UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January ~~29, 2022~~28, 2023


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-37499

BARNES & NOBLE EDUCATION, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

46-0599018

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

120 Mountain View Blvd.,

Basking Ridge,

07920

(Address of Principal Executive Offices)

(Zip Code)

(Registrant’s Telephone Number, Including Area Code): (908) 991-2665

Securities registered pursuant to Section 12(b) of the Act:


Title of Class	Trading Symbol	Name of Exchange on which registered
Common Stock, $0.01 par value per share	BNED	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of ~~March 3, 2022, 52,045,951~~February 24, 2023, 52,604,274 shares of Common Stock, par value $0.01 per share, were outstanding.

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Fiscal Quarter Ended January ~~29, 2022~~28, 2023

Index to Form 10-Q


			Page No.
PART I -	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations – For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022		3
	Condensed Consolidated Balance Sheets – As of January 28, 2023, January 29, 2022, ~~January~~and April 30, ~~2021, and May 1, 2021~~2022		4
	Condensed Consolidated Statements of Cash Flows – For the ~~13 and~~ 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022		5
	Condensed Consolidated Statements of Equity – As of January 29 ~~, 202~~2 28, 2023 and January 30 ~~, 20~~2129, 2022		6
	Notes to Condensed Consolidated Financial Statements		7
	Note 1.	Organization	7
	Note 2.	Summary of Significant Accounting Policies	8
	Note 3.	Revenue	12
	Note 4.	Segment Reporting	13
	Note 5.	Equity and Earnings Per Share	16
	Note 6.	Fair Value Measurements	17
	Note 7.	~~Credit Facility~~Debt	18
	Note 8.	Leases	19
	Note 9.	Supplementary Information	20
	Note 10.	Long-Term Incentive Plan Compensation Expense	2021
	Note 11.	Employee Benefit Plans	22
	Note 12.	Income Taxes	22
	Note 13.	Legal Proceedings	2223
	Note 14.	Subsequent Event	23

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2324
	Overview		2324
	Results of Operations		2728
	Non-GAAP Measures		3839
	Liquidity and Capital Resources		42

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4647
Item 4.	Controls and Procedures		4647

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings		4648
Item 1A.	Risk Factors		4648
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		4748
Item 5.	Other Information		4748
Item 6.	Exhibits		4749
	SIGNATURES		4850

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1: Financial Statements

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
		January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021			January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Sales:	Sales:									Sales:
Product sales and other	Product sales and other	$	377,713	$	373,502	$	1,182,812	$	1,118,544	Product sales and other	$	402,755	$	377,713	$	1,231,465	$	1,182,812
Rental income	Rental income	25,085		38,111		87,757		92,568		Rental income	44,309		25,085		96,555		87,757
Total sales	Total sales	402,798		411,613		1,270,569		1,211,112		Total sales	447,064		402,798		1,328,020		1,270,569
Cost of sales (exclusive of depreciation and amortization expense):	Cost of sales (exclusive of depreciation and amortization expense):									Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	Product and other cost of sales	297,693		315,607		924,924		933,847		Product and other cost of sales	319,644		297,693		963,071		924,924
Rental cost of sales	Rental cost of sales	18,144		25,394		53,096		60,506		Rental cost of sales	23,210		18,144		52,416		53,096
Total cost of sales	Total cost of sales	315,837		341,001		978,020		994,353		Total cost of sales	342,854		315,837		1,015,487		978,020
Gross profit	Gross profit	86,961		70,612		292,549		216,759		Gross profit	104,210		86,961		312,533		292,549
Selling and administrative expenses	Selling and administrative expenses	101,460		92,708		295,597		254,723		Selling and administrative expenses	99,473		101,460		305,045		295,597
Depreciation and amortization expense	Depreciation and amortization expense	12,179		13,307		36,755		40,563		Depreciation and amortization expense	10,618		12,179		33,910		36,755
Impairment loss (non-cash)	Impairment loss (non-cash)	6,411		27,630		6,411		27,630		Impairment loss (non-cash)	6,008		6,411		6,008		6,411
Restructuring and other charges	Restructuring and other charges	46		1,669		3,785		10,727		Restructuring and other charges	5,975		46		6,610		3,067
Operating loss	Operating loss	(33,135)		(64,702)		(49,999)		(116,884)		Operating loss	(17,864)		(33,135)		(39,040)		(49,281)
Interest expense, net	Interest expense, net	3,051		2,311		7,809		5,876		Interest expense, net	6,918		3,051		15,672		7,809
Loss before income taxes	Loss before income taxes	(36,186)		(67,013)		(57,808)		(122,760)		Loss before income taxes	(24,782)		(36,186)		(54,712)		(57,090)
Income tax expense (benefit)		615		(18,724)		811		(35,334)
Income tax expense										Income tax expense	267		615		900		811
Net loss	Net loss	$	(36,801)	$	(48,289)	$	(58,619)	$	(87,426)	Net loss	$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)

Loss per share of common stock:	Loss per share of common stock:									Loss per share of common stock:
Basic	Basic	$	(0.71)	$	(0.96)	$	(1.13)	$	(1.78)	Basic	$	(0.48)	$	(0.71)	$	(1.06)	$	(1.12)
Diluted	Diluted	$	(0.71)	$	(0.96)	$	(1.13)	$	(1.78)	Diluted	$	(0.48)	$	(0.71)	$	(1.06)	$	(1.12)
Weighted average shares of common stock outstanding:	Weighted average shares of common stock outstanding:									Weighted average shares of common stock outstanding:
Basic	Basic	52,003		50,082		51,714		49,099		Basic	52,602		52,003		52,404		51,714
Diluted	Diluted	52,003		50,082		51,714		49,099		Diluted	52,602		52,003		52,404		51,714

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)


		January 29, 2022		January 30, 2021		May 1, 2021			January 28, 2023		January 29, 2022		April 30, 2022
		(unaudited)		(unaudited)		(audited)			(unaudited)		(unaudited)		(audited)
ASSETS	ASSETS							ASSETS
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	9,967	$	9,915	$	8,024	Cash and cash equivalents	$	11,137	$	9,967	$	10,388
Receivables, net	Receivables, net	250,187		227,174		121,072		Receivables, net	277,513		250,187		137,039
Merchandise inventories, net	Merchandise inventories, net	403,646		452,611		281,112		Merchandise inventories, net	408,924		403,646		293,854
Textbook rental inventories	Textbook rental inventories	40,976		40,720		28,692		Textbook rental inventories	35,468		40,976		29,612
Prepaid expenses and other current assets	Prepaid expenses and other current assets	60,615		25,281		61,933		Prepaid expenses and other current assets	57,036		60,615		61,709

Total current assets	Total current assets	765,391		755,701		500,833		Total current assets	790,078		765,391		532,602
Property and equipment, net	Property and equipment, net	93,752		87,405		89,172		Property and equipment, net	92,225		93,752		94,072
Operating lease right-of-use assets	Operating lease right-of-use assets	229,259		242,937		240,456		Operating lease right-of-use assets	259,470		229,259		286,584
Intangible assets, net	Intangible assets, net	133,975		155,536		150,904		Intangible assets, net	114,947		133,975		129,624
Goodwill	Goodwill	4,700		4,700		4,700		Goodwill	4,700		4,700		4,700
Deferred tax assets, net	Deferred tax assets, net	22,918		14,984		23,248		Deferred tax assets, net	—		15,613		—
Other noncurrent assets	Other noncurrent assets	24,040		27,195		29,105		Other noncurrent assets	19,686		24,040		23,971
Total assets	Total assets	$	1,274,035	$	1,288,458	$	1,038,418	Total assets	$	1,281,106	$	1,266,730	$	1,071,553
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:							Current liabilities:
Accounts payable	Accounts payable	$	359,743	$	318,795	$	137,578	Accounts payable	$	355,348	$	359,743	$	182,790
Accrued liabilities	Accrued liabilities	150,754		125,815		92,871		Accrued liabilities	138,179		150,754		95,387
Current operating lease liabilities	Current operating lease liabilities	100,773		105,624		92,513		Current operating lease liabilities	116,051		100,773		97,143
Short-term borrowings	Short-term borrowings	—		—		50,000		Short-term borrowings	—		—		40,000
Total current liabilities	Total current liabilities	611,270		550,234		372,962		Total current liabilities	609,578		611,270		415,320

Long-term deferred taxes, net								Long-term deferred taxes, net	1,601		—		1,430
Long-term operating lease liabilities	Long-term operating lease liabilities	168,924		190,453		184,780		Long-term operating lease liabilities	188,466		168,924		219,594
Other long-term liabilities	Other long-term liabilities	48,676		52,814		52,042		Other long-term liabilities	19,375		48,676		21,135
Long-term borrowings	Long-term borrowings	200,400		150,800		127,600		Long-term borrowings	285,600		200,400		185,700
Total liabilities	Total liabilities	1,029,270		944,301		737,384		Total liabilities	1,104,620		1,029,270		843,179
Commitments and contingencies	Commitments and contingencies	—		—		—		Commitments and contingencies	—		—		—
Stockholders' equity:	Stockholders' equity:							Stockholders' equity:

Preferred stock, $0.01 par value; authorized, 5,000 shares; 0 shares issued and 0 shares outstanding	Preferred stock, $0.01 par value; authorized, 5,000 shares; 0 shares issued and 0 shares outstanding	—		—		—		Preferred stock, $0.01 par value; authorized, 5,000 shares; 0 shares issued and 0 shares outstanding	—		—		—
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 54,234, 53,327 and 53,327 shares, respectively; outstanding, 52,046, 51,379 and 51,379 shares, respectively		542		533		533
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 55,140, 54,234 and 54,234 shares, respectively; outstanding, 52,604, 52,046 and 52,046 shares, respectively								Common stock, $0.01 par value; authorized, 200,000 shares; issued, 55,140, 54,234 and 54,234 shares, respectively; outstanding, 52,604, 52,046 and 52,046 shares, respectively	551		542		542

Additional paid-in capital	Additional paid-in capital	738,968		733,019		734,257		Additional paid-in capital	745,417		738,968		740,838
Accumulated deficit	Accumulated deficit	(473,233)		(370,253)		(414,614)		Accumulated deficit	(547,106)		(480,538)		(491,494)
Treasury stock, at cost	Treasury stock, at cost	(21,512)		(19,142)		(19,142)		Treasury stock, at cost	(22,376)		(21,512)		(21,512)
Total stockholders' equity	Total stockholders' equity	244,765		344,157		301,034		Total stockholders' equity	176,486		237,460		228,374
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,274,035	$	1,288,458	$	1,038,418	Total liabilities and stockholders' equity	$	1,281,106	$	1,266,730	$	1,071,553

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


		39 weeks ended					39 weeks ended
		January 29, 2022		January 30, 2021			January 28, 2023		January 29, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(58,619)	$	(87,426)	Net loss	$	(55,612)	$	(57,901)
Adjustments to reconcile net loss to net cash flows from operating activities:	Adjustments to reconcile net loss to net cash flows from operating activities:					Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	36,755		40,563		Depreciation and amortization expense	33,910		36,755
Content amortization expense	Content amortization expense	3,984		3,700		Content amortization expense	4,882		3,984
Amortization of deferred financing costs	Amortization of deferred financing costs	1,087		811		Amortization of deferred financing costs	2,058		1,087
Impairment loss (non-cash)	Impairment loss (non-cash)	6,411		27,630		Impairment loss (non-cash)	6,008		6,411
Merchandise inventory loss	Merchandise inventory loss	434		—		Merchandise inventory loss	—		434
Deferred taxes	Deferred taxes	330		(7,179)		Deferred taxes	171		330
Stock-based compensation expense	Stock-based compensation expense	4,463		3,857		Stock-based compensation expense	4,588		4,463
Changes in other long-term assets and liabilities, net	Changes in other long-term assets and liabilities, net	260		10,878		Changes in other long-term assets and liabilities, net	362		260
Changes in operating lease right-of-use assets and liabilities	Changes in operating lease right-of-use assets and liabilities	1,808		11,937		Changes in operating lease right-of-use assets and liabilities	13,196		1,808
Changes in other operating assets and liabilities, net	Changes in other operating assets and liabilities, net	10,988		36,402		Changes in other operating assets and liabilities, net	(32,145)		10,270
Net cash flows provided by operating activities		7,901		41,173
Net cash flows (used in) provided by operating activities						Net cash flows (used in) provided by operating activities	(22,582)		7,901
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(33,393)		(25,910)		Purchases of property and equipment	(26,899)		(33,393)
Net change in other noncurrent assets	Net change in other noncurrent assets	734		335		Net change in other noncurrent assets	572		734
Net cash flows used in investing activities	Net cash flows used in investing activities	(32,659)		(25,575)		Net cash flows used in investing activities	(26,327)		(32,659)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from borrowings under Credit Agreement		463,220		547,600
Repayments of borrowings under Credit Agreement		(440,420)		(571,500)
Proceeds from borrowings						Proceeds from borrowings	512,000		463,220
Repayments of borrowings						Repayments of borrowings	(452,100)		(440,420)
Payment of deferred financing costs						Payment of deferred financing costs	(2,614)		—

Sale of treasury shares		—		10,869
Purchase of treasury shares	Purchase of treasury shares	(2,370)		(894)		Purchase of treasury shares	(864)		(2,370)
Proceeds from the exercise of stock options, net	Proceeds from the exercise of stock options, net	256		—		Proceeds from the exercise of stock options, net	—		256
Net cash flows provided by (used in) financing activities		20,686		(13,925)
Net cash flows provided by financing activities						Net cash flows provided by financing activities	56,422		20,686

Net (decrease) increase in cash, cash equivalents and restricted cash		(4,072)		1,673
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	7,513		(4,072)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	16,814		9,008		Cash, cash equivalents and restricted cash at beginning of period	21,934		16,814
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	12,742	$	10,681	Cash, cash equivalents and restricted cash at end of period	$	29,447	$	12,742
Changes in other operating assets and liabilities, net:	Changes in other operating assets and liabilities, net:					Changes in other operating assets and liabilities, net:
Receivables, net	Receivables, net	$	(129,115)	$	(136,323)	Receivables, net	$	(140,474)	$	(129,115)
Merchandise inventories	Merchandise inventories	(122,968)		(23,672)		Merchandise inventories	(115,070)		(122,968)
Textbook rental inventories	Textbook rental inventories	(12,284)		(10)		Textbook rental inventories	(5,856)		(12,284)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(4,697)		(9,104)		Prepaid expenses and other current assets	14,034		(4,697)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	280,052		205,511		Accounts payable and accrued liabilities	215,221		279,334
Changes in other operating assets and liabilities, net	Changes in other operating assets and liabilities, net	$	10,988	$	36,402	Changes in other operating assets and liabilities, net	$	(32,145)	$	10,270

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(In thousands) (unaudited)


					Additional
		Common Stock			Paid-In		Accumulated		Treasury Stock			Total
		Shares	Amount		Capital		Deficit		Shares	Amount		Equity
Balance at May 2, 2020		52,140	$	521	$	732,958	$	(282,827)	3,842	$	(32,901)	$	417,751
Stock-based compensation expense					1,521							1,521
Vested equity awards		514	5		(5)							—
Shares repurchased for tax withholdings for vested stock awards									179	(342)		(342)
Net loss							(46,652)					(46,652)
Balance August 1, 2020		52,654	$	526	$	734,474	$	(329,479)	4,021	$	(33,243)	$	372,278
Stock-based compensation expense					1,180							1,180
Vested equity awards		662	7		(7)							—
Shares repurchased for tax withholdings for vested stock awards									231	(539)		(539)
Net income							7,515					7,515
Balance at October 31, 2020		53,316	$	533	$	735,647	$	(321,964)	4,252	$	(33,782)	$	380,434
Stock-based compensation expense					1,156							1,156
Vested equity awards		11	—		—							—
Sale of treasury shares					(3,784)				(2,308)	14,653		10,869
Shares repurchased for tax withholdings for vested stock awards									4	(13)		(13)
Net loss							(48,289)					(48,289)
Balance at January 30, 2021		53,327	$	533	$	733,019	$	(370,253)	1,948	$	(19,142)	$	344,157

					Additional													Additional
		Common Stock			Paid-In		Accumulated		Treasury Stock			Total			Common Stock			Paid-In		Accumulated		Treasury Stock			Total
		Shares	Amount		Capital		Deficit		Shares	Amount		Equity			Shares	Amount		Capital		Deficit		Shares	Amount		Equity
Balance at May 1, 2021	Balance at May 1, 2021	53,327	$	533	$	734,257	$	(414,614)	1,948	$	(19,142)	$	301,034	Balance at May 1, 2021	53,327	$	533	$	734,257	$	(422,637)	1,948	$	(19,142)	$	293,011
Stock-based compensation expense	Stock-based compensation expense				1,122							1,122		Stock-based compensation expense				1,122							1,122
Vested equity awards	Vested equity awards	338	3		(3)							—		Vested equity awards	338	3		(3)							—
Shares repurchased for tax withholdings for vested stock awards	Shares repurchased for tax withholdings for vested stock awards								130	(1,215)		(1,215)		Shares repurchased for tax withholdings for vested stock awards								130	(1,215)		(1,215)
Net loss	Net loss						(44,346)					(44,346)		Net loss						(43,628)					(43,628)
Balance July 31, 2021	Balance July 31, 2021	53,665	$	536	$	735,376	$	(458,960)	2,078	$	(20,357)	$	256,595	Balance July 31, 2021	53,665	$	536	$	735,376	$	(466,265)	2,078	$	(20,357)	$	249,290
Stock-based compensation expense	Stock-based compensation expense				1,478							1,478		Stock-based compensation expense				1,478							1,478
Vested equity awards	Vested equity awards	487	5		(5)							—		Vested equity awards	487	5		(5)							—
Shares repurchased for tax withholdings for vested stock awards	Shares repurchased for tax withholdings for vested stock awards								108	(1,144)		(1,144)		Shares repurchased for tax withholdings for vested stock awards								108	(1,144)		(1,144)
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	10	—		37							37		Issuance of common stock upon exercise of stock options	10	—		37							37
Net income	Net income						22,528					22,528		Net income						22,528					22,528
Balance October 30, 2021	Balance October 30, 2021	54,162	$	541	$	736,886	$	(436,432)	2,186	$	(21,501)	$	279,494	Balance October 30, 2021	54,162	$	541	$	736,886	$	(443,737)	2,186	$	(21,501)	$	272,189
Stock-based compensation expense	Stock-based compensation expense				1,863							1,863		Stock-based compensation expense				1,863							1,863
Vested equity awards	Vested equity awards	4	—		—							—		Vested equity awards	4	—		—							—
Shares repurchased for tax withholdings for vested stock awards	Shares repurchased for tax withholdings for vested stock awards								2	(11)		(11)		Shares repurchased for tax withholdings for vested stock awards								2	(11)		(11)
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	68	1		219							220		Issuance of common stock upon exercise of stock options	68	1		219							220
Net loss	Net loss						(36,801)					(36,801)		Net loss						(36,801)					(36,801)
Balance January 29, 2022	Balance January 29, 2022	54,234	$	542	$	738,968	$	(473,233)	2,188	$	(21,512)	$	244,765	Balance January 29, 2022	54,234	$	542	$	738,968	$	(480,538)	2,188	$	(21,512)	$	237,460

																		Additional
															Common Stock			Paid-In		Accumulated		Treasury Stock			Total
															Shares	Amount		Capital		Deficit		Shares	Amount		Equity
Balance at April 30, 2022														Balance at April 30, 2022	54,234	$	542	$	740,838	$	(491,494)	2,188	$	(21,512)	$	228,374
Stock-based compensation expense														Stock-based compensation expense				1,791							1,791
Vested equity awards														Vested equity awards	540	5		(5)							—
Shares repurchased for tax withholdings for vested stock awards														Shares repurchased for tax withholdings for vested stock awards								238	(612)		(612)
Net loss														Net loss						(52,707)					(52,707)
Balance July 30, 2022														Balance July 30, 2022	54,774	$	547	$	742,624	$	(544,201)	2,426	$	(22,124)	$	176,846
Stock-based compensation expense														Stock-based compensation expense				1,719							1,719
Vested equity awards														Vested equity awards	357	4		(4)							—
Shares repurchased for tax withholdings for vested stock awards														Shares repurchased for tax withholdings for vested stock awards								107	(245)		(245)

Net income														Net income						22,144					22,144
Balance October 29, 2022														Balance October 29, 2022	55,131	$	551	$	744,339	$	(522,057)	2,533	$	(22,369)	$	200,464
Stock-based compensation expense														Stock-based compensation expense				1,078							1,078
Vested equity awards														Vested equity awards	9	—		—							—
Shares repurchased for tax withholdings for vested stock awards														Shares repurchased for tax withholdings for vested stock awards								3	(7)		(7)

Net loss														Net loss						(25,049)					(25,049)
Balance January 28, 2023														Balance January 28, 2023	55,140	$	551	$	745,417	$	(547,106)	2,536	$	(22,376)	$	176,486

See accompanying notes to condensed consolidated financial statements.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

Unless the context otherwise indicates, references in these Notes to the accompanying condensed consolidated financial statements to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education or "BNED", Inc., a Delaware corporation. References to “Barnes & Noble College” refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, LLC.

This Form 10-Q should be read in conjunction with our Audited Consolidated Financial Statements and accompanying Notes to consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021,~~April 30, 2022, which includes consolidated financial statements for the Company as of April 30, 2022 and May 1, 2021 and for each of the three fiscal years ended April 30, 2022, May 1, 2021 and May 2, 2020 ~~and April 27, 2019~~ (Fiscal 2022, Fiscal 2021 and Fiscal 2020, ~~and Fiscal 2019,~~ respectively) and the unaudited condensed consolidated financial statements in our Quarterly ~~Report~~Reports on Form 10-Q for the ~~13 weeks~~quarter ended July ~~31, 2021,~~30, 2022, and ~~the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q~~ for the ~~26 weeks~~quarter ended October ~~30, 2021.~~29, 2022.

Note 1. Organization

Description of Business

Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions. We operate ~~1,441~~1,388 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content, tools and ~~tools~~general merchandise within a dynamic omnichannel retail environment. Additionally, we offer direct-to-student products and services to help students study more effectively and improve academic performance.

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands. We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our ~~recent~~ merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. D/B/A "Lids" (“~~FLC”~~Lids”) (collectively referred to herein as the ~~“FLC~~“F/L Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect gross general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the ~~“FLC Partnership”.~~F/L Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo ~~and emblematic~~ general merchandise business.

~~We believe the~~The Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States. Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

We have 3three reportable segments: Retail, Wholesale and DSS. For additional information related to our strategies, operations and segments, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021~~April 30, 2022.

First Day Inclusive and Equitable Access Programs

We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. We offer our BNC First Day® inclusive and equitable access programs, consisting of First Day Complete and First Day, in which course materials, including both physical and digital content, are offered at a reduced price through a course fee or included in tuition, and delivered to students on or before the first day of class.

•First Day Complete is adopted by an institution and includes all classes, providing students both physical and digital materials. The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

•Through First Day, digital course materials are adopted by a faculty member for a single course, and students receive their materials through their school's learning management system.

Offering courseware sales through our inclusive and equitable access First Day Complete and First Day models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has occurred at those schools where such programs have been adopted. We are moving quickly and decisively to accelerate our First Day Complete strategy. We plan to move many institutions to First Day Complete for the Fall of 2023 and the majority of schools by Fall 2024.

As of January 28, 2023, 116 campus stores adopted our First Day Complete course materials delivery program for the 2023 Spring Term, representing approximately 580,000 in total undergraduate student enrollment (as reported by National Center for Education Statistics), compared to 76 campus stores representing approximately 380,000 in total undergraduate student enrollment for the 2022 Spring Term. During the 13 weeks ended January 28, 2023, First Day Complete sales increased by $28,912 to $66,901, or 76%, as compared to $37,989 in the prior year period. During the 39 weeks ended January 28, 2023, First Day Complete sales increased by $83,752 to $173,380, or 94%, as compared to $89,628 in the prior year period.

Partnership with Fanatics and ~~FLC~~Lids

In December 2020, we entered into the ~~FLC~~F/L Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our general merchandise business. Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with Lids, ~~(FLC's parent company),~~ the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.

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~~BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~For the 39 weeks ended January 29, 2022 and January 30, 2021~~

~~(Thousands of dollars, except share and per share data)~~

~~(unaudited)~~

maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. ~~FLC~~Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus ~~stores.~~

~~In December 2020, Fanatics, Inc.~~stores, and Lids ~~Holdings, Inc. jointly made a strategic equity investment in BNED. On April 4, 2021, as contemplated by~~owns the ~~FLC Partnership's merchandising agreement, we sold our logo and emblematic general merchandise~~ inventory it manages, relieving us of the obligation to FLC, which was finalized during the first quarter of Fiscal 2022. As contemplated by the FLC Partnership's e-commerce agreement, we began to transition certain of our e-commerce sites to Fanatics e-commerce sites for logo and emblematic products during the first quarter of Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis. For additional information, see ~~Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies - Merchandise Inventories~~ ~~and~~ ~~Note 6. Equity and Earnings Per Share~~ ~~in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.~~finance inventory purchases from working capital.

COVID-19 Business Impact

~~Since the fourth quarter of Fiscal 2020, our~~Our business has been significantly negatively impacted by the COVID-19 pandemic, ~~resulting in an unprecedented material decline in revenue. Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile~~as many schools adjusted their learning models and on-campus activities. However, on campus traffic continues to ~~evolve. We~~grow from increased campus events and activities, as compared to the last two years. Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across the country during the 2022 Spring Term which did not recur during the 2023 Spring Term. While the impact of the COVID-19 pandemic is lessening, we cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations. Although most four year schools returned to a traditional on-campus environment, ~~for learning in the Fall semester, as well as hosted traditional on campus sporting activities,~~ there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

The COVID-19 impact on higher education remains a fluid situation. We are committed to supporting our campus partners through our flexible offerings and our ability to quickly pivot to ensure uninterrupted service as institutions manage the safety of their campuses. If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations. We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to how to operate our bookstores in the safest manner for our employees and customers. Please see our ~~Part II - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ ~~for further discussion.~~

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Our condensed consolidated financial statements reflect our condensed consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported. These condensed consolidated financial statements are

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

condensed and therefore do not include all of the information and footnotes required by GAAP. All material intercompany accounts and transactions have been eliminated in consolidation.

Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. ~~Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April.~~

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~~BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~For the 39 weeks ended January 29, 2022 and January 30, 2021~~

~~(Thousands of dollars, except share and per share data)~~

~~(unaudited)~~

Due to the seasonal nature of the business, the results of operations for the 39 weeks ended January 29, 2022 are not indicative of the results expected for the 52 weeks ending April 30, 2022 (Fiscal 2022).

For certain of our retail operations, sales are generally highest in the second and third fiscal quarters, when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as MBS sells textbooks and other course materials for retail distribution. Our DSS segment sales and operating profit are realized relatively consistently throughout the year.

Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. Due to the seasonal nature of the business, the results of operations for the 13 and 39 weeks ended January 28, 2023 are not indicative of the results expected for the 52 weeks ending April 29, 2023 (Fiscal 2023).

Use of Estimates

In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Restricted Cash

As of January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, we had restricted cash of ~~$2,775~~$18,309 and ~~$766,~~$2,775, respectively, comprised of ~~$1,878~~$17,397 and ~~$0,~~$1,878, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to ~~FLC~~Lids for logo merchandise sales as per the ~~FLC~~F/L Partnership's merchandising agreement, and ~~$897~~$912 and ~~$766,~~$897, respectively, in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Merchandise Inventories

Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand.

Cost is determined primarily by the retail inventory method for our Retail segment and last-in first out, or “LIFO”, method for our Wholesale segment. Our textbook inventories, for Retail and Wholesale, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends.

The Retail Segment courseware fulfillment order is directed first to our wholesale business before other sources of inventory are utilized. The products that we sell originate from a wide variety of domestic and international vendors. After internal sourcing, the bookstore purchases ~~textbooks~~courseware from outside suppliers and publishers.

As contemplated by the ~~FLC~~F/L Partnership merchandising agreement, we sold our logo ~~and emblematic~~ general merchandise inventory to ~~FLC~~Lids and received proceeds of $41,773, and recognized a merchandise inventory loss on the sale of $10,262 in cost of goods sold in the condensed consolidated statement of operations during the 52 weeks ended May 1, 2021 for the Retail Segment. The final inventory sale price was determined during the first quarter of Fiscal 2022, at which time, we received additional proceeds of $1,906, and recognized a merchandise inventory loss on the sale of $434 in cost of goods sold in the Fiscal 2022 condensed consolidated statement of operations for the Retail Segment.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

Textbook Rental Inventories

Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost.

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~~BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~For the 39 weeks ended January 29, 2022 and January 30, 2021~~

~~(Thousands of dollars, except share and per share data)~~

~~(unaudited)~~

Leases

We recognize lease assets and lease liabilities on the condensed consolidated balance sheet for all operating lease arrangements based on the present value of future lease payments as required by Accounting Standards Codification ("ASC") Topic 842, Leases. We do not recognize lease assets or lease liabilities for short-term leases (i.e., those with a term of twelve months or less). We recognize lease expense on a straight-line basis over the lease term for contracts with fixed lease payments, including those with fixed annual minimums, or over a rolling twelve-month period for leases where the annual guarantee resets at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset. For additional information, see Note 8. Leases.

Revenue Recognition and Deferred Revenue

Product sales and rentals

The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Note 3. Revenue.

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale.

Revenue from the rental of digital textbooks, which contains a single performance obligation, is recognized at the point of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.

For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis. Effective in April 4, 2021, as contemplated by the ~~FLC~~F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo ~~and emblematic~~ general merchandise sales to ~~FLC~~Lids and Fanatics. The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo ~~and emblematic~~ general merchandise sales are fulfilled by ~~FLC~~Lids and Fanatics, we recognize commission revenue earned for these sales on a net

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

basis in our condensed consolidated financial statements, as compared to the recognition of logo ~~and emblematic~~general merchandise sales on a gross basis in the periods prior to ~~April 4, 2021.~~the transition.

We do not have gift card or customer loyalty programs. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year.

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~~BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~For the 39 weeks ended January 29, 2022 and January 30, 2021~~

~~(Thousands of dollars, except share and per share data)~~

~~(unaudited)~~

Service and other revenue

Service and other revenue is primarily derived from DSS segment subscription-based service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers.

Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer. The majority of subscriptions sold are one month in duration.

Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

Cost of Sales

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Selling and Administrative Expenses

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment subscription-based services business. Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services.

Evaluation of Goodwill and Other Long-Lived Assets

As of January ~~29, 2022,~~28, 2023, we had ~~$0, $0 and~~ $4,700 of goodwill on our condensed consolidated balance sheet related to our ~~Retail, Wholesale and~~ DSS reporting ~~units, respectively.~~unit. In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value.

We completed our annual goodwill impairment test as of the first day of the third quarter of Fiscal ~~2022.~~2023. In performing the valuation, we used cash flows that reflected management's forecasts and discount rates that included risk adjustments consistent with the current market conditions. The fair value of the DSS reporting unit was determined to exceed the carrying value of the reporting unit; therefore, no goodwill impairment was recognized.

We review our long-lived assets for impairment whenever events or changes in circumstances, including but not limited to contractual changes, renewals or amendments are made to agreements with our college, university, or K-12 schools, indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. As of January ~~29, 2022,~~28, 2023, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of ~~$93,752, $229,259, $133,975,~~$92,225, $259,470, $114,947, and ~~$24,040,~~$19,686, respectively, on our condensed consolidated balance sheet.

Our business has been significantly negatively impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning models and on-campus activities. Many of the trends observed during the Fall 2021 semester continued into the Spring 2022 semester, as fewer students have returned to campus for the Spring semester. As we entered the Spring rush period in early January 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities. In early January, while the majority of schools brought students back to campus, some schools chose to conduct classes virtually for the beginning of the semester, while other schools chose to delay their start dates (and some schools both delayed the start of the semester and started classes virtually),

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

~~thus reducing and/~~Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. Although most academic institutions have since reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes. Enrollment trends have been negatively impacted overall by COVID-19 concerns at physical campuses. While many athletic conferences resumed their sport activities, other events, such as parent and alumni weekends and prospective student campus tour activities, some may still be curtailed or ~~delaying sales later into the quarter or shifting some sales to our fourth quarter.~~offer a virtual option. These combined events continue to impact the Company’s course materials and general merchandise business.

During the 13 weeks ended January 28, 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6,008 (both pre-tax and after-tax), comprised of $708, $1,697, $3,599 and $4 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

During the 13 weeks ended January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6,411 (both pre-tax and after-tax), comprised of $739, $1,793, $3,668 and $211 ~~of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.~~

During the 13 weeks ended January 30, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $27,630 ($20,506 after-tax), comprised of $5,085, $13,328, $6,278 and $2,939 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations. For additional information, see Note 6. Fair Value Measurements.

Income Taxes

AsThe provision for income taxes includes federal, state and local income taxes currently payable and those deferred because of ~~January 29, 2022, other long-term~~temporary differences between the financial statement and tax basis of assets and liabilities. The deferred tax assets and liabilities ~~includes $25,335 related~~are measured using the enacted tax rates and laws that are expected to be in effect when the ~~long-term~~differences reverse. We regularly review deferred tax ~~payable associated with the LIFO reserve. The LIFO reserve is impacted by changes in the consumer price index (“CPI”)~~assets for recoverability and is dependent on the inventory levels at the end of our tax year (on or about January 31st) which is in the middle of our second largest selling cycle. At the end of the most recent tax year, inventory levels declined as comparedestablish a valuation allowance, if determined to the prior year resulting in approximately $745 of the LIFO reserve becoming currently payable. Given recent trends relating to the pricing and rental of textbooks, management believes that an additional portion of the remaining long-term tax payable associated with the LIFO reserve could be payable within the next twelve months. We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months.necessary.

Note 3. Revenue

Revenue from sales of our products and services is recognized either at the point in time when control of the products is transferred to our customers or over time as services are provided in an amount that reflects the consideration we expect to be entitled to in exchange for the products or services. See Note 2. Summary of Significant Accounting Policies for additional information related to our revenue recognition policies and Note 4. Segment Reporting for a description of each segment's product and service offerings.

Disaggregation of Revenue

The following table disaggregates the revenue associated with our major product and service offerings:

13 weeks ended 36 weeks ended
January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021
Retail
Product Sales (a)
$ 340,706 $ 338,495 $ 1,076,122 $ 998,158
Rental Income 25,085 38,111 87,757 92,568
Service and Other Revenue (b)
8,949 11,063 30,282 32,233
Retail Total Sales $ 374,740 $ 387,669 $ 1,194,161 $ 1,122,959
Wholesale Sales $ 37,039 $ 39,465 $ 103,192 $ 156,146
DSS Sales (c)
$ 9,430 $ 7,206 $ 26,012 $ 19,025
Eliminations (d)
$ (18,411) $ (22,727) $ (52,796) $ (87,018)
Total Sales $ 402,798 $ 411,613 $ 1,270,569 $ 1,211,112

~~(a)~~Effective April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for


	13 weeks ended				39 weeks ended
	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Retail
Course Materials Product Sales	$	286,714	$	262,895	$	834,190	$	818,849
General Merchandise Product Sales (a)	81,813		76,777		293,285		248,400
Service and Other Revenue (b)	8,423		9,983		32,346		39,155
Retail Product and Other Sales sub-total	376,950		349,655		1,159,821		1,106,404
Course Materials Rental Income	44,309		25,085		96,555		87,757
Retail Total Sales	$	421,259	$	374,740	$	1,256,376	$	1,194,161
Wholesale Sales	$	38,958	$	37,039	$	97,161	$	103,192
DSS Sales (c)	$	9,010	$	9,430	$	26,659	$	26,012
Eliminations (d)	$	(22,163)	$	(18,411)	$	(52,176)	$	(52,796)
Total Sales	$	447,064	$	402,798	$	1,328,020	$	1,270,569

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

(a)Effective in April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo general merchandise sales to Lids and Fanatics. The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo general merchandise sales are fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo ~~and emblematic~~general merchandise sales on a gross basis in the periods prior to ~~April 4, 2021.~~the transition.

(b)Service and other revenue primarily relates to brand partnerships and other service revenues.

(c)DSS sales primarily relate to direct-to-student subscription-based revenue.

(d)The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

Contract ~~Assets and Contract~~ Liabilities

Contract assets represent the sale of goods or services to a customer before we have the right to obtain consideration from the customer. Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract assets (unbilled receivables) were $0 as of January 29, 2022, January 30, 2021 and May 1, 2021 on our condensed consolidated balance sheets.

Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (deferred revenue). Deferred revenue consists of the following:

•advanced payments from customers related to textbook rental and subscription-based performance obligations, which are recognized ratably over the terms of the related rental or subscription periods;

•unsatisfied performance obligations associated with partnership marketing services, which are recognized when the contracted services are provided to our partnership marketing customers; and

•unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the e-commerce and merchandising contracts for Fanatics and ~~FLC,~~Lids, respectively.

Deferred revenue of $51,125, $47,166, and $13,469 is recorded in accrued liabilities and $4,466, $3,956, and $4,670 is recorded in other long-term liabilities on our condensed consolidated balance sheets for the periods ended January 29, 2022, January 30, 2021 and May 1, 2021, respectively. As of January 29, 2022, we expect to recognize $51,125 of the deferred revenue balance within the next 12 months. The following table presents changes in deferred revenue associated with our contract liabilities:


		39 weeks ended					39 weeks ended
		January 29, 2022		January 30, 2021			January 28, 2023		January 29, 2022
Deferred revenue at the beginning of period	Deferred revenue at the beginning of period	$	18,139	$	13,373	Deferred revenue at the beginning of period	$	19,722	$	18,139
Additions to deferred revenue during the period	Additions to deferred revenue during the period	141,071		148,777		Additions to deferred revenue during the period	177,150		141,071
Reductions to deferred revenue for revenue recognized during the period	Reductions to deferred revenue for revenue recognized during the period	(103,619)		(111,028)		Reductions to deferred revenue for revenue recognized during the period	(139,704)		(103,619)
Deferred revenue balance at the end of period		$	55,591	$	51,122
Deferred revenue balance at the end of period:						Deferred revenue balance at the end of period:	$	57,168	$	55,591
Balance Sheet classification:						Balance Sheet classification:
Accrued liabilities						Accrued liabilities	$	52,891	$	51,125
Other long-term liabilities						Other long-term liabilities	4,277		4,466
Deferred revenue balance at the end of period:						Deferred revenue balance at the end of period:	$	57,168	$	55,591

As of January 28, 2023, we expect to recognize $52,891 of the deferred revenue balance within the next 12 months.

Note 4. Segment Reporting

We have 3three reportable segments: Retail, Wholesale and DSS. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance. The following summarizes the three segments. For additional information about each segment's operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021~~April 30, 2022.

Retail

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

including emblematic apparel and gifts. The Retail Segment also offers inclusive and equitable access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first

~~Table of Contents~~

~~BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~For the 39 weeks ended January 29, 2022 and January 30, 2021~~

~~(Thousands of dollars, except share and per share data)~~

~~(unaudited)~~

day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

Wholesale

The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately ~~3,100~~3,000 physical bookstores (including our Retail Segment's ~~799~~785 physical bookstores) and sources and distributes new and used textbooks to our ~~642~~603 virtual bookstores. Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately ~~400~~340 college bookstores.

DSS

The Digital Student Solutions (“DSS”) Segment includes ~~direct-to-student~~ products and services to assist students to study more effectively and improve academic performance. The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby®, aan institutional and direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

Corporate Services represents unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

Intercompany Eliminations

The eliminations are primarily related to the following intercompany activities:

•The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale, and

•These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

Our international operations are not material, and the majority of the revenue and total assets are within the United States.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

Summarized financial information for our reportable segments is reported below:


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
		January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021			January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Sales:
Sales										Sales
Retail	Retail	$	374,740	$	387,669	$	1,194,161	$	1,122,959	Retail	$	421,259	$	374,740	$	1,256,376	$	1,194,161
Wholesale	Wholesale	37,039		39,465		103,192		156,146		Wholesale	38,958		37,039		97,161		103,192
DSS	DSS	9,430		7,206		26,012		19,025		DSS	9,010		9,430		26,659		26,012
Elimination	Elimination	(18,411)		(22,727)		(52,796)		(87,018)		Elimination	(22,163)		(18,411)		(52,176)		(52,796)
Total Sales	Total Sales	$	402,798	$	411,613	$	1,270,569	$	1,211,112	Total Sales	$	447,064	$	402,798	$	1,328,020	$	1,270,569

Gross Profit	Gross Profit									Gross Profit
Retail (a)	Retail (a)	$	69,161	$	53,523	$	246,129	$	165,170	Retail (a)	$	88,926	$	69,161	$	272,421	$	246,129
Wholesale	Wholesale	8,104		10,658		24,129		38,129		Wholesale	6,668		8,104		19,022		24,129
DSS	DSS	7,932		5,882		21,868		15,290		DSS	7,199		7,932		21,376		21,868
Elimination	Elimination	1,764		549		423		(1,830)		Elimination	1,417		1,764		(286)		423
Total Gross Profit	Total Gross Profit	$	86,961	$	70,612	$	292,549	$	216,759	Total Gross Profit	$	104,210	$	86,961	$	312,533	$	292,549

Selling and Administrative Expenses										Selling and Administrative Expenses
Retail										Retail	$	82,753	$	84,626	$	251,843	$	242,477
Wholesale										Wholesale	3,563		3,941		11,561		12,319
DSS										DSS	7,632		7,775		23,909		21,527
Corporate Services										Corporate Services	5,572		5,154		17,861		19,407
Elimination										Elimination	(47)		(36)		(129)		(133)
Total Selling and Administrative Expenses										Total Selling and Administrative Expenses	$	99,473	$	101,460	$	305,045	$	295,597

Depreciation and Amortization	Depreciation and Amortization									Depreciation and Amortization
Retail	Retail	$	8,939	$	9,806	$	27,015	$	30,361	Retail	$	8,749	$	8,939	$	27,147	$	27,015
Wholesale	Wholesale	1,396		1,614		4,060		4,231		Wholesale	1,357		1,396		4,076		4,060
DSS	DSS	1,826		1,863		5,627		5,883		DSS	506		1,826		2,646		5,627
Corporate Services	Corporate Services	18		24		53		88		Corporate Services	6		18		41		53
Total Depreciation and Amortization	Total Depreciation and Amortization	$	12,179	$	13,307	$	36,755	$	40,563	Total Depreciation and Amortization	$	10,618	$	12,179	$	33,910	$	36,755

Operating (Loss) Income
Impairment loss (non-cash) - Retail (b)										Impairment loss (non-cash) - Retail (b)	$	6,008	$	6,411	$	6,008	$	6,411

Restructuring and Other Charges (b)										Restructuring and Other Charges (b)
Retail										Retail	$	1,452	$	30	$	1,452	$	2,113
Wholesale										Wholesale	931		—		931		—
DSS										DSS	1,848		—		1,848		—
Corporate Services										Corporate Services	1,744		16		2,379		954
Total Restructuring and Other Charges										Total Restructuring and Other Charges	$	5,975	$	46	$	6,610	$	3,067

Operating Loss										Operating Loss
Retail	Retail	$	(30,845)	$	(59,996)	$	(32,605)	$	(107,740)	Retail	$	(10,036)	$	(30,845)	$	(14,029)	$	(31,887)
Wholesale	Wholesale	2,767		4,708		7,750		21,625		Wholesale	817		2,767		2,454		7,750
DSS	DSS	(1,669)		(2,567)		(5,286)		(6,218)		DSS	(2,787)		(1,669)		(7,027)		(5,286)
Corporate Services	Corporate Services	(5,188)		(7,451)		(20,414)		(22,847)		Corporate Services	(7,322)		(5,188)		(20,281)		(20,414)
Elimination	Elimination	1,800		604		556		(1,704)		Elimination	1,464		1,800		(157)		556
Total Operating Loss	Total Operating Loss	$	(33,135)	$	(64,702)	$	(49,999)	$	(116,884)	Total Operating Loss	$	(17,864)	$	(33,135)	$	(39,040)	$	(49,281)

13 weeks ended 39 weeks ended
Reconciliation of segment Operating Loss to consolidated Loss Before Income Taxes: January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021
Total Operating Loss $ (33,135) $ (64,702) $ (49,999) $ (116,884)
Interest Expense, net 3,051 2,311 7,809 5,876
Loss Before Income Taxes $ (36,186) $ (67,013) $ (57,808) $ (122,760)

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)


	13 weeks ended				39 weeks ended
Reconciliation of segment Operating Loss to Loss Before Income Taxes:	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Total Operating Loss	$	(17,864)	$	(33,135)	$	(39,040)	$	(49,281)
Interest Expense, net	6,918		3,051		15,672		7,809
Loss Before Income Taxes	$	(24,782)	$	(36,186)	$	(54,712)	$	(57,090)

(a) For the 39 weeks ended January 29, 2022, gross margin includes a merchandise inventory loss of $434 in the Retail Segment. See Note 2. Summary of Significant Accounting Policies - Merchandise Inventories.

~~Table of Contents~~(b) For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022, operating loss includes an impairment loss (non-cash) and restructuring and other charges. For additional information, see Note 9. Supplementary Information.

~~BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~For the 39 weeks ended January 29, 2022 and January 30, 2021~~

~~(Thousands of dollars, except share and per share data)~~

~~(unaudited)~~

Note 5. Equity and Earnings Per Share

Equity

Share Repurchases

During the 39 weeks ended January 29, 2022, our shareholders approved an amendment to the Equity Incentive Plan to increase the number of shares available for issuance by an additional 3,000,000 shares of our Common Stock, for an aggregate total of 13,409,345 shares.

~~Share Repurchases~~

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50,000, in the aggregate, of our outstanding Common Stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During the 39 weeks ended January 29, 2022,28, 2023, we did not repurchase shares of our Common Stock under the stock repurchase program and as of January ~~29, 2022,~~28, 2023, approximately $26,669 remains available under the stock repurchase program.

During the 39 weeks ended January ~~29, 2022,~~28, 2023, we repurchased ~~239,751~~347,808 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

~~Sale of Treasury Shares~~

During the 39 weeks ended January 30, 2021, we entered into a merchandising partnership with Fanatics and FLC which included a strategic equity investment in the Company. Fanatics, Inc. and Lids Holdings, Inc. jointly purchased an aggregate 2,307,692 of our common shares (issued from treasury shares) for $15,000, representing a share price of $6.50 per share. The premium price paid above the fair market value of our common stock at closing was approximately $4,131 and was recorded as a contract liability which is recognized over the term of the merchandising contracts for Fanatics and FLC ($211 and $175, respectively, in accrued liabilities, and $3,762 and $3,956, respectively, as of January 29, 2022 and January 30, 2021, in other long-term liabilities our condensed consolidated balance sheet), as discussed in ~~Note 1. Organization - Partnership with Fanatics and FLC~~.

Earnings Per Share

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. During the 13 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, average shares of ~~4,233,063~~4,677,926 and ~~4,005,236~~4,233,063 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively. During the 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, average shares of ~~3,295,417~~4,824,844 and ~~3,234,606~~3,295,417 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

The following is a reconciliation of the basic and diluted earnings per share calculation:


	13 weeks ended				39 weeks ended
(shares in thousands)	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Numerator for basic and diluted earnings per share:


Net loss available to common shareholders	$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)







Denominator for basic and diluted earnings per share:
Basic and diluted weighted average shares of Common Stock	52,602		52,003		52,404		51,714










Loss per share of Common Stock:
Basic	$	(0.48)	$	(0.71)	$	(1.06)	$	(1.12)
Diluted	$	(0.48)	$	(0.71)	$	(1.06)	$	(1.12)

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

~~The following is a reconciliation of the basic and diluted earnings per share calculation:~~

13 weeks ended 39 weeks ended
(shares in thousands) January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021
Numerator for basic and diluted earnings per share:
Net loss available to common shareholders $ (36,801) $ (48,289) $ (58,619) $ (87,426)
Denominator for basic and diluted earnings per share:
Basic and diluted weighted average shares of Common Stock 52,003 50,082 51,714 49,099
Loss per share of Common Stock:
Basic $ (0.71) $ (0.96) $ (1.13) $ (1.78)
Diluted $ (0.71) $ (0.96) $ (1.13) $ (1.78)

Note 6. Fair Value Measurements

In accordance with ASC No. 820, Fair Value Measurements and Disclosures, the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1—Observable inputs that reflect quoted prices in active markets

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1. The fair value of short-term and long-term debt approximates its carrying value.

Non-Financial Assets and Liabilities

Our non-financial assets include goodwill, property and equipment, operating lease right-of-use assets, and intangible assets. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets.

During the 13 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment and based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6,008 and $6,411 (both pre-tax and ~~after-tax), and $27,630 ($20,506~~ after-tax), respectively, on the condensed consolidated statement of operations. The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using our best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations. For additional information, see Note 2. Summary of Significant Accounting ~~Policies.~~Policies

~~Table of Contents~~.

~~BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~For the 39 weeks ended January 29, 2022 and January 30, 2021~~

~~(Thousands of dollars, except share and per share data)~~

~~(unaudited)~~

The following table shows the fair values of our non-financial assets and liabilities that were required to be remeasured at fair value on a non-recurring basis for each respective period and the total impairments recorded as a result of the remeasurement process:


		13 and 39 weeks ended January 29, 2022						13 and 39 weeks ended January 30, 2021							13 and 39 weeks ended January 28, 2023						13 and 39 weeks ended January 29, 2022
		Carrying Value Prior to Impairment		Fair Value		Impairment Loss (non-cash)		Carrying Value Prior to Impairment		Fair Value		Impairment Loss (non-cash)			Carrying Value Prior to Impairment		Fair Value		Impairment Loss (non-cash)		Carrying Value Prior to Impairment		Fair Value		Impairment Loss (non-cash)
Property and equipment, net	Property and equipment, net	$	742	$	3	$	739	$	5,505	$	420	$	5,085	Property and equipment, net	$	708	$	—	$	708	$	742	$	3	$	739
Operating lease right-of-use assets	Operating lease right-of-use assets	3,299		1,506		1,793		26,427		13,099		13,328		Operating lease right-of-use assets	3,002		1,305		1,697		3,299		1,506		1,793
Intangible assets, net	Intangible assets, net	3,745		77		3,668		7,723		1,445		6,278		Intangible assets, net	3,599		—		3,599		3,745		77		3,668
Other noncurrent assets	Other noncurrent assets	211		—		211		3,539		600		2,939		Other noncurrent assets	4		—		4		211		—		211
Total	Total	$	7,997	$	1,586	$	6,411	$	43,194	$	15,564	$	27,630	Total	$	7,313	$	1,305	$	6,008	$	7,997	$	1,586	$	6,411

Other Non-Financial Liabilities

We granted phantom share units as long-term incentive awards which are settled in cash based on the fair market value of a share of common stock of the Company at each vesting date. The fair value of the liability for the cash-settled phantom share unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk-free rate and volatility assumptions. As of January 28, 2023, we recorded a liability of $1,261 (Level 2 input) which is reflected in accrued liabilities ($1,205) and other long-term liabilities ($56) on the condensed consolidated balance sheet. As of January 29, 2022, we recorded a liability of $3,666 (Level 2 input) which is reflected in accrued liabilities ($2,397) and other long-term liabilities ($1,269) on the condensed consolidated balance sheet. As of January 30, 2021, we recorded a liability of $1,729 (Level 2 input) which is reflected in accrued liabilities $1,093 and other long-term liabilities $636 on the condensed consolidated balance sheet. For additional information, see Note 10. Long-Term Incentive Plan Compensation Expense.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

Note 7. Debt

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended from time to time including on March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount of $400,000 (the “Credit Facility”) effective from the ~~date of the~~March 1, 2019 amendment. We have the option to request an increase in commitments under the Credit Facility of up to $100,000, subject to certain restrictions. Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs. The agreement ~~includes~~included an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100,000 ~~incremental facility~~ maintaining the maximum availability under the Credit Agreement at $500,000.

From and after July 31, 2022, commitments under the FILO Facility were reduced to $0. As of January ~~29, 2022,~~28, 2023, we were in compliance with all debt covenants under the Credit Agreement.

On March ~~4, 2022,~~8, 2023, subsequent to quarter end, we ~~were granted a waiver~~amended our existing Credit Agreement to, among other things, extend the ~~condition~~maturity date thereunder by six months to August 29, 2024. The amendment also reduces the ~~upcoming draw~~commitments under the ~~FILO Facility, scheduled for April 2022, that Consolidated EBITDA (as defined in the~~ Credit ~~Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110,000. Under the waiver amendment, the commitment under the FILO Facility of $25,000 was increased~~Agreement by $20,000 to ~~$40,000, with all remaining terms unchanged.~~$380,000. For additional information, see Note 14. Subsequent Event.

For additional information including interest terms and covenant requirements related to the Credit Facility, refer to Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021.~~April 30, 2022.

During the 39 weeks ended January 28, 2023, we borrowed $512,000 and repaid $452,100 under the Credit Agreement, with $255,600 of outstanding borrowings as of January 28, 2023, comprised entirely of borrowings under the Credit Facility. During the 39 weeks ended January 29, 2022, we borrowed $463,220 and repaid $440,420 under the Credit Agreement, with $200,400 of outstanding borrowings as of January 29, 2022, comprised entirely of borrowings under the Credit Facility. During the 39 weeks ended January 30, 2021, we borrowed $547,600 and repaid $571,500 under the Credit Agreement, with $150,800 of outstanding borrowings as of January 30, 2021, comprised entirely of borrowings under the Credit Facility. As of both January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, we have issued $4,759 in letters of credit under the Credit Facility.

Term Loan

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered into an amendment to our existing Credit Agreement, which permitted us to incur the Term Loan Facility (as defined below). For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $30,000 (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”). The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility. During the 39 weeks ended January 28, 2023, we borrowed $30,000 and repaid $0 under the Term Loan Credit Agreement, with $30,000 of outstanding borrowings as of January 28, 2023.

On March 8, 2023, subsequent to quarter end, we amended the Term Loan Credit Agreement to, among other things, extend the maturity date thereunder by six months to December 7, 2024. For additional information, see Note 14. Subsequent Event.

We incurred debt issuance costs totaling $2,614 related to the Term Loan Credit Agreement. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly, and mature on June 7, 2024. We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind. To date, all interest on the term loan has been paid in cash. The Term Loans do not amortize prior to maturity. Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions. The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that, upon repayment of the Term Loan Credit Agreement (and, if applicable, any replacement credit facility thereof), we may incur second lien secured debt in an aggregate principal amount not to exceed $75,000.

Note 8. Leases

We recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements as required by FASB ASC 842, Leases (Topic 842). Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).

We recognize a right of use ("ROU") asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.

The following table summarizes lease expense:


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
		January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021			January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Variable lease expense	Variable lease expense	$	18,306	$	27,399	$	60,746	$	62,081	Variable lease expense	$	17,242	$	18,306	$	57,707	$	60,746
Operating lease expense	Operating lease expense	33,838		28,127		99,201		87,558		Operating lease expense	38,593		33,838		114,453		99,201
Net lease expense	Net lease expense	$	52,144	$	55,526	$	159,947	$	149,639	Net lease expense	$	55,835	$	52,144	$	172,160	$	159,947

The increase in lease expense during the 39 weeks ended January ~~29, 2022~~28, 2023 is primarily due to higher sales for contracts based on a percentage of revenue ~~and the impact of the timing and reduction of minimum contractual guarantees due to temporary store closings due to the COVID pandemic~~ during the 39 weeks ended January ~~30, 2021.~~

~~The following table summarizes our~~28, 2023, the impact of the timing due to contract renewals, and the increase in minimum ~~fixed lease obligations, excluding variable commissions, as of January 29, 2022:~~


	~~As of~~
	~~January 29, 2022~~
~~Remainder of Fiscal 2022~~	$	~~65,338~~
~~Fiscal 2023~~	~~55,784~~
~~Fiscal 2024~~	~~44,086~~
~~Fiscal 2025~~	~~40,366~~
~~Fiscal 2026~~	~~29,228~~
~~Thereafter~~	~~72,943~~
~~Total lease payments~~	~~307,745~~
~~Less: imputed interest~~	~~(38,048)~~
~~Operating lease liabilities at period end~~	$	~~269,697~~

~~Future lease payment obligations related~~contractual guarantees which were temporarily eliminated in the prior year due to ~~leases that were entered into, but did not commence as of January 29, 2022, were not material.~~limited on campus store traffic resulting from the COVID pandemic.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of January 28, 2023:


	As of
	January 28, 2023
Remainder of Fiscal 2023	$	78,142
Fiscal 2024	60,526
Fiscal 2025	52,264
Fiscal 2026	38,777
Fiscal 2027	30,469
Thereafter	83,443
Total lease payments	343,621
Less: imputed interest	(39,104)
Operating lease liabilities at period end	$	304,517

Future lease payment obligations related to leases that were entered into, but did not commence as of January 28, 2023, were not material. The following summarizes additional information related to our operating leases:


		As of							As of
		January 29, 2022			January 30, 2021				January 28, 2023			January 29, 2022
Weighted average remaining lease term (in years)	Weighted average remaining lease term (in years)	5.2 years			5.5 years			Weighted average remaining lease term (in years)	5.2 years			5.2 years
Weighted average discount rate	Weighted average discount rate	4.6		%	4.7		%	Weighted average discount rate	4.5		%	4.6		%

Supplemental cash flow information:	Supplemental cash flow information:							Supplemental cash flow information:
Cash payments for lease liabilities within operating activities	Cash payments for lease liabilities within operating activities	$	95,042		$	75,851		Cash payments for lease liabilities within operating activities	$	100,130		$	95,042
ROU assets obtained in exchange for lease liabilities from initial recognition		$	86,900		$	108,873
Right-of-use assets obtained in exchange for lease liabilities from initial recognition								Right-of-use assets obtained in exchange for lease liabilities from initial recognition	$	91,365		$	86,900

Note 9. Supplementary Information

Impairment Loss (non-cash)

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived ~~Assets~~Assets..

During the 13 and 39 weeks ended January 28, 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6,008 (both pre-tax and after-tax), comprised of $708, $1,697, $3,599 and $4 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

During the 13 and 39 weeks ended January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6,411 (both pre-tax and after-tax), comprised of $739, $1,793, $3,668 and $211 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

During the 13 and 39 weeks ended January 30, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $27,630, ($20,506 after-tax), comprised of $5,085, $13,328, $6,278 and $2,939 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

For additional information, see Note 2. Summary of Significant Accounting Policies and Note 6. Fair Value Measurements.

Restructuring and other charges

During the 13 and 39 weeks ended January 28, 2023, we recognized restructuring and other charges totaling $5,975 and $6,610, respectively, comprised primarily of $4,696 in each period for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($781 is included in accrued liabilities in the condensed consolidated balance sheet as of January 28, 2023), and $1,279 and $1,914, respectively, for costs primarily associated with professional service costs for restructuring and process improvements.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

During the 13 and 39 weeks ended January 29, 2022, we recognized restructuring and other charges totaling $46 and ~~$3,785,~~$3,067, respectively, comprised primarily of $0 and ~~$1,968~~$1,250, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($202 is included in accrued liabilities in the condensed consolidated balance sheet as of January 29, 2022), ~~and~~ $46 and $1,817, respectively, for costs primarily associated with professional service costs for restructuring, process improvements, development and integration associated with the ~~FLC Partnership, shareholder activist activities, and liabilities for a facility closure.~~

During the 13 and 39 weeks ended January 30, 2021, we recognized restructuring and other charges totaling $1,669 and $10,727, respectively, comprised primarily of $1,285 and $5,756, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($4,660 is included in accrued liabilities in the condensed consolidated balance sheet as of January 30, 2021), $384 and $4,971, respectively, for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.F/L Partnership.

Note 10. Long-Term Incentive Plan Compensation Expense

We recognize compensation expense for restricted stock awards and performance share awards ratably over the requisite service period of the award, which is generally three years. We recognize compensation expense for these awards based on the number of awards expected to vest, which includes an estimated average forfeiture rate. We calculate the fair value of these awards based on the closing stock price on the date the award was granted. For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the requisite service period regardless of whether the market condition is satisfied.

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~~BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~For the 39 weeks ended January 29, 2022 and January 30, 2021~~

~~(Thousands of dollars, except share and per share data)~~

~~(unaudited)~~

For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model. The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options.

During the 39 weeks ended January ~~29, 2022,~~28, 2023, we granted the following awards:

•~~47,216~~82,628 restricted stock units ("RSU") awards and ~~35,412~~11,804 restricted stock ("RS") awards with a one year vesting period to the Board of Directors ("BOD") members for annual compensation.

•~~849,366~~908,247 restricted stock units ("RSU") awards to employees with a three year vesting period.

•322,495 stock options with an exercise price of ~~$10.80~~$2.36 per stock option, which was the fair market value on the date of grant (Stock Option Grant #1) and 348,723 stock options with an exercise price of ~~$13.30~~$4.86 per stock option, which was above the fair market value on the date of grant, (Stock Option Grant #2) granted to employees. The stock options are exercisable in four equal annual installments commencing one year after the date of grant and have a ten year term. Holders are not entitled to receive dividends (if any) prior to vesting and exercise of the options. The following summarizes the stock option fair value assumptions:


		Stock Option Grant #1			Stock Option Grant #2				Stock Option Grant #1			Stock Option Grant #2
Exercise Price	Exercise Price	$	10.80		$	13.30		Exercise Price	$	2.36		$	4.86
Valuation method utilized	Valuation method utilized	Black-Scholes			Monte Carlo			Valuation method utilized	Black-Scholes			Monte Carlo
Risk-free interest rate	Risk-free interest rate	0.94		%	0.94		%	Risk-free interest rate	3.28		%	3.28		%
Expected option term	Expected option term	6.2 years			10.0 years			Expected option term	6.3 years			10.0 years
Company volatility	Company volatility	74		%	74		%	Company volatility	74		%	74		%
Dividend yield	Dividend yield	—		%	—		%	Dividend yield	—		%	—		%
Grant date fair value per award	Grant date fair value per award	$	7.10		$	6.73		Grant date fair value per award	$	1.61		$	1.28

The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term. For Stock Option Grant #1, we are permitted to use the simplified approach to estimate the expected term of the stock options, which typically assumes exercise occurs at the mid-point between the end of the vesting period and the expiration date. The simplified approach is not allowed for premium-priced options (Stock Option Grant #2), which were estimated using a stock price multiple, as there is no option exercise history which to base an early exercise option. The expected stock option term represents the weighted average period of time that stock options granted are expected to be outstanding, based on vesting schedules and the contractual term of the stock options. Volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term.

•183,348 phantom share units granted to employees. Each phantom share represents the economic equivalent to one share of the Company's common stock and will be settled in cash based on the fair market value of a share of common stock at each vesting date in an amount not to exceed $32.40 per share. The phantom shares vest and will be settled in three equal installments commencing one year after the date of grant. The fair value of the phantom shares was determined using the closing stock price on the date of the award less the fair value of the call option which was estimated using the Black-Scholes model. The average fair value on the date of grant was $8.50 per phantom share using risk-free rates ranging from 0.08%-0.53% for the three tranches and annual volatility ranging from 78%-92% for the three tranches. The fair value of the liability for the cash-settled phantom share unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk-free rate and volatility assumptions. As of January 29, 2022, we recorded a liability of $3,666 (Level 2 input) related to phantom share units grants which is reflected in accrued liabilities and other long-term liabilities on the condensed consolidated balance sheet.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021~~29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

We recognized compensation expense for long-term incentive plan awards in selling and administrative expenses as follows:


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
		January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021			January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Stock-based awards	Stock-based awards									Stock-based awards
Restricted stock expense	Restricted stock expense	$	94	$	88	$	301	$	138	Restricted stock expense	$	7	$	94	$	165	$	301
Restricted stock units expense	Restricted stock units expense	1,106		786		2,767		3,121		Restricted stock units expense	679		1,106		2,692		2,767

Performance share units expense	Performance share units expense	28		12		91		217		Performance share units expense	—		28		10		91
Stock option expense	Stock option expense	635		270		1,304		381		Stock option expense	392		635		1,721		1,304
Sub-total stock-based awards:	Sub-total stock-based awards:	$	1,863	$	1,156	$	4,463	$	3,857	Sub-total stock-based awards:	$	1,078	$	1,863	$	4,588	$	4,463
Cash settled awards	Cash settled awards									Cash settled awards
Phantom share units expense	Phantom share units expense	$	192	$	1,505	$	5,116	$	1,729	Phantom share units expense	$	(138)	$	192	$	130	$	5,116
Total compensation expense for long-term incentive awards	Total compensation expense for long-term incentive awards	$	2,055	$	2,661	$	9,579	$	5,586	Total compensation expense for long-term incentive awards	$	940	$	2,055	$	4,718	$	9,579

Total unrecognized compensation cost related to unvested awards as of January ~~29, 2022~~28, 2023 was ~~$18,042~~$9,838 and is expected to be recognized over a weighted-average period of ~~2.6~~2.1 years.

Note 11. Employee Benefit Plans

We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS. MBS maintains a profit sharing plan covering substantially all full-time employees of MBS. For all plans, we are responsible to fund the employer contributions directly. Total employee benefit expense for these plans was ~~$1,155~~$1,151 and $0$1,155 during the 13 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, respectively. Total employee benefit expense for these plans was ~~$2,203~~$3,545 and $0$2,203 during the 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, respectively.

Effective April 2020, due to the significant impact as a result of COVID-19 related campus store closures, we temporarily suspended employer matching contributions into our 401(k) plans. The matching contributions were reinstated effective July 25, 2021.

Note 12. Income Taxes

We recorded an income tax expense of $267 on pre-tax loss of $(24,782) during the 13 weeks ended January 28, 2023, which represented an effective income tax rate of (1.1)% and an income tax expense of $615 on pre-tax loss of $(36,186) during the 13 weeks ended January 29, ~~2022,~~20221, which represented an effective income tax rate of (1.7)% ~~and~~.

We recorded an income tax ~~benefit~~expense of ~~$(18,724)~~$900 on pre-tax loss of ~~$(67,013)~~$(54,712) during the 1339 weeks ended January ~~30, 2021,~~28, 2023, which represented an effective income tax rate of ~~27.9%.~~

~~We recorded~~(1.6)% and an income tax expense of $811 on a pre-tax loss of ~~$(57,808)~~$(57,090) during the 39 weeks ended January 29, 2022, which represented an effective income tax rate of (1.4)%~~% and an income tax benefit of $(35,334) on a pre-tax loss of $(122,760) during the 39 weeks ended January 30, 2021, which represented an effective income tax rate of 28.8%~~.

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. As of January ~~29, 2022,~~28, 2023, we determined that it was more likely than not that we would not realize ~~certain~~all deferred tax assets and our tax rate for the current fiscal year reflects this determination. We will continue to evaluate this position.

The effective tax rate for the 13 ~~and~~weeks ended January 28, 2023 is higher as compared to the prior year comparable period due to state tax adjustments recorded in the prior year. The effective tax rate for the 39 weeks ended January ~~29, 2022~~28, 2023 is lower as compared to the prior year comparable period due to ~~the assessment of the realization of deferred tax assets~~foreign taxes and lower projected annual taxable loss ~~carrybacks recorded~~ in the ~~prior~~current year.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 39 weeks ended January 28, 2023 and January 29, 2022

(Thousands of dollars, except share and per share data)

(unaudited)

Note 13. Legal Proceedings

Note 14. Subsequent Event

Credit Agreement Amendment

On March 8, 2023, subsequent to quarter end, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement by six months to August 29, 2024, (ii) reduce the commitments under the Credit Agreement by $20,000 to $380,000, (iii) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.375% per annum, in the case of interest accruing based on a Secured Overnight Financing Rate, and 2.375%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (iv) reduce advance rates with respect to the borrowing base (x) by 500 basis points upon the achievement of certain liquidity events, which may include a sale of equity interests or of assets (a “Specified Event”), or, if such a Specified Event shall not have occurred, on May 31, 2023 and (y) by an additional 500 basis points on September 29, 2023, (v) amend certain negative covenants and add certain additional covenants, (vi) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) to be at all times greater than the greater of 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and $32,500 and (vii) require repayment of the loans under the Credit Agreement upon a Specified Event. In addition, the amendment requires the achievement of a Special Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms of the Credit Agreement).

We paid a fee of 0.25% of the outstanding principal amount of the commitments under the Credit Agreement on the amendment closing date and we will pay an additional fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement on September 29, 2023.

Term Loan Agreement Amendment

On March 8, 2023, subsequent to quarter end, we amended the Term Loan Credit Agreement to (i) extend the maturity date of the Term Loan Credit Agreement by six months to December 7, 2024, (ii) permit the application of certain proceeds to the repayment of the loans under Credit Agreement and (iii) amend certain negative covenants and add certain additional covenants to conform to the Credit Agreement.In addition, the amendment requires the achievement of a Specified Event (as described above) by no later than May 31, 2023 (as such date may be extended under the Credit Agreement, but no later than August 31, 2023 without consent from lenders under the Term Loan Credit Agreement). We paid a fee of $50 on the amendment closing date to the lenders under the Term Loan Credit Agreement.

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise indicates, references to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc. or “BNED”, a Delaware corporation. References to “Barnes & Noble College” or “BNC” refer to our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our subsidiary MBS Textbook Exchange, LLC.

Overview

Description of Business

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands. We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. D/B/A "Lids" (“~~FLC”~~Lids”) (collectively referred to herein as the ~~“FLC~~“F/L Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect gross general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the ~~FLC~~F/L Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo ~~and emblematic~~ general merchandise business.

For additional information related to our business, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021.~~April 30, 2022.

Financing Arrangements

On March 8, 2023, subsequent to quarter end, we amended our existing Credit Agreement to, among other things, extend the maturity date thereunder by six months to August 29, 2024. The amendment also reduces the commitments under the Credit Agreement by $20 million to $380 million.

On March 8, 2023, subsequent to quarter end, we amended the Term Loan Credit Agreement to, among other things, extend the maturity date thereunder by six months to December 7, 2024.

For additional information, see Item 1. Financial Statements -Note 14. Subsequent Event.

Cost Savings Initiative

On December 2, 2022, the Board of Directors approved a company-wide initiative to drive efficiencies, streamline operations, simplify the organizational structure and further reduce non-essential costs. These actions were substantially implemented in December 2022. The Company incurred restructuring charges, primarily related to severance, of approximately $6 million in the third quarter of fiscal 2023 and, as a result, expects to save $10 million to $15 million in fiscal year 2023. These initiatives are expected to provide annualized savings of $30 million to $35 million. The restructuring charges are excluded from non-GAAP adjusted EBITDA and from the annualized and fiscal year 2023 savings. We continue to focus on achieving efficiencies and reducing costs to further improve our operating performance.

First Day Inclusive and Equitable Access Programs

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designed to drive improved student experiences and outcomes. We offer our BNC First Day® inclusive and equitable access programs, consisting of ~~First Day and~~ First Day Completeand First Day, in which course materials, including both physical and digital content, are offered at a reduced price through a course fee or included in tuition, and delivered to students on or before the first day of class.

•~~Through~~ First Day Complete is adopted by an institution and includes all classes, providing students both physical and digital materials. The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.

•Through First Day, digital course materials are adopted by a faculty member for a single course, and students receive their materials through their school's learning management system.

Offering courseware sales through our inclusive and equitable access ~~First Day and~~ First Day Completeand First Day models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has been observed at those schools where such programs have been adopted. We are moving quickly and decisively to accelerate our First Day Complete strategy. We plan to move many institutions to First Day Complete for the Fall of 2023 and the majority of schools by Fall 2024.

~~Table~~As of ~~Contents~~January 28, 2023, 116 campus stores adopted our

First Day Complete course materials delivery program for the 2023 Spring Term, representing approximately 580,000 in total undergraduate student enrollment (as reported by National Center for Education Statistics), compared to 76 campus stores representing approximately 380,000 in total undergraduate student enrollment or the 2022 Spring Term. During the 13 weeks ended January 28, 2023, First Day Complete sales increased by $28.9 million to $66.9 million, or 76%, as compared to $38.0 million in the prior year period. During the 39 weeks ended January 28, 2023, First Day Complete sales increased by $83.8 million to $173.4 million, or 94%, as compared to $89.6 million in the prior year period.

Partnership with Fanatics and ~~FLC~~Lids

We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores. We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. ~~FLC~~Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus ~~stores.~~

~~In December 2020, Fanatics, Inc.~~stores, and Lids ~~Holdings, Inc. jointly made a strategic equity investment in BNED. On April 4, 2021, as contemplated~~owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital.

COVID-19 Business Impact

Our business has been significantly negatively impacted by the ~~FLC Partnership's merchandising agreement, we sold our logo~~COVID-19 pandemic, as many schools adjusted their learning models and ~~emblematic general merchandise inventory~~on-campus activities. However, on campus traffic continues to FLC, which was finalized during the first quarter of Fiscal 2022. As contemplated by the FLC Partnership's e-commerce agreement, we began to transition certain of our e-commerce sites to Fanatics e-commerce sites for logogrow from increased campus events and emblematic products during the first quarter of Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements,activities, as compared to the ~~recognition~~last two years. Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across the country during the 2022 Spring Term which did not recur during the 2023 Spring Term. While the impact of ~~logo and emblematic general merchandise sales on a gross basis in~~ the ~~prior year. For additional information, see~~ ~~Item 1. Financial Statements - Note 2. Summary of Significant Accounting Policies - Merchandise Inventories~~.

COVID-19 ~~Business Impact~~

Our business experienced an unprecedented and significant negative impact as a result of COVID-19 related campus store closures. Beginning in March 2020, colleges and universities nationwide began to close their campuses in light of safety concerns and as a result of local and state issued stay-at-home orders. By mid-March, during our Fiscal 2020 fourth quarter,pandemic is lessening, we ~~closed the majority of our physical campus stores to protect the health and safety of our customers and employees.~~

While our campus stores were closed, we continued to serve institutions and students through our campus websites, providing free shipping on all orders and an expanded digital content offering to provide immediate access to course materials to students at our campuses that closed due to COVID-19. We developed and implemented plans to safely reopen our campus stores based on national, state and local guidelines, as well as the campus policies set by the school administration.

~~Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. We~~ cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations. Although most four year schools returned to a traditional on-campus environment, ~~for learning in the Fall semester, as well as hosted traditional on campus sporting activities ,~~ there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

As we entered the Spring rush period in early January 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities. In early January, while the majority of schools brought students back to campus, some schools chose to conduct classes virtually for the beginning of the semester, while other schools chose to delay their start dates (and some schools both delayed the start of the semester and started classes virtually), thus reducing and/or delaying sales later into the quarter or shifting some sales to our fourth quarter. We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to determine how to operate our bookstores in the safest manner for our employees and customers. If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations. For additional information, see ~~Part I - Item 1. Business~~ ~~in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021~~.

Segments

We have three reportable segments: Retail, Wholesale and DSS. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information

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distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance. The following summarizes the three segments. For additional information about each segment's operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021~~April 30, 2022.

Retail Segment

The Retail Segment operates ~~1,441~~1,388 college, university, and K-12 school bookstores, comprised of ~~799~~785 physical bookstores and ~~642~~603 virtual bookstores. Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce ~~sites~~websites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts. The Retail Segment also offers inclusive and equitable access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

Wholesale Segment

DSS Segment

Seasonality

Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April.

For our retail operations, sales are generally highest in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarter, as it sells textbooks and other course materials for retail distribution. For our DSS segment, or direct-to-student business, sales and operating profit are realized relatively consistently throughout the year.

Trends, Competition and Other Business Conditions Affecting Our Business

The market for educational materials is undergoing unprecedented change. As tuition and other costs rise, colleges and universities face increasing pressure to attract and retain students and provide them with innovative, affordable educational content and tools that support their educational development. Current trends, competition and other factors affecting our business include:

•Overall Economic Environment, Capital Markets, College Enrollment and Consumer Spending Patterns. Our business is affected by the impact of the COVID-19 pandemic, the overall economic environment, capital markets, funding levels at colleges and universities, by changes in enrollments at colleges and universities, and spending on course materials and general merchandise.

��•Impact of the COVID-19 Pandemic: The COVID-19 pandemic has materially and adversely impacted certain segments of the U.S. economy, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors, and there is significant uncertainty as to timing of stabilization and recovery, including the ability to gain adequate herd-immunity levels through vaccine programs and their resilience to future virus variants.sectors. Many colleges and K-12 schools ~~were~~had been required to cease in-person classes in an attempt to limit the spread of the COVID-19 virus and ensure the safety of their students. Although ~~many~~most academic institutions have since reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes. While many athletic conferences resumed their sport

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~~significantly reduced classroom sizes.~~activities, other events, such as parent and alumni weekends and prospective student campus tour activities, some may still be curtailed or offered virtually. Additionally, our business, like many others has been affected by the challenging labor market and the ability to recruit employees. The impact of COVID-19 store closings during Fiscal 2021 to Fiscal 2022 resulted in the loss of cash flow and increased borrowings that we would not otherwise have expected to incur.

•Economic ~~Environment~~Environment:: Retail general merchandise sales are subject to short-term fluctuations driven by the broader retail environment and other economic factors, such as interest rate fluctuations and inflationary considerations. The broader macro-economic global supply chain issues ~~has~~have impacted our ability to source textbooks, school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing. A significant reduction in U.S. economic activity could lead to decreased consumer spending.

•Capital Market Trends: We may require additional capital in the future to sustain or grow our business. The future availability of financing will depend on a variety of factors, such as economic and market conditions, and the availability of credit. These factors could materially adversely affect our costs of borrowing, and our financial position and results of operations would be adversely impacted. Volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions.

•Enrollment Trends: The growth of our business depends on our ability to attract new customers and to increase the level of engagement by our current student customers. We continue to see downward enrollment trends. Enrollment trends, specifically at community colleges, generally correlate with changes in the economy and unemployment factors, e.g., low unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment trends, as students generally enroll to obtain skills that are in demand in the workforce. Enrollment trends have been negatively impacted overall by COVID-19 concerns at physical campuses. ~~A significant reduction in U.S. economic activity and increased unemployment could lead to decreased enrollment and consumer spending.~~ Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional 18-24 year-old college age. Online degree program enrollments continue to grow, even in the face of declining overall higher education enrollment.

•Increased Use of Online and Digital Platforms as Companions or Alternatives to Printed Course Materials. Students and faculty can now choose from a wider variety of educational content and tools than ever before, delivered across both print and digital platforms.

•Increasing Costs Associated with Defending Against Security Breaches and Other Data Loss, Including Cyber-Attacks. We are increasingly dependent upon information technology systems, infrastructure and data. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. We continue to invest in data protection, including insurance, and information technology to prevent or minimize these risks and, to date, we have not experienced any material service interruptions and are not aware of any material breaches.

•Distribution Network Evolving. The way course materials are distributed and consumed is changing significantly, a trend that is expected to continue. The market for course materials, including textbooks and supplemental materials, is intensely competitive and subject to rapid change.

•Disintermediation. We are experiencing growing competition from alternative media and alternative sources of textbooks and other course materials. In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, publishers, including Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, and student-to-student transactions over the Internet.

•Supply Chain and Inventory. Since the demand for used textbooks has historically been greater than the available supply, our financial results are highly dependent upon Wholesale’s ability to build its textbook inventory from suppliers in advance of the selling season. Recently, the impact of fewer students on campus due to the COVID-19 pandemic has significantly impacted our on-campus buyback programs which supplies Wholesale’s used textbook inventory for future selling periods. Some textbook publishers have begun to supply textbooks pursuant to consignment or rental programs which could impact used textbook supplies in the future. Additionally, Wholesale is a national distributor for rental textbooks offered through McGraw-Hill Education's and Pearson Education’s consignment rental program, both of which are relatively nascent. The broader macro-economic global supply chain issues may also impact our ability to source school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing.

•Price Competition. In addition to the competition in the services we provide to our customers, our textbook and other course materials business faces significant price competition. Students purchase textbooks and other course materials from multiple providers, are highly price sensitive, and can easily shift spending from one provider or format to another.

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•First Day Complete and First Day Models. Offering courseware sales through our inclusive and equitable access First Day Complete and First Day models is a key, and increasingly important, strategic initiative of ours to meet the market demands of substantially reduced pricing to students. Our First Day Complete and First Day programs contribute to improved student outcomes, while increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has been observed at those schools where such programs have been adopted. We are moving quickly and decisively to accelerate our First Day Complete strategy. While we plan to move many institutions to First Day Complete for the Fall of 2023, and the majority of our schools by Fall 2024, we cannot guarantee that we will be able to achieve these plans within these timeframes or at all.

•A Large Number of Traditional Campus Bookstores Have Yet to be Outsourced.

•Outsourcing Trends. We continue to see the trend towards outsourcing in the campus bookstore market and also continue to see a variety of business models being pursued for the provision of course materials (such as inclusive and equitable access programs and publisher subscription models) and general merchandise.

•New and Existing Bookstore ~~Contracts.~~Contracts. We expect awards of new accounts resulting in new physical and virtual store openings will continue to be an important driver of future growth in our business. We also expect that certain less

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profitable or ~~essential~~non-essential bookstores we operate may close. ~~Such stores could be included in contracts for stores we operate that may be deemed non-essential; and such stores could be operated by others or independently by schools.~~ The scope of any such store closures remains uncertain, although we are not aware, at this time, of any significant volume of stores which we operate that are likely to close or have informed us of upcoming closures.

For additional discussion of our trends and other factors affecting our business, see Part I - Item 1. Business in our Annual Report on Form 10-K for the year ended ~~May 1, 2021.~~April 30, 2022.

Elements of Results of Operations

Our condensed consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). The results of operations reflected in our consolidated financial statements are presented on a consolidated basis. All material intercompany accounts and transactions have been eliminated in consolidation.

Our sales are primarily derived from the sale of course materials, which include new, used and digital textbooks, and at college and university bookstores which we operate, we sell high margin general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Our rental income is primarily derived from the rental of physical textbooks. We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, direct-to-student subscription-based services, and other services.

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our direct-to-student subscription-based services business. Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services as discussed in the Overview - Segments discussion above.

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Results of Operations - Summary

13 weeks ended 39 weeks ended
Dollars in thousands January 29,
2022 January 30,
2021 January 29,
2022 January 30,
2021
Sales:
Product sales and other $ 377,713 $ 373,502 $ 1,182,812 $ 1,118,544
Rental income 25,085 38,111 87,757 92,568
Total sales $ 402,798 $ 411,613 $ 1,270,569 $ 1,211,112
Net loss $ (36,801) $ (48,289) $ (58,619) $ (87,426)
Adjusted Earnings (non-GAAP) (a)
$ (28,946) $ (25,572) $ (44,005) $ (56,213)
Adjusted EBITDA by Segment (non-GAAP) (a)
Retail $ (15,386) $ (22,222) $ 4,436 $ (44,538)
Wholesale 4,163 6,322 11,810 25,856
DSS 1,476 1,005 3,975 3,358
Corporate Services (5,154) (6,491) (19,407) (17,236)
Elimination 1,800 604 556 (1,704)
Total Adjusted EBITDA (non-GAAP) $ (13,101) $ (20,782) $ 1,370 $ (34,264)


	13 weeks ended				39 weeks ended
Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Sales:
Product sales and other (a)	$	402,755	$	377,713	$	1,231,465	$	1,182,812
Rental income	44,309		25,085		96,555		87,757
Total sales	$	447,064	$	402,798	$	1,328,020	$	1,270,569

Net loss	$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)

Adjusted Earnings (non-GAAP) (b)	$	(11,380)	$	(28,946)	$	(38,113)	$	(44,005)

Adjusted EBITDA by Segment (non-GAAP) (b)
Retail	$	6,173	$	(15,386)	$	20,604	$	4,436
Wholesale	3,105		4,163		7,461		11,810
DSS	1,253		1,476		2,322		3,975
Corporate Services	(5,572)		(5,154)		(17,861)		(19,407)
Elimination	1,464		1,800		(157)		556
Total Adjusted EBITDA (non-GAAP)	$	6,423	$	(13,101)	$	12,369	$	1,370

(a)Effective in April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo general merchandise sales to Lids and Fanatics. The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo general merchandise sales are fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition. For Retail Gross Comparable Store Sales details, see below.

(b)Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment are non-GAAP financial measures. See Use of Non-GAAP Measures discussion below.

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The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales:


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
		January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021			January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Sales:	Sales:									Sales:
Product sales and other	Product sales and other	93.8	%	90.7	%	93.1	%	92.4	%	Product sales and other	90.1	%	93.8	%	92.7	%	93.1	%
Rental income	Rental income	6.2		9.3		6.9		7.6		Rental income	9.9		6.2		7.3		6.9
Total sales	Total sales	100.0		100.0		100.0		100.0		Total sales	100.0		100.0		100.0		100.0
Cost of sales (exclusive of depreciation and amortization expense):	Cost of sales (exclusive of depreciation and amortization expense):									Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales (a)	Product and other cost of sales (a)	78.8		84.5		78.2		83.5		Product and other cost of sales (a)	79.4		78.8		78.2		78.2
Rental cost of sales (a)	Rental cost of sales (a)	72.3		66.6		60.5		65.4		Rental cost of sales (a)	52.4		72.3		54.3		60.5
Total cost of sales	Total cost of sales	78.4		82.8		77.0		82.1		Total cost of sales	76.7		78.4		76.5		77.0
Gross margin	Gross margin	21.6		17.2		23.0		17.9		Gross margin	23.3		21.6		23.5		23.0
Selling and administrative expenses	Selling and administrative expenses	25.2		22.5		23.3		21.0		Selling and administrative expenses	22.3		25.2		23.0		23.3
Depreciation and amortization expense	Depreciation and amortization expense	3.0		3.2		2.9		3.3		Depreciation and amortization expense	2.4		3.0		2.6		2.9
Impairment loss (non-cash)	Impairment loss (non-cash)	1.6		6.7		0.5		2.3		Impairment loss (non-cash)	1.3		1.6		0.5		0.5
Restructuring and other charges	Restructuring and other charges	—		0.4		0.3		0.9		Restructuring and other charges	1.3		—		0.5		0.2

Operating loss	Operating loss	(8.2)	%	(15.6)	%	(4.0)	%	(9.6)	%	Operating loss	(4.0)	%	(8.2)	%	(3.1)	%	(3.9)	%

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

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Results of Operations - 13 and 39 weeks ended January ~~29, 2022~~28, 2023 compared with the 13 and 39 weeks ended January ~~30, 2021~~29, 2022


		13 weeks ended January 29, 2022													13 weeks ended January 28, 2023
Dollars in thousands	Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total		Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:	Sales:													Sales:
Product sales and other	Product sales and other	$	349,655	$	37,039	$	9,430	$	—	$	(18,411)	$	377,713	Product sales and other	$	376,950	$	38,958	$	9,010	$	—	$	(22,163)	$	402,755
Rental income	Rental income	25,085		—		—		—		—		25,085		Rental income	44,309		—		—		—		—		44,309
Total sales	Total sales	374,740		37,039		9,430		—		(18,411)		402,798		Total sales	421,259		38,958		9,010		—		(22,163)		447,064
Cost of sales (exclusive of depreciation and amortization expense):	Cost of sales (exclusive of depreciation and amortization expense):													Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	Product and other cost of sales	287,435		28,935		1,498		—		(20,175)		297,693		Product and other cost of sales	309,123		32,290		1,811		—		(23,580)		319,644
Rental cost of sales	Rental cost of sales	18,144		—		—		—		—		18,144		Rental cost of sales	23,210		—		—		—		—		23,210
Total cost of sales	Total cost of sales	305,579		28,935		1,498		—		(20,175)		315,837		Total cost of sales	332,333		32,290		1,811		—		(23,580)		342,854
Gross profit	Gross profit	69,161		8,104		7,932		—		1,764		86,961		Gross profit	88,926		6,668		7,199		—		1,417		104,210
Selling and administrative expenses	Selling and administrative expenses	84,626		3,941		7,775		5,154		(36)		101,460		Selling and administrative expenses	82,753		3,563		7,632		5,572		(47)		99,473
Depreciation and amortization expense	Depreciation and amortization expense	8,939		1,396		1,826		18		—		12,179		Depreciation and amortization expense	8,749		1,357		506		6		—		10,618
Sub-Total:		(24,404)		2,767		(1,669)		(5,172)		1,800		(26,678)
Impairment loss (non-cash)	Impairment loss (non-cash)	6,411		—		—		—		—		6,411		Impairment loss (non-cash)	6,008		—		—		—		—		6,008
Restructuring and other charges	Restructuring and other charges	30		—		—		16		—		46		Restructuring and other charges	1,452		931		1,848		1,744		—		5,975
Operating (loss) income	Operating (loss) income	$	(30,845)	$	2,767	$	(1,669)	$	(5,188)	$	1,800	$	(33,135)	Operating (loss) income	$	(10,036)	$	817	$	(2,787)	$	(7,322)	$	1,464	$	(17,864)


	13 weeks ended January 29, 2022
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:
Product sales and other	$	349,655	$	37,039	$	9,430	$	—	$	(18,411)	$	377,713
Rental income	25,085		—		—		—		—		25,085
Total sales	374,740		37,039		9,430		—		(18,411)		402,798
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	287,435		28,935		1,498		—		(20,175)		297,693
Rental cost of sales	18,144		—		—		—		—		18,144
Total cost of sales	305,579		28,935		1,498		—		(20,175)		315,837
Gross profit	69,161		8,104		7,932		—		1,764		86,961
Selling and administrative expenses	84,626		3,941		7,775		5,154		(36)		101,460
Depreciation and amortization expense	8,939		1,396		1,826		18		—		12,179
Impairment loss (non-cash)	6,411		—		—		—		—		6,411
Restructuring and other charges	30		—		—		16		—		46
Operating (loss) income	$	(30,845)	$	2,767	$	(1,669)	$	(5,188)	$	1,800	$	(33,135)

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		13 weeks ended January 30, 2021													39 weeks ended January 28, 2023
Dollars in thousands	Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total		Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:	Sales:													Sales:
Product sales and other	Product sales and other	$	349,558	$	39,465	$	7,206	$	—	$	(22,727)	$	373,502	Product sales and other	$	1,159,821	$	97,161	$	26,659	$	—	$	(52,176)	$	1,231,465
Rental income	Rental income	38,111		—		—		—		—		38,111		Rental income	96,555		—		—		—		—		96,555
Total sales	Total sales	387,669		39,465		7,206		—		(22,727)		411,613		Total sales	1,256,376		97,161		26,659		—		(52,176)		1,328,020
Cost of sales (exclusive of depreciation and amortization expense):	Cost of sales (exclusive of depreciation and amortization expense):													Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	Product and other cost of sales	308,752		28,807		1,324		—		(23,276)		315,607		Product and other cost of sales	931,539		78,139		5,283		—		(51,890)		963,071
Rental cost of sales	Rental cost of sales	25,394		—		—		—		—		25,394		Rental cost of sales	52,416		—		—		—		—		52,416
Total cost of sales	Total cost of sales	334,146		28,807		1,324		—		(23,276)		341,001		Total cost of sales	983,955		78,139		5,283		—		(51,890)		1,015,487
Gross profit	Gross profit	53,523		10,658		5,882		—		549		70,612		Gross profit	272,421		19,022		21,376		—		(286)		312,533
Selling and administrative expenses	Selling and administrative expenses	75,921		4,336		6,015		6,491		(55)		92,708		Selling and administrative expenses	251,843		11,561		23,909		17,861		(129)		305,045
Depreciation and amortization expense	Depreciation and amortization expense	9,806		1,614		1,863		24		—		13,307		Depreciation and amortization expense	27,147		4,076		2,646		41		—		33,910
Sub-Total:		(32,204)		4,708		(1,996)		(6,515)		604		(35,403)
Impairment loss (non-cash)	Impairment loss (non-cash)	27,630		—		—		—		—		27,630		Impairment loss (non-cash)	6,008		—		—		—		—		6,008
Restructuring and other charges	Restructuring and other charges	162		—		571		936		—		1,669		Restructuring and other charges	1,452		931		1,848		2,379		—		6,610
Operating (loss) income	Operating (loss) income	$	(59,996)	$	4,708	$	(2,567)	$	(7,451)	$	604	$	(64,702)	Operating (loss) income	$	(14,029)	$	2,454	$	(7,027)	$	(20,281)	$	(157)	$	(39,040)

39 weeks ended January 29, 2022
Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total
Sales:
Product sales and other $ 1,106,404 $ 103,192 $ 26,012 $ — $ (52,796) $ 1,182,812
Rental income 87,757 — — — — 87,757
Total sales 1,194,161 103,192 26,012 — (52,796) 1,270,569
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales 894,936 79,063 4,144 — (53,219) 924,924
Rental cost of sales 53,096 — — — — 53,096
Total cost of sales 948,032 79,063 4,144 — (53,219) 978,020
Gross profit 246,129 24,129 21,868 — 423 292,549
Selling and administrative expenses 242,477 12,319 21,527 19,407 (133) 295,597
Depreciation and amortization expense 27,015 4,060 5,627 53 — 36,755
Sub-Total: (23,363) 7,750 (5,286) (19,460) 556 (39,803)
Impairment loss (non-cash) 6,411 — — — — 6,411
Restructuring and other charges 2,831 — — 954 — 3,785
Operating (loss) income $ (32,605) $ 7,750 $ (5,286) $ (20,414) $ 556 $ (49,999)

~~Table of Contents~~

39 weeks ended January 30, 2021
Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total
Sales:
Product sales and other $ 1,030,391 $ 156,146 $ 19,025 $ — $ (87,018) $ 1,118,544
Rental income 92,568 — — — — 92,568
Total sales 1,122,959 156,146 19,025 — (87,018) 1,211,112
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales 897,283 118,017 3,735 — (85,188) 933,847
Rental cost of sales 60,506 — — — — 60,506
Total cost of sales 957,789 118,017 3,735 — (85,188) 994,353
Gross profit 165,170 38,129 15,290 — (1,830) 216,759
Selling and administrative expenses 210,286 12,273 15,054 17,236 (126) 254,723
Depreciation and amortization expense 30,361 4,231 5,883 88 — 40,563
Sub-Total: (75,477) 21,625 (5,647) (17,324) (1,704) (78,527)
Impairment loss (non-cash) 27,630 — — — — 27,630
Restructuring and other charges 4,633 — 571 5,523 — 10,727
Operating (loss) income $ (107,740) $ 21,625 $ (6,218) $ (22,847) $ (1,704) $ (116,884)


	39 weeks ended January 29, 2022
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:
Product sales and other	$	1,106,404	$	103,192	$	26,012	$	—	$	(52,796)	$	1,182,812
Rental income	87,757		—		—		—		—		87,757
Total sales	1,194,161		103,192		26,012		—		(52,796)		1,270,569
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	894,936		79,063		4,144		—		(53,219)		924,924
Rental cost of sales	53,096		—		—		—		—		53,096
Total cost of sales	948,032		79,063		4,144		—		(53,219)		978,020
Gross profit	246,129		24,129		21,868		—		423		292,549
Selling and administrative expenses	242,477		12,319		21,527		19,407		(133)		295,597
Depreciation and amortization expense	27,015		4,060		5,627		53		—		36,755
Impairment loss (non-cash)	6,411		—		—		—		—		6,411
Restructuring and other charges	2,113		—		—		954		—		3,067
Operating (loss) income	$	(31,887)	$	7,750	$	(5,286)	$	(20,414)	$	556	$	(49,281)

Sales

The following table summarizes our sales for the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021:~~29, 2022:


		13 weeks ended					39 weeks ended						13 weeks ended							39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		January 30, 2021		%	January 29, 2022		January 30, 2021		%	Dollars in thousands	January 28, 2023		January 29, 2022		Var $		Var %	January 28, 2023		January 29, 2022		Var $		Var %
Product sales and other	Product sales and other	$	377,713	$	373,502	1.1%	$	1,182,812	$	1,118,544	5.7%	Product sales and other	$	402,755	$	377,713	$	25,042	6.6%	$	1,231,465	$	1,182,812	$	48,653	4.1%
Rental income	Rental income	25,085		38,111		(34.2)%	87,757		92,568		(5.2)%	Rental income	44,309		25,085		$	19,224	76.6%	96,555		87,757		$	8,798	10.0%
Total Sales	Total Sales	$	402,798	$	411,613	(2.1)%	$	1,270,569	$	1,211,112	4.9%	Total Sales	$	447,064	$	402,798	$	44,266	11.0%	$	1,328,020	$	1,270,569	$	57,451	4.5%

~~Sales decreased by $8.8 million, or 2.1%, to $402.8 million~~The sales increase during the 13 and 39 weeks ended January ~~29, 2022 from $411.6 million during the 13 weeks ended January 30, 2021. The decrease~~28, 2023 is primarily related to ~~lower~~higher course material sales, primarily ~~due to lower enrollments, primarily~~ at ~~community colleges~~our First Day programs and ~~by international students, and the continuation of remote and hybrid class offerings in response to the latest COVID variant. The decrease in sales is also due to lower logo and emblematic~~higher general merchandise sales as ~~they are reflected in sales~~many schools approach a more traditional on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021. For additional information, see Retail Sales discussion below.

Sales increased by $59.5 million, or 4.9%, to $1,270.6 million during the 39 weeks ended January 29, 2022 from $1,211.1 million during the 39 weeks ended January 30, 2021. The sales increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year. The increase is offset by lower sales primarily due to lower enrollments, primarily at community colleges and by international students, the continuation of remote and hybrid class offerings and lower logo and emblematic sales as they are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021. For additional information, see Retail Sales discussion below.campus learning experience.

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The components of the variances for the 13 and 39 week periods are reflected in the table below.


Sales variances	Sales variances	13 weeks ended				39 weeks ended				Sales variances	13 weeks ended		39 weeks ended
Dollars in millions	Dollars in millions	January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021		Dollars in millions	January 28, 2023			January 28, 2023
Retail Sales	Retail Sales									Retail Sales
New stores	New stores	$	17.3	$	17.3	$	53.9	$	52.7	New stores	$	21.6		$	73.5
Closed stores	Closed stores	(7.4)		(8.3)		(28.7)		(32.2)		Closed stores	(13.7)			(39.8)
Comparable stores (a)	Comparable stores (a)	(10.2)		(83.3)		57.2		(384.0)		Comparable stores (a)	22.5			28.8
Textbook rental deferral	Textbook rental deferral	(11.5)		1.6		(8.1)		11.7		Textbook rental deferral	17.7			6.5
Service revenue (b)	Service revenue (b)	(2.1)		1.8		(2.0)		(1.9)		Service revenue (b)	(1.1)			(3.4)
Other (c)	Other (c)	1.0		0.6		(1.1)		2.2		Other (c)	(0.5)			(3.4)
Retail sales subtotal:	Retail sales subtotal:	$	(12.9)	$	(70.3)	$	71.2	$	(351.5)	Retail sales subtotal:	$	46.5		$	62.2

Wholesale Sales	Wholesale Sales	$	(2.4)	$	(27.5)	$	(53.0)	$	(23.4)	Wholesale Sales	$	1.9		$	(6.0)
DSS Sales	DSS Sales	$	2.2	$	0.8	$	7.0	$	2.0	DSS Sales	$	(0.4)		$	0.7
Eliminations (d)	Eliminations (d)	$	4.3	$	6.3	$	34.3	$	(10.2)	Eliminations (d)	$	(3.7)		$	0.6
Total sales variance:	Total sales variance:	$	(8.8)	$	(90.7)	$	59.5	$	(383.1)	Total sales variance:	$	44.3		$	57.5

(a) In December 2020, we entered into merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. D/B/A "Lids" (“~~FLC”~~Lids”) (collectively referred to herein as the ~~“FLC~~“F/L Partnership”). Effective in April 4, 2021, as contemplated by the ~~FLC~~F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo ~~and emblematic~~ general merchandise sales to ~~FLC~~Lids and Fanatics. The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo ~~and emblematic~~ general merchandise sales are fulfilled by ~~FLC~~Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our ~~condensed~~ consolidated financial statements, as compared to the recognition of logo ~~and emblematic~~general merchandise sales on a gross basis in the periods prior to ~~April 4, 202~~1. the transition. For Retail Gross Comparable Store Sales details, see below.

(b) Service revenue includes brand partnerships, shipping and handling, and revenue from other programs.

(c) Other includes inventory liquidation sales to third parties, marketplace sales and certain accounting adjusting items related to return reserves, and other deferred items.

(d) Eliminates Wholesale sales and service fees to Retail and Retail commissions earned from Wholesale. See discussion of intercompany activities and eliminations below.

Retail

Retail sales decreased by $12.9 million, or 3.3%, to $374.7 million during the 13 weeks ended January 29, 2022 from $387.7 million during the 13 weeks ended January 30, 2021. Retail sales increased by $71.2 million, or 6.3%, to $1,194.2 million during the 39 weeks ended January 29, 2022 from $1,123.0 million during the 39 weeks ended January 30, 2021.

~~Retail added 82new~~The following is a store count summary for physical stores and ~~closed 58~~virtual stores. Many of the store closings relate to closing less profitable stores, ~~during the 39 weeks ended January 29, 2022, ending the period with a total of 1,441 stores.~~including satellite store locations.


		13 weeks ended				39 weeks ended					13 weeks ended						39 weeks ended
		January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021			January 28, 2023			January 29, 2022			January 28, 2023			January 29, 2022
Number of Stores:	Number of Stores:	Physical	Virtual	Physical	Virtual	Physical	Virtual	Physical	Virtual	Number of Stores:	Physical	Virtual	Total	Physical	Virtual	Total	Physical	Virtual	Total	Physical	Virtual	Total
Number of stores at beginning of period		794	651	769	671	769	648	772	647
Beginning of period										Beginning of period	793	606	1,399	794	651	1,445	805	622	1,427	769	648	1,417
Opened	Opened	6	—	—	7	47	35	30	58	Opened	—	4	4	6	—	6	34	28	62	47	35	82
Closed	Closed	1	9	4	2	17	41	37	29	Closed	8	7	15	1	9	10	54	47	101	17	41	58
Number of stores at end of period		799	642	765	676	799	642	765	676
End of period										End of period	785	603	1,388	799	642	1,441	785	603	1,388	799	642	1,441

~~Product and other~~Generally, sales ~~and Rental income~~ are impacted by ~~comparable store sales, the growth of First Day Complete, new store openings~~revenue from net new/closed stores, increased campus traffic, and store closings, as well as the impact from the COVID-19 pandemic. Sales were impacted by overall enrollment declines in higher education. Although most four year schools returned to a traditional on-campus environment for learningan increase in the ~~Fall semester, as well as hosted traditional~~number of on campus ~~sporting~~ activities ~~there is still uncertainty about the duration~~ and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, and the continuation of remote and hybrid class offerings. While many conferences resumed their sport activities, other on campus events, such as ~~Parent's Weekends or Alumni~~graduations, alumni events ~~continue to be either eliminated or severely~~

~~Table of Contents~~

~~restricted, which further impacted the company’s general merchandise business. As we entered the Spring rush period in early January 2022, we~~and prospective student campus tours, as schools approach a more traditional campus experience. We continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities. In early January, while the majority of schools brought students back to campus, some schools chose to conduct classes virtually for the beginning of the semester, while other schools chose to delay their start dates (and some schools both delayed the start of the semester and started classes virtually), thus reducing and/or delayinghigher sales ~~later into the quarter or shifting some sales~~related to our ~~fourth quarter.~~

~~Product~~First Day programs and ~~other~~higher general merchandise sales, especially for ~~Retail for~~graduation products, logo products, and cafe and convenience products, as on campus traffic continues to grow compared to the 13 weeks ended January 29, 2022 remained flat at $349.6 million during the 13 weeks ended January 30, 2021. Rental income for Retail for the 13 weeks ended January 29, 2022 decreased by $13.0 million, or 34.2% to $25.1 million from $38.1 million during the 13 weeks ended January 30, 2021. During the 13 weeks ended January 29, 2022, course material sales and rentalsprior year.Sales were negatively impacted by lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class ~~offerings,~~offerings.

Retail sales increased by $46.5 million, or 12.4%, to $421.2 million during the 13 weeks ended January 28, 2023 from $374.7 million during the 13 weeks ended January 29, 2022. Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across the country during the 2022 Spring Term which did not recur during the 2023 Spring Term. In addition, our sales and margins were positively impacted in Q3 2023 compared to Q3 2022 as a result of improved availability of used inventory which was ~~somewhat mitigated~~constrained in 2022.

•Product sales and other increased by $27.3 million, or 7.8%, to $377.0 million during the ~~growth~~13 weeks ended January 28, 2023 from $349.7 million during the 13 weeks ended January 29, 2022. During the 13 weeks ended January 28, 2023,

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total course material product sales increased by $23.8 million, or 9.1%, to $286.7 million; total general merchandise product sales increased by $5.0 million, or 6.6%, to $81.8 million as students return to on campus activities, partially offset by a decrease in service and other revenue of $1.6 million, or 15.6%, to $8.4 million.

•Revenue from both of our First Day inclusive and equitable access programs increased by $45 million, or 59%, to $121 million during the 13 weeks ended January 28, 2023, as compared to $76 million during the 13 weeks ended January 29, 2022. Specifically, First Day ~~Complete.~~Complete total sales increased by $29 million, or 76%, to $67 million during the 13 weeks ended January 28, 2023, as compared to $38 million during the 13 weeks ended January 29, 2022. As of January 28, 2023, 116 campus stores adopted our First Day Complete course materials delivery program for the 2023 Spring Term, representing approximately 580,000 in total undergraduate student enrollment (as reported by National Center for Education Statistics), compared to 76 campus stores representing approximately 380,000 in total undergraduate student enrollment in the 2022 Spring Term.

•Total course material rental income increased by $19.2 million, or 76.6%, to $44.3 million during the 13 weeks ended January 28, 2023 from $25.1 million during the 13 weeks ended January 29, 2022 primarily due to increased rental textbook activity in our First Day Complete program and improved availability of used textbook inventory.

Retail sales increased by $62.2 million, or 5.2%, to $1,256.4 million during the 39 weeks ended January 28, 2023 from $1,194.2 million during the 39 weeks ended January 29, 2022.

•Product sales and other increased by $53.4 million, or 4.8%, to $1,159.8 million during the 39 weeks ended January 28, 2023 from $1,106.4 million during the 39 weeks ended January 29, 2022. During the 39 weeks ended January 28, 2023, total course material product sales increased by $15.3 million, or 1.9%, to $834.2 million; total general merchandise product sales increased by $44.9 million, or 18.1%, to $293.3 million as students return to on campus activities, partially offset by a decrease in service and other revenue of $6.8 million, or 32.3%, to $32.3 million primarily due to lower shipping and handling income resulting from increased in-store order fulfillment.

•Revenue from both of our First Day inclusive and equitable access programs increased by $110 million, or 55%, to $309 million during the 39 weeks ended January 28, 2023, as compared to $199 million during the 39 weeks ended January 29, 2022. Specifically, First Day Complete total sales increased by $84 million, or 94%, to $174 million during the 39 weeks ended January 28, 2023, as compared to $90 million during the 39 weeks ended January 29, 2022. As of January 28, 2023, 116 campus stores adopted our First Day Complete course materials delivery program for ~~Retail~~the 2023 Spring Term, representing approximately 580,000 in total undergraduate student enrollment (as reported by National Center for Education Statistics), compared to 76 campus stores representing approximately 380,000 in total undergraduate student enrollment in the 2022 Spring Term.

•Total course material rental income increased by $8.8 million, or 10.0%, to $96.6 million during the 39 weeks ended January 28, 2023 from $87.8 million during the 39 weeks ended January 29, 2022 increased by $76.0 million, or 7.4% to $1,106.4 million from $1,030.4 million during the 39 weeks ended January 30, 2021. Rental income for Retail for the 39 weeks ended January 29, 2022 decreased by $4.8 million, or 5.2% to $87.8 million from $92.6 million during the 39 weeks ended January 30, 2021. The overall Retail sales increase is primarily ~~related to the impact from re-opening stores that had temporarily closed~~ due to ~~the COVID-19 pandemic~~increased rental textbook activity in ~~the prior year. Course material sales were also impacted by to lower enrollments, primarily at community colleges~~our First Day Complete program and ~~by international students, and the continuation~~improved availability of ~~remote and hybrid class offerings.~~used textbook inventory.

During the 13 weeks ended January 29, 2022, Retail Gross Comparable Store textbook sales decreased by 4.0%, as compared to an 8.1% decline a year ago. During the 39 weeks ended January 29, 2022, Retail Gross Comparable Store textbook sales increased by 2.0%, as compared to a 14.3% decline a year ago, when the majority of our stores had temporarily closed due to the COVID-19 pandemic. See Retail Gross Comparable Store Sales discussion below. Course material declines were mitigated by the growth of First Day (our inclusive access program), digital and eTextbook revenue increases, due to a shift to lower cost options and more affordable solutions, including digital offerings. For the 2022 Spring term, First Day Complete was offered through 76 campus bookstores compared to 14 campus bookstores in the prior year, at schools with over 380,000 in total undergraduate enrollment, up from approximately 62,000 in total undergraduate enrollment in the 2021 Spring term. Revenue for both of our First Day models increased to $76.1 million during the third quarter of Fiscal 2022, as compared to $46.4 million in the prior year period. Revenue for both of our First Day models increased to $199.2 million during Fiscal 2022, as compared to $108.9 million in the prior year period.

During the 13 and 39 weeks ended January ~~29, 2022,~~28, 2023, logo ~~and emblematic~~general merchandise sales are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo ~~and emblematic~~general merchandise sales on a gross basis infor the prior year period. See Retail Gross Comparable Store Sales discussion below. During the 13 weeks ended January 29, 2022, Retail Gross Comparable Store general merchandise sales increased by 59.1%, as compared to a 45.8% decline a year ago. Duringmajority of our e-commerce websites during the 39 weeks ended January 29, 2022, Retail Gross Comparable Store general merchandise sales increased by 82.0%, as compared to a 54.9% decline a year ago. Both results during both periods benefited greatly from the return to an on campus learning experience and the resumption of many activities and events. Sales for general merchandise, including on-campus cafe and convenience products, and trade merchandise have increased compared to the prior year, when sales were impacted by the temporary store closings due to the COVID-19 pandemic. However, general merchandise sales are still impacted by fewer students returning to campus, as many schools implemented a remote or hybrid learning model and curtailed on-campus classes and activities.

~~Retail Gross Comparable Store Sales~~2022.

To supplement the Total Sales table presented above, the Company uses Retail Gross Comparable Store Sales as a key performance indicator. Retail Gross Comparable Store Sales includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from permanently closed stores for all periods presented. For Retail Gross Comparable Store Sales, sales for logo ~~and emblematic~~ general merchandise fulfilled by ~~FLC,~~Lids, Fanatics and digital agency sales are included on a gross basis for consistent year-over-year comparison.

Effective in April 4, 2021, as contemplated by the ~~FLC~~F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo ~~and emblematic~~ general merchandise sales to ~~FLC~~Lids and Fanatics. The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo ~~and emblematic~~ general merchandise sales are fulfilled by ~~FLC~~Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo ~~and emblematic~~general merchandise sales on a gross basis in the periods prior to ~~April 4, 2021.~~the transition.

We believe the current Retail Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time. We present this metric as additional useful information about the Company’s operational and financial performance and to allow greater transparency with respect to important metrics used by management for operating and financial ~~decision-~~

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~~making.~~decision-making. Retail Gross Comparable Store Sales are also referred to as "same-store" sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry. As a result, our calculation of comparable

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store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

During the 13 and 39 weeks ended January 28, 2023, Retail Gross Comparable Store general merchandise sales increased by 2.3% and 11.3%, respectively. During the 13 and 39 weeks ended January 28, 2023, Retail Gross Comparable Store course material sales increased by 7.4% and 0.3%, respectively. The increase in course material sales was primarily due to the growth of First Day inclusive and equitable access programs (as discussed above), partially offset by a shift to lower cost options and more affordable solutions, including digital offerings.

Retail Gross Comparable Store Sales variances ~~for Retail~~ by category for the 13 and 39 week periods are as follows:

13 weeks ended 39 weeks ended
Dollars in millions January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021
Textbooks (Course Materials) $ (11.9) (4.0) % $ (25.0) (8.1) % $ 17.4 2.0 % $ (136.1) (14.3) %
General Merchandise 41.2 59.1 % (58.0) (45.8) % 164.5 82.0 % (242.2) (54.9) %
Trade Books 1.6 48.5 % (5.5) (61.1) % 5.0 61.6 % (19.4) (69.3) %
Total Retail Gross Comparable Store Sales $ 30.9 8.4 % $ (88.5) (19.9) % $ 186.9 17.6 % $ (397.7) (28.0) %

Consistent with prior years and further exacerbated by some delayed start dates, the Spring Rush period extended beyond the quarter into the fourth quarter. Factoring in the fiscal month of February into the third quarter, which includes rental deferred revenue for our First Day programs, Retail gross comparable store sales increased by approximately 18.8%.


	13 weeks ended								39 weeks ended
Dollars in millions	January 28, 2023				January 29, 2022				January 28, 2023				January 29, 2022
Textbooks (Course Materials)	$	21.3	7.4	%	$	(11.9)	(4.0)	%	$	2.9	0.3	%	$	17.4	2.0	%
General Merchandise	2.6		2.3	%	42.8		58.6	%	42.6		11.3	%	169.5		81.2	%
Total Retail Gross Comparable Store Sales	$	23.9	5.9	%	$	30.9	8.4	%	$	45.5	3.6	%	$	186.9	17.6	%

Wholesale

Wholesale sales ~~decreased~~increased by ~~$2.4~~$1.9 million, or ~~6.1%~~5.2% to $38.9 million during the 13 weeks ended January 28, 2023 from $37.0 million during the 13 weeks ended January 29, ~~2022 from $39.5 million during~~2022. The increase is primarily due to increased customer demand compared to the ~~13 weeks ended January 30, 2021.~~ prior year period, partially offset by higher returns and allowances.

Wholesale sales decreased by ~~$53.0~~$6.0 million, or ~~33.9%~~5.8% to $97.2 million during the 39 weeks ended January 28, 2023 from $103.2 million during the 39 weeks ended January 29, ~~2022 from $156.1 million during the 39 weeks ended January 30, 2021.~~2022. The decrease is primarily due to lower gross sales impacted by ~~the COVID-19 pandemic, including~~ supply constraints resulting from the lack of ~~on campus~~ textbook ~~buyback~~purchasing opportunities during the prior fiscal year, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, ~~partially offset by lower~~and higher returns and allowances. During the prior year period, the Wholesale operations assumed direct-to-student fulfillment of course material orders for the Retail Segment campus bookstores that were not fully operational due to COVID-19 campus store closures, whereas the sales shifted back to the physical bookstores in the current period.

DSS

DSS total sales ~~increased~~decreased by ~~$2.2~~$0.4 million, or ~~30.9%~~4.5% to $9.0 million during the 13 weeks ended January 28, 2023 from $9.4 million during the 13 weeks ended January 29, ~~2022 from $7.2 million during the 13 weeks ended January 30, 2021.~~ 2022. Sales decreased in both Bartleby and Student Brands subscription sales.

DSS total sales increased by ~~$7.0~~$0.7 million, or ~~36.7%~~2.5% to $26.7 million during the 39 weeks ended January 28, 2023 from $26.0 million during the 39 weeks ended January 29, ~~2022 from $19.0 million during the 39 weeks ended January 30, 2021.~~2022. Sales increased primarily due to an increase in Student Brands subscription sales.

Cost of Sales and Gross Margin

Our cost of sales decreased as a percentage of sales to 76.7% during the 13 weeks ended January 28, 2023 compared to 78.4% during the 13 weeks ended January 29, ~~2022 compared~~2022. Our gross margin increased by $17.2 million, or 19.8%, to ~~82.8%~~$104.2 million, or 23.3% of sales, during the 13 weeks ended January ~~30, 2021. Our gross margin increased by $16.4 million, or 23.2%, to~~28, 2023 from $87.0 million, or 21.6% of sales during the 13 weeks ended January 29, ~~2022 from $70.6 million, or 17.2% of sales during the 13 weeks ended January 30, 2021.~~2022.

Our cost of sales decreased as a percentage of sales to 76.5% during the 39 weeks ended January 28, 2023 compared to 77.0% during the 39 weeks ended January 29, ~~2022 compared~~2022. Our gross margin increased by $20.0 million, or 6.8%, to ~~82.1%~~$312.5 million, or 23.5% of sales, during the 39 weeks ended January ~~30, 2021. Our gross margin increased by $75.8 million, or 35.0%, to~~28, 2023 from $292.5 million, or 23.0% of sales during the 39 weeks ended January 29, ~~2022 from $216.7 million, or 17.9% of sales during the 39 weeks ended January 30, 2021.~~2022. During the 39 weeks ended January 29, 2022, we recognized a merchandise inventory loss of $0.4 million in cost of goods sold in the Retail Segment discussed below. For additional information, see Item 1. Financial Statements - Note 2. Summary of Significant Accounting Policies - Merchandise Inventories.

Retail

The following table summarizes the Retail cost of sales for the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021:~~29, 2022:


		13 weeks ended						39 weeks ended							13 weeks ended						39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		% of Related Sales	January 30, 2021		% of Related Sales	January 29, 2022		% of Related Sales	January 30, 2021		% of Related Sales	Dollars in thousands	January 28, 2023		% of Related Sales	January 29, 2022		% of Related Sales	January 28, 2023		% of Related Sales	January 29, 2022		% of Related Sales
Product and other cost of sales	Product and other cost of sales	$	287,435	82.2%	$	308,752	88.3%	$	894,936	80.9%	$	897,283	87.1%	Product and other cost of sales	$	309,123	82.0%	$	287,435	82.2%	$	931,539	80.3%	$	894,936	80.9%
Rental cost of sales	Rental cost of sales	18,144		72.3%	25,394		66.6%	53,096		60.5%	60,506		65.4%	Rental cost of sales	23,210		52.4%	18,144		72.3%	52,416		54.3%	53,096		60.5%
Total Cost of Sales	Total Cost of Sales	$	305,579	81.5%	$	334,146	86.2%	$	948,032	79.4%	$	957,789	85.3%	Total Cost of Sales	$	332,333	78.9%	$	305,579	81.5%	$	983,955	78.3%	$	948,032	79.4%

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The following table summarizes the Retail gross margin for the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021:~~29, 2022:


		13 weeks ended						39 weeks ended							13 weeks ended						39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		% of Related Sales	January 30, 2021		% of Related Sales	January 29, 2022		% of Related Sales	January 30, 2021		% of Related Sales	Dollars in thousands	January 28, 2023		% of Related Sales	January 29, 2022		% of Related Sales	January 28, 2023		% of Related Sales	January 29, 2022		% of Related Sales
Product and other gross margin	Product and other gross margin	$	62,220	17.8%	$	40,806	11.7%	$	211,468	19.1%	$	133,108	12.9%	Product and other gross margin	$	67,827	18.0%	$	62,220	17.8%	$	228,282	19.7%	$	211,468	19.1%
Rental gross margin	Rental gross margin	6,941		27.7%	12,717		33.4%	34,661		39.5%	32,062		34.6%	Rental gross margin	21,099		47.6%	6,941		27.7%	44,139		45.7%	34,661		39.5%
Gross Margin	Gross Margin	$	69,161	18.5%	$	53,523	13.8%	$	246,129	20.6%	$	165,170	14.7%	Gross Margin	$	88,926	21.1%	$	69,161	18.5%	$	272,421	21.7%	$	246,129	20.6%

For the 13 and 39 weeks ended January ~~29, 2022,~~28, 2023, the Retail Product and other gross margin as a percentage of sales increased as discussed below:

•For the 13 weeks ended January 28, 2023, Product and other gross margin increased ~~(610~~(20 basis points), driven primarily by a favorable sales mix (450 basis points) due to higher general merchandise sales, higher margin rates (295 basis points) due to lower inventory reserves and lower markdowns, partially offset by higher contract costs as a percentage of sales related to our college and university contracts (135 basis points) resulting from contract renewals and new store contracts.

•~~Rental gross margin decreased (570 basis points), driven primarily by lower rental margin rates (1,380 basis points) and unfavorable rental mix (275 basis points), partially offset~~ by lower contract costs as a percentage of sales related to our college and university contracts ~~(1,080~~(200 basis points). resulting from contract renewals and new store contracts, partially offset by lower margin rates (105 basis points) due to higher markdowns and an unfavorable sales mix (75 basis points) due to the increased shift to lower margin digital products.

•For the 39 weeks ended January ~~29, 2022, the Retail gross margin as a percentage of sales increased as discussed below:~~

•28, 2023, Product and other gross margin increased ~~(620~~(60 basis points), driven primarily by a favorable sales mix ~~(465~~(85 basis points) due to higher general merchandise sales and higher margin rates ~~(200~~(10 basis points) due to ~~lower inventory reserves and~~ lower markdowns, partially offset by higher contract costs as a percentage of sales related to our college and university contracts (40 basis points) resulting from contract renewals and new store ~~contracts and an inventory merchandise loss of $0.4 million (5 basis points) related to the final sale of our logo and emblematic general merchandise inventory below cost to FLC.~~contracts.

•For the 13 and 39 weeks ended January 28, 2023, the Retail Rental gross margin as a percentage of sales increased ~~(490 basis points),~~ driven primarily by ~~lower~~higher rental margin rates primarily due to our First Day Complete program and favorable rental mix due to improved availability of used textbook inventory, partially offset by higher contract costs as a percentage of sales related to our college and university contracts ~~(685 basis points)~~resulting from contract renewals and ~~a favorable rental mix (45 basis points), partially offset by lower rental margin rates (240 basis points).~~new store contracts.

Wholesale

The cost of sales and gross margin for Wholesale were $32.3 million, or 82.9% of sales, and $6.7 million, or 17.1% of sales, respectively, during the 13 weeks ended January 28, 2023. The cost of sales and gross margin for Wholesale was $28.9 million or 78.1% of sales and $8.1 million or 21.9% of sales, respectively, during the 13 weeks ended January 29, 2022. ~~The cost of sales and gross margin for Wholesale was $28.8 million or 73.0% of sales and $10.7 million or 27.0% of sales, respectively, during the 13 weeks ended January 30, 2021.~~

The cost of sales and gross margin for Wholesale were $78.1 million, or 80.4% of sales, and $19.0 million, or 19.6% of sales, respectively, during the 39 weeks ended January 28, 2023. The cost of sales and gross margin for Wholesale was $79.1 million or 76.6% of sales and $24.1 million or 23.4% of sales, respectively, during the 39 weeks ended January 29, 2022. ~~The cost of sales and gross margin for Wholesale was $118.0 million or 75.6% of sales and $38.1 million or 24.4% of sales, respectively, during the 39 weeks ended January 30, 2021.~~

The gross margin rate decreased during both the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 primarily due to ~~the unfavorable impact of returns and allowances and~~ higher ~~markdowns, partially offset by a favorable sales mix.~~markdowns.

DSS

The gross margin for the DSS segment was $7.2 million, or 79.9% of sales, during the 13 weeks ended January 28, 2023 and $7.9 million, or 84.1% of sales, during the 13 weeks ended January 29, ~~2022 and $5.9 million, or 81.6% of sales, during the 13 weeks ended January 30, 2021.~~2022. The gross margin for the DSS segment was $21.4 million, or 80.2% of sales, during the 39 weeks ended January 28, 2023 and $21.9 million, or 84.1% of sales, during the 39 weeks ended January 29, ~~2022 and $15.3 million, or 80.4% of sales, during the 39 weeks ended January 30, 2021.~~2022. The high gross margins are driven primarily by high margin subscription service revenue earned.

Intercompany Eliminations

During the 13 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, our sales eliminations were ~~$(18.4)~~$(22.2) million and ~~$(22.7)~~$(18.4) million, respectively. During the 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, our sales eliminations were ~~$(52.8)~~$(52.2) million and ~~$(87.0)~~$(52.8) million, respectively. These sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

During the 13 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, the cost of sales eliminations were ~~$(20.2)~~$(23.6) million and ~~$(23.3)~~$(20.2) million, respectively. During the 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, the cost of sales eliminations were ~~$(53.2)~~$(51.9) million and ~~$(85.2)~~$(53.2) million, respectively. These cost of sales eliminations represent (i) the recognition of

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intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory

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for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

During the 13 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, the gross margin eliminations were ~~$1.8~~$1.4 million and ~~$0.5~~$1.8 million, respectively. During the 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, the gross margin eliminations were ~~$0.4~~$(0.3) million and ~~$(1.8)~~$0.4 million, respectively. The gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods.

Selling and Administrative Expenses


		13 weeks ended						39 weeks ended							13 weeks ended						39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		% of Sales	January 30, 2021		% of Sales	January 29, 2022		% of Sales	January 30, 2021		% of Sales	Dollars in thousands	January 28, 2023		% of Sales	January 29, 2022		% of Sales	January 28, 2023		% of Sales	January 29, 2022		% of Sales
Total Selling and Administrative Expenses	Total Selling and Administrative Expenses	$	101,460	25.2%	$	92,708	22.5%	$	295,597	23.3%	$	254,723	21.0%	Total Selling and Administrative Expenses	$	99,473	22.3%	$	101,460	25.2%	$	305,045	23.0%	$	295,597	23.3%

During the 13 weeks ended January ~~29, 2022,~~28, 2023, selling and administrative expenses ~~increased~~decreased by ~~$8.8~~$2.0 million, or ~~9.4%~~2.0%, to ~~$101.5~~$99.5 million from ~~$92.7~~$101.5 million during the 13 weeks ended January ~~30, 2021.~~29, 2022. During the 39 weeks ended January ~~29, 2022,~~28, 2023, selling and administrative expenses increased by ~~$40.9~~$9.4 million, or ~~16.0%~~3.2%, to ~~$295.6~~$305.0 million from ~~$254.7~~$295.6 million during the 39 weeks ended January ~~30, 2021.~~29, 2022. The variances by segment are discussed by segment below.

The increase in selling and administrative expenses is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year. Additionally, during the 13 and 39 weeks ended January 29, 2022, long-term incentive compensation expense decreased by $0.6 million and increased by $4.0 million, respectively, primarily related to cash-settled phantom share unit awards which are remeasured at the end of each reporting period to reflect current assumptions, including changes in the our common stock price.

Retail

During the 13 weeks ended January ~~29, 2022,~~28, 2023, Retail selling and administrative expenses ~~increased~~decreased by ~~$8.7~~$1.9 million, or ~~11.5%~~2.2%, to ~~$84.6~~$82.7 million from ~~$75.9~~$84.6 million during the 13 weeks ended January ~~30, 2021.~~29, 2022. This ~~increase~~decrease was primarily due to a ~~$7.4~~$3.0 million decrease in comparable store payroll and operating costs primarily due to cost initiatives implemented during the quarter, and a $1.3 million decrease in incentive plan compensation expense, including compensation expense related to phantom share awards, partially offset by a $1.5 million increase in ~~stores~~net new/closed store payroll and operating ~~expenses including comparable stores, virtual stores and new/closed stores payroll and operating expenses,~~costs, and a ~~$1.3~~$1.0 million increase in corporate payroll, infrastructure and product development costs. ~~The payroll increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.~~

During the 39 weeks ended January ~~29, 2022,~~28, 2023, Retail selling and administrative expenses increased by ~~$32.2~~$9.3 million, or ~~15.3%~~3.9%, to ~~$242.5~~$251.8 million from ~~$210.3~~$242.5 million during the 39 weeks ended January ~~30, 2021.~~29, 2022. This increase was primarily due to ~~a $29.8 million~~an increase in ~~stores~~store payroll and operating ~~expenses including~~costs at new/closed stores and comparable stores ~~virtual stores~~of $6.8 million and ~~new/closed stores payroll~~$1.3 million, respectively, and ~~operating expenses, a $0.9 million increase in incentive plan compensation expense related to phantom share awards as discussed above, and a $1.5~~an $8.7 million increase in corporate payroll, infrastructure and product development ~~costs.~~ costs, partially offset by a $7.6 million decrease in incentive plan compensation expense, including compensation expense related to phantom share awards.

The payroll increase is primarily related to ~~the impact from re-opening~~increased staffing at stores that had temporarily or partially closed due to limited on campus activities related to the COVID-19 pandemic in the prior year. The increase is also due to greater on campus activity and related sales during the 39 weeks ended January 28, 2023 and costs to support the growth in First Day programs.

Wholesale

Wholesale selling and administrative expenses decreased by $0.4 million, or ~~9.1%~~9.6%, to ~~$3.9~~$3.5 million from ~~$4.3~~$3.9 million during the 13 weeks ended January ~~30, 2021,~~29, 2022. The decrease was primarily driven by lower ~~payroll~~compensation expense of $0.3 million, including incentive plan compensation expense, and lower operating ~~costs.~~ costs of $0.1 million.

Wholesale selling and administrative expenses ~~remained flat at~~decreased by $0.7 million, or 6.2%, to $11.6 million from $12.3 million ~~for both~~during the 39 weeks ended January 29, ~~2022 and January 30, 2021, as~~2022. The decrease was primarily driven by lower ~~payroll and operating costs were offset by higher~~compensation expense, including incentive plan compensation expense ~~related to phantom share awards, as discussed above.~~of $0.6 million.

DSS

During the 13 weeks ended January 28, 2023, DSS selling and administrative expenses decreased by $0.2 million, or 1.8%, to $7.6 million from $7.8 million during the 13 weeks ended January 29, ~~2022,~~2022. The decrease in costs was primarily driven by a decrease of $0.4 million in incentive plan compensation expense, partially offset by higher compensation expense of $0.1 million and an increase of $0.1 million in operating costs invested in the business associated with product development, sales and infrastructure costs aimed at increasing revenue.

During the 39 weeks ended January 28, 2023, DSS selling and administrative expenses increased by ~~$1.8~~$2.4 million, or ~~29.3%~~11.1%, to ~~$7.8~~$23.9 million from ~~$6.0 million during the 13 weeks ended January 30, 2021. During the 39 weeks ended January 29, 2022, DSS selling and administrative expenses increased by $6.5 million, or 43.0%, to~~ $21.5 ~~million from $15.0~~ million during the 39 weeks ended January ~~30, 2021.~~29, 2022. The increase in costs was primarily driven by ~~higher compensation-related~~an increase of $1.4 million in compensation expense ~~higher~~and an increase of $1.6 million in operating costs invested in the business associated with ~~higher~~ product development, sales and ~~sales~~infrastructure costs aimed at increasing revenue, ~~and higher~~partially offset by lower incentive plan compensation expense ~~related~~of $0.6 million.

DSS has begun to ~~phantom share awards, as discussed above.~~adjust its cost structure, particularly within its Bartleby organization, to focus on enhanced profitability and sustainable growth.

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Corporate Services

During the 13 weeks ended January ~~29, 2022,~~28, 2023, Corporate Services' selling and administrative expenses ~~decreased~~increased by ~~$1.3~~$0.4 million, or ~~20.6%~~8.1%, to $5.6 million from $5.2 million during the 13 weeks ended January 29, ~~2022~~2022. The increase in costs was primarily due to higher compensation expense of $0.6 million and higher professional service costs of $0.3 million, partially offset by lower incentive plan compensation costs of $0.5 million.

During the 39 weeks ended January 28, 2023, Corporate Services' selling and administrative expenses decreased by $1.5 million, or 8.0%, to $17.9 million from ~~$6.5~~$19.4 million during the 39 weeks ended January 29, 2022. The decrease in costs was primarily due to lower incentive plan compensation costs of $2.7 million, primarily related to phantom share awards, partially offset by higher professional service costs of $0.8 million and higher compensation expense of $0.4 million.

Depreciation and Amortization Expense


	13 weeks ended						39 weeks ended
Dollars in thousands	January 28, 2023		% of Sales	January 29, 2022		% of Sales	January 28, 2023		% of Sales	January 29, 2022		% of Sales
Total Depreciation and Amortization Expense	$	10,618	2.4%	$	12,179	3.0%	$	33,910	2.6%	$	36,755	2.9%

Depreciation and amortization expense decreased by $1.6 million, or 12.8%, to $10.6 million during the 13 weeks ended January 30, 2021. The decrease was primarily due to lower compensation-related expense of $1.5 million and lower incentive plan compensation expense related to phantom share awards of $0.4 million, as discussed above, partially offset by higher operating costs of $0.6 million.

~~During the 39 weeks ended January 29, 2022, Corporate Services' selling and administrative expenses increased by $2.2 million, or 12.6%, to $19.4 million~~28, 2023 from $17.2 million during the 39 weeks ended January 30, 2021. The increase was primarily due to higher incentive plan compensation expense related to phantom share awards of $2.6 million, as discussed above, and higher operating costs of $1.1 million, partially offset by lower compensation-related expense of $1.5 million.

~~Depreciation and Amortization Expense~~

13 weeks ended 39 weeks ended
Dollars in thousands January 29, 2022 % of
Sales January 30, 2021 % of
Sales January 29, 2022 % of
Sales January 30, 2021 % of
Sales
Total Depreciation and Amortization Expense $ 12,179 3.0% $ 13,307 3.2% $ 36,755 2.9% $ 40,563 3.3%

~~Depreciation and amortization expense decreased by $1.1 million, or 8.5%, to~~ $12.2 million during the 13 weeks ended January 29, ~~2022 from $13.3 million during the 13 weeks ended January 30, 2021.~~2022. Depreciation and amortization expense decreased by ~~$3.8~~$2.8 million, or ~~9.4%~~7.7%, to $33.9 million during the 39 weeks ended January 28, 2023 from $36.8 million during the 39 weeks ended January 29, ~~2022 from $40.6 million during the 39 weeks ended January 30, 2021.The~~2022. The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during ~~the third quarter of~~ Fiscal ~~2021.~~2023 and Fiscal 2022.

Impairment Loss (non-cash)

During the 13 and 39 weeks ended January 28, 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6.0 million (both pre-tax and after-tax), comprised of $0.7 million, $1.7 million, and $3.6 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the condensed consolidated statement of operations.

During the 13 and 39 weeks ended January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6.4 million (both pre-tax and after-tax), comprised of $0.7 million, $1.8 million, $3.7 million and $0.2 million of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

During the 13 and 39 weeks ended January 30, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $27.6 million ($20.5 million after-tax), comprised of $5.1 million, $13.3 million, $6.3 million and $2.9 million of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

For additional information, see Item 1. Financial Statements - Note 2. Summary of Significant Accounting Policies and Note 6. Fair Value Measurements.

Restructuring and other charges

During the 13 and 39 weeks ended January 28, 2023, we recognized restructuring and other charges totaling $6.0 million and $6.6 million, respectively, comprised primarily of $4.7 million in each period for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $1.3 million and $1.9 million, respectively, primarily for costs primarily associated with professional service costs for restructuring and process improvements.

During the 13 and 39 weeks ended January 29, 2022, we recognized restructuring and other charges totaling ~~$3.8~~$0 and $3.1 million, respectively. The $3.1 million for the 39 weeks ended January 29, 2022 is comprised primarily of ~~$2.0~~$1.3 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $1.8 million for costs primarily associated with professional service costs for restructuring, process improvements, and development and integration associated with the ~~FLC Partnership, shareholder activist activities, and liabilities for a facility closure.~~

During the 13 and 39 weeks ended January 30, 2021, we recognized restructuring and other charges totaling $1.7 million and $10.7 million, respectively, comprised primarily of $1.3 million and $5.8 million, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $0.4 million and $4.9 million, respectively, for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.F/L Partnership.

3637

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Operating Loss


		13 weeks ended						39 weeks ended							13 weeks ended						39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		% of Sales	January 30, 2021		% of Sales	January 29, 2022		% of Sales	January 30, 2021		% of Sales	Dollars in thousands	January 28, 2023		% of Sales	January 29, 2022		% of Sales	January 28, 2023		% of Sales	January 29, 2022		% of Sales
Total Operating Loss	Total Operating Loss	$	(33,135)	(8.2)%	$	(64,702)	(15.6)%	$	(49,999)	(4.0)%	$	(116,884)	(9.6)%	Total Operating Loss	$	(17,864)	(4.0)%	$	(33,135)	(8.2)%	$	(39,040)	(3.1)%	$	(49,281)	(3.9)%

Our operating loss was $(17.9) million during the 13 weeks ended January 28, 2023, compared to operating loss of $(33.1) million during the 13 weeks ended January 29, ~~2022, compared to operating loss of $(64.7) million during the 13 weeks ended January 30, 2021.~~2022. The decrease in operating loss is due to the matters discussed above. For the 13 weeks ended January 28, 2023, excluding the $6.0 million of impairment loss (non-cash) and $6.0 million of restructuring and other charges, discussed above, operating loss was $(5.9) million (or (1.3)% of sales). For the 13 weeks ended January 29, 2022, excluding the $6.4 million of impairment loss (non-cash), discussed above, operating loss was $(26.7) million (or (6.6)% of sales). For the 13 weeks ended January 30, 2021, excluding the $27.6 million of impairment loss (non-cash) and the $1.7 million of restructuring and other charges, discussed above, operating loss was $(35.4) million (or (8.6)% of sales).

Our operating loss was ~~$(50.0)~~$(39.0) million during the 39 weeks ended January 28, 2023, compared to operating loss of $(49.3) million during the 39 weeks ended January 29, ~~2022, compared to an operating loss of $(116.9) million during the 39 weeks ended January 30, 2021.~~2022. The decrease in operating loss is due to the matters discussed above. For the 39 weeks ended January 28, 2023, excluding the $6.0 million of impairment loss (non-cash) and $6.6 million of restructuring and other charges, discussed above, operating loss was $(26.4) million (or (2.0)% of sales). For the 39 weeks ended January 29, 2022, excluding the $0.4 million of merchandise inventory loss, the $6.4 million of impairment loss (non-cash), and the ~~$3.8~~$3.1 million of restructuring and other charges, discussed above, operating loss was $(39.4) million (or (3.1)% of sales). For the 39 weeks ended January 30, 2021, excluding the $27.6 million of impairment loss (non-cash) and the $10.7 million of restructuring and other charges, discussed above, operating loss was $(78.5) million (or (6.5)% of sales).

Interest Expense, Net


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021		Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Interest Expense, Net	Interest Expense, Net	$	3,051	$	2,311	$	7,809	$	5,876	Interest Expense, Net	$	6,918	$	3,051	$	15,672	$	7,809

Net interest expense increased by ~~$0.7~~$3.9 million ~~or 32.0%,~~ to $6.9 million during the 13 weeks ended January 28, 2023 from $3.1 million during the 13 weeks ended January 29, ~~2022 from $2.3 million during the 13 weeks ended January 30, 2021.~~2022. Net interest expense increased by ~~$1.9~~$7.9 million ~~or 32.9%,~~ to $15.7 million during the 39 weeks ended January 28, 2023 from $7.8 million during the 39 weeks ended January 29, ~~2022 from $5.9 million during the 39 weeks ended January 30, 2021.~~2022. The increase was primarily due to higher borrowings and higher interest rates compared to the prior year.

Income Tax Expense ~~(Benefit)~~


		13 weeks ended						39 weeks ended							13 weeks ended						39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		Effective Rate	January 30, 2021		Effective Rate	January 29, 2022		Effective Rate	January 30, 2021		Effective Rate	Dollars in thousands	January 28, 2023		Effective Rate	January 29, 2022		Effective Rate	January 28, 2023		Effective Rate	January 29, 2022		Effective Rate
Income Tax Expense (Benefit)		$	615	(1.7)%	$	(18,724)	27.9%	$	811	(1.4)%	$	(35,334)	28.8%
Income Tax Expense														Income Tax Expense	$	267	(1.1)%	$	615	(1.7)%	$	900	(1.6)%	$	811	(1.4)%

We recorded an income tax expense of $0.3 million on pre-tax loss of $(24.8) million during the 13 weeks ended January 28, 2023, which represented an effective income tax rate of (1.1)% and we recorded an income tax expense of $0.6 million on a pre-tax loss of $(36.2) million during the 13 weeks ended January 29, 2022, which represented an effective income tax rate of (1.7)% ~~and we~~.

We recorded an income tax ~~benefit~~expense of ~~$(18.7)~~$0.9 million on a pre-tax loss of ~~$(67.0)~~$(54.7) million during the 1339 weeks ended January ~~30, 2021,~~28, 2023, which represented an effective income tax rate of ~~27.9%.~~

We(1.6)% and we recorded an income tax expense of $0.8 million on a pre-tax loss of ~~$(57.8)~~$(57.1) million during the 39 weeks ended January 29, 2022, which represented an effective income tax rate of (1.4)% ~~and we recorded an income tax benefit of $(35.3) million on a pre-tax loss of $(122.8) million during the 39 weeks ended January 30, 2021, which represented an effective income tax rate of 28.8%~~.

The effective tax rate for the 13 ~~and~~weeks ended January 28, 2023 is higher as compared to the prior year comparable period due to state tax adjustments recorded in the prior year. The effective tax rate for the 39 weeks ended January ~~29, 2022~~28, 2023 is lower as compared to the ~~comparable~~ prior year comparable period due to ~~the assessment of the realization of deferred tax assets~~foreign taxes and lower projected annual taxable loss ~~carrybacks recorded~~ in the ~~prior~~current year.

3738

Table of Contents

Net Loss


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021		Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Net loss	Net loss	$	(36,801)	$	(48,289)	$	(58,619)	$	(87,426)	Net loss	$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)

As a result of the factors discussed above, net loss was $(25.0) million during the 13 weeks ended January 28, 2023, compared with net loss of $(36.8) million during the 13 weeks ended January 29, ~~2022, compared with net loss of $(48.3) million during the 13 weeks ended January 30, 2021.~~2022. As a result of the factors discussed above, net loss was ~~$(58.6)~~$(55.6) million during the 39 weeks ended January 28, 2023, compared with net loss of $(57.9) million during the 39 weeks ended January 29, ~~2022, compared with net loss of $(87.4) million during the 39 weeks ended January 30, 2021.~~2022.

Adjusted Earnings (non-GAAP) is $(11.4) million during the 13 weeks ended January 28, 2023, compared with $(28.9) million during the 13 weeks ended January 29, ~~2022, compared with $(25.6)~~2022. Adjusted Earnings (non-GAAP) is $(38.1) million during the 1339 weeks ended January ~~30, 2021. Adjusted Earnings (non-GAAP) is~~28, 2023, compared with $(44.0) million during the 39 weeks ended January 29, ~~2022, compared with $(56.2) million during the 39 weeks ended January 30, 2021.~~2022. See Adjusted Earnings (non-GAAP) discussion below.

Use of Non-GAAP Measures - Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow

To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we use the measure of Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow, which are non-GAAP financial measures under Securities and Exchange Commission (the “SEC”) regulations. We define Adjusted Earnings as net income adjusted for certain reconciling items that are subtracted from or added to net income (loss). We define Adjusted EBITDA as net income (loss) plus (1) depreciation and amortization; (2) interest expense and (3) income taxes, (4) as adjusted for items that are subtracted from or added to net income (loss). We define Free Cash Flow as Cash Flows from Operating Activities less capital expenditures, cash interest and cash taxes.

To properly and prudently evaluate our business, we encourage you to review our condensed consolidated financial statements included elsewhere in this Form 10-Q, the reconciliation of Adjusted Earnings to net income (loss), the reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss), and the reconciliation of Adjusted EBITDA by Segment to net income (loss) by segment, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance.

These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures of financial performance prepared in accordance with GAAP. In addition, our use of these non-GAAP financial measures may be different from similarly named measures used by other companies, limiting their usefulness for comparison purposes.

We review these non-GAAP financial measures as internal measures to evaluate our performance at a consolidated level and at a segment level and manage our operations. We believe that these measures are useful performance measures which are used by us to facilitate a comparison of our on-going operating performance on a consistent basis from period-to-period. We believe that these non-GAAP financial measures provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone, as they exclude certain items that management believes do not reflect the ordinary performance of our operations in a particular period. Our Board of Directors and management also use Adjusted EBITDA and Adjusted EBITDA by Segment, at a consolidated and at a segment level, as one of the primary methods for planning and forecasting expected performance, for evaluating on a quarterly and annual basis actual results against such expectations, and as a measure for performance incentive plans. Management also uses Adjusted EBITDA by Segment to determine segment capital allocations. We believe that the inclusion of Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment results provides investors useful and important information regarding our operating results, in a manner that is consistent with management's evaluation of business performance. We believe that Free Cash Flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements and assists investors in their understanding of our operating profitability and liquidity as we manage the business to maximize margin and cash flow.

3839

Table of Contents

Consolidated Adjusted Earnings (non-GAAP)


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021		Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Net loss	Net loss	$	(36,801)	$	(48,289)	$	(58,619)	$	(87,426)	Net loss	$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)
Reconciling items, after-tax (below)		7,855		22,717		14,614		31,213
Reconciling items (below)										Reconciling items (below)	13,669		7,855		17,499		13,896
Adjusted Earnings (non-GAAP)	Adjusted Earnings (non-GAAP)	$	(28,946)	$	(25,572)	$	(44,005)	$	(56,213)	Adjusted Earnings (non-GAAP)	$	(11,380)	$	(28,946)	$	(38,113)	$	(44,005)

Reconciling items, pre-tax
Reconciling items										Reconciling items
Impairment loss (non-cash) (a)	Impairment loss (non-cash) (a)	$	6,411	$	27,630	$	6,411	$	27,630	Impairment loss (non-cash) (a)	$	6,008	$	6,411	$	6,008	$	6,411
Merchandise inventory loss (a)	Merchandise inventory loss (a)	—		—		434		—		Merchandise inventory loss (a)	—		—		—		434
Content amortization (non-cash)	Content amortization (non-cash)	1,398		1,314		3,984		3,700		Content amortization (non-cash)	1,686		1,398		4,881		3,984
Restructuring and other charges (a)	Restructuring and other charges (a)	46		1,669		3,785		10,727		Restructuring and other charges (a)	5,975		46		6,610		3,067

Reconciling items, pre-tax		7,855		30,613		14,614		42,057
Less: Pro forma income tax impact (a)(b)		—		7,896		—		10,844
Reconciling items, after-tax		$	7,855	$	22,717	$	14,614	$	31,213
Reconciling items (b)										Reconciling items (b)	$	13,669	$	7,855	$	17,499	$	13,896

(a) See Management Discussion and Analysis and Results of Operations discussion above.

(b) ~~Represents the~~There is no pro forma income ~~tax effects~~effect of the non-GAAP items.

Consolidated Adjusted EBITDA (non-GAAP)


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021		Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Net loss	Net loss	$	(36,801)	$	(48,289)	$	(58,619)	$	(87,426)	Net loss	$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)
Add:	Add:									Add:
Depreciation and amortization expense	Depreciation and amortization expense	12,179		13,307		36,755		40,563		Depreciation and amortization expense	10,618		12,179		33,910		36,755
Interest expense, net	Interest expense, net	3,051		2,311		7,809		5,876		Interest expense, net	6,918		3,051		15,672		7,809
Income tax expense (benefit)		615		(18,724)		811		(35,334)
Income tax expense										Income tax expense	267		615		900		811
Impairment loss (non-cash) (a)	Impairment loss (non-cash) (a)	6,411		27,630		6,411		27,630		Impairment loss (non-cash) (a)	6,008		6,411		6,008		6,411
Merchandise inventory loss (a)	Merchandise inventory loss (a)	—		—		434		—		Merchandise inventory loss (a)	—		—		—		434
Content amortization (non-cash)	Content amortization (non-cash)	1,398		1,314		3,984		3,700		Content amortization (non-cash)	1,686		1,398		4,881		3,984
Restructuring and other charges (a)	Restructuring and other charges (a)	46		1,669		3,785		10,727		Restructuring and other charges (a)	5,975		46		6,610		3,067

Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	(13,101)	$	(20,782)	$	1,370	$	(34,264)	Adjusted EBITDA (non-GAAP)	$	6,423	$	(13,101)	$	12,369	$	1,370

(a) See Management Discussion and Analysis and Results of Operations discussion above.

~~Table of Contents~~

The following is Adjusted EBITDA by segment for the 13 and 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021.~~29, 2022.

Adjusted EBITDA - by Segment 13 weeks ended January 29, 2022
Dollars in thousands Retail Wholesale DSS
Corporate Services(a)
Eliminations Total
Net (loss) income $ (30,845) $ 2,767 $ (1,669) $ (8,854) $ 1,800 $ (36,801)
Add:
Depreciation and amortization expense 8,939 1,396 1,826 18 — 12,179
Interest expense, net — — — 3,051 — 3,051
Income tax expense — — — 615 — 615
Impairment loss (non-cash) (a)
6,411 — — — — 6,411
Merchandise inventory loss (a)
— — — — — —
Content amortization (non-cash) 79 — 1,319 — — 1,398
Restructuring and other charges (a)
30 — — 16 — 46
Adjusted EBITDA (non-GAAP) $ (15,386) $ 4,163 $ 1,476 $ (5,154) $ 1,800 $ (13,101)

Adjusted EBITDA - by Segment 13 weeks ended January 30, 2021
Dollars in thousands Retail Wholesale DSS
Corporate Services(a)
Eliminations Total
Net (loss) income $ (59,996) $ 4,708 $ (2,567) $ 8,962 $ 604 $ (48,289)
Add:
Depreciation and amortization expense 9,806 1,614 1,863 24 — 13,307
Interest expense, net — — — 2,311 — 2,311
Income tax benefit — — — (18,724) — (18,724)
Impairment loss (non-cash) (a)
27,630 — — — — 27,630
Merchandise inventory loss (a)
— — — — —
Content amortization (non-cash) 176 — 1,138 — — 1,314
Restructuring and other charges (a)
162 — 571 936 — 1,669
Adjusted EBITDA (non-GAAP) $ (22,222) $ 6,322 $ 1,005 $ (6,491) $ 604 $ (20,782)

Adjusted EBITDA - by Segment 39 weeks ended January 29, 2022
Dollars in thousands Retail Wholesale DSS
Corporate Services(a)
Eliminations Total
Net (loss) income $ (32,605) $ 7,750 $ (5,286) $ (29,034) $ 556 $ (58,619)
Add:
Depreciation and amortization expense 27,015 4,060 5,627 53 — 36,755
Interest expense, net — — — 7,809 — 7,809
Income tax expense — — — 811 — 811
Impairment loss (non-cash) (a)
6,411 — — — — 6,411
Merchandise inventory loss (a)
434 — — — — 434
Content amortization (non-cash) 350 — 3,634 — — 3,984
Restructuring and other charges (a)
2,831 — — 954 — 3,785
Adjusted EBITDA (non-GAAP) $ 4,436 $ 11,810 $ 3,975 $ (19,407) $ 556 $ 1,370


Adjusted EBITDA - by Segment	13 weeks ended January 28, 2023
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total
Net (loss) income	$	(10,036)	$	817	$	(2,787)	$	(14,507)	$	1,464	$	(25,049)
Add:
Depreciation and amortization expense	8,749		1,357		506		6		—		10,618
Interest expense, net	—		—		—		6,918		—		6,918
Income tax expense	—		—		—		267		—		267
Impairment loss (non-cash) (a)	6,008		—		—		—		—		6,008

Content amortization (non-cash)	—		—		1,686		—		—		1,686
Restructuring and other charges (b)	1,452		931		1,848		1,744		—		5,975
Adjusted EBITDA (non-GAAP)	$	6,173	$	3,105	$	1,253	$	(5,572)	$	1,464	$	6,423

Table of Contents


Adjusted EBITDA - by Segment	Adjusted EBITDA - by Segment	39 weeks ended January 30, 2021												Adjusted EBITDA - by Segment	13 weeks ended January 29, 2022
Dollars in thousands	Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total		Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total
Net (loss) income	Net (loss) income	$	(107,740)	$	21,625	$	(6,218)	$	6,611	$	(1,704)	$	(87,426)	Net (loss) income	$	(30,845)	$	2,767	$	(1,669)	$	(8,854)	$	1,800	$	(36,801)
Add:	Add:													Add:
Depreciation and amortization expense	Depreciation and amortization expense	30,361		4,231		5,883		88		—		40,563		Depreciation and amortization expense	8,939		1,396		1,826		18		—		12,179
Interest expense, net	Interest expense, net	—		—		—		5,876		—		5,876		Interest expense, net	—		—		—		3,051		—		3,051
Income tax benefit		—		—		—		(35,334)		—		(35,334)
Income tax expense														Income tax expense	—		—		—		615		—		615
Impairment loss (non-cash) (a)	Impairment loss (non-cash) (a)	27,630		—		—		—		—		27,630		Impairment loss (non-cash) (a)	6,411		—		—		—		—		6,411
Merchandise inventory loss (a)				—		—		—		—		—

Content amortization (non-cash)	Content amortization (non-cash)	578		—		3,122		—		—		3,700		Content amortization (non-cash)	79		—		1,319		—		—		1,398
Restructuring and other charges ~~(a)~~(b)	Restructuring and other charges ~~(a)~~(b)	4,633		—		571		5,523		—		10,727		Restructuring and other charges ~~(a)~~(b)	30		—		—		16		—		46
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	(44,538)	$	25,856	$	3,358	$	(17,236)	$	(1,704)	$	(34,264)	Adjusted EBITDA (non-GAAP)	$	(15,386)	$	4,163	$	1,476	$	(5,154)	$	1,800	$	(13,101)


Adjusted EBITDA - by Segment	39 weeks ended January 28, 2023
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total
Net (loss) income	$	(14,029)	$	2,454	$	(7,027)	$	(36,853)	$	(157)	$	(55,612)
Add:
Depreciation and amortization expense	27,147		4,076		2,646		41		—		33,910
Interest expense, net	—		—		—		15,672		—		15,672
Income tax expense	—		—		—		900		—		900
Impairment loss (non-cash) (a)	6,008		—		—		—		—		6,008

Content amortization (non-cash)	26		—		4,855		—		—		4,881
Restructuring and other charges (b)	1,452		931		1,848		2,379		—		6,610
Adjusted EBITDA (non-GAAP)	$	20,604	$	7,461	$	2,322	$	(17,861)	$	(157)	$	12,369


Adjusted EBITDA - by Segment	39 weeks ended January 29, 2022
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total
Net (loss) income	$	(31,887)	$	7,750	$	(5,286)	$	(29,034)	$	556	$	(57,901)
Add:
Depreciation and amortization expense	27,015		4,060		5,627		53		—		36,755
Interest expense, net	—		—		—		7,809		—		7,809
Income tax expense	—		—		—		811		—		811
Impairment loss (non-cash) (a)	6,411		—		—		—		—		6,411
Merchandise inventory loss (b)	434		—		—		—		—		434
Content amortization (non-cash)	350		—		3,634		—		—		3,984
Restructuring and other charges (b)	2,113		—		—		954		—		3,067
Adjusted EBITDA (non-GAAP)	$	4,436	$	11,810	$	3,975	$	(19,407)	$	556	$	1,370

(a) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement and Term Loan Agreement which ~~funds~~fund our operating and financing needs across the organization. Income taxes are reflected in Corporate Services as we record our income tax provision on a consolidated basis.

(b) See Management Discussion and Analysis and Results of Operations discussion above.

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Free Cash Flow (non-GAAP)


		13 weeks ended				39 weeks ended					13 weeks ended				39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021		Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Net cash flows (used in) provided by operating activities	Net cash flows (used in) provided by operating activities	$	(16,241)	$	(50,213)	$	7,901	$	41,173	Net cash flows (used in) provided by operating activities	$	(31,958)	$	(16,375)	$	(22,582)	$	7,901
Less:	Less:									Less:
Capital expenditures (a)	Capital expenditures (a)	12,129		9,713		33,393		25,910		Capital expenditures (a)	6,326		12,129		26,899		33,393
Cash interest	Cash interest	2,320		1,685		5,982		4,885		Cash interest	6,105		2,320		13,406		5,982
Cash taxes	Cash taxes	(38)		14		(7,816)		6,036		Cash taxes	1		(38)		(15,582)		(7,816)
Free Cash Flow (non-GAAP)	Free Cash Flow (non-GAAP)	$	(30,652)	$	(61,625)	$	(23,658)	$	4,342	Free Cash Flow (non-GAAP)	$	(44,390)	$	(30,786)	$	(47,305)	$	(23,658)

(a) 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:

Capital Expenditures 13 weeks ended 39 weeks ended
Dollars in thousands January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021
Physical store capital expenditures $ 5,081 $ 1,238 $ 12,561 $ 7,200
Product and system development 4,398 4,288 11,878 9,514
Content development costs 2,037 2,260 6,749 5,088
Other 613 1,927 2,205 4,108
Total Capital Expenditures $ 12,129 $ 9,713 $ 33,393 $ 25,910


Capital Expenditures	13 weeks ended				39 weeks ended
Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Physical store capital expenditures	$	1,700	$	5,081	$	12,248	$	12,561
Product and system development	2,972		4,398		8,584		11,878
Content development costs	1,168		2,037		4,481		6,749
Other	486		613		1,586		2,205
Total Capital Expenditures	$	6,326	$	12,129	$	26,899	$	33,393

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Liquidity and Capital Resources

Our primary sources of cash are net cash flows from operating activities, funds available under our credit agreement and short-term vendor financing. As of January ~~29, 2022,~~28, 2023, we had ~~$200.4~~$255.6 million and $30.0 million outstanding borrowings under the Credit ~~Agreement.~~Agreement and Term Loan Agreement, respectively. See Financing Arrangements discussion below.

~~COVID-19 Business Impact~~

~~Our business experienced an unprecedented and significant negative impact as a result of COVID-19 related campus store closures. Beginning in~~On March ~~2020, colleges and universities nationwide began~~8, 2023, subsequent to ~~close their campuses in light of safety concerns and as a result of local and state issued stay-at-home orders. By mid-March, during~~quarter end, we amended our ~~Fiscal 2020 fourth~~existing Credit Agreement to, among other things, extend the maturity date thereunder by six months to August 29, 2024. The amendment also reduces the commitments under the Credit Agreement by $20,000 to $380,000. On March 8, 2023, subsequent to quarter end, we ~~closed~~amended the ~~majority of our physical campus stores~~Term Loan Credit Agreement to, ~~protect~~among other things, extend the ~~health and safety of our customers and employees.~~

~~While our campus stores were closed, we continued~~maturity date thereunder by six months to serve institutions and students through our campus websites, providing free shipping on all orders and an expanded digital content offering to provide immediate access to course materials to students at our campuses that closed due to COVID-19. We developed and implemented plans to safely reopen our campus stores based on national, state and local guidelines, as well as the campus policies set by the school administration.

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations. Although most four year schools returned to a traditional on-campus environment for learning in the Fall semester, as well as hosted traditional on campus sporting activities , there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings. As we entered the Spring rush period in early January 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities. In early January, while the majority of schools brought students back to campus, some schools chose to conduct classes virtually for the beginning of the semester, while other schools chose to delay their start dates (and some schools both delayed the start of the semester and started classes virtually), thus reducing and/or delaying sales later into the quarter or shifting some sales to our fourth quarter.

We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to determine how to operate our bookstores in the safest manner for our employees and customers. If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations.December 7, 2024. For additional information, see ~~Part I - Item 1. Business~~Financing Arrangements ~~in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021~~below.

We believe that our future cash from operations, access to borrowings under the Credit ~~Facility, FILO Facility~~Agreement and ~~short-term vendor financing~~Term Loan Agreement will provide adequate resources to fund our operating and financing needs for the foreseeable future. Our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store openings, and any potential acquisitions of other brands or companies including digital properties. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity. Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy. There can be no assurances that we will have access to capital markets on acceptable terms.

COVID-19 Business Impact

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years. Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across the country during the 2022 Spring Term which did not recur during the 2023 Spring Term. While the impact of COVID-19 pandemic are lessening, we cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that

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directly affect our business operations. Although most four year schools returned to a traditional on-campus environment for learning, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

Sources and Uses of Cash Flow


		39 weeks ended					39 weeks ended
Dollars in thousands	Dollars in thousands	January 29, 2022		January 30, 2021		Dollars in thousands	January 28, 2023		January 29, 2022
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	$	16,814	$	9,008	Cash, cash equivalents, and restricted cash at beginning of period	$	21,934	$	16,814
Net cash flows provided by operating activities		7,901		41,173
Net cash flows (used in) provided by operating activities						Net cash flows (used in) provided by operating activities	(22,582)		7,901
Net cash flows used in investing activities	Net cash flows used in investing activities	(32,659)		(25,575)		Net cash flows used in investing activities	(26,327)		(32,659)
Net cash flows provided by (used in) financing activities		20,686		(13,925)
Net cash flows provided by financing activities						Net cash flows provided by financing activities	56,422		20,686

Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	12,742	$	10,681	Cash, cash equivalents, and restricted cash at end of period	$	29,447	$	12,742

As of January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, we had restricted cash of ~~$2.8~~$18.3 million and ~~$0.8~~$2.8 million, respectively, comprised of ~~$1.9~~$17.4 million and ~~$0,~~$1.9 million, respectively, in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to ~~FLC~~Lids for logo merchandise sales as per the ~~FLC~~F/L Partnership's merchandising agreement

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and $0.9 million ~~and $0.8 million, respectively,~~for both periods in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities

Our business is highly seasonal. For our retail operations, cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials for the upcoming semesters based on the typical academic semester. Given the growth of First Day programs and the timing of cash collection from our school partners, the third fiscal quarter which has been a source of cash has shifted to the fourth quarter. When a school adopts our First Day inclusive and equitable access offerings, cash collection from the school generally occurs after the student drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to First Day inclusive and equitable access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors with cash inflows collected from schools. For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and fourth fiscal quarters, as payments are received from the summer and winter selling season when they sell textbooks and other course materials for retail distribution. For both retail and wholesale, cash flows from operating activities are typically a use of cash in the fourth fiscal quarter, when sales volumes are materially lower than the other quarters. For our DSS segment, cash flows are not seasonal as cash flows from operating activities are typically consistent throughout the year. Our quarterly cash flows also may fluctuate depending on the timing of the start of the various school’s semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods.

Cash flows ~~provided by~~used in operating activities during the 39 weeks ended January ~~29, 2022~~28, 2023 were ~~$7.9~~$(22.6) million compared to ~~$41.2~~cash flows provided by operating activities $7.9 million during the 39 weeks ended January ~~30, 2021.~~29, 2022. This decrease in cash ~~used in~~flows provided by operating activities of ~~$33.3~~$30.5 million was primarily due to changes in our working capital ~~including higher accounts receivables~~in our third quarter due to increased adoption of our First Day inclusive and equitable access offering in the third quarter of 2023 compared to 2022. During the 13 weeks ended January 28, 2023, First Day Complete sales increased $28.9 million to $66.9 million, or 76%, as compared to $38.0 million in the prior year period, which resulted in higher inventory purchases ~~partially~~and higher receivables, offset by higher ~~earnings of $28.8 million~~payables and right-of-use payments during the third quarter in the current year period compared to the prior year period and lower tax payments of $13.8 million compared to the prior year period as discussed below. Our operations were highly impacted by COVID-19 related campus store closures in the prior year period, resulting in lower operating costs and lower inventory purchases.period.

Cash Flow from Investing Activities

Cash flows used in investing activities during the 39 weeks ended January ~~29, 2022~~28, 2023 were ~~$(32.7)~~$(26.3) million compared to ~~$(25.6)~~$(32.7) million during the 39 weeks ended January ~~30, 2021.~~29, 2022. The ~~increase~~decrease in cash used in investing activities is primarily due to ~~higher~~lower capital expenditures and contractual capital investments associated with content development, digital initiatives,

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enhancements to internal systems and websites, ~~renewing existing contracts~~ and new store construction. Capital expenditures totaled ~~$33.4~~$26.9 million and ~~$25.9~~$33.4 million during the 39 weeks ended January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, respectively.

Cash Flow from Financing Activities

Cash flows provided by financing activities during the 39 weeks ended January ~~29, 2022~~28, 2023 were ~~$20.7~~$56.4 million compared to ~~cash flows used in financing activities of $(13.9)~~$20.7 million during the 39 weeks ended January ~~30, 2021.~~29, 2022. This net change of ~~$34.6~~$35.7 million is primarily due to higher net ~~borrowings under the credit agreement, offset by the sale of treasury shares of $10.9 million during the 39 weeks ended January 30, 2021.~~borrowings.

Financing Arrangements

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended from time to time, including on March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5-year asset-backed revolving credit facility in an aggregate committed principal amount of $400 million (the “Credit Facility”). effective from the March 1, 2019 amendment. We ~~have~~had the option to request an increase in commitments under the Credit Facility of up to $100 million, subject to certain restrictions. Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs. The agreement ~~includes~~included an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100 million ~~incremental facility~~ maintaining the maximum availability under the Credit Agreement at $500 million.

From and after July 31, 2022, commitments under the FILO Facility were reduced to $0. As of January ~~29, 2022,~~28, 2023, we were in compliance with all debt covenants under the Credit Agreement.

On March ~~4, 2022,~~8, 2023, subsequent to quarter end, we ~~were granted a waiver~~amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement by six months to August 29, 2024, (ii) reduce the commitments under the Credit Agreement by $20 million to $380 million, (iii) increase the applicable margin with respect to the ~~condition~~interest rate under the Credit Agreement to 3.375% per annum, in the case of interest accruing based on a Secured Overnight Financing Rate, and 2.375%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (iv) reduce advance rates with respect to the ~~upcoming draw under~~borrowing base (x) by 500 basis points upon the ~~FILO Facility, scheduled for April 2022, that Consolidated EBITDA~~achievement of certain liquidity events, which may include a sale of equity interests or of assets (a “Specified Event”), or, if such a Specified Event shall not have occurred, on May 31, 2023 and (y) by an additional 500 basis points on September 29, 2023, (v) amend certain negative covenants and add certain additional covenants, (vi) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) ~~minus Restricted Payments~~to be at all times greater than the greater of 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) ~~equal at least $110.0 million. Under~~and $32.5 million and (vii) require repayment of the ~~waiver amendment, the commitment~~loans under the ~~FILO Facility~~Credit Agreement upon a Specified Event. In addition, the amendment requires the achievement of ~~$25.0~~a Specified Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms fo the Credit Agreement).

During the 39 weeks ended January 28, 2023, we borrowed $512.0 million ~~was increased to $40.0~~and repaid $452.1 million under the Credit Agreement, with ~~all remaining terms unchanged.~~

$255.6 million of outstanding borrowings as of January 28, 2023, comprised entirely of borrowings under the Credit Facility. During the 39 weeks ended January 29, 2022, we borrowed $463.2 million and repaid $440.4 million under the Credit Agreement, with $200.4 million of outstanding borrowings as of January 29, 2022, comprised entirely of borrowings under the Credit Facility. During the 39 weeks ended January 30, 2021, we borrowed $547.6 million and repaid $571.5 million under the Credit Agreement, with $150.8 million of outstanding borrowings as of January 30, 2021, comprised entirely of outstanding borrowings under the Credit Facility. As of both January ~~29, 2022~~28, 2023 and January ~~30, 2021,~~29, 2022, we have issued $4.8 million in letters of credit under the Credit Facility.

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For additional information including interest terms and covenant requirements related to the Credit Facility and FILO Facility, refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021.~~April 30, 2022.

Term Loan

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to our existing Credit Agreement. For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $30.0 million (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”). The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility. During the 39 weeks ended January 28, 2023, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of January 28, 2023.

We incurred debt issuance costs totaling $2.6 million related to the Term Loan Credit Agreement. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

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term loan has been paid in cash. The Term Loans do not amortize prior to maturity. Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

On March 8, 2023, subsequent to quarter end, we extended and amended the Term Loan Credit Agreement to (i) extend the maturity date of the Term Loan Credit Agreement by six months to December 7, 2024, (ii) permit the application of certain proceeds to the repayment of the loans under Credit Agreement and (iii) amend certain negative covenants and add certain additional covenants.In addition, the amendment requires the achievement of a Specified Event (as described above) no later than May 31, 2023. We paid a fee of $0.05 million on the amendment closing date to the lenders under the Term Loan Credit Agreement.

For additional information related to the Credit Agreement amendment and the Term Loan Agreement amendment, see the Company’s Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions. The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

Income Tax Implications on Liquidity

~~As of January 29,~~For the fiscal year ended April 30, 2022, ~~other long-term liabilities includes $25.3 million related~~we filed an application to ~~the long-term tax payable associated with the LIFO reserve. The LIFO reserve is impacted by changes in the consumer price index ("CPI") and is dependent on the inventory levels at the end of~~change our tax year ~~(on or about~~from January ~~31st) which is in~~to April under the ~~middle of our second largest selling cycle. At the end~~automatic consent provisions. As a result of the ~~most recent~~ tax year, inventory levels declined as compared to the prior year resulting in approximately $0.7 million of the income taxes associated with the LIFO reserve becoming currently payable. Given recent trends relating to the pricing and rental of textbooks, management believes that an additional portion of the remainingyear-end change, there is no longer a long-term tax payable associated with the LIFO reserve could become payable within the next twelve months. We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months.in other long-term liabilities.

We have filed our federal income tax returns for the tax year ended January 2021, ~~as well~~which included claims for $33.6 million in refunds for cash taxes paid in prior years. We received arefunds of $7.8 million ~~refund~~ in ~~the second quarter of~~ Fiscal 2022 and $15.8 million on August 29, 2022 (Fiscal 2023). We expect to receive additional refunds of approximately ~~$22.6~~$10.0 million.

~~Sale of Treasury Shares~~

In December 2020, we entered into a new merchandising partnership with Fanatics and FLC which included a strategic equity investment in the Company. Fanatics, Inc. and Lids Holdings, Inc. jointly purchased an aggregate 2,307,692 of our common shares (issued from treasury shares) for $15 million, representing a share price of $6.50 per share. The premium price paid above the fair market value of our common stock at closing was approximately $4.1 million and was recognized as a contract liability which is expected to be earned over the term of the merchandising contracts for Fanatics and FLC ($0.2 million and $0.2 million, respectively, in accrued liabilities, and $3.8 million and $4.0 million, respectively, as of January 29, 2022 and January 30, 2021, in other long-term liabilities our condensed consolidated balance sheet).

Share Repurchases

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, in the aggregate, of our outstanding Common Stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During the 1339 weeks ended January ~~29, 2022,~~28, 2023, we did not repurchase any of our Common Stock under the stock repurchase program. As of January ~~29, 2022,~~28, 2023, approximately $26.7 million remains available under the stock repurchase program.

Contractual Obligations

Our projected contractual obligations are consistent with amounts disclosed in Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021.~~April 30, 2022.

Off-Balance Sheet Arrangements

As of January ~~29, 2022,~~28, 2023, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Critical Accounting Policies

Our policies regarding the use of estimates and other critical accounting policies are consistent with the disclosures in Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021.~~April 30, 2022.

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Disclosure Regarding Forward-Looking Statements

This quarterly report on Form 10-Q 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

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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. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Form 10-Q 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, and~~ products;

•the inability to achieve the expected cost ~~savings;~~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;

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•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;

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•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 fiscal year ended ~~May 1, 2021.~~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 Form 10-Q.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the items discussed in Part II - Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021.~~April 30, 2022.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation (as required under Rules 13a-15(b) and 15d-15(b) under the Exchange Act) was performed under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, management concluded that a material weakness existed at April 30, 2022 due to an operating deficiency resulting from insufficient precision applied in the execution of management’s review of the analysis of its deferred tax asset valuation allowance. The Company is in the process of implementing its remediation plan, which will occur in the fourth quarter of Fiscal 2023, due to the annual nature of the control. Based ~~upon that~~on management’s evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective at the reasonable assurance level.

Management has not identified any changes in the Company’s internal control over financial reporting that occurred during the third quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of our business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, personal injuries and other matters. We record a liability when we believe that it is both probable that a loss has been incurred and the amount of loss can be reasonably estimated. Based on our current knowledge, we do not believe that there is a reasonable possibility that the final outcome of any pending or threatened legal proceedings to which we or any of our subsidiaries are a party, either individually or in the aggregate, will have a material adverse effect on our future financial results. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect our business, financial condition, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes during the 39 weeks ended January ~~29, 2022~~28, 2023 to the risk factors discussed in Part I - Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended ~~May 1, 2021.~~April 30, 2022.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information as of January ~~29, 2022~~28, 2023 with respect to shares of Common Stock we purchased during the third quarter of Fiscal ~~2022:~~2023:


Period	Total Number of Shares Purchased	Average Price Paid per Share (a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
October ~~31, 2021~~30, 2022 - November ~~27, 2021~~26, 2022	—	$	—	—	$	26,669,324
November ~~28, 2021~~27, 2022 - ~~January 1,~~December 31, 2022	—	$	—	—	$	26,669,324
January ~~2, 2022~~1, 2023 - January ~~29, 2022~~28, 2023	—	$	—	—	$	26,669,324
	—	$	—	—

(a) This amount represents the average price paid per common share. This price includes a per share commission paid for all repurchases.

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, in the aggregate, of our outstanding Common Stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During the 39 ended January ~~29, 2022,~~28, 2023, we did not repurchase any shares of our Common Stock under the stock repurchase program.

During the 39 ended January ~~29, 2022,~~28, 2023, we repurchased ~~239,751~~347,808 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Item 5. Other Information

None

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Item 6. Exhibits


10.1						~~Fourth Amendment and Waiver to Credit Agreement~~Resignation Letter, dated as of ~~March 7,~~December 1, 2022 ~~among Barnes & Noble Education, Inc.,~~between the Company and David W.B. Nenke, filed as Exhibit 10.1 to Report on Form 8-K filed with the ~~lead borrower, the other borrowers party thereto, the lenders party thereto~~SEC on December 6, 2022, and ~~Bank of America, N.A., as administrative agent and collateral agent for the lenders, to the Credit Agreement, dated as of August 3, 2015.~~incorporated herein by reference.

31.1						Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


BARNES & NOBLE EDUCATION, INC.
(Registrant)

By:						/S/ THOMAS D. DONOHUE
						Thomas D. Donohue
						Chief Financial Officer
						(principal financial officer)

By:						/S/ SEEMA C. PAUL
						Seema C. Paul
						Chief Accounting Officer
						(principal accounting officer)

March ~~8, 2022~~9, 2023

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	13 weeks ended				36 weeks ended
	January 29, 2022		January 30, 2021		January 29, 2022		January 30, 2021
Retail
Product Sales (a)	$	340,706	$	338,495	$	1,076,122	$	998,158
Rental Income	25,085		38,111		87,757		92,568
Service and Other Revenue (b)	8,949		11,063		30,282		32,233
Retail Total Sales	$	374,740	$	387,669	$	1,194,161	$	1,122,959
Wholesale Sales	$	37,039	$	39,465	$	103,192	$	156,146
DSS Sales (c)	$	9,430	$	7,206	$	26,012	$	19,025
Eliminations (d)	$	(18,411)	$	(22,727)	$	(52,796)	$	(87,018)
Total Sales	$	402,798	$	411,613	$	1,270,569	$	1,211,112