press Release.

(b) We recognized a loss on extinguishment of debt of $55.2 million in the condensed consolidated statement of operations in connection with the June 10, 2024 Term Loan debt conversion, which represents the difference between the debt fair value and net carrying value, plus unamortized deferred financing costs related to the Term Loan.

(c)    Restructuring and other charges are comprised primarily of professional service costs for restructuring and process improvements, including costs related to evaluating strategic alternatives, and severance and other employee termination and benefit costs associated with the elimination of various positions as part of cost reduction objectives.

(d)    There is no pro forma income effect of the non-GAAP items.

Free Cash Flow (non-GAAP) (a)

(a)    For additional information, see "Use of Non-GAAP Financial Information" in the Non-GAAP disclosure information of this Press Release.

(b)    Purchases of property and equipment are also referred to as capital expenditures. Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, digital initiatives and enhancements to internal systems and our website. The following table provides the components of total purchases of property and equipment: