Barnes & Noble Education(BNED) - 2025 Q3 - Quarterly Report

Business Operations - Barnes & Noble Education, Inc. operates 1,164 physical and virtual bookstores, serving college and university campuses and K-12 institutions across the U.S.[147] - The company has streamlined operations into one reporting segment to better reflect its management structure and resource allocation[160]. - The company opened 49 stores and closed 130 stores during the 39 weeks ended January 25, 2025, with estimated net annual sales of $159 million[178]. Financial Performance - In Fiscal 2024, the BNC First Day Complete sales reached $141.8 million, a 29.5% increase from $109.5 million in Fiscal 2023, while total BNC First Day sales increased by 20.8% to $222.2 million[153]. - Total sales for the 13 weeks ended January 25, 2025, were $466.3 million, a slight increase from $456.7 million in the same period of 2024, while total sales for the 39 weeks ended January 25, 2025, remained stable at $1.33 billion compared to $1.33 billion in 2024[170]. - Gross profit for the 13 weeks ended January 25, 2025, was $96.4 million, down from $100.0 million in the same period of 2024, and for the 39 weeks, gross profit decreased to $281.2 million from $286.9 million[170]. - Net income from continuing operations for the 13 weeks ended January 25, 2025, was $7.1 million, compared to a loss of $9.9 million in the same period of 2024, while the net loss for the 39 weeks was $42.6 million, an increase from a loss of $35.0 million in 2024[170]. - Total revenue for the 13 weeks ended January 25, 2025, increased by 2.1%, or $9.7 million, to $466.3 million compared to the same period last year[175]. - Income from Continuing Operations surged by $27.5 million, or 283.3%, to $17.8 million compared to a loss of $(9.7) million in the prior year[175]. - Adjusted EBITDA from Continuing Operations improved by $6.3 million, or 29.8%, to $27.4 million from $21.1 million last year[175]. Enrollment and Market Trends - The estimated enrollment for institutions adopting the First Day Complete program increased by 18.9%, from 805,000 to 957,000 students[153]. - The company observed increased year-over-year enrollment trends in Fall 2023 and Spring 2024, particularly at community colleges, which are correlated with economic conditions and unemployment rates[164]. - The company plans to scale the number of schools adopting the First Day Complete program in Fiscal 2025 and beyond, aiming to improve student outcomes and increase market share[153]. Cost Management and Competition - The company continues to face significant price competition in the textbook and course materials market, with students being highly price sensitive[169]. - The company is experiencing growing competition from alternative sources of textbooks and course materials, impacting traditional bookstore sales[164]. - Selling and administrative expenses decreased by $31.7 million, or 13.0%, to $211.5 million for the 39 weeks ended January 25, 2025, primarily due to a decrease in payroll and related operating costs[192]. Debt and Financing - The company raised approximately $95.0 million in new equity capital through a $50.0 million private investment and a $45.0 million rights offering, enhancing financial flexibility[156]. - A term loan debt conversion resulted in a loss of $55.2 million, with $34.0 million of outstanding principal converted into common stock[156]. - The refinanced credit facility provides access to $325.0 million, maturing in 2028, which is expected to reduce annual interest expenses[156]. - The company recognized a loss on extinguishment of debt of $55.2 million during the 39 weeks ended January 25, 2025, due to the conversion of approximately $34.0 million of outstanding principal and interest into Common Stock[199]. Cash Flow and Capital Expenditures - Free Cash Flow for the 39 weeks ended January 25, 2025, was $(160.3) million, compared to $(114.6) million for the same period in 2024, indicating a 39.9% increase in cash outflows[216]. - Total Capital Expenditures for the 39 weeks ended January 25, 2025, were $9.3 million, down from $11.5 million in the same period in 2024, a decrease of 19.1%[224]. - Cash flows provided by financing activities for the 39 weeks ended January 25, 2025, were $135.2 million, compared to $59.9 million in the prior year, a significant increase of $75.3 million[225]. Tax and Income - The company recorded an income tax expense of $10.7 million on pre-tax income of $17.8 million for the 13 weeks ended January 25, 2025, resulting in an effective tax rate of 60.0%[205]. - The effective tax rate for the 39 weeks ended January 25, 2025, was (38.8)%, with an income tax expense of $11.9 million on a pre-tax loss of $(30.7) million[206].