Financial Data and Key Metrics Changes - Consolidated fiscal '23 revenue from continuing operations was $1.5 billion, an increase of 3.2% [44] - Consolidated adjusted EBITDA grew by $2.2 million to negative $8.1 million [44] - Retail non-GAAP adjusted EBITDA for fiscal '23 was $10.6 million, an increase of $2 million, primarily due to a $52 million revenue increase [45] Business Line Data and Key Metrics Changes - Total retail gross comparable store sales in fiscal '23 increased by 3.2% [7] - Retail gross comparable course material sales grew by 0.4%, while general merchandise gross comparable store sales increased by 8.6% [7] - Total course materials revenue increased by 1.8%, driven by a 48% increase in First Day and First Day Complete revenues, offset by a 9.4% decline in the traditional a la carte model [19] Market Data and Key Metrics Changes - In fiscal '23, the company added a record number of schools for the fall semester, with 157 campus stores committed to utilize First Day Complete, representing an enrollment increase of approximately 800,000 students, a 46% increase versus fall 2022 [11] - Fiscal '23 wholesale revenue decreased by 5.2% to $106.4 million due to supply constraints and a shift to digital course materials [21] Company Strategy and Development Direction - The company is transitioning to a more profitable subscription-like model, First Day Complete, which is expected to approach the majority of course material revenue in fiscal '24 [19] - The company divested its Digital Student Solutions business to focus on First Day Complete and general merchandise growth [5] - The company aims to enhance its general merchandise business and has seen an 8.6% growth in gross comparable store sales [49] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the operating environment remained challenging in fiscal '23, but significant progress was made to transform the business for sustained profitable growth [3] - The company is entering fiscal '24 as a more efficient entity with a clear focus on strengths and opportunities for profitable growth over the next several years [6] - Management expressed confidence in the ability to grow the top line through primary growth initiatives, including general merchandise and First Day Complete [47] Other Important Information - The company has strengthened its liquidity and financial position to accelerate the execution of its strategy [5] - The amended credit facility extends the maturity of debt facilities and provides additional liquidity to fund operations [66][74] Q&A Session Summary Question: Progress on First Day Complete and expectations for courseware material sales - Management expects First Day and First Day Complete to continue growing significantly, with a focus on transitioning schools to this model [31][64] Question: Future of a la carte required materials business - The company will continue to support the a la carte model but is moving towards the subscription model as the industry standard [61] Question: Enrollment trends at partner schools - Management noted that it is too early to provide specific enrollment trends, but they are optimistic about the upcoming academic year [60][35] Question: Updated terms of the amended credit facility - The amended credit facility extends maturities and provides ample liquidity to support operations, allowing for flexibility in executing growth initiatives [66][74]

Financial Performance - Total sales for fiscal year 2023 were $1,543,208 thousand, a 3.2% increase from $1,495,734 thousand in 2022[25] - Gross profit for fiscal year 2023 was $349,439 thousand, a 1.9% increase from $342,832 thousand in 2022[25] - Net loss for fiscal year 2023 was $101,862 thousand, a 47.9% increase from $68,857 thousand in 2022[25] - The company's pre-tax earnings would be affected by approximately $3.3 million in Fiscal 2023 if there is a 10% change in rental cost of goods sold[486] - A 10% change in long-term incentive compensation expense would impact pre-tax earnings by approximately $0.5 million in Fiscal 2023[488] - A 10% decrease in estimated discounted cash flows would not have materially affected the company's operations in Fiscal 2023[490] Assets and Liabilities - Cash and cash equivalents as of April 29, 2023 totaled $14.2 million, a 61.6% increase from $8.8 million in 2022[464] - Receivables decreased to $92,512 thousand in 2023 from $136,001 thousand in 2022, a 32% decline[476] - Merchandise inventories increased to $322,979 thousand in 2023 from $293,854 thousand in 2022, a 9.9% rise[476] - Total current assets were $537,001 thousand in 2023, a 1% increase from $531,705 thousand in 2022[476] - Total liabilities increased to $850,028 thousand in 2023 from $843,179 thousand in 2022, a 0.8% rise[476] Impairment and Valuation - The company recognized an impairment charge of $6.0 million related to long-lived assets in fiscal year 2023[472] - Significant assumptions for impairment analysis include annual revenue growth rates, gross margin rates, and weighted average cost of capital[490] - The company uses the Black-Scholes model to determine the fair value of stock options and phantom shares[488] - The fair value of cash-settled phantom share units is remeasured at each reporting period based on current risk-free rate and volatility assumptions[488] Tax and Refunds - The company expects to receive additional tax refunds of approximately $10.0 million[481] - Deferred tax assets are evaluated based on future taxable income expectations and carryforward periods[491] - The company does not recognize tax benefits for positions with a 50% or lower likelihood of being sustained upon audit[491] Operational and Accounting Practices - Management evaluates conditions that may raise substantial doubt about the company's ability to continue as a going concern[483] - Textbook rental inventories are amortized to their estimated residual value over the rental period[486]

Barnes & Noble Education (NYSE:BNED) Q3 2023 Earnings Conference Call March 9, 2023 4:30 PM ET Company Participants Hunter Blankenbaker - VP, IR Michael Huseby - CEO Thomas Donohue - EVP and CFO Jonathan Shar - EVP, BNED Retail, President Barnes & Noble College Conference Call Participants Ryan MacDonald - Needham & Co. Alex Fuhrman - Craig Hallum Capital Operator Good afternoon. Thank you for attending today’s Barnes & Noble Education Fiscal 2023 Third Quarter Earnings Conference Call. My name is Hannah, a ...

Financial Performance - For the 39 weeks ended January 28, 2023, total sales amounted to $1,328,020, an increase from $1,270,569 for the same period in 2022, representing a growth of approximately 4.5%[103] - Total gross profit for the 39 weeks ended January 28, 2023, was $312,533, up from $292,549 in the prior year, indicating a growth of approximately 6.8%[103] - Selling and administrative expenses totaled $305,045 for the 39 weeks ended January 28, 2023, compared to $295,597 for the same period in 2022, marking an increase of about 3.2%[103] - The Retail Segment generated sales of $1,256,376 for the 39 weeks ended January 28, 2023, compared to $1,194,161 for the same period in 2022, reflecting an increase of about 5.2%[103] - The Wholesale Segment's sales for the 39 weeks ended January 28, 2023, were $97,161, down from $103,192 in the same period of 2022, reflecting a decline of approximately 5.8%[103] - The Digital Student Solutions (DSS) Segment generated sales of $26,659 for the 39 weeks ended January 28, 2023, compared to $26,012 in the prior year, indicating a slight increase of about 2.5%[103] - Total sales for the 13 weeks ended January 28, 2023, were $447,064,000, an increase from $402,798,000 for the same period in 2022, representing a growth of 11.0%[112] - Gross profit for the 39 weeks ended January 28, 2023, was $312,533,000, compared to $292,549,000 for the same period in 2022, reflecting an increase of 6.8%[112] - The net loss for the 13 weeks ended January 28, 2023, was $(25,049,000), an improvement from $(36,801,000) in the same period of 2022[112] - Operating loss for the 39 weeks ended January 28, 2023, was $(39,040,000), compared to $(49,281,000) for the same period in 2022, indicating a reduction of 20.9%[112] - Interest expense for the 39 weeks ended January 28, 2023, was $15,672,000, up from $7,809,000 in the same period of 2022, showing an increase of 100.0%[112] - Basic earnings per share (EPS) for the 13 weeks ended January 28, 2023, was $(0.48), compared to $(0.71) for the same period in 2022[112] Debt and Financing - The company borrowed $512,000 and repaid $452,100 under the Credit Agreement during the 39 weeks ended January 28, 2023, resulting in outstanding borrowings of $255,600[85] - The company amended its Credit Agreement on March 8, 2023, extending the maturity date to August 29, 2024, and reducing commitments by $20,000 to $380,000[85] - The company borrowed $30,000 thousand under the Term Loan Credit Agreement, with outstanding borrowings of $30,000 thousand as of January 28, 2023[123] - The Term Loans accrue interest at a rate of 11.25%, payable quarterly, with a maturity date extended to December 7, 2024[123] - The company incurred debt issuance costs totaling $2,614 thousand related to the Term Loan Credit Agreement, which will be amortized over the term of the facility[123] Assets and Liabilities - Total current assets increased to $790,078 thousand as of January 28, 2023, compared to $765,391 thousand as of January 29, 2022, reflecting a growth of 3.3%[121] - Total liabilities rose to $1,104,620 thousand as of January 28, 2023, up from $1,029,270 thousand as of January 29, 2022, indicating an increase of 7.3%[121] - The total stockholders' equity decreased to $176,486 thousand as of January 28, 2023, down from $237,460 thousand as of January 29, 2022, a decline of 25.6%[121] Cash Flow and Expenditures - Cash payments for lease liabilities within operating activities were $100,130 thousand for the 39 weeks ended January 28, 2023, compared to $95,042 thousand for the same period in the previous year, reflecting an increase of 5.5%[128] - Net cash flows provided by financing activities during the 39 weeks ended January 28, 2023, were $56.4 million, compared to $20.7 million for the same period in 2022[313] - Capital expenditures totaled $26.9 million during the 39 weeks ended January 28, 2023, down from $33.4 million for the same period in 2022[313] Stock and Compensation - The company repurchased 347,808 shares of Common Stock during the 39 weeks ended January 28, 2023, for employee tax withholding obligations[105] - Total compensation expense for long-term incentive awards was $940,000 for the 13 weeks ended January 28, 2023, down from $2.1 million for the same period in 2022[295] - The company reported a total stock-based awards expense of $4.6 million for the 39 weeks ended January 28, 2023, compared to $4.5 million for the same period in 2022[295] - Total unrecognized compensation cost related to unvested awards as of January 28, 2023, was $9,838, expected to be recognized over a weighted-average period of 2.1 years[139] - The company granted 908,247 restricted stock units (RSUs) to employees with a three-year vesting period during the 39 weeks ended January 28, 2023[138] Tax and Impairment - Income tax expense recorded was $267 on a pre-tax loss of $(24,782) for the 13 weeks ended January 28, 2023, resulting in an effective tax rate of (1.1)%[141] - The effective tax rate for the 39 weeks ended January 28, 2023, was lower compared to the prior year due to foreign taxes and lower projected annual taxable loss[141] - An impairment loss of $6,008 was recognized during the 13 and 39 weeks ended January 28, 2023, compared to an impairment loss of $6,411 for the same periods in 2022[157] Operational Highlights - The company operates 1,388 college, university, and K-12 school bookstores, including 785 physical and 603 virtual bookstores[150] - The company maintains a partnership with Fanatics to enhance e-commerce capabilities and product assortment for campus stores[148] - The company is in the process of implementing a remediation plan for a material weakness identified in its internal controls related to deferred tax asset valuation allowance[294]

Financial Data and Key Metrics Changes - Total sales for Q2 2023 were $617.1 million, a decline of $9.9 million or 1.6% compared to $627 million in the prior year [31] - Consolidated revenue and adjusted EBITDA were essentially flat year-over-year, primarily due to the growth of higher margin First Day Complete (FDC) and general merchandise businesses [13][31] - The second quarter consolidated gross margin rate was 23.5%, compared to 23.2% in the prior year, primarily due to higher retail gross margins [34] Business Line Data and Key Metrics Changes - Retail revenue decreased by 1.7% year-over-year to $598.6 million, with gross comparable course material revenue down 4.6% [14][31] - FDC revenue grew 97% to $89.9 million, with 111 campus stores utilizing FDC for the fall term, representing approximately 545,000 undergraduate students [15][32] - General merchandise sales increased by 4.5% on a gross comparable basis, driven by strength in logo and emblematic sales [17][32] - DSS revenues increased by 2.3% to $8.5 million, although the growth was lower than anticipated due to product offering mix and lower web traffic [18][32] Market Data and Key Metrics Changes - Wholesale revenue declined by 2.5% to $21.1 million, impacted by supply constraints and lower overall demand due to declining enrollment [19][33] - The decline in the traditional à la carte course material model was attributed to faculty assigning fewer materials and students opting not to purchase materials [12][14] Company Strategy and Development Direction - The company is focusing on accelerating the transition to the FDC model, which aims to provide greater access, affordability, and convenience for students [11][25] - Cost reduction initiatives are being implemented to streamline operations and align capital allocation with high-return opportunities, expecting annual run rate savings of $30 million to $35 million [10][23] - The company plans to reinvest most of the savings into strategic priorities, particularly the FDC model [23][64] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing challenges in the higher education space, including negative enrollment trends and rising operating costs [12][30] - The company expressed confidence in its ability to create durable growth and shareholder value through decisive actions and strategic investments [30][62] Other Important Information - The company expects to achieve free cash flow breakeven in the DSS segment in fiscal year 2024 [21] - The cash balance at the end of the quarter was $19.1 million, with outstanding borrowings of $252 million, an increase from $183.3 million in the prior year [37] Q&A Session Summary Question: How to drive accelerated adoption of First Day Complete? - Management emphasized the importance of leading the industry towards the FDC model and working closely with schools to ensure successful implementation [41][42] Question: Magnitude of cost cuts across segments? - Management indicated that cuts would be made across all segments, with a focus on aligning resources with the FDC model [48][49] Question: Impact of students not purchasing course materials? - Management acknowledged that the decline in the à la carte model indicates many students are not purchasing necessary materials, which impacts overall business [50][51] Question: Timeline for realizing cost savings? - Management expects the full annualized effect of cost savings to be realized in fiscal year 2024, with ongoing initiatives already in place [60][62]

Financial Position and Borrowings - The company has a credit facility with a committed principal amount of $400,000, with an option to request an increase of up to $100,000[81]. - As of October 29, 2022, the company had $222,000 in outstanding borrowings under the credit facility, compared to $183,300 as of October 30, 2021, reflecting an increase of 21.1% year-over-year[81]. - The company borrowed $318,200 and repaid $321,900 under the credit agreement during the 26 weeks ended October 29, 2022[81]. - The term loan credit agreement provides for term loans of $30,000, with an interest rate of 11.25%, maturing on June 7, 2024[82]. - The company incurred debt issuance costs of $1,964 related to the term loan credit agreement, which will be amortized over the term of the loan[85]. - The company had $222.0 million and $30.0 million in outstanding borrowings under the Credit Agreement and Term Loan Agreement, respectively, as of October 29, 2022[184]. - The company borrowed $30.0 million under the Term Loan Credit Agreement during the 26 weeks ended October 29, 2022, with an outstanding balance of $30.0 million as of the same date[194]. Revenue and Sales Performance - Total sales for the 13 weeks ended October 29, 2022, were $617.1 million, a decrease of 1.4% from $627.0 million for the same period in 2021[126]. - Total sales for the 13 weeks ended October 29, 2022, were $617,098, a decrease of 1.6% compared to $626,977 for the same period in 2021[134]. - Total sales for the 26 weeks ended October 29, 2022, increased to $880,956, up 1.5% from $867,771 in the prior year[134]. - Product sales and other for the 13 weeks ended October 29, 2022, were $575,764, down 0.3% from $577,329 in the prior year[134]. - Total course material product sales decreased by $13.9 million, or 3.2%, to $419.9 million during the 13 weeks ended October 29, 2022[139]. - Revenue from First Day models increased by $47.2 million to $143.2 million, or 49%, during the 13 weeks ended October 29, 2022, compared to $96.0 million during the same period in 2021[142]. - Retail sales decreased by $10.3 million, or 1.7%, to $598.6 million during the 13 weeks ended October 29, 2022, compared to $608.9 million during the same period in 2021[139]. - Retail sales increased by $15.7 million, or 1.9%, during the 26 weeks ended October 29, 2022, compared to the same period in 2021[139]. Expenses and Cost Management - The company recognized restructuring and other charges totaling $635 during the 26 weeks ended October 29, 2022, a decrease of 78.9% compared to $3,021 in the same period of the previous year[90]. - Lease expenses for the 26 weeks ended October 29, 2022, totaled $116,325, an increase of 7.5% from $107,803 in the same period of the previous year[89]. - Selling and administrative expenses as a percentage of total sales were 17.4% for the 13 weeks ended October 29, 2022, compared to 17.2% for the same period in 2021[129]. - Selling and administrative expenses for the 13 weeks ended October 29, 2022, decreased by $0.8 million, or 0.8%, to $107.1 million from $107.9 million during the same period in 2021[153]. - DSS selling and administrative expenses increased by $0.8 million, or 11.3%, to $8.1 million during the 13 weeks ended October 29, 2022, driven by increased operating costs and compensation expenses[158]. - Corporate Services' selling and administrative expenses decreased by $1.7 million, or 25.5%, to $5.1 million during the 13 weeks ended October 29, 2022, due to lower incentive plan compensation costs[159]. Profitability and Income - Net income for the 13 weeks ended October 29, 2022, was $22.1 million, compared to $22.5 million for the same period in 2021, reflecting a decrease of 1.7%[126]. - Adjusted Earnings (non-GAAP) was $24.0 million during the 13 weeks ended October 29, 2022, compared with $25.0 million during the same period in 2021, a decrease of 4.0%[168]. - Adjusted EBITDA for the 13 weeks ended October 29, 2022, was $39.4 million, slightly up from $39.0 million in the same period last year[126]. - Operating income was $26.7 million during the 13 weeks ended October 29, 2022, compared to $24.6 million during the same period in 2021, representing an increase of 8.6%[163]. - The effective income tax rate for the 26 weeks ended October 29, 2022, was (2.1)% on a pre-tax loss of $(29,930) million[98]. - The effective income tax rate for the 13 weeks ended October 29, 2022, was (1.4)%, compared to (0.9)% for the same period in 2021[166]. Operational Challenges and Market Conditions - The company is experiencing downward enrollment trends, particularly at community colleges, which correlate with economic conditions and unemployment rates[121]. - The impact of COVID-19 has led to a challenging labor market, affecting the company's ability to recruit employees and resulting in increased borrowings[119]. - The company continues to face significant price competition in the textbook and course materials market, with students being highly price sensitive[121]. - The company is exposed to risks related to counterfeit and piracy of digital and print materials[204]. - The company may face challenges related to attracting and retaining employees[204]. - The company faces risks associated with potential disruptions to information technology systems and third-party web service providers[204]. - The company is subject to various risks from international operations, including regulatory changes and supply chain disruptions[204]. Cash Flow and Capital Expenditures - Free cash flow for the 26 weeks ended October 29, 2022, was $38,864, compared to $37,738 for the same period in the previous year[181]. - Capital expenditures for the 26 weeks ended October 29, 2022, totaled $20,573, an increase from $21,264 in the prior year[183]. - Cash flows provided by operating activities during the 26 weeks ended October 29, 2022 were $9.4 million, a decrease of $14.9 million compared to $24.3 million during the same period in 2021[188]. - Cash flows used in investing activities were $(20.3) million for the 26 weeks ended October 29, 2022, compared to $(20.9) million in the prior year, primarily due to lower capital expenditures[189]. - Cash flows provided by financing activities increased to $23.7 million during the 26 weeks ended October 29, 2022, up from $3.4 million in the same period of 2021, driven by higher net borrowings[190]. Internal Controls and Compliance - A material weakness in internal controls was identified due to insufficient precision in the analysis of deferred tax asset valuation allowance[209]. - The company is in the process of implementing a remediation plan for the identified material weakness, expected to occur in Q4 of Fiscal 2023[209]. - The effectiveness of the company's disclosure controls and procedures was evaluated, concluding they were not effective at the reasonable assurance level[209]. - The company has not identified any changes in internal control over financial reporting that materially affected its operations during the second quarter[210].

Financial Data and Key Metrics Changes - Total sales for Q1 2023 were $263.9 million, a 9.6% increase from $240.8 million in the prior year [22] - Retail sales increased by $26 million or 12.4%, benefiting from a strong graduation season and higher demand for general merchandise [22][23] - The retail non-GAAP adjusted EBITDA loss was $25 million, compared to a loss of $19.6 million in the prior year [17] Business Line Data and Key Metrics Changes - Retail segment sales increased by $26 million, while wholesale segment revenue declined by 16.6% to $37.1 million due to supply constraints and lower demand for physical textbooks [22][26] - DSS segment sales grew by $0.9 million or 10.6% to $9.2 million, driven by an increase in subscription sales [26] Market Data and Key Metrics Changes - The First Day sales grew by 67% to $45 million, with First Day Complete sales doubling to $16.9 million [24] - The number of campus stores utilizing the First Day Complete program increased to 111, representing an 85% growth in undergraduate enrollment compared to Fall 2021 [14] Company Strategy and Development Direction - The company is focusing on expanding its First Day Complete program, which has shown to improve student outcomes and increase enrollment [13][19] - There is a strong pipeline of institutions evaluating the FDC program, indicating potential for continued growth [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about increased on-campus traffic and fewer restrictions, which may positively impact enrollment and sales [32] - The company is preparing for a robust Fall Rush, expecting strong demand for general merchandise and course materials [52] Other Important Information - The consolidated gross margin rate for the quarter was 24.1%, down from 24.9% in the prior year, primarily due to lower sales in the wholesale segment [27] - Cash balance at the end of the quarter was $9.1 million, with outstanding borrowings of $260.3 million [29] Q&A Session Summary Question: What is the enrollment outlook for this Fall? - Management is optimistic about increased traffic and fewer restrictions on campuses, but specific enrollment data will be available after the ad drop period [32][34] Question: What trends are observed in the First Day Complete program? - There is improved knowledge and acceptance of the program, with expectations of positive gains in participation rates [40] Question: How is consumer spending behavior changing? - While inflation is impacting costs, management expects a strong Fall Rush and is prepared for increased demand [52][54]

Debt and Financing - The company has a credit facility with a committed principal amount of $400,000, with an option to request an increase of up to $100,000[78]. - As of July 30, 2022, the company had outstanding borrowings of $230,300, comprised of $190,300 under the Credit Facility and $40,000 under the FILO Facility[78]. - During the 13 weeks ended July 30, 2022, the company borrowed $117,200 and repaid $112,600 under the Credit Agreement[78]. - The Term Loan Credit Agreement provides for term loans of $30,000, with an interest rate of 11.25% and a maturity date of June 7, 2024[79]. - The company incurred debt issuance costs totaling $1,909 related to the Term Loan Credit Agreement during the 13 weeks ended July 30, 2022[81]. - As of July 30, 2022, the company had outstanding borrowings of $260.3 million under the Credit Agreement and $203.7 million under the Term Loan Agreement[160]. Lease and Restructuring - Net lease expense for the 13 weeks ended July 30, 2022, was $38,045, an increase from $28,075 for the same period in 2021[85]. - The total lease payments as of July 30, 2022, amounted to $390,823, with operating lease liabilities at period end of $346,994[85]. - The weighted average remaining lease term as of July 30, 2022, was 5.3 years, with a weighted average discount rate of 4.2%[85]. - The company recognized restructuring and other charges totaling $375 during the 13 weeks ended July 30, 2022, compared to $1,905 in the same period in 2021[86]. Sales and Revenue - Total sales for the 13 weeks ended July 30, 2022, were $263.858 million, an increase from $240.794 million for the same period in 2021, representing an increase of 9.5%[117]. - Product sales and other accounted for 95.9% of total sales, while rental income contributed 4.1% for the 13 weeks ended July 30, 2022[118]. - Retail sales increased by $26.0 million, or 12.4%, to $236.5 million during the 13 weeks ended July 30, 2022, from $210.5 million during the same period in 2021[125]. - Total course material rental income for Retail decreased by $2.1 million, or 16.2%, to $10.9 million during the 13 weeks ended July 30, 2022, from $13.0 million during the same period in 2021[128]. - Revenue for First Day models increased to $45.0 million, or 67%, compared to $27.0 million in the prior year period[128]. Expenses and Losses - The net loss for the 13 weeks ended July 30, 2022, was $52.707 million, compared to a net loss of $43.628 million for the same period in 2021[117]. - Total Selling and Administrative Expenses rose by $12.3 million, or 14.2%, to $98.5 million during the 13 weeks ended July 30, 2022, compared to $86.2 million in the same period of 2021[141]. - The operating loss for the 13 weeks ended July 30, 2022, was $(47.9) million, compared to $(40.7) million in the same period of 2021, representing an increase in the operating loss margin from (16.9)% to (18.0)%[147]. - Net interest expense increased by $1.4 million, or 55.1%, to $3.9 million during the 13 weeks ended July 30, 2022, from $2.5 million in the prior year[148]. - Free Cash Flow (non-GAAP) for the 13 weeks ended July 30, 2022, was $(41.8) million, compared to $(30.6) million for the same period in 2021, reflecting a decline of approximately 36.4%[159]. Tax and Refunds - The company recorded an income tax expense of $933 million on a pre-tax loss of $(51,774) million for the 13 weeks ended July 30, 2022, resulting in an effective tax rate of (1.8)%[94]. - The company expects to receive additional tax refunds of approximately $6,881 million following refunds of $7,842 million received in Fiscal 2022 and $15,770 million on August 29, 2022[96]. - Income tax expense for the 13 weeks ended July 30, 2022, was $0.9 million on a pre-tax loss of $(51.8) million, resulting in an effective tax rate of (1.8)%[148]. Market and Operational Challenges - The company continues to face significant price competition in the textbook and course materials market, with students being highly price sensitive[113]. - The broader macroeconomic global supply chain issues have impacted the company's ability to source textbooks and school supplies[113]. - Enrollment trends at community colleges are negatively impacted by COVID-19 concerns and a decline in the U.S. birth rate, leading to fewer students in the traditional college age group[111]. - The company faces risks associated with public health crises, including the COVID-19 pandemic, which may impact overall demand for its products and services[179]. - There is a risk of decreased college enrollment or reduced funding available for students, which could negatively affect sales[179]. Digital Strategy and Initiatives - The company aims to expand its e-commerce capabilities through a partnership with Fanatics, enhancing product assortment and digital marketing tools[99]. - The implementation of the company's digital strategy may not yield the expected growth in digital sales and profitability[179]. - The company plans to continue focusing on digital initiatives and enhancements to internal systems and its website as part of its capital expenditures strategy[159]. Inventory and Capital Expenditures - The company reported a merchandise inventory loss of $434,000 for the 13 weeks ended July 31, 2021, which was not present in the current year[156]. - Total capital expenditures for the 13 weeks ended July 30, 2022, were $9.7 million, down from $11.4 million in the same period last year, a decrease of about 14.5%[159]. Employee and Operational Risks - The company may face challenges in attracting and retaining employees, which could affect operations[179]. - Risks associated with data privacy, information security, and intellectual property could impact the company's performance[179]. - The company is subject to potential disruptions in its information technology systems due to malware, viruses, or hacking attacks[179].

Financial Data and Key Metrics Changes - Total sales for Q4 2022 were $260.8 million, up from $222.8 million in the prior year, driven by a 32.6% increase in gross comparable store sales [33] - For the full fiscal year, total sales increased by $97.5 million, benefiting from the growth of inclusive access models and more students returning to campus [36] - Consolidated non-GAAP adjusted EBITDA improved by $60.8 million to a loss of $4.8 million for the full year [39] Business Line Data and Key Metrics Changes - Retail segment sales increased significantly, with textbook sales growing over 150% to $35.1 million in Q4, and general merchandise sales increasing by 76% [34][18] - Inclusive access offerings contributed to a 2.3% increase in comparable course material sales, marking the first increase in over five years [12] - The wholesale business saw a revenue decline of 32%, with EBITDA dropping to $3.8 million [22] Market Data and Key Metrics Changes - Undergraduate enrollment declined by 4.7% in spring 2022 compared to the previous year, with a total decline of 9.4% since before the pandemic [8] - Digital course materials grew from 11% of overall course material sales in 2019 to 35% in fiscal 2022 [43] - The First Day Complete program grew to 76 stores, representing approximately 380,000 undergraduate students, with revenue increasing more than 5x to $106 million [15] Company Strategy and Development Direction - The company is focused on expanding inclusive access offerings, growing general merchandise through partnerships, and increasing digital solutions subscriber base [10][28] - The First Day Complete program aims to reverse long-term declines in course material sales by ensuring students have access to all required materials on the first day of class [13] - The company plans to continue investing in its digital solutions and enhancing store-level economics [20][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the return to traditional on-campus learning but acknowledged ongoing challenges from COVID-19 variants and declining enrollments [7][8] - The company expects significant improvement in retail business driven by new First Day Complete implementations and increased on-campus traffic [39] - Management anticipates challenges in the wholesale business due to inventory constraints and inflationary pressures [40] Other Important Information - The company restated fiscal year 2021 results by $8 million due to out-of-period adjustments, which did not impact non-GAAP EBITDA figures [31] - The First Day Complete program's revenue is expected to continue growing, with commitments from 112 campus stores for the upcoming fall semester [49] Q&A Session Summary Question: Potential for converting First Day Courseware to First Day Complete - Management indicated that they expect to see a trend of campuses converting to First Day Complete, with commitments for 112 stores representing approximately 547,000 undergraduate students [57] Question: Trends in credit hours and pricing - Management noted that pricing varies by institution and is aligned with expectations, with annual reviews to ensure the right pricing for students [60][64] Question: Factors affecting return to pre-pandemic adjusted EBITDA levels - Management highlighted the significant decline in wholesale EBITDA as a major factor, with expectations for retail growth to drive overall improvement [66][76] Question: Guidance on enrollment and wholesale EBITDA - Management confirmed that the decline in wholesale EBITDA is a key driver of the shortfall relative to pre-COVID levels, with expectations for DSS to remain stable while retail is expected to grow [75][80] Question: Prioritization of new bookstore contracts versus existing initiatives - Management emphasized a careful allocation of capital, focusing on First Day Complete and digital business growth while being cautious about opening new stores [84][86]

Retail Segment Performance - In Fiscal 2022, the Retail Segment signed contracts for 92 new physical and virtual bookstores, estimated to generate approximately $128 million in first-year annual sales[27]. - The company generated $102 million in net new business in the Retail Segment, despite pruning under-performing stores[27]. - The partnership with Fanatics and FLC has enhanced product assortment and e-commerce capabilities, driving growth in the general merchandise business[32]. - The company operates 1,427 bookstores, including 805 physical and 622 virtual locations, serving a diverse educational market[27]. - The Retail Segment offers a suite of digital content and services, including open education resources, to enhance student access and affordability[27]. - The average relationship tenure for physical bookstore management contracts is 15 years, with approximately 90% renewal rate from Fiscal 2019 to Fiscal 2022[34]. - The company transitioned over 300 stores to a Custom Store Solutions model during the pandemic, ensuring continued service to customers[30]. - In Fiscal 2022, total sales from the First Day programs increased by 91% compared to the prior year, indicating strong growth in affordable course material offerings[39]. - The company operates 73 customized cafés and 11 convenience stores at physical campus locations, adapting offerings to include more grab-and-go options[39]. - The company’s e-commerce sales for general merchandise have seen significant growth, supported by the development of a next-generation e-commerce platform launched in Fiscal 2021[39]. Digital Solutions and Services - The Digital Student Solutions (DSS) Segment includes Student Brands and bartleby, providing subscription-based writing services and study tools to students[57]. - Student Brands generates subscription revenue that is deferred and recognized over the service period, with a community of online learners across multiple digital properties[59]. - Bartleby offers various products including bartleby+, bartleby learn™, and bartleby write, providing millions of textbook solutions and 24/7 virtual writing assistance[62]. - The company leverages its physical and virtual bookstore relationships to enhance the adoption of its digital products, targeting both K-12 and higher education institutions[63]. Market Trends and Challenges - The overall economic environment, including the impact of the COVID-19 pandemic, has affected college enrollment and consumer spending patterns, leading to downward enrollment trends[69]. - The market for educational materials is undergoing significant change, with increasing costs and a shift towards online and digital platforms as alternatives to printed materials[67]. - The competitive landscape is evolving, with disintermediation trends allowing students to purchase materials directly from publishers and alternative sources, impacting traditional bookstore sales[69]. - The company faces significant competition from various digital student solutions providers, including Chegg.com and Grammarly, as well as traditional textbook vendors like Amazon[66]. - The transition to online curriculums has impacted the demand for print textbooks, leading to potential revenue declines[89]. Financial Performance - Total sales for the 52 weeks ended April 30, 2022, were $1,531,400, an increase from $1,433,890 for the 52 weeks ended May 1, 2021, representing a growth of approximately 6.8%[321]. - Gross profit for the same period was $372,760, significantly higher than $252,661 in the previous year, indicating a gross profit margin improvement[321]. - The net loss for the 52 weeks ended April 30, 2022, was $68,857, a reduction from a net loss of $139,810 in the prior year, showing a decrease in losses by approximately 50.8%[321]. - Basic and diluted loss per share improved to $(1.33) from $(2.81) year-over-year, reflecting better financial performance[321]. - Cash and cash equivalents increased to $10,388 as of April 30, 2022, compared to $8,024 as of May 1, 2021, indicating improved liquidity[326]. Employee and Workplace Initiatives - As of April 30, 2022, the company had approximately 4,600 domestic employees, including about 3,000 full-time employees and 270 full-time international employees[77]. - Approximately 64% of full-time and part-time domestic employees identify as women, and about 33% identify as ethnically diverse[81]. - The company offers a 401(k) retirement savings plan with a 100% match of employee contributions up to 4% of eligible compensation[80]. - The company has implemented safety measures in response to the COVID-19 pandemic, including increased sanitization efforts and remote work arrangements for non-retail employees[81]. - The company is focused on creating an inclusive culture and has required all employees to complete training aimed at preventing harassment and discrimination[81]. Strategic Initiatives and Future Outlook - The company anticipates that new bookstore contracts will drive future growth, while also expecting some less profitable stores to close[71]. - The strategic initiative to grow digital products and services is critical, but the company may face challenges in successful implementation and customer adoption[106]. - The company plans to pursue strategic acquisitions and partnerships to expand its business, but may encounter difficulties in identifying suitable candidates and obtaining financing[106]. - The company aims to expand its strategic opportunities through acquisitions and partnerships, enhancing its competitive position in the market[339]. Risks and Compliance - The company is investing in data protection and information technology to defend against increasing cyber-attack risks, with no material service interruptions reported to date[69]. - The company faces potential data privacy and cybersecurity risks, which could lead to legal exposure and damage to reputation if not managed properly[110]. - Changes in federal, state, local, or international laws could increase regulatory compliance requirements and operational costs for the company[119]. - The company relies on third-party web service providers, such as AWS, posing risks that could disrupt operations and impact the ability to serve customers[113]. - The company has entered into agreements with major textbook publishers to implement anti-counterfeit best practices, but may still inadvertently sell counterfeit textbooks[125].