- Sale of DSS segment enables BNED to further prioritize the
growth opportunities within its Retail business
- Expects fiscal 2023 non-GAAP Adjusted EBITDA from continuing
operations in the range of $(10) million to $(5) million
Barnes & Noble Education, Inc. (NYSE: BNED), a
leading solutions provider for the education industry, today
provided a business update and certain preliminary, unaudited
financial results for the twelve months ended April 29, 2023.
Digital Student Solutions (“DSS”) Segment Sale Strengthens
Financial Flexibility
The Company announced that it has closed on the sale of its DSS
segment, which consists of the Student Brands and bartleby®
products, to Learneo, a platform of productivity and learning
businesses. Proceeds, net of certain transaction fees, severance
costs, escrow, and other considerations, to BNED at closing were
approximately $20 million.
“In a period of rapid change in the higher education market,
scale and focus are key to driving profitable growth and the best
possible experience for our institutions and students. The sale of
DSS enables us to deepen our focus and capital allocation on
accelerating our transition to our First Day® Complete (“FDC”)
equitable access model and growing our general merchandise
business,” said Michael P. Huseby, Chief Executive Officer, BNED.
“The transaction also positions Student Brands and bartleby® for
their next phase of growth. We are confident that DSS will continue
to thrive by being part of Learneo's platform of productivity and
learning businesses with the size, scale and technical
infrastructure to support its sustained success.”
Net cash proceeds from the sale will be used for debt repayment
and will provide additional funds for working capital needs under
the Company’s Credit Facility. Additionally, this transaction and
cash proceeds satisfy the “liquidity raising milestone”
requirements under the Company’s amended and extended Credit
Facility Agreement executed on March 8, 2023.
The Company will report the DSS segment as discontinued
operations for the year ending April 29, 2023. In Fiscal 2023, DSS
segment unaudited non-GAAP adjusted EBITDA is not expected to
materially impact consolidated full year non-GAAP adjusted
EBITDA.
Houlihan Lokey acted as financial adviser and Paul Hastings
acted as legal adviser to BNED on this transaction.
Preliminary Full Year Fiscal 2023 Financial Update
The Company expects to report consolidated full year non-GAAP
Adjusted EBITDA from continuing operations in the range of $(10)
million to $(5) million, compared to $(10.3) million in the prior
year period. The Company’s fiscal 2023 non-GAAP Adjusted EBITDA
from continuing operations is below its guidance due to lower than
expected fourth quarter revenue and lower fourth quarter gross
profits, which included a shift in the mix of buying patterns from
physical textbooks to lower-margin digital course materials within
the Company’s a la carte course material model.
“While fiscal 2023 did not meet our financial expectations, we
believe the strategic actions taken throughout the year position
BNED on the path to profitable growth,” said Huseby. “During the
second half of fiscal 2023, we made substantial progress on our
cost reduction initiatives to better align our overall expenses and
resources with the secular trends of declining enrollment and the
proliferation of digital course materials.
“We also made meaningful progress with our institutional
partners to accelerate their transition to our FDC equitable access
model. We expect to launch a significant number of new schools on
the FDC model in the Fall of 2023 and remain confident about FDC’s
contribution to BNED’s long-term profitable growth.”
Mr. Huseby continued, “As a result of the actions we’ve taken to
lower our fixed costs, focus and simplify the business and
accelerate the transition to the higher-margin, subscription-like
FDC model, we expect to significantly improve adjusted EBITDA in
fiscal 2024 and we are positioned to consistently grow adjusted
EBITDA over the next several years.”
The Company intends to provide its fiscal 2024 non-GAAP adjusted
EBITDA outlook, and additional updates on key strategic financial
initiatives, when it reports its fiscal 2023 fourth quarter and
year-end results.
Balance Sheet Update
As of April 29, 2023, the Company’s unaudited cash and cash
equivalents balance was approximately $24 million and total
unaudited outstanding debt was $184 million resulting in net debt
of approximately $160 million.
On May 24, 2023, the Company amended its existing credit
agreement. The ABL Amendment amends the ABL Credit Agreement to (i)
increase the applicable margin with respect to the interest rate
under the ABL Credit Agreement to 3.75% per annum, in the case of
interest accruing based on a Secured Overnight Financing Rate, and
2.75%, in the case of interest accruing based on an alternative
base rate, in each case, without regard to a pricing grid, (ii)
defer the reduction of advance rates by an amount equal to 500
basis points previously required on May 31, 2023 to September 1,
2023, (iii) require cash flow reporting and variance testing
commencing June 3, 2023 and (iv) defer partial prepayment of the
term loan from the DSS segment sale proceeds to September 1,
2023.
The Company is actively pursuing a refinancing of its debt under
a new credit facility, or facilities, which, if obtained, will
strengthen its capital structure, and provide additional balance
sheet flexibility to execute BNED’s transition to its FDC equitable
access model.
The results reported in this press release are preliminary and
unaudited. The Company has not yet completed its annual financial
close process for the fiscal 2023 fourth quarter and full year, and
its independent auditors have not completed their audit of the
Company’s financial statements for the fiscal 2023 full year. This
update does not present all necessary information for an
understanding of the Company’s results of operations for the fiscal
2023 fourth quarter or full year. As the Company completes its
annual financial close process and finalizes its financial
statements for the fiscal 2023 fourth quarter and full year, and as
its independent auditors complete their audit of the Company’s
financial statements for the fiscal 2023 full year, it is possible
the Company may identify items that require adjustments to the
preliminary financial information set forth in this press release,
and those changes could be material. The Company does not intend to
update such financial information prior to the release of its final
fourth quarter and full year financial results.
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, wholesale
capabilities and more. BNED is a company serving all who work to
elevate their lives through education, supporting students, faculty
and institutions as they make tomorrow a better, more inclusive and
smarter world. For more information, visit www.bned.com.
FORWARD-LOOKING STATEMENTS This press release contains
certain “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995 and information
relating to us and our business that are based on the beliefs of
our management as well as assumptions made by and information
currently available to our management. When used in this
communication, the words “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and
similar expressions, as they relate to us or our management,
identify forward-looking statements. Moreover, we operate in a very
competitive and rapidly changing environment. New risks emerge from
time to time. It is not possible for our management to predict all
risks, nor can we assess the impact of all factors on our business
or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in
any forward-looking statements we may make, including any
statements made in regards to our response to the COVID-19
pandemic. In light of these risks, uncertainties and assumptions,
the future events and trends discussed in this press release may
not occur and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking
statements. Such statements reflect our current views with respect
to future events, the outcome of which is subject to certain risks,
including, among others: risks associated with public health
crises, epidemics, and pandemics, such as the COVID-19 pandemic,
including the duration, spread, severity, and any recurrences
thereof, and the impact such public health crises have on the
overall demand for BNED products and services, our operations, the
operations of our suppliers and other business partners, and the
effectiveness of our response to these risks; general competitive
conditions, including actions our competitors and content providers
may take to grow their businesses; a decline in college enrollment
or decreased funding available for students; decisions by colleges
and universities to outsource their physical and/or online
bookstore operations or change the operation of their bookstores;
implementation of our digital strategy may not result in the
expected growth in our digital sales and/or profitability; risk
that digital sales growth does not exceed the rate of investment
spend; the performance of our online, digital and other
initiatives, integration of and deployment of, additional products
and services including new digital channels, and enhancements to
higher education digital products, the inability to achieve the
expected cost savings during the anticipated time frame, and the
inability to implement our cost saving initiatives in a timely and
efficient manner; 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 April 30,
2022. 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20230531005958/en/
Media and Investor: Hunter
Blankenbaker Vice President Corporate Communications and Investor
Relations 908-991-2776 hblankenbaker@bned.com
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