August 30, 2017 Last Updated 8:56 am

Barnes & Noble Education reports $34.8M loss in Q1, fiscal 2018 earnings report

BNC comparable store sales decreased 2.5 percent in the quarter, though the company opened 24 new stores this quarter with estimated annual sales of $49 million, increasing total company sales by 48.7 percent

BASKING RIDGE, N.J. — August 30, 2017 — Barnes & Noble Education, Inc., a leading provider of educational products and services solutions for higher education and K-12 institutions, today reported sales and earnings for the first quarter for fiscal 2018. As a result of the acquisition of MBS Textbook Exchange, LLC  on February 27, 2017, the condensed consolidated financial statements for the 13 weeks ended July 29, 2017 is the first reporting period to include the financial results of MBS for a full reporting period. All material intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements for the 13 weeks ended July 30, 2016 exclude the financial results of MBS. The first quarter results of our two segments, Barnes & Noble College Booksellers, LLC (“BNC”) and MBS are consistent with the historical seasonality trends and the Company’s expectations.

Financial highlights for the first quarter 2018:

  • Consolidated sales of $355.7 million increased by $116.5 million, or 48.7%, as compared to prior year period.
  • BNC comparable store sales decreased 2.5% in the quarter, as compared with a decrease of 2.8% in the prior year period.
  • Consolidated net loss of $(34.8) million, as compared with a net loss of $(27.9) million in the prior year period.
  • Non-GAAP Adjusted EBITDA improved by $4.1 million to $(32.4) million, from $(36.5) million in the prior year period.
  • Non-GAAP Adjusted Earnings of $(29.8) million, as compared to $(25.9) million in the prior year period.

Operational highlights for the first quarter 2018:

  • BNC opened 24 new physical stores this quarter with estimated annual sales of $49 million, bringing total stores operated by BNC to 781 locations as of July 29, 2017.
  • MBS opened 10 new virtual stores this quarter with estimated annual revenue of $4 million, bringing total contracts operated by MBS to 714 as of July 29, 2017.
  • Completed the acquisition of Student Brands, LLC, a leading direct-to-student subscription-based writing skills services business, on August 3, 2017 for $58.5 million. Student Brands is expected to contribute more than $10 million of EBITDA to BNED’s consolidated results over the next twelve months and significantly expands the Company’s opportunity to market the services students need to improve performance in the classroom and to secure jobs after graduation.
  • Launched implementations of LoudSight, the Company’s predictive analytics offering, with Unizin, a nonprofit consortium of 22 schools focused on promoting affordability, access, and student success in digital education.
  • Signed a multi-year contract with Eastern Gateway Community College which includes providing institutional-wide LMS and predictive analytics solutions, as well as operating a traditional physical bookstore.
  • Partnered with Target to promote its brand and college essentials to our customer base.
  • Collaborated with major publishers in the Educational Publishers Enforcement Group (“EPEG”) to implement enhanced anti-counterfeiting procedures developed by EPEG to assist publishers and distributors in combating counterfeit print textbooks.

“For the first time, our results include a full quarter of MBS’ leading position in the wholesale and direct markets, providing $16.1 million of segment Adjusted EBITDA. MBS’ first quarter results, coupled with our success in integrating MBS into our operations post acquisition, reinforce our belief that the MBS transaction is highly beneficial for our operating leverage, financial position and for creation of shareholder value,” said Michael P. Huseby, Executive Chairman, Barnes & Noble Education. “In our Barnes & Noble College segment, general merchandise sales performed well in the first quarter growing by 3.3% on a comparable store basis. This growth was led by strong branded apparel and gift sales. General merchandise represented approximately 50% of the total sales for the quarter for BNC. The comparable store sales decline for BNC of 2.5% is in line with our expectations. Looking ahead, we are well prepared for the fall rush period for course material and general merchandise sales both in store and online. We are well positioned to broaden and deepen our partnerships with schools to support student success. In addition, our agreement with the major publishers to enhance and formalize procedures to combat counterfeits and assure authentic content has placed us in a better position to negotiate expanded and mutually-beneficial commercial relationships with them.”

Consolidated first quarter sales of $355.7 million increased $116.5 million, or 48.7%, as compared to the prior year period, primarily due to the MBS acquisition. The Company reported a consolidated net loss of $(34.8) million compared to $(27.9) million in the prior year period.

Comparable store sales decreased 2.5% for BNC for the quarter, representing approximately $5.5 million in revenue, compared to 2.8% for BNC in the prior year quarter. The decrease is primarily attributable to textbook sales, which were down 8.5% partially offset by an increase in general merchandise sales of 3.3%.

The Company’s operating loss was $(55.5) million during the 13 weeks ended July 29, 2017, compared to operating loss of $(52.8) million during the 13 weeks ended July 30, 2016. For the 13 weeks ended July 29, 2017, excluding the fair value inventory adjustment for MBS of $2.2 million, CEO separation costs of $5.2 million (recorded in restructuring and other charges) and transaction costs of $0.6 million, operating loss was $(47.5) million, an improvement of $1.9 million. For the 13 weeks ended July 30, 2016, excluding the transaction costs of $1.5 million and restructuring costs of $1.8 million, operating loss was $(49.4) million.

The Company’s non-GAAP Adjusted EBITDA improved by $4.1 million to $(32.4) million for the quarter, as compared to $(36.5) million in the prior year period. Adjusted EBITDA for BNC was $(36.9) million, compared with $(36.5) million in the prior year period, reflecting the seasonality of the business. MBS contributed $16.1 million of Adjusted EBITDA. The intercompany eliminations of $(11.6) million of profit will be recognized in the second quarter as BNC sells through the inventory provided by MBS.

First quarter consolidated net loss was $(34.8) million, or $(0.75) per diluted share, compared to net loss of $(27.9) million, or $(0.60) per diluted share, in the prior year period. The current year’s fiscal first quarter has 46.5 million diluted shares outstanding, while the prior year period had 46.3 million diluted shares outstanding.

Outlook

For fiscal year 2018, the Company expects sales at BNC to be relatively flat, while BNC comparable store sales are projected to decline in the low- to mid-single digit percentage point range year over year. In addition, the Company expects consolidated sales to be in the range of $2.25 billion to $2.35 billion before intercompany eliminations. Capital expenditures are expected to be approximately $50 million, an increase from fiscal 2017 due to new store growth at BNC.

Comments are closed.