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 28,~~July 29, 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 ~~February 24,~~September 1, 2023, ~~52,604,274~~52,705,377 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 28,~~July 29, 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 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022		3
	Condensed Consolidated Balance Sheets – As of ~~January 28,~~July 29, 2023, ~~January 29,~~July 30, 2022, and April ~~30, 2022~~29, 2023		4
	Condensed Consolidated Statements of Cash Flows – For the 3913 weeks ended ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022		5
	Condensed Consolidated Statements of Equity – As of ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022		67
	Notes to Condensed Consolidated Financial Statements		78
	Note 1.	Organization	78
	Note 2.	Summary of Significant Accounting Policies	89
	Note 3.	Revenue	1215
	Note 4.	Segment Reporting	1317
	Note 5.	Equity and Earnings Per Share	1619
	Note 6.	Fair Value Measurements	1719
	Note 7.	Debt	1820
	Note 8.	Leases	1923
	Note 9.	Supplementary Information	2024
	Note 10.	Long-Term Incentive Plan Compensation Expense	2125
	Note 11.	Employee Benefit Plans	2225
	Note 12.	Income Taxes	2225
	Note 13.	Legal Proceedings	23
	~~Note 14.~~	~~Subsequent Event~~	2326

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2427
	Overview		2427
	Results of Operations		2832
	Non-GAAP Measures		39
	Liquidity and Capital Resources		42

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4749
Item 4.	Controls and Procedures		4750

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings		4851
Item 1A.	Risk Factors		4851
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		4851
Item 5.	Other Information		4851
Item 6.	Exhibits		4952
	SIGNATURES		5053

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
		January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022			July 29, 2023		July 30, 2022
Sales:	Sales:									Sales:
Product sales and other	Product sales and other	$	402,755	$	377,713	$	1,231,465	$	1,182,812	Product sales and other	$	252,650	$	243,762
Rental income	Rental income	44,309		25,085		96,555		87,757		Rental income	11,511		10,912
Total sales	Total sales	447,064		402,798		1,328,020		1,270,569		Total sales	264,161		254,674
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	319,644		297,693		963,071		924,924		Product and other cost of sales	207,014		192,404
Rental cost of sales	Rental cost of sales	23,210		18,144		52,416		53,096		Rental cost of sales	6,513		6,265
Total cost of sales	Total cost of sales	342,854		315,837		1,015,487		978,020		Total cost of sales	213,527		198,669
Gross profit	Gross profit	104,210		86,961		312,533		292,549		Gross profit	50,634		56,005
Selling and administrative expenses	Selling and administrative expenses	99,473		101,460		305,045		295,597		Selling and administrative expenses	77,476		90,341
Depreciation and amortization expense	Depreciation and amortization expense	10,618		12,179		33,910		36,755		Depreciation and amortization expense	10,253		10,896
Impairment loss (non-cash)		6,008		6,411		6,008		6,411

Restructuring and other charges	Restructuring and other charges	5,975		46		6,610		3,067		Restructuring and other charges	4,633		375
Operating loss	Operating loss	(17,864)		(33,135)		(39,040)		(49,281)		Operating loss	(41,728)		(45,607)
Interest expense, net	Interest expense, net	6,918		3,051		15,672		7,809		Interest expense, net	8,254		3,868
Loss before income taxes		(24,782)		(36,186)		(54,712)		(57,090)
Income tax expense		267		615		900		811
Loss from continuing operations before income taxes										Loss from continuing operations before income taxes	(49,982)		(49,475)
Income tax (benefit) expense										Income tax (benefit) expense	(11)		847
Loss from continuing operations										Loss from continuing operations	$	(49,971)	$	(50,322)
Loss from discontinued operations, net of tax $20 and $86, respectively										Loss from discontinued operations, net of tax $20 and $86, respectively	$	(417)	$	(2,385)
Net loss	Net loss	$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)	Net loss	$	(50,388)	$	(52,707)

Loss per share of common stock:	Loss per share of common stock:									Loss per share of common stock:
Basic		$	(0.48)	$	(0.71)	$	(1.06)	$	(1.12)
Diluted		$	(0.48)	$	(0.71)	$	(1.06)	$	(1.12)
Weighted average shares of common stock outstanding:
Basic		52,602		52,003		52,404		51,714
Diluted		52,602		52,003		52,404		51,714
Basic and Diluted:										Basic and Diluted:
Continuing operations										Continuing operations	$	(0.95)	$	(0.96)
Discontinued operations										Discontinued operations	$	(0.01)	$	(0.05)
Total Basic and Diluted Earnings per share										Total Basic and Diluted Earnings per share	$	(0.96)	$	(1.01)
Weighted average common shares outstanding - Basic and Diluted										Weighted average common shares outstanding - Basic and Diluted	52,642		52,172

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 28, 2023		January 29, 2022		April 30, 2022			July 29, 2023		July 30, 2022		April 29, 2023
		(unaudited)		(unaudited)		(audited)			(unaudited)		(unaudited)		(audited)
ASSETS	ASSETS							ASSETS
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	11,137	$	9,967	$	10,388	Cash and cash equivalents	$	7,657	$	7,615	$	14,219
Receivables, net	Receivables, net	277,513		250,187		137,039		Receivables, net	140,858		118,954		92,512
Merchandise inventories, net	Merchandise inventories, net	408,924		403,646		293,854		Merchandise inventories, net	384,185		463,555		322,979
Textbook rental inventories	Textbook rental inventories	35,468		40,976		29,612		Textbook rental inventories	6,860		8,501		30,349
Prepaid expenses and other current assets	Prepaid expenses and other current assets	57,036		60,615		61,709		Prepaid expenses and other current assets	59,012		57,184		49,512

Assets held for sale, current								Assets held for sale, current	—		30,425		27,430
Total current assets	Total current assets	790,078		765,391		532,602		Total current assets	598,572		686,234		537,001
Property and equipment, net	Property and equipment, net	92,225		93,752		94,072		Property and equipment, net	64,438		73,734		68,153
Operating lease right-of-use assets	Operating lease right-of-use assets	259,470		229,259		286,584		Operating lease right-of-use assets	283,096		318,070		246,972
Intangible assets, net	Intangible assets, net	114,947		133,975		129,624		Intangible assets, net	107,413		123,339		110,632
Goodwill		4,700		4,700		4,700
Deferred tax assets, net	Deferred tax assets, net	—		15,613		—		Deferred tax assets, net	—		—		132
Other noncurrent assets	Other noncurrent assets	19,686		24,040		23,971		Other noncurrent assets	17,298		22,242		17,889
Total assets	Total assets	$	1,281,106	$	1,266,730	$	1,071,553	Total assets	$	1,070,817	$	1,223,619	$	980,779
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:							Current liabilities:
Accounts payable	Accounts payable	$	355,348	$	359,743	$	182,790	Accounts payable	$	275,380	$	324,397	$	267,923
Accrued liabilities	Accrued liabilities	138,179		150,754		95,387		Accrued liabilities	89,792		88,982		85,759
Current operating lease liabilities	Current operating lease liabilities	116,051		100,773		97,143		Current operating lease liabilities	150,917		149,587		99,980
Short-term borrowings	Short-term borrowings	—		—		40,000		Short-term borrowings	—		40,000		—
Liabilities held for sale								Liabilities held for sale	—		5,482		8,423
Total current liabilities	Total current liabilities	609,578		611,270		415,320		Total current liabilities	516,089		608,448		462,085
Long-term deferred taxes, net	Long-term deferred taxes, net	1,601		—		1,430		Long-term deferred taxes, net	1,836		1,430		1,970
Long-term operating lease liabilities	Long-term operating lease liabilities	188,466		168,924		219,594		Long-term operating lease liabilities	171,154		197,407		184,754
Other long-term liabilities	Other long-term liabilities	19,375		48,676		21,135		Other long-term liabilities	23,016		20,938		19,068
Long-term borrowings	Long-term borrowings	285,600		200,400		185,700		Long-term borrowings	277,663		218,550		182,151
Total liabilities	Total liabilities	1,104,620		1,029,270		843,179		Total liabilities	989,758		1,046,773		850,028
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, 55,140, 54,234 and 54,234 shares, respectively; outstanding, 52,604, 52,046 and 52,046 shares, respectively		551		542		542
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 55,319, 54,774 and 55,140 shares, respectively; outstanding, 52,705, 52,348 and 52,604 shares, respectively								Common stock, $0.01 par value; authorized, 200,000 shares; issued, 55,319, 54,774 and 55,140 shares, respectively; outstanding, 52,705, 52,348 and 52,604 shares, respectively	553		547		551

Additional paid-in capital	Additional paid-in capital	745,417		738,968		740,838		Additional paid-in capital	746,724		742,624		745,932
Accumulated deficit	Accumulated deficit	(547,106)		(480,538)		(491,494)		Accumulated deficit	(643,744)		(544,201)		(593,356)
Treasury stock, at cost	Treasury stock, at cost	(22,376)		(21,512)		(21,512)		Treasury stock, at cost	(22,474)		(22,124)		(22,376)
Total stockholders' equity	Total stockholders' equity	176,486		237,460		228,374		Total stockholders' equity	81,059		176,846		130,751
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,281,106	$	1,266,730	$	1,071,553	Total liabilities and stockholders' equity	$	1,070,817	$	1,223,619	$	980,779

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)


	13 weeks ended
	July 29, 2023		July 30, 2022
Cash flows from operating activities:
Net loss	$	(50,388)	$	(52,707)
Less: Loss from discontinued operations, net of tax	(417)		(2,385)
Loss from continuing operations	(49,971)		(50,322)
Adjustments to reconcile net loss from continuing operations to net cash flows from operating activities from continuing operations:
Depreciation and amortization expense	10,253		10,896
Content amortization expense	—		26
Amortization of deferred financing costs	1,244		555


Deferred taxes	(3)		—
Stock-based compensation expense	957		1,576
Changes in operating lease right-of-use assets and liabilities	721		(1,230)
Changes in other long-term assets and liabilities, net	4,056		1,782
Changes in other operating assets and liabilities, net
Receivables, net	(48,346)		17,048
Merchandise inventories	(61,206)		(169,701)
Textbook rental inventories	23,489		21,110
Prepaid expenses and other current assets	(12,168)		(782)
Accounts payable and accrued liabilities	11,116		140,435
Changes in other operating assets and liabilities, net	(87,115)		8,110
Net cash flows used in operating activities from continuing operations	(119,858)		(28,607)
Net cash flows used in operating activities from discontinued operations	(3,266)		(392)
Net cash flow used in operating activities	$	(123,124)	$	(28,999)
Cash flows from investing activities:
Purchases of property and equipment	$	(4,219)	$	(7,530)
Net change in other noncurrent assets	78		—
Net cash flows used in investing activities from continuing operations	(4,141)		(7,530)
Net cash flows provided by (used in) investing activities from discontinued operations	21,395		(2,196)
Net cash flow used in investing activities	$	17,254	$	(9,726)
Cash flows from financing activities:
Proceeds from borrowings	$	145,187	$	147,200
Repayments of borrowings	(49,606)		(112,600)
Payment of deferred financing costs	(2,307)		(559)
Purchase of treasury shares	(98)		(612)

Net cash flows provided by financing activities from continuing operations	93,176		33,429
Net cash flows provided by financing activities from discontinued operations	—		—
Net cash flows provided by financing activities	$	93,176	$	33,429

Net decrease in cash, cash equivalents and restricted cash	(12,694)		(5,296)
Cash, cash equivalents and restricted cash at beginning of period	31,988		21,036
Cash, cash equivalents and restricted cash at end of period	19,294		15,740

39 weeks ended
January 28,
2023 January 29,
2022
Cash flows from operating activities:
Net loss $ (55,612) $ (57,901)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization expense 33,910 36,755
Content amortization expense 4,882 3,984
Amortization of deferred financing costs 2,058 1,087
Impairment loss (non-cash) 6,008 6,411
Merchandise inventory loss — 434
Deferred taxes 171 330
Stock-based compensation expense 4,588 4,463
Changes in other long-term assets and liabilities, net 362 260
Changes in operating lease right-of-use assets and liabilities 13,196 1,808
Changes in other operating assets and liabilities, net (32,145) 10,270
Net cash flows (used in) provided by operating activities (22,582) 7,901
Cash flows from investing activities:
Purchases of property and equipment (26,899) (33,393)
Net change in other noncurrent assets 572 734
Net cash flows used in investing activities (26,327) (32,659)
Cash flows from financing activities:
Proceeds from borrowings 512,000 463,220
Repayments of borrowings (452,100) (440,420)
Payment of deferred financing costs (2,614) —
Purchase of treasury shares (864) (2,370)
Proceeds from the exercise of stock options, net — 256
Net cash flows provided by financing activities 56,422 20,686
Net increase (decrease) in cash, cash equivalents and restricted cash 7,513 (4,072)
Cash, cash equivalents and restricted cash at beginning of period 21,934 16,814
Cash, cash equivalents and restricted cash at end of period $ 29,447 $ 12,742
Changes in other operating assets and liabilities, net:
Receivables, net $ (140,474) $ (129,115)
Merchandise inventories (115,070) (122,968)
Textbook rental inventories (5,856) (12,284)
Prepaid expenses and other current assets 14,034 (4,697)
Accounts payable and accrued liabilities 215,221 279,334
Changes in other operating assets and liabilities, net $ (32,145) $ 10,270

Table of Contents


Less: Cash, cash equivalents and restricted cash of discontinued operations at end of period	—		(633)
Cash, cash equivalents, and restricted cash of continuing operations at end of period	$	19,294	$	15,107

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 1, 2021		53,327	$	533	$	734,257	$	(422,637)	1,948	$	(19,142)	$	293,011
Stock-based compensation expense					1,122							1,122
Vested equity awards		338	3		(3)							—
Shares repurchased for tax withholdings for vested stock awards									130	(1,215)		(1,215)
Net loss							(43,628)					(43,628)
Balance July 31, 2021		53,665	$	536	$	735,376	$	(466,265)	2,078	$	(20,357)	$	249,290
Stock-based compensation expense					1,478							1,478
Vested equity awards		487	5		(5)							—
Shares repurchased for tax withholdings for vested stock awards									108	(1,144)		(1,144)
Issuance of common stock upon exercise of stock options		10	—		37							37
Net income							22,528					22,528
Balance October 30, 2021		54,162	$	541	$	736,886	$	(443,737)	2,186	$	(21,501)	$	272,189
Stock-based compensation expense					1,863							1,863
Vested equity awards		4	—		—							—
Shares repurchased for tax withholdings for vested stock awards									2	(11)		(11)
Issuance of common stock upon exercise of stock options		68	1		219							220
Net loss							(36,801)					(36,801)
Balance January 29, 2022		54,234	$	542	$	738,968	$	(480,538)	2,188	$	(21,512)	$	237,460

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

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

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

																		Additional
															Common Stock			Paid-In		Accumulated		Treasury Stock			Total
															Shares	Amount		Capital		Deficit		Shares	Amount		Equity
Balance at April 29, 2023														Balance at April 29, 2023	55,140	$	551	$	745,932	$	(593,356)	2,536	$	(22,376)	$	130,751
Stock-based compensation expense														Stock-based compensation expense				794							794
Vested equity awards														Vested equity awards	179	2		(2)							—
Shares repurchased for tax withholdings for vested stock awards														Shares repurchased for tax withholdings for vested stock awards								78	(98)		(98)
Net loss														Net loss						(50,388)					(50,388)
Balance July 29, 2023														Balance July 29, 2023	55,319	$	553	$	746,724	$	(643,744)	2,614	$	(22,474)	$	81,059

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 ~~and 39~~ weeks ended ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 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 April ~~30, 2022,~~29, 2023, which includes consolidated financial statements for the Company as of April 29, 2023, and April 30, 2022 ~~and May 1, 2021~~ and for each of the three fiscal years ended April 29, 2023, April 30, 2022 and May 1, 2021 ~~and May 2, 2020~~ (Fiscal 2023, Fiscal 2022 and Fiscal 2021, ~~and Fiscal 2020,~~ respectively) ~~and the unaudited condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the quarter ended July 30, 2022, and for the quarter ended October 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.~~providers. We operate ~~1,388~~1,289 physical, virtual, and custom bookstores and serve more than 65.8 million students, delivering essential educational content, tools and 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 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® equitable and inclusive access programs, consisting of First DayComplete and First Day, which provide faculty required course materials on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately. The BNC First Day discounted price is offered as a course fee or included in tuition. During the first quarter ended July 29, 2023, BNC First Day total revenue increased by $16,715, or 37%, to $61,773 compared to $45,057 during the prior year period.

We expect to continue to introduce scalable and advanced ~~digital~~ solutions focused largely on the student and customer experience, 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" (“Lids”) (collectively referred to herein as the “F/L Partnership”), ~~increase market share with~~win 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 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 general merchandise business.

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.~~channels.

During the fourth quarter of Fiscal 2023, assets related to our DSS Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment. We have ~~three~~two reportable segments: Retail ~~Wholesale~~ and ~~DSS.~~Wholesale. 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 April ~~30, 2022~~29, 2023.

BNC First Day ~~Inclusive~~Equitable and ~~Equitable~~Inclusive 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® equitable and 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,~~July 29, 2023 and ~~January 29,~~July 30, 2022

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

(unaudited)

•programs, consisting of ~~Through~~First DayComplete and First Day, ~~digital~~which provide faculty required course materials ~~are~~on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately. The BNC First Day discounted price is offered as a course fee or included in tuition.

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

•First Day is adopted by a faculty member for a single course, and students receive ~~their~~primarily digital course materials through their school's learning management ~~system.~~system ("LMS").

Offering ~~courseware sales~~course materials through our ~~inclusive~~equitable and ~~equitable~~inclusive 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~~course material 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~~These programs ~~to allow~~have allowed us to ~~ultimately~~ reverse historical long-term trends in ~~courseware~~course materials revenue declines, which ~~has occurred~~have 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~~in Fiscal 2024 and the majority of our schools by Fiscal 2025, with continued relative adoption of this model thereafter.

In the Fall of 2023, ~~and the majority of schools by Fall 2024.~~

~~As of January 28, 2023, 116~~157 campus stores ~~adopted our~~are utilizing First Day® Complete ~~course materials delivery program for the 2023 Spring Term,~~ representing ~~approximately 580,000 in total~~enrollment of nearly 800,000 undergraduate ~~student enrollment~~and post graduate students (as reported by National Center for Education Statistics), an increase of approximately 46% compared to ~~76 campus stores representing approximately 380,000 in total undergraduate student enrollment for the 2022 Spring Term.~~Fall of 2022. During the 13 weeks ended ~~January 28,~~July 29, 2023, First Day Complete sales increased by ~~$28,912~~$9,058, or 55%, to ~~$66,901, or 76%,~~$25,522 as compared to ~~$37,989~~$16,464 in the prior year period. During the 3913 weeks ended ~~January 28,~~July 29, 2023, First Day ~~Complete~~ sales increased by ~~$83,752~~$7,657, or 27%, to ~~$173,380, or 94%,~~$36,251 as compared to ~~$89,628~~$28,593 in the prior year period.

Partnership with Fanatics and Lids

In December 2020, we entered into the 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, 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.

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. Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and Lids 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 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 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, 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.

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”). Net income (loss) is equal to comprehensive income (loss) on our condensed consolidated statement of operations. 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 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 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 weeks ended July 29, 2023 are not indicative of the results expected for the 52 weeks ending April 27, 2024 (Fiscal 2024).

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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,~~July 29, 2023 and ~~January 29,~~July 30, 2022

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

(unaudited)

Liquidity and Going Concern

The accompanying condensed consolidated financial statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and ~~therefore do~~the satisfaction of liabilities in the normal course of business and does not include ~~all~~any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the ~~information~~uncertainties described below.

Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), management must evaluate whether there are conditions and ~~footnotes required~~events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these condensed consolidated financial statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date of these condensed consolidated financial statements if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

Our primary sources of cash are net cash flows from operating activities, funds available under our Credit Agreement, Term Loan Agreement, and short-term vendor financing. Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales are generally highest in the second and third fiscal quarters, when college students generally purchase textbooks for the upcoming Fall and Spring semesters, respectively. As of July 29, 2023, we had $19,294 of cash on hand, including $10,704 of restricted cash related to segregated funds for commission due to Fanatics for logo merchandise sales as per the merchandising partnership agreement.

Our business was significantly negatively impacted by ~~GAAP. All material intercompany accounts~~the COVID-19 pandemic during the years ended April 30, 2022 and ~~transactions~~May 1, 2021, as many schools adjusted their learning models and on-campus activities. Although most academic institutions have since reopened after the COVID-19 pandemic, the lingering impacts of the pandemic have resulted in changes in customer behaviors, lower enrollments, and an evolving educational landscape which continued to impact our financial results during the year ended April 29, 2023. Some institutions are still providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes. The impact of COVID-19 store closings, as well as lower earnings during the year ended April 29, 2023, resulted in the loss of cash flows and increased borrowings that we would not otherwise have expected to incur.

We incurred a Net Loss from Continuing Operations of $(49,971) and $(50,322) for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively, and we incurred a Net Loss from Continuing Operations of $(90,140), $(61,559), and $(133,569) for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively. Our Cash Flow Used In Operating Activities from Continuing Operations were $(119,858) and $(28,607) for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively, and were $90,513, $(16,195), and $27,049, for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively. The tightening of our available credit commitments, including the elimination and repayment of our seasonal borrowing facility (FILO Facility) of $40,000, has had a significant impact on our liquidity during the year ended April 29, 2023, including our ability to make timely vendor payments and school commission payments, resulting in a positive cash flow from operations offset by a use of cash for financing activities.

Our losses and projected cash needs, combined with our current liquidity level, raised substantial doubt about our ability to continue as a going concern as of the year ended April 29, 2023, which Management subsequently remediated by implementing a plan to improve the Company’s liquidity and successfully alleviate substantial doubt including (1) raising additional liquidity and (2) taking additional operational restructuring actions.

Debt amendments

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

covenants and add certain additional covenants, all as more particularly set forth in such amendment. The amendment also requires that we appoint a Chief Restructuring Officer and that, by August 11, 2023, we (i) appoint two independent members to the board of directors of the Company from prospective candidates that have been previously disclosed to the Administrative Agent and the Lenders and (ii) appoint a committee of the board of directors of the Company to consist of three board members (two of whom will be the new independent directors), and as of the date of this filing, we have satisfied such requirements. The committee’s responsibilities will include, among other things, to explore, consider, solicit expressions of interest or proposals for, respond to any communications, inquiries or proposals regarding, and advise as to all strategic alternatives to effect a “Specified Liquidity Transaction” (as defined in the Credit Agreement). There can be no guarantee or assurances that any such transaction or transactions be consummated. We must pay (i) a fee of 0.50% of the outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment (as defined in the Credit Agreement) on the closing date (in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment (as defined in the Credit Agreement)) and (ii) a fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2, 2024 and an Event of Default (as defined in the Credit Agreement).

On July 28, 2023, we amended our Term Loan to (i) extend the maturity date of the Term Loan Agreement to April 7, 2025, (ii) allow for interest to be paid in kind until September 2, 2024, (iii) amend the 1.50% anniversary fee to recur on June 7 of each year that the Term Loan Agreement remains outstanding, with 2024 fee deferred to the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement) and (iv) amend certain negative covenants and affirmative and add certain additional covenants. We must pay a fee of $50,000 to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

Operational restructuring plans

We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability. We have taken steps to significantly reduce our workforce, eliminated duplicate administrative headcounts at all levels, implemented improved system development processes to reduce maintenance costs, reduced capital expenditures, and evaluated operating contractual obligations for cost savings. We have achieved meaningful cost savings from this program of approximately $17,000 during the second half of the year ended April 29, 2023. These initiatives are expected to provide annualized savings of $30,000 to $35,000 in ~~consolidation.~~Fiscal 2024. Management's plans over the next twelve months include the further reduction of gross capital expenditures and other cost saving measures of approximately $25,000. Management believes that these plans are within its control and probable of being implemented on a timely basis.

During the 13 weeks ended July 29, 2023, Net Loss from Continuing Operations decreased by $351 compared to the prior year period. During the 13 weeks ended July 29, 2023, Net Loss from Continuing Operations, excluding interest expense and restructuring and other charges, improved by $8,995 primarily due to operational improvements and cost savings initiatives. As discussed below, our first quarter is generally a low sales period, as the majority of sales and operating profit will be realized during the second and third quarters.

Management believes that the expected impact on our liquidity and cash flows resulting from the debt amendments and the operational initiatives outlined above are sufficient to enable the Company to meet its obligations for at least twelve months from the issuance date of these condensed consolidated financial statements and to continue to alleviate the conditions that initially raised substantial doubt about the Company's ability to continue as a going concern.

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. ~~For certain~~Our retail business is highly seasonal, with the major portion of ~~our retail operations,~~ sales ~~are generally highest in~~and operating profit realized during the second and third fiscal quarters, when college students generally purchase and rent textbooks ~~and other course materials~~ for the ~~typical academic year, and lowest in the first and fourth fiscal quarters.~~upcoming semesters. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as ~~MBS~~it sells textbooks and other course materials for retail distribution. ~~Our DSS segment sales~~See Revenue Recognition 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).Deferred Revenue discussion below.

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.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

Discontinued Operations

During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment. Certain assets and liabilities associated with the DSS Segment are presented in our condensed consolidated balance sheets as "Assets Held for Sale" and "Liabilities Held for Sale". The results of operations related to the DSS Segment are included in the condensed consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of the DSS Segment are also presented separately in our condensed consolidated statements of cash flows. All corresponding prior year periods presented in our financial statements and related information in the accompanying notes have been reclassified to reflect the Asset Held for Sale and Discontinued Operations presentation.

On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20,000, net of certain transaction fees, severance costs, escrow, and other considerations. During the 13 weeks ended July 29, 2023, we recorded a Gain on Sale of Business of $3,068 in Net Loss from Discontinued Operations related to the sale. Net cash proceeds from the sale were used for debt repayment and provided additional funds for working capital needs under our Credit Facility. The following table summarizes the operating results of the discontinued operations for the periods indicated:


	13 weeks ended
Dollars in thousands	July 29, 2023		July 30, 2022
Total sales	$	2,784	$	9,184
Cost of sales (a)	76		1,700
Gross profit (a)	2,708		7,484
Selling and administrative expenses	2,281		8,146
Depreciation and amortization	—		1,637
Gain on sale of business	(3,068)		—
Impairment loss (non-cash) (b)	610		—
Restructuring costs (c)	3,287		—
Transaction costs	(5)		—
Operating loss	(397)		(2,299)
Income tax expense	20		86
Loss from discontinued operations, net of tax	$	(417)	$	(2,385)

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $0 and $1,551 for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively.

(b) During the 13 weeks ended July 29, 2023, we recognized an impairment loss (non-cash) of $610 (both pre-tax and after-tax), comprised of $119 and $491 of property and equipment and operating lease right-of-use assets, respectively, on the condensed consolidated statement of operations as part of discontinued operations.

(c) During the 13 weeks ended July 29, 2023, we recognized restructuring and other charges of $3,287 comprised of severance and other employee termination costs.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

The following table summarizes the assets and liabilities of the Assets Held for Sale included in the condensed consolidated balance sheets:


	As of
	April 29, 2023		July 30, 2022
Cash and cash equivalents	$	1,057	$	633
Receivables, net	480		649
Prepaid expenses and other current assets	901		2,043
Property and equipment, net	19,523		20,904
Intangible assets, net	402		1,230
Goodwill	4,700		4,700
Deferred tax assets, net	130		—
Other noncurrent assets	237		266
Assets held for sale	$	27,430	$	30,425

Accounts payable	$	211	$	216
Accrued liabilities	8,212		5,235
Other long-term liabilities	—		31
Liabilities held for sale	$	8,423	$	5,482

Restricted Cash

As of ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, we had restricted cash of ~~$18,309~~$11,637 and ~~$2,775,~~$7,492, respectively, comprised of ~~$17,397~~$10,704 and ~~$1,878,~~$6,593, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the ~~F/L~~Lids Partnership's merchandising agreement, and ~~$912~~$933 and ~~$897,~~$899, 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 and trade book 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. There were no LIFO adjustments in Fiscal 2023, Fiscal 2022 and Fiscal 2021.

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 ~~courseware~~textbooks from outside suppliers and publishers.

As contemplated by the F/L Partnership merchandising agreement, we sold our logo general merchandise inventory to 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.

913

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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,~~July 29, 2023 and ~~January 29,~~July 30, 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.

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.

Revenue from the ~~rental~~sale of ~~physical~~digital textbooks, which contains a single performance obligation, is recognized at the point of sale as product revenue in our condensed consolidated financial statements. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the term the customer is no longer able to access the content. While the sale of the digital textbook 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.

Revenue from the rental of physical textbooks 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.~~customer and is recognized as rental income in our condensed consolidated financial statements. 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 for our BNC First Day offerings are recognized consistent with our policies outlined above for product, digital and rental sales, net of an anticipated opt-out or return provision. Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the ~~rental of digital textbooks,~~school generally occurs after the institution's drop/add dates, which ~~contains a single performance obligation,~~ is ~~recognized at~~later in the ~~point of sale. A software feature is embedded within~~working capital cycle, particularly in our third quarter given the ~~content of our digital textbooks, such that upon expiration~~timing of the ~~rental term~~Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the ~~customer is no longer able to access~~point-of-sale transaction or within a few days from 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.credit card processor.

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

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

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 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of our 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

~~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)~~

basis in our condensed consolidated financial statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to 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.

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~~customers, shipping and handling, and 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.from other programs.

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.~~accounting. 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 28, 2023, we had $4,700 of goodwill on our condensed consolidated balance sheet related to our DSS reporting 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 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 28, 2023, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $92,225, $259,470, $114,947, and $19,686, respectively, on our condensed consolidated balance sheet.

~~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)~~

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 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.

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

The provision for income taxes includes federal, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax basis of assets and liabilities. The deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. We regularly review deferred tax assets for recoverability and establish a valuation allowance, if determined to be 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 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 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022

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

(unaudited)

Disaggregation of Revenue

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


	13 weeks ended
	July 29, 2023		July 30, 2022
Retail
Course Materials Product Sales	$	138,536	$	127,493
General Merchandise Product Sales (a)	88,680		88,824
Service and Other Revenue (b)	6,733		9,278
Retail Product and Other Sales sub-total	233,949		225,595
Course Materials Rental Income	11,511		10,912
Retail Total Sales	$	245,460	$	236,507
Wholesale Sales	$	38,791	$	37,083
Eliminations (c)	$	(20,090)	$	(18,916)
Total Sales	$	264,161	$	254,674

(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~~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~~Retail Segment are ~~fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales~~recognized on a net basis as commission revenue in ~~our~~the condensed consolidated financial ~~statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition.~~statements.

(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 Liabilities

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;~~period;

•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 Lids, respectively.

The following table presents changes in deferred revenue associated with our contract liabilities:


		39 weeks ended					13 weeks ended
		January 28, 2023		January 29, 2022			July 29, 2023		July 30, 2022
Deferred revenue at the beginning of period	Deferred revenue at the beginning of period	$	19,722	$	18,139	Deferred revenue at the beginning of period	$	15,356	$	16,475
Additions to deferred revenue during the period	Additions to deferred revenue during the period	177,150		141,071		Additions to deferred revenue during the period	12,856		17,502
Reductions to deferred revenue for revenue recognized during the period	Reductions to deferred revenue for revenue recognized during the period	(139,704)		(103,619)		Reductions to deferred revenue for revenue recognized during the period	(12,444)		(15,302)
Deferred revenue balance at the end of period:	Deferred revenue balance at the end of period:	$	57,168	$	55,591	Deferred revenue balance at the end of period:	$	15,768	$	18,675
Balance Sheet classification:	Balance Sheet classification:					Balance Sheet classification:
Accrued liabilities	Accrued liabilities	$	52,891	$	51,125	Accrued liabilities	$	11,769	$	14,120
Other long-term liabilities	Other long-term liabilities	4,277		4,466		Other long-term liabilities	3,999		4,555
Deferred revenue balance at the end of period:	Deferred revenue balance at the end of period:	$	57,168	$	55,591	Deferred revenue balance at the end of period:	$	15,768	$	18,675

As of ~~January 28,~~July 29, 2023, we expect to recognize ~~$52,891~~$11,769 of the deferred revenue balance within the next 12 months.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

Note 4. Segment Reporting

We have ~~three~~two reportable segments: Retail ~~Wholesale~~ and ~~DSS.~~Wholesale. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are not allocated to any specific reporting segment and 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~~two 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 April ~~30, 2022~~29, 2023.

Retail Segment

~~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~~our BNC First Day® equitable and ~~equitable~~inclusive access programs, inconsisting of First DayComplete and First Day, which provide faculty required 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.~~class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately. The BNC First Day discounted price is offered as a course fee or included in tuition. 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

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 ~~3,000~~2,900 physical bookstores (including our Retail Segment's ~~785~~726 physical bookstores) and sources and distributes new and used textbooks to our ~~603~~563 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 ~~340~~330 college bookstores.

~~DSS~~

~~The~~ ~~Digital Student Solutions (“DSS”) Segment~~ includes 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~~®~~, an 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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Notes to Condensed Consolidated Financial Statements

For the 13 ~~and 39~~ weeks ended ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 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
		January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022			July 29, 2023		July 30, 2022
Sales	Sales									Sales
Retail	Retail	$	421,259	$	374,740	$	1,256,376	$	1,194,161	Retail	$	245,460	$	236,507
Wholesale	Wholesale	38,958		37,039		97,161		103,192		Wholesale	38,791		37,083
DSS		9,010		9,430		26,659		26,012
Elimination		(22,163)		(18,411)		(52,176)		(52,796)
Eliminations										Eliminations	(20,090)		(18,916)
Total Sales	Total Sales	$	447,064	$	402,798	$	1,328,020	$	1,270,569	Total Sales	$	264,161	$	254,674

Gross Profit	Gross Profit									Gross Profit
Retail (a)		$	88,926	$	69,161	$	272,421	$	246,129
Retail										Retail	$	50,291	$	53,993
Wholesale	Wholesale	6,668		8,104		19,022		24,129		Wholesale	5,794		6,899
DSS		7,199		7,932		21,376		21,868
Elimination		1,417		1,764		(286)		423
Eliminations										Eliminations	(5,451)		(4,887)
Total Gross Profit	Total Gross Profit	$	104,210	$	86,961	$	312,533	$	292,549	Total Gross Profit	$	50,634	$	56,005

Selling and Administrative Expenses	Selling and Administrative Expenses									Selling and Administrative Expenses
Retail	Retail	$	82,753	$	84,626	$	251,843	$	242,477	Retail	$	69,173	$	79,004
Wholesale	Wholesale	3,563		3,941		11,561		12,319		Wholesale	3,388		4,131
DSS		7,632		7,775		23,909		21,527
Corporate Services	Corporate Services	5,572		5,154		17,861		19,407		Corporate Services	4,918		7,214
Elimination		(47)		(36)		(129)		(133)
Eliminations										Eliminations	(3)		(8)
Total Selling and Administrative Expenses	Total Selling and Administrative Expenses	$	99,473	$	101,460	$	305,045	$	295,597	Total Selling and Administrative Expenses	$	77,476	$	90,341

Depreciation and Amortization	Depreciation and Amortization									Depreciation and Amortization
Retail	Retail	$	8,749	$	8,939	$	27,147	$	27,015	Retail	$	8,966	$	9,529
Wholesale	Wholesale	1,357		1,396		4,076		4,060		Wholesale	1,277		1,349
DSS		506		1,826		2,646		5,627
Corporate Services	Corporate Services	6		18		41		53		Corporate Services	10		18
Total Depreciation and Amortization	Total Depreciation and Amortization	$	10,618	$	12,179	$	33,910	$	36,755	Total Depreciation and Amortization	$	10,253	$	10,896

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

Restructuring and Other Charges (b)
Restructuring and Other Charges										Restructuring and Other Charges
Retail	Retail	$	1,452	$	30	$	1,452	$	2,113	Retail	$	526	$	—
Wholesale	Wholesale	931		—		931		—		Wholesale	526		—
DSS		1,848		—		1,848		—
Corporate Services	Corporate Services	1,744		16		2,379		954		Corporate Services	3,581		375
Total Restructuring and Other Charges	Total Restructuring and Other Charges	$	5,975	$	46	$	6,610	$	3,067	Total Restructuring and Other Charges	$	4,633	$	375

Operating Loss	Operating Loss									Operating Loss
Retail	Retail	$	(10,036)	$	(30,845)	$	(14,029)	$	(31,887)	Retail	$	(28,374)	$	(34,540)
Wholesale	Wholesale	817		2,767		2,454		7,750		Wholesale	603		1,419
DSS		(2,787)		(1,669)		(7,027)		(5,286)
Corporate Services	Corporate Services	(7,322)		(5,188)		(20,281)		(20,414)		Corporate Services	(8,509)		(7,607)
Elimination	Elimination	1,464		1,800		(157)		556		Elimination	(5,448)		(4,879)
Total Operating Loss	Total Operating Loss	$	(17,864)	$	(33,135)	$	(39,040)	$	(49,281)	Total Operating Loss	$	(41,728)	$	(45,607)


	13 weeks ended
Reconciliation of segment Operating Loss from Continuing Operations to Loss from Continuing Operations Before Income Taxes:	July 29, 2023		July 30, 2022
Total Operating Loss	$	(41,728)	$	(45,607)
Interest Expense, net	8,254		3,868
Total Loss from Continuing Operations Before Income Taxes	$	(49,982)	$	(49,475)

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Notes to Condensed Consolidated Financial Statements

For the 13 ~~and 39~~ weeks ended ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 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~~.

(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.~~

Note 5. Equity and Earnings Per Share

Equity

Share Repurchases

During the 3913 weeks ended ~~January 28,~~July 29, 2023, we did not repurchase shares of our Common Stock under the stock repurchase program and as of ~~January 28,~~July 29, 2023, approximately $26,669 remains available under the stock repurchase program.

During the 3913 weeks ended ~~January 28,~~July 29, 2023, we repurchased ~~347,808~~77,898 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

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 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, average shares of ~~4,677,926~~3,698,357 and ~~4,233,063~~4,722,668 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively. During the 39 weeks ended January 28, 2023 and January 29, 2022, average shares of 4,824,844 and 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					13 weeks ended
(shares in thousands)	(shares in thousands)	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022		(shares in thousands)	July 29, 2023		July 30, 2022
Numerator for basic and diluted earnings per share:	Numerator for basic and diluted earnings per share:									Numerator for basic and diluted earnings per share:

Loss from continuing operations, net of tax										Loss from continuing operations, net of tax	$	(49,971)	$	(50,322)
Loss from discontinued operations, net of tax										Loss from discontinued operations, net of tax	(417)		(2,385)
Net loss available to common shareholders	Net loss available to common shareholders	$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)	Net loss available to common shareholders	$	(50,388)	$	(52,707)

Denominator for basic and diluted earnings per share:	Denominator for basic and diluted earnings per share:									Denominator for basic and diluted earnings per share:
Basic and diluted weighted average shares of Common Stock	Basic and diluted weighted average shares of Common Stock	52,602		52,003		52,404		51,714		Basic and diluted weighted average shares of Common Stock	52,642		52,172

Loss per share of Common Stock:	Loss per share of Common Stock:									Loss per share of Common Stock:
Basic		$	(0.48)	$	(0.71)	$	(1.06)	$	(1.12)
Diluted		$	(0.48)	$	(0.71)	$	(1.06)	$	(1.12)
Basic and Diluted										Basic and Diluted
Continuing operations										Continuing operations	$	(0.95)	$	(0.96)
Discontinued operations										Discontinued operations	(0.01)		(0.05)
Basic and diluted loss per share of Common Stock										Basic and diluted loss per share of Common Stock	$	(0.96)	$	(1.01)

~~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)~~

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

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

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 28, 2023 and January 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), 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~~.

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 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)
Property and equipment, net $ 708 $ — $ 708 $ 742 $ 3 $ 739
Operating lease right-of-use assets 3,002 1,305 1,697 3,299 1,506 1,793
Intangible assets, net 3,599 — 3,599 3,745 77 3,668
Other noncurrent assets 4 — 4 211 — 211
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,~~July 29, 2023, we recorded a liability of ~~$1,261~~$633 (Level 2 input) which is reflected in accrued liabilities ($~~1,205)~~595) and other long-term liabilities ($~~56)~~38) on the condensed consolidated balance sheet. As of ~~January 29,~~July 30, 2022, we recorded a liability of ~~$3,666~~$2,976 (Level 2 input) which is reflected in accrued liabilities ($~~2,397)~~1,810) and other long-term liabilities ($~~1,269)~~1,166) 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


	As of
	July 29, 2023		July 30, 2022
Credit Facility	$	249,735	$	190,300
FILO Facility	—		40,000
Term Loan	30,000		30,000
sub-total	279,735		260,300
Less: Deferred financing costs	(2,072)		(1,750)
Total debt	$	277,663	$	258,550
Balance Sheet classification:
Short-term borrowings	$	—	$	40,000
Long-term borrowings	277,663		218,550
Total debt	$	277,663	$	258,550

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended from time to time including on July 28,2023, May 24, 2023, March 8, 2023, March 31, 2021 and March 1, 2019, under which the lenders originally 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 March 1, 2019 amendment. We ~~have~~had 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 included an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100,000 maintaining the maximum availability under the Credit Agreement at $500,000. ~~From and after~~As of July 31, 2022, the FILO Facility was repaid and eliminated according to its terms and future commitments under the FILO Facility were reduced to $0.

March 2023 Credit Agreement Amendment

On March 8, 2023, 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

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

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 (see discussion below) 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. For additional information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.

As noted above, 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). See Note 2. Summary of Significant Accounting Policies for information related to the sale of our DSS segment on May 31, 2023.

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.

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $4,081 related to the March 2023 Credit Agreement amendment. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the condensed consolidated balance sheets, and subsequently amortized ratably over the term of the credit agreement.

May 2023 Credit Agreement Amendment

On May 24, 2023, we amended our existing Credit Agreement to (i) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.75% per annum, in the case of interest accruing based on SOFR, and 2.75%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (ii) defer the reduction of advance rates used to calculate our borrowing capacity by an amount equal to 500 basis points previously required on May 31, 2023 to September 1, 2023, (iii) require cash flow reporting and variance testing commencing June 3, 2023 and (iv) defer partial prepayment of the term loan from the DSS segment sale proceeds to September 1, 2023. We did not incur debt issuance costs related to the May 2023 Credit Agreement amendment. For additional information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated May 24, 2023 and filed with the SEC on May 31, 2023.

July 2023 Credit Agreement Amendment

On July 28, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement to December 28, 2024, (ii) reduce advance rates with respect to the borrowing base by 1000 basis points on September 2, 2024 (in lieu of the reductions previously contemplated for September 2023), (iii) subject to the conditions set forth in such amendment, add a CARES Act tax refund claim to the borrowing base, from April 1, 2024 through July 31, 2024, (iv) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) at all times greater than the greater of (x) 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and (y) (A) $32,500 minus, subject to the conditions set forth in such amendment, (B) (a) $7,500 for the period of April 1, 2024 through and including April 30, 2024, (b) $2,500 for the period of May 1, 2024 through and including May 31, 2024 and (c) $0 at all other times, (v) add a minimum Consolidated EBITDA (as defined in the Credit Agreement) financial maintenance covenant, and (vi) amend certain negative and affirmative covenants and add certain additional covenants, all as more particularly set forth in such amendment. The amendment also requires that we appoint a Chief Restructuring Officer and that, by August 11, 2023, we (i) appoint two independent members to the board of directors of the Company from prospective candidates that have been previously disclosed to the Administrative Agent and the Lenders and (ii) appoint a committee of the board of directors of the Company to consist of three board members (two of whom will be the new independent directors). The committee’s responsibilities will include, among other things, to explore, consider, solicit expressions of interest or proposals for, respond to any communications, inquiries or proposals regarding, and advise as to all strategic alternatives to effect a “Specified Liquidity Transaction” (as defined in the Credit Agreement). There can be no guarantee or assurances that any such transaction or transactions be consummated. We must pay (i) a fee of 0.50% of the outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment (as defined in the Credit Agreement) on the closing date (in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment (as defined in the Credit Agreement)) and (ii) a fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2, 2024 and an Event of Default (as defined in the Credit Agreement).

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

During the 13 weeks ended July 29, 2023, we incurred debt issuance costs totaling $10,979 related to the July 2023 Credit Agreement amendment. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the condensed consolidated balance sheets, and subsequently amortized ratably over the term of the credit agreement.

As of ~~January 28,~~July 29, 2023, and through the date of this filing, we were in compliance with all debt covenants under the Credit Agreement.

~~On March 8,~~The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the Credit Facility. This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company and a pledge of equity from subsidiaries, exclusive of real estate).

During the 13 weeks ended July 29, 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~~borrowed $145,187 and repaid $49,606 under the Credit Agreement, ~~by $20,000 to $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 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~~had outstanding borrowings of $249,735 as of ~~January 28,~~July 29, 2023, comprised entirely of borrowings under the Credit Facility. During the 3913 weeks ended ~~January 29,~~July 30, 2022, we borrowed ~~$463,220~~$117,200 and repaid ~~$440,420~~$112,600 under the Credit Agreement, ~~with $200,400 of~~and had outstanding borrowings of $230,300 as of ~~January 29,~~July 30, 2022, comprised ~~entirely~~$190,300 and $40,000 of borrowings under the Credit ~~Facility.~~Facility and FILO Facility, respectively. As of ~~both January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, we have issued $575 and $4,759, respectively, 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”). and matures on June 7, 2024. 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 3913 weeks ended ~~January 28,~~July 29, 2023, we borrowed ~~$30,000~~$0 and repaid $0 under the Term Loan Credit Agreement, with $30,000 of outstanding borrowings as of ~~January 28,~~July 29, 2023. During the 13 weeks ended July 30, 2022, we borrowed $30,000 and repaid $0 under the Term Loan Credit Agreement.

March 2023 Term Loan Credit Agreement Amendment

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

WeDuring the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling ~~$2,614~~$431 related to the March 2023 Term Loan Credit Agreement amendment. We paid a fee of $50 on the amendment closing date to the lenders under 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 condensed consolidated balance sheets, and subsequently amortized ratably over the term of the credit agreement.

July 2023 Term Loan Credit Agreement Amendment

On July 28, 2023, we amended our Term Loan to (i) extend the maturity date of the Term Loan Agreement to April 7, 2025, (ii) allow for interest to be paid in kind until September 2, 2024, (iii) amend the 1.50% anniversary fee to recur on June 7 of each year that the Term Loan Agreement remains outstanding, with 2024 fee deferred to the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement) and (iv) amend certain negative covenants and affirmative and add certain additional covenants. We must pay a fee of $50 to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 weeks ended July 29, 2023 and July 30, 2022

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

(unaudited)

During the 13 weeks ended July 29, 2023, we incurred debt issuance costs totaling $369 related to the July 2023 Term Loan Credit Agreement amendment. The debt issuance costs have been deferred and are presented as a reduction to long-term borrowings in the condensed 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.~~quarterly. 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

~~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)~~

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
January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022
Variable lease expense $ 17,242 $ 18,306 $ 57,707 $ 60,746
Operating lease expense 38,593 33,838 114,453 99,201
Net lease expense $ 55,835 $ 52,144 $ 172,160 $ 159,947


	13 weeks ended
	July 29, 2023		July 30, 2022
Variable lease expense	$	12,229	$	15,183
Operating lease expense	22,389		22,862
Net lease expense	$	34,618	$	38,045

The ~~increase~~decrease in lease expense during the 3913 weeks ended ~~January 28,~~July 29, 2023 is primarily due to lower commission rates related to the shift to from physical to digital course materials and the impact of the timing due to contract renewals, partially offset by higher sales for contracts based on a percentage of revenue during the 39 weeks ended January 28, 2023, the impact of the timing due to contract renewals, and the increase in minimum contractual guarantees which were temporarily eliminated in the prior year due to limited on campus store traffic resulting from the COVID pandemic.sales.

1923

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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,~~July 29, 2023 and ~~January 29,~~July 30, 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:~~commissions:


	As of
	~~January 28,~~ July 29, 2023
Remainder of Fiscal ~~2023~~2024	$	~~78,142~~
~~Fiscal 2024~~	~~60,526~~148,353
Fiscal 2025	~~52,264~~53,542
Fiscal 2026	~~38,777~~39,072
Fiscal 2027	~~30,469~~31,399
Fiscal 2028	24,316
Thereafter	~~83,443~~59,227
Total lease payments	~~343,621~~355,909
Less: imputed interest	~~(39,104)~~(33,838)
Operating lease liabilities at period end	$	~~304,517~~322,071

Future lease payment obligations related to leases that were entered into, but did not commence as of ~~January 28,~~July 29, 2023, were not material. The following summarizes additional information related to our operating leases:


		As of							As of
		January 28, 2023			January 29, 2022				July 29, 2023			July 30, 2022
Weighted average remaining lease term (in years)	Weighted average remaining lease term (in years)	5.2 years			5.2 years			Weighted average remaining lease term (in years)	4.6 years			5.3 years
Weighted average discount rate	Weighted average discount rate	4.5		%	4.6		%	Weighted average discount rate	4.1		%	4.2		%

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	$	100,130		$	95,042		Cash payments for lease liabilities within operating activities	$	22,804		$	25,073
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		Right-of-use assets obtained in exchange for lease liabilities from initial recognition	$	59,304		$	64,211

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.~~

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.

~~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,~~July 29, 2023, we recognized restructuring and other charges totaling ~~$5,975 and $6,610, respectively,~~$4,633 comprised primarily of ~~$4,696 in each period~~$1,051 for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($~~781~~1,007 is included in accrued liabilities in the condensed consolidated balance sheet as of ~~January 28,~~July 29, 2023), and ~~$1,279 and $1,914,~~$3,582, respectively, for costs primarily associated with professional service costs for restructuring.

During the 13 weeks ended July 30, 2022, we recognized restructuring and other charges totaling $375, comprised primarily of costs associated with professional service costs for restructuring, process improvements.

2024

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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,~~July 29, 2023 and ~~January 29,~~July 30, 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 $3,067, respectively, comprised primarily of $0 and $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), $46 and $1,817, respectively, for costs primarily associated with professional service costs for restructuring, process improvements, development and integration associated with the 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.

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 3913 weeks ended ~~January 28,~~July 29, 2023, we ~~granted the following awards:~~

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

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

•~~322,495 stock options with an exercise price of $2.36 per stock option, which was the fair market value on the date of~~did not grant (Stock Option Grant #1) and 348,723 stock options with an exercise price of $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
Exercise Price $ 2.36 $ 4.86
Valuation method utilized Black-Scholes Monte Carlo
Risk-free interest rate 3.28 % 3.28 %
Expected option term 6.3 years 10.0 years
Company volatility 74 % 74 %
Dividend yield — % — %
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.

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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)~~

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


		13 weeks ended				39 weeks ended					13 weeks ended
		January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022			July 29, 2023		July 30, 2022
Stock-based awards	Stock-based awards									Stock-based awards
Restricted stock expense	Restricted stock expense	$	7	$	94	$	165	$	301	Restricted stock expense	$	7	$	94
Restricted stock units expense	Restricted stock units expense	679		1,106		2,692		2,767		Restricted stock units expense	568		866

Performance share units expense	Performance share units expense	—		28		10		91		Performance share units expense	—		10
Stock option expense	Stock option expense	392		635		1,721		1,304		Stock option expense	382		606
Sub-total stock-based awards:	Sub-total stock-based awards:	$	1,078	$	1,863	$	4,588	$	4,463	Sub-total stock-based awards:	$	957	$	1,576
Cash settled awards	Cash settled awards									Cash settled awards
Phantom share units expense	Phantom share units expense	$	(138)	$	192	$	130	$	5,116	Phantom share units expense	$	(89)	$	188
Total compensation expense for long-term incentive awards	Total compensation expense for long-term incentive awards	$	940	$	2,055	$	4,718	$	9,579	Total compensation expense for long-term incentive awards	$	868	$	1,764

Total unrecognized compensation cost related to unvested awards as of ~~January 28,~~July 29, 2023 was ~~$9,838~~$5,131 and is expected to be recognized over a weighted-average period of ~~2.1~~1.6 years.

Note 11. Employee Benefit Plans

We sponsor defined contribution plans for the benefit of substantially all of the employees of ~~BNC and DSS.~~BNC. 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 ~~$1,151~~$1,097 and ~~$1,155~~$1,259 during the 13 weeks ended ~~January 28,~~July 29, 2023 and ~~January 29, 2022, respectively. Total employee benefit expense for these plans was $3,545 and $2,203 during the 39 weeks ended January 28, 2023 and January 29,~~July 30, 2022, respectively.

~~Effective April 2020, due~~Commencing in September 2023, we revised the 401(k)-retirement savings plan to an annual end of plan year discretionary match, in lieu of 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.current pay period match.

Note 12. Income Taxes

Our provision for income taxes during interim reporting periods has historically been calculated by applying an estimate of the annual effective tax rate for the full fiscal year to ordinary income (loss) (pre-tax income (loss) excluding unusual or infrequently occurring discrete items) for the reporting period. For the 13 weeks ended July 29, 2023, and in accordance with ASC 740-270-30-18 “Income Taxes - Interim Reporting - Initial Measurement,” and paragraph 82 of FASB interpretation No. 18, "Accounting for Income Taxes in Interim Periods" ("FIN 18"), we computed our provision for income taxes based on the actual effective tax rate for the year-to-date period by applying the discrete method. We determined that as small changes in estimated ordinary income would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the 13 weeks ended July 29, 2023. We believe that, at this time, the use of this discrete method represents the best estimate of our annual effective tax rate.

We recorded an income tax ~~expense~~benefit of ~~$267~~$(11) on pre-tax loss of ~~$(24,782)~~$(49,982) during the 13 weeks ended ~~January 28,~~July 29, 2023, which represented an effective income tax rate of ~~(1.1)%~~0% and an income tax expense of ~~$615~~$847 on pre-tax loss of ~~$(36,186)~~$(49,475) during the 13 weeks ended ~~January 29, 20221,~~July 30, 2022, which represented an effective income tax rate of (1.7)%.

~~We recorded an income~~ The effective tax ~~expense of $900 on pre-tax loss of $(54,712) during~~rate for the 3913 weeks ended ~~January 28,~~July 29, 2023 ~~which represented an effective income~~is lower than the prior year comparable period due to utilization of the discrete tax ~~rate of (1.6)% and an income tax expense of $811 on pre-tax loss of $(57,090) during the 39 weeks ended January 29, 2022, which represented an effective income tax rate of (1.4)%.~~provision methodology discussed above.

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 28,~~July 29, 2023, we determined that it was more likely than not that we would not realize 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 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 28, 2023 is lower as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable loss in the 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,~~July 29, 2023 and ~~January 29,~~July 30, 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).

~~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.

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.

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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 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® equitable and inclusive access programs, consisting of First DayComplete and First Day, which provide faculty required course materials on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately. The BNC First Day discounted price is offered as a course fee or included in tuition. During the first quarter ended July 29, 2023, BNC First Day total revenue increased by $16.7 million, or 37%, to $61.7 million compared to $45.1 million during the prior year period.

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 April ~~30, 2022.~~29, 2023.

Financing Arrangements

~~On March 8,~~During the 13 weeks ended July 29, 2023, ~~subsequent to quarter end,~~ we amended our existing Credit Agreement and Term Loan Agreement to, ~~among other things,~~ extend the maturity ~~date thereunder by six months~~dates and modify various terms 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.~~

provide additional liquidity. For additional information, see Item 1. Financial Statements - Note ~~14. Subsequent Event.~~7. Debt.

Sale of DSS Segment

During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment. On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20 million, net of certain transaction fees, severance costs, escrow, and other considerations. During the 13 weeks ended July 29, 2023, we recorded a Gain on Sale of Business of $3.1 million in Net Loss from Discontinued Operations related to the sale. Net cash proceeds from the sale were used for debt repayment and provided additional funds for working capital needs under our Credit Facility. For additional information, see Note 2. Summary of Significant Accounting Policies.

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Cost Savings Initiative

~~On December 2, 2022,~~We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability. We have taken steps to significantly reduce our workforce, eliminated duplicate administrative headcounts at all levels, implemented improved system development processes to reduce maintenance costs, reduced capital expenditures, and evaluated operating contractual obligations for cost savings. We have achieved meaningful cost savings from this program of approximately $17 million during the ~~Board~~second half 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 ended April 29, 2023. These initiatives are expected to provide annualized savings of $30 million to $35 million in Fiscal 2024. Management's plans over the next twelve months include the further reduction of gross capital expenditures and other cost saving measures of approximately $25 million. ~~The restructuring charges~~Management believes that these plans are ~~excluded from non-GAAP adjusted EBITDA~~within its control and ~~from the annualized and fiscal year 2023 savings. We continue to focus~~probable of being implemented on ~~achieving efficiencies and reducing costs to further improve our operating performance.~~a timely basis.

BNC First Day ~~Inclusive~~Equitable and ~~Equitable~~Inclusive Access Programs

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designed to drive improved student experiences and outcomes. We offer our BNC First Day® ~~inclusive~~equitable and ~~equitable~~inclusive access programs, consisting of First DayComplete and First Day, in which provide faculty required 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.~~class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately. The BNC First Day discounted price is offered as a course fee or included in tuition.

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

Offering ~~courseware sales~~course materials through our ~~inclusive~~equitable and ~~equitable~~inclusive 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~~course material 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~~These programs ~~to allow~~have allowed us to ~~ultimately~~ reverse historical long-term trends in ~~courseware~~course materials revenue declines, which ~~has~~have 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~~in Fiscal 2024 and the majority of our schools by Fiscal 2025, with continued relative adoption of this model thereafter.

In the Fall of 2023, ~~and the majority of schools by Fall 2024.~~

~~As of January 28, 2023, 116~~157 campus stores ~~adopted our~~ are utilizing First Day ~~Complete~~® ~~course materials delivery program for the 2023 Spring Term,~~Complete representing ~~approximately 580,000 in total~~enrollment of nearly 800,000 undergraduate ~~student enrollment~~and post graduate students (as reported by National Center for Education Statistics), an increase of approximately 46% compared to ~~76 campus stores representing approximately 380,000 in total undergraduate student enrollment or the 2022 Spring Term.~~Fall of 2022. During the 13 weeks ended ~~January 28,~~July 29, 2023, First Day Complete sales increased by ~~$28.9 million to $66.9~~$9.1 million, or ~~76%~~55%, to $25.5 million as compared to ~~$38.0~~$16.5 million in the prior year period. During the 3913 weeks ended ~~January 28,~~July 29, 2023, First Day ~~Complete~~ sales increased by ~~$83.8 million to $173.4~~$7.7 million, or ~~94%~~27%, to $36.3 million as compared to ~~$89.6~~$28.6 million in the prior year period.

Partnership with Fanatics and Lids

~~COVID-19 Business Impact~~

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Segments

~~Our business has been significantly negatively impacted by~~During the ~~COVID-19 pandemic,~~fourth quarter of Fiscal 2023, assets related to our DSS Segment met the criteria for classification as ~~many schools adjusted their learning models~~Assets Held for Sale and ~~on-campus activities. However, on campus traffic continues to grow from increased campus events~~Discontinued Operations and ~~activities, as compared to~~is no longer a reportable segment. We completed the ~~last two years. Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across~~sale of the ~~country~~previous DSS Segment during the ~~2022 Spring Term which did not recur during the 2023 Spring Term. While the impact~~first quarter of ~~the COVID-19 pandemic is lessening, we cannot accurately predict the duration or extent~~Fiscal 2024. For additional information, see Note 2. Summary 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~~Significant Accounting Policies.. Although most four year schools returned to a traditional on-campus environment, 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.

~~Segments~~

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 April ~~30, 2022~~29, 2023.

Retail Segment

The Retail Segment operates ~~1,388~~1,289 college, university, and K-12 school bookstores, comprised of ~~785~~726 physical bookstores and ~~603~~563 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 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~~our BNC First Day® equitable and ~~equitable~~inclusive access programs, inconsisting of First DayComplete and First Day, which provide faculty required 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.~~class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately. The BNC First Day discounted price is offered as a course fee or included in tuition. 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.

During the 13 weeks ended July 29, 2023, we opened 20 stores and closed 97 stores in the Retail Segment, with estimated net annual sales of $52 million as we pruned some under-performing, less profitable stores, satellite stores, and certain other contracts were awarded to competitors. We plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our stores by Fiscal 2025, with continued relative adoption of this model thereafter.

Wholesale Segment

~~DSS Segment~~

Seasonality

~~For our~~Our retail ~~operations,~~business is highly seasonal, with the major portion of sales ~~are generally highest in~~and operating profit realized during the second and third fiscal quarters, when college students generally purchase and rent textbooks for the upcoming semesters.

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 ~~other course materials,~~virtual bookstores. Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized at the point of sale as product revenue in our condensed consolidated financial statements. Revenue from the rental of physical textbooks is deferred and ~~lowest~~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 and is recognized as rental income in our condensed consolidated financial statements. Depending on the product mix offered under the BNC First

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Day offerings, revenue recognized is consistent with our policies for product, digital and rental sales, net of an anticipated opt-out or return provision.

Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the ~~first~~working capital cycle, particularly in our third quarter given the timing of the Spring Term and ~~fourth fiscal quarters.~~ 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 BNC First Day equitable and inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and schools with cash inflows collected from schools, including modifying payment terms in existing and future school contracts.

Sales attributable to our wholesale business are generally highest in our first, second and third ~~quarter,~~quarters, 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~~continues to undergo significant 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 Capital Markets, Economic Environment, ~~Capital Markets,~~ College Enrollment and Consumer Spending Patterns. Our business is affected by ~~the impact of the COVID-19 pandemic,~~capital markets, 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. Many colleges and K-12 schools 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 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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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:~~ 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 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.~~business, including implementation of our strategic initiatives. 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 have and could continue to 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.

•Economic 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. Broader macro-economic global supply chain issues could impact our ability to source textbooks, school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing. Union and labor market issues may also impact our ability to provide services and products to our customers. A significant reduction in U.S. economic activity could lead to decreased consumer spending.

•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.~~ 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 Open Educational Resources ("OER"), Online and Digital Platforms as Companions or Alternatives to ~~Printed~~Traditional Course ~~Materials.~~Materials, Including Artificial Intelligence ("AI") Technologies. 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.

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•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~~including student-to-student transactions over the ~~Internet.~~Internet, and multi-title subscription access.

•Suppliers, Supply Chain and Inventory. The products that we sell originate from a wide variety of domestic and international vendors. During Fiscal 2023, our four largest retail suppliers, excluding our wholesale business which fulfills orders for all our physical and virtual bookstores, accounted for approximately 28% of our merchandise purchased, with the largest supplier accounting for approximately 8% of our merchandise purchased. 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,~~In Fiscal 2021 and Fiscal 2022, during the COVID-19 pandemic, the impact of fewer students on campus, ~~due~~and the resulting increase in transition to ~~the COVID-19 pandemic~~digital materials, 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. We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, content or services, particular payment terms or the extension of credit limits. If our current suppliers were to stop selling merchandise, content or services to us on acceptable terms, including as a result of one or more supplier bankruptcies due to poor economic conditions or refusal by such suppliers to ship products to us due to delayed or extended payment windows as a result of our own liquidity constraints, we may be unable to procure the same merchandise, content or services from other suppliers in a timely and efficient manner and on acceptable terms, or at all. Additionally, delayed or incomplete publisher shipments of physical textbook orders, or delays in receiving digital courseware access codes, could have an adverse impact on sales, including our First Day Complete equitable access program, ~~both~~which relies upon timely receipt of ~~which are relatively nascent.~~inventory in advance of class start dates each academic term. 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~~course materials sales through our ~~inclusive~~equitable and ~~equitable~~inclusive access First Day Complete and First Day ~~models~~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~~course materials 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~~These programs ~~to allow~~have allowed us to ~~ultimately~~ reverse historical long-term trends in ~~courseware~~course materials revenue declines, which ~~has~~have 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,~~in Fiscal 2024, and the majority of our schools by ~~Fall 2024,~~Fiscal 2025, 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~~equitable and ~~equitable~~inclusive access programs and publisher subscription models) and general merchandise.

•New and Existing Bookstore 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 profitable or non-essential bookstores we operate may close. 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.

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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 fiscal year ended April ~~30, 2022.~~29, 2023.

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 condensed consolidated financial statements are presented on a consolidated basis. All material intercompany accounts and transactions have been eliminated in consolidation.

During the fourth quarter of Fiscal 2023, assets related to our DSS Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Certain assets and liabilities associated with the DSS Segment are presented in our condensed consolidated balance sheets as current "Assets Held for Sale" and current "Liabilities Held for Sale". The results of operations related to the DSS Segment are included in the condensed consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of the DSS Segment are also presented separately in our condensed consolidated statements of cash flows.

Our sales are primarily derived from the sale of course materials, which include new, used, rental and digital ~~textbooks, and~~textbooks. Additionally, 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, and finance and ~~accounting, and operating costs related to our direct-to-student subscription-based services business.~~accounting. 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 - Continuing Operations
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)


	13 weeks ended (a)
Dollars in thousands	July 29, 2023		July 30, 2022
Sales:
Product sales and other (b)	$	252,650	$	243,762
Rental income	11,511		10,912
Total sales	$	264,161	$	254,674

Net loss from continuing operations	$	(49,971)	$	(50,322)

Adjusted Earnings (non-GAAP) - Continuing Operations (c)	$	(45,338)	$	(49,921)

Adjusted EBITDA by Segment (non-GAAP) - Continuing Operations (c)
Retail	$	(18,882)	$	(24,985)
Wholesale	2,406		2,768

Corporate Services	(4,918)		(7,214)
Elimination	(5,448)		(4,879)
Total Adjusted EBITDA (non-GAAP)	$	(26,842)	$	(34,310)

(a)~~Effective in April 2021,~~During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as ~~contemplated by~~Assets Held for Sale and Discontinued Operations. Net Loss from Continuing Operations excludes the ~~F/L Partnership's merchandising agreement and e-commerce agreement, we began~~results of operations related to ~~transition~~ the ~~fulfillment of logo~~DSS Segment for all periods reported above.

(b)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~~Retail Segment are ~~fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales~~recognized on a net basis as commission revenue in ~~our~~the condensed consolidated financial ~~statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition.~~statements. For Retail Gross Comparable Store Sales details, see below.

~~(b)~~Table of Contents

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

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
		January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022			July 29, 2023		July 30, 2022
Sales:	Sales:									Sales:
Product sales and other	Product sales and other	90.1	%	93.8	%	92.7	%	93.1	%	Product sales and other	95.6	%	95.7	%
Rental income	Rental income	9.9		6.2		7.3		6.9		Rental income	4.4		4.3
Total sales	Total sales	100.0		100.0		100.0		100.0		Total sales	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)	79.4		78.8		78.2		78.2		Product and other cost of sales (a)	81.9		78.9
Rental cost of sales (a)	Rental cost of sales (a)	52.4		72.3		54.3		60.5		Rental cost of sales (a)	56.6		57.4
Total cost of sales	Total cost of sales	76.7		78.4		76.5		77.0		Total cost of sales	80.8		78.0
Gross margin	Gross margin	23.3		21.6		23.5		23.0		Gross margin	19.2		22.0
Selling and administrative expenses	Selling and administrative expenses	22.3		25.2		23.0		23.3		Selling and administrative expenses	29.3		35.5
Depreciation and amortization expense	Depreciation and amortization expense	2.4		3.0		2.6		2.9		Depreciation and amortization expense	3.9		4.3
Impairment loss (non-cash)		1.3		1.6		0.5		0.5

Restructuring and other charges	Restructuring and other charges	1.3		—		0.5		0.2		Restructuring and other charges	1.8		0.1

Operating loss		(4.0)	%	(8.2)	%	(3.1)	%	(3.9)	%
Operating loss from continuing operations										Operating loss from continuing operations	(15.8)	%	(17.9)	%

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

Results of Operations - Discontinued Operations

During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment. Certain assets and liabilities associated with the DSS Segment are presented in our condensed consolidated balance sheets as "Assets Held for Sale" and "Liabilities Held for Sale". The results of operations related to the DSS Segment are included in the condensed consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of the DSS Segment are also presented separately in our condensed consolidated statements of cash flows.

On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20 million, net of certain transaction fees, severance costs, escrow, and other considerations. During the 13 weeks ended July 29, 2023, we recorded a Gain on Sale of Business of $3.1 million in Net Loss from Discontinued Operations related to the sale. Net cash proceeds from the sale were used for debt repayment and to provide additional funds for working capital needs under our Credit Facility.


	13 weeks ended
Dollars in thousands	July 29, 2023		July 30, 2022
Total sales	2,784		9,184
Cost of sales (a)	76		1,701
Gross profit (a)	2,708		7,483
Selling and administrative expenses	2,281		8,145
Depreciation and amortization	—		1,637
Gain on sale of business	(3,068)		—
Impairment loss (non-cash) (b)	610		—
Restructuring costs (c)	3,287		—
Transaction costs	(5)		—
Operating loss	(397)		(2,299)
Income tax expense	20		86
Loss from discontinued operations, net of tax	$	(417)	$	(2,385)

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $0 and $1.6 million for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively.

Table of Contents

(b) During the 13 weeks ended July 29, 2023, we recognized an impairment loss (non-cash) of $0.6 million (both pre-tax and after-tax), comprised of $0.1 million and $0.5 million of property and equipment and operating lease right-of-use assets, respectively, on the condensed consolidated statement of operations as part of discontinued operations.

(c) During the 13 weeks ended July 29, 2023, we recognized restructuring and other charges of $3.3 million comprised of severance and other employee termination costs.

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


	13 weeks ended July 29, 2023
Dollars in thousands	Retail		Wholesale		Corporate Services		Eliminations		Total
Sales:
Product sales and other	$	233,949	$	38,791	$	—	$	(20,090)	$	252,650
Rental income	11,511		—		—		—		11,511
Total sales	245,460		38,791		—		(20,090)		264,161
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	188,656		32,997		—		(14,639)		207,014
Rental cost of sales	6,513		—		—		—		6,513
Total cost of sales	195,169		32,997		—		(14,639)		213,527
Gross profit	50,291		5,794		—		(5,451)		50,634
Selling and administrative expenses	69,173		3,388		4,918		(3)		77,476
Depreciation and amortization expense	8,966		1,277		10		—		10,253

Restructuring and other charges	526		526		3,581		—		4,633
Operating (loss) income	$	(28,374)	$	603	$	(8,509)	$	(5,448)	$	(41,728)

13 weeks ended January 28, 2023
Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total
Sales:
Product sales and other $ 376,950 $ 38,958 $ 9,010 $ — $ (22,163) $ 402,755
Rental income 44,309 — — — — 44,309
Total sales 421,259 38,958 9,010 — (22,163) 447,064
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales 309,123 32,290 1,811 — (23,580) 319,644
Rental cost of sales 23,210 — — — — 23,210
Total cost of sales 332,333 32,290 1,811 — (23,580) 342,854
Gross profit 88,926 6,668 7,199 — 1,417 104,210
Selling and administrative expenses 82,753 3,563 7,632 5,572 (47) 99,473
Depreciation and amortization expense 8,749 1,357 506 6 — 10,618
Impairment loss (non-cash) 6,008 — — — — 6,008
Restructuring and other charges 1,452 931 1,848 1,744 — 5,975
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)

~~Table of Contents~~

39 weeks ended January 28, 2023
Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total
Sales:
Product sales and other $ 1,159,821 $ 97,161 $ 26,659 $ — $ (52,176) $ 1,231,465
Rental income 96,555 — — — — 96,555
Total sales 1,256,376 97,161 26,659 — (52,176) 1,328,020
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales 931,539 78,139 5,283 — (51,890) 963,071
Rental cost of sales 52,416 — — — — 52,416
Total cost of sales 983,955 78,139 5,283 — (51,890) 1,015,487
Gross profit 272,421 19,022 21,376 — (286) 312,533
Selling and administrative expenses 251,843 11,561 23,909 17,861 (129) 305,045
Depreciation and amortization expense 27,147 4,076 2,646 41 — 33,910
Impairment loss (non-cash) 6,008 — — — — 6,008
Restructuring and other charges 1,452 931 1,848 2,379 — 6,610
Operating (loss) income $ (14,029) $ 2,454 $ (7,027) $ (20,281) $ (157) $ (39,040)


		39 weeks ended January 29, 2022													13 weeks ended July 30, 2022
Dollars in thousands	Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total		Dollars in thousands	Retail		Wholesale		Corporate Services		Eliminations		Total
Sales:	Sales:													Sales:
Product sales and other	Product sales and other	$	1,106,404	$	103,192	$	26,012	$	—	$	(52,796)	$	1,182,812	Product sales and other	$	225,595	$	37,083	$	—	$	(18,916)	$	243,762
Rental income	Rental income	87,757		—		—		—		—		87,757		Rental income	10,912		—		—		—		10,912
Total sales	Total sales	1,194,161		103,192		26,012		—		(52,796)		1,270,569		Total sales	236,507		37,083		—		(18,916)		254,674
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	894,936		79,063		4,144		—		(53,219)		924,924		Product and other cost of sales	176,249		30,184		—		(14,029)		192,404
Rental cost of sales	Rental cost of sales	53,096		—		—		—		—		53,096		Rental cost of sales	6,265		—		—		—		6,265
Total cost of sales	Total cost of sales	948,032		79,063		4,144		—		(53,219)		978,020		Total cost of sales	182,514		30,184		—		(14,029)		198,669
Gross profit	Gross profit	246,129		24,129		21,868		—		423		292,549		Gross profit	53,993		6,899		—		(4,887)		56,005
Selling and administrative expenses	Selling and administrative expenses	242,477		12,319		21,527		19,407		(133)		295,597		Selling and administrative expenses	79,004		4,131		7,214		(8)		90,341
Depreciation and amortization expense	Depreciation and amortization expense	27,015		4,060		5,627		53		—		36,755		Depreciation and amortization expense	9,529		1,349		18		—		10,896
Impairment loss (non-cash)		6,411		—		—		—		—		6,411

Restructuring and other charges	Restructuring and other charges	2,113		—		—		954		—		3,067		Restructuring and other charges	—		—		375		—		375
Operating (loss) income	Operating (loss) income	$	(31,887)	$	7,750	$	(5,286)	$	(20,414)	$	556	$	(49,281)	Operating (loss) income	$	(34,540)	$	1,419	$	(7,607)	$	(4,879)	$	(45,607)

Sales

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


		13 weeks ended							39 weeks ended								13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		January 29, 2022		Var $		Var %	January 28, 2023		January 29, 2022		Var $		Var %	Dollars in thousands	July 29, 2023		July 30, 2022		Var $		Var %
Product sales and other	Product sales and other	$	402,755	$	377,713	$	25,042	6.6%	$	1,231,465	$	1,182,812	$	48,653	4.1%	Product sales and other	$	252,650	$	243,762	$	8,888	3.6%
Rental income	Rental income	44,309		25,085		$	19,224	76.6%	96,555		87,757		$	8,798	10.0%	Rental income	11,511		10,912		$	599	5.5%
Total Sales	Total Sales	$	447,064	$	402,798	$	44,266	11.0%	$	1,328,020	$	1,270,569	$	57,451	4.5%	Total Sales	$	264,161	$	254,674	$	9,487	3.7%

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The sales increase during the 13 ~~and 39~~ weeks ended ~~January 28,~~July 29, 2023 is primarily related to higher course material sales, primarily at our First Day ~~programs and higher general merchandise sales as many schools approach a more traditional on campus learning experience.~~programs. During the first quarter ended July 29, 2023,

~~Table of Contents~~BNC First Day

total revenue increased by $16.7 million, or 37%, to $61.7 million compared to $45.1 million during the prior year period. The components of the variances for the 13 ~~and 39~~ week periods are reflected in the table below.

Sales variances 13 weeks ended 39 weeks ended
Dollars in millions January 28, 2023 January 28, 2023
Retail Sales
New stores $ 21.6 $ 73.5
Closed stores (13.7) (39.8)
Comparable stores (a)
22.5 28.8
Textbook rental deferral 17.7 6.5
Service revenue (b)
(1.1) (3.4)
Other (c)
(0.5) (3.4)
Retail sales subtotal: $ 46.5 $ 62.2
Wholesale Sales $ 1.9 $ (6.0)
DSS Sales $ (0.4) $ 0.7
Eliminations (d)
$ (3.7) $ 0.6
Total sales variance: $ 44.3 $ 57.5


Sales variances	13 weeks ended
Dollars in millions	July 29, 2023
Retail Sales (a)
New stores	$	4.7
Closed stores	(7.3)
Comparable stores (a)	8.6
Textbook rental deferral	2.1
Service revenue (b)	(0.3)
Other (c)	1.2
Retail sales subtotal:	$	9.0



Wholesale Sales	$	1.7

Eliminations (d)	$	(1.2)
Total sales variance:	$	9.5

(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" (“Lids”) (collectively referred to herein as the “F/L Partnership”). 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 logoLogo 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~~Retail Segment are ~~fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales~~recognized on a net basis as commission revenue in ~~our~~the condensed consolidated financial ~~statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition.~~statements. 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

The following is a store count summary for physical stores and virtual stores. ~~Many~~


	13 weeks ended
	July 29, 2023			July 30, 2022
Number of Stores:	Physical	Virtual	Total	Physical	Virtual	Total
Beginning of period	774	592	1,366	805	622	1,427
Opened	8	12	20	26	14	40
Closed	56	41	97	38	23	61
End of period	726	563	1,289	793	613	1,406

During the 13 weeks ended July 29, 2023, we opened 20 stores and closed 97 stores in the Retail Segment, with estimated net annual sales of ~~the store closings relate to closing~~$52 million as we pruned some under-performing, less profitable stores, ~~including~~ satellite ~~store locations.~~

13 weeks ended 39 weeks ended
January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022
Number of Stores: Physical Virtual Total Physical Virtual Total Physical Virtual Total Physical Virtual Total
Beginning of period 793 606 1,399 794 651 1,445 805 622 1,427 769 648 1,417
Opened — 4 4 6 — 6 34 28 62 47 35 82
Closed 8 7 15 1 9 10 54 47 101 17 41 58
End of period 785 603 1,388 799 642 1,441 785 603 1,388 799 642 1,441
stores, and certain other contracts were awarded to competitors. We plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our stores by Fiscal 2025, with continued relative adoption of this model thereafter.

Generally, sales are impacted by revenue from net new/closed stores, increased campus traffic, and an increase in the number of on campus activities and events, such as graduations, athletic events, alumni events and prospective student campus tours, as schools approach a more traditional campus experience. We continued to experience higher sales related to our BNC First Day programs and higher general merchandise gross sales, especially for graduation products, logo products, and cafe and convenience products, as on campus traffic continues to grow compared to the prior 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.

Retail sales increased by ~~$46.5~~$9.0 million, or ~~12.4%~~3.8%, to ~~$421.2~~$245.5 million during the 13 weeks ended ~~January 28,~~July 29, 2023 from ~~$374.7~~$236.5 million during the 13 weeks ended ~~January 29,~~July 30, 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 constrained in 2022.

•Product sales and other increased by ~~$27.3~~$8.4 million, or ~~7.8%~~3.7%, to ~~$377.0~~$233.9 million during the 13 weeks ended ~~January 28,~~July 29, 2023 from ~~$349.7~~$225.6 million during the 13 weeks ended ~~January 29,~~July 30, 2022. During the 13 weeks ended ~~January 28,~~July 29, 2023, total course material product sales increased by $11.0 million, or 8.7%, to $138.5 million primarily due to the growth of our BNC First Day programs discussed below; total general merchandise product net sales decreased by $0.1 million, or 0.2%, to

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~~total course material~~$88.7 million primarily due to lower commissions for logo general merchandise part of the F/L Partnership agreements, under which the commission rates adjusts as the relationship matured, offset by higher graduation product ~~sales~~sales. Effective August 1, 2023, the commission rates for logo general merchandise increases for an estimated one year period under the terms of the July 2023 Term Loan Credit Agreement amendment. Retail Gross Comparable Store Sales for general merchandise 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~~5.3% as ~~students return to on campus activities, partially offset by a decrease in service~~discussed below. Service and other revenue ~~of $1.6~~decreased by $2.5 million, ~~or 15.6%,~~ to ~~$8.4 million.~~$6.7 million primarily due to lower other income for non-return rental penalty fees.

•Revenue from both of our BNC First Day ~~inclusive~~equitable and ~~equitable~~inclusive access programs increased by ~~$45~~$16.7 million, or ~~59%~~37%, to ~~$121~~$61.8 million during the 13 weeks ended ~~January 28,~~July 29, 2023, as compared to ~~$76~~$45.1 million during the 13 weeks ended ~~January~~July 30, 2022. First Day sales increased by $7.7 million, or 27%, to $36.3 million during the 13 weeks ended July 29, 2023, as compared to $28.6 million during the 13 weeks ended July 30, 2022. ~~Specifically,~~ First Day Complete total sales increased by ~~$29~~$9.0 million, or ~~76%~~55%, to ~~$67~~$25.5 million during the 13 weeks ended ~~January 28,~~July 29, 2023, as compared to ~~$38~~$16.5 million during the 13 weeks ended ~~January 29,~~July 30, 2022. As of ~~January 28,~~July 29, 2023, ~~116~~157 campus stores ~~adopted our~~are utilizing First Day Complete course materials delivery program for the 2023 ~~Spring~~Fall Term, representing approximately ~~580,000~~800,000 in total undergraduate and post graduate student enrollment (as reported by National Center for Education Statistics), compared to 76111 campus stores representing approximately ~~380,000~~545,000 in total undergraduate student enrollment in the 2022 ~~Spring~~Fall Term.

•Total course material rental income increased by ~~$19.2~~$0.6 million, or ~~76.6%~~5.5%, to ~~$44.3~~$11.5 million during the 13 weeks ended ~~January 28,~~July 29, 2023 from ~~$25.1~~$10.9 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 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,~~July 30, 2022 primarily due to increased rental textbook activity in our First Day Complete program and improved availability of used textbook inventory.

Retail Gross Comparable Store Sales

During the 13 and 39 weeks ended January 28, 2023, logo general merchandise sales are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo general merchandise sales on a gross basis for the majority of our e-commerce websites during the 39 weeks ended January 29, 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 general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis ~~for consistent year-over-year comparison.~~

~~Effective~~ in ~~April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began~~Retail Gross Comparable Store Sales compared 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 as commission revenue in our condensed consolidated financial ~~statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition.~~statements.

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-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 BNC First Day ~~inclusive~~equitable and ~~equitable~~inclusive access programs (as discussed above), partially offset by a shift to lower cost options and more affordable solutions, including digital offerings. The increase in general merchandise sales was primarily due to higher sales related to graduation products and logo products, and cafe and convenience products.

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


		13 weeks ended								39 weeks ended									13 weeks ended
Dollars in millions	Dollars in millions	January 28, 2023				January 29, 2022				January 28, 2023				January 29, 2022				Dollars in millions	July 29, 2023				July 30, 2022
Textbooks (Course Materials)	Textbooks (Course Materials)	$	21.3	7.4	%	$	(11.9)	(4.0)	%	$	2.9	0.3	%	$	17.4	2.0	%	Textbooks (Course Materials)	$	9.0	6.5	%	$	1.9	1.5	%
General Merchandise	General Merchandise	2.6		2.3	%	42.8		58.6	%	42.6		11.3	%	169.5		81.2	%	General Merchandise	6.8		5.3	%	31.6		34.0	%
Total Retail Gross Comparable Store Sales	Total Retail Gross Comparable Store Sales	$	23.9	5.9	%	$	30.9	8.4	%	$	45.5	3.6	%	$	186.9	17.6	%	Total Retail Gross Comparable Store Sales	$	15.8	5.9	%	$	33.5	15.0	%

Wholesale

Wholesale sales increased by ~~$1.9~~$1.7 million, or ~~5.2%~~4.6% to ~~$38.9~~$38.8 million during the 13 weeks ended ~~January 28,~~July 29, 2023 from ~~$37.0~~$37.1 million during the 13 weeks ended ~~January 29,~~July 30, 2022. The increase is primarily due to ~~increased customer demand~~higher gross sales of $5.1 million compared to the prior year period, partially offset by higher returns and ~~allowances.~~

Wholesale sales decreased by $6.0 million, or 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. The decrease is primarily due to lower gross sales impacted by supply constraints resulting from the lackallowances of textbook 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, and higher returns and allowances.

~~DSS~~

~~DSS total sales decreased by $0.4 million, or 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. Sales decreased in both~~ ~~Bartleby~~ ~~and Student Brands subscription sales.~~

DSS total sales increased by $0.7 million, or 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. Sales increased primarily due to an increase in Student Brands subscription sales.$3.4 million.

Cost of Sales and Gross Margin

Our cost of sales ~~decreased~~increased as a percentage of sales to ~~76.7%~~80.8% during the 13 weeks ended ~~January 28,~~July 29, 2023 compared to ~~78.4%~~78.0% during the 13 weeks ended ~~January 29,~~July 30, 2022. Our gross margin ~~increased~~decreased by ~~$17.2~~$5.4 million, or ~~19.8%~~9.6%, to ~~$104.2~~$50.6 million, or ~~23.3%~~19.2% of sales, during the 13 weeks ended ~~January 28,~~July 29, 2023 from ~~$87.0~~$56.0 million, or ~~21.6%~~22.0% of sales during the 13 weeks ended ~~January 29,~~July 30, 2022.

~~Our cost~~Table 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. Our gross margin increased by $20.0 million, or 6.8%, to $312.5 million, or 23.5% of sales, during the 39 weeks ended January 28, 2023 from $292.5 million, or 23.0% of sales during the 39 weeks ended January 29, 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 Contents~~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 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022:

13 weeks ended 39 weeks ended
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 $ 309,123 82.0% $ 287,435 82.2% $ 931,539 80.3% $ 894,936 80.9%
Rental cost of sales 23,210 52.4% 18,144 72.3% 52,416 54.3% 53,096 60.5%
Total Cost of Sales $ 332,333 78.9% $ 305,579 81.5% $ 983,955 78.3% $ 948,032 79.4%

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	13 weeks ended
Dollars in thousands	July 29, 2023		% of Related Sales	July 30, 2022		% of Related Sales
Product and other cost of sales	$	188,656	80.6%	$	176,249	78.1%
Rental cost of sales	6,513		56.6%	6,265		57.4%
Total Cost of Sales	$	195,169	79.5%	$	182,514	77.2%

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


		13 weeks ended						39 weeks ended							13 weeks ended
Dollars in thousands	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	Dollars in thousands	July 29, 2023		% of Related Sales	July 30, 2022		% of Related Sales
Product and other gross margin	Product and other gross margin	$	67,827	18.0%	$	62,220	17.8%	$	228,282	19.7%	$	211,468	19.1%	Product and other gross margin	$	45,293	19.4%	$	49,346	21.9%
Rental gross margin	Rental gross margin	21,099		47.6%	6,941		27.7%	44,139		45.7%	34,661		39.5%	Rental gross margin	4,998		43.4%	4,647		42.6%
Gross Margin	Gross Margin	$	88,926	21.1%	$	69,161	18.5%	$	272,421	21.7%	$	246,129	20.6%	Gross Margin	$	50,291	20.5%	$	53,993	22.8%

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

•For the 13 weeks ended ~~January 28,~~July 29, 2023, Product and other gross margin ~~increased (20~~decreased (250 basis points), driven primarily by lower margin rates for course materials (200 basis points) due to higher markdowns, including markdowns related to closed stores, and lower margin rates due to the shift to digital course materials; and lower commissions for logo general merchandise (290 basis points) as part of the F/L Partnership agreements, under which the commission rates adjust as the relationship matures. Effective August 1, 2023, the commission rates for logo general merchandise increases for an estimated one year period under the terms of the July 2023 Term Loan Credit Agreement amendment. These decreases were partially offset by lower contract costs as a percentage of sales related to our college and university contracts ~~(200~~(210 basis points) resulting from contract renewals, and ~~new store contracts, partially offset by lower margin rates (105~~a favorable sales mix (30 basis points) due to ~~higher markdowns and an unfavorable~~increased sales ~~mix (75 basis points) due to the increased shift to lower margin digital~~primarily for graduation products.

•For the 3913 weeks ended January 28, 2023, Product and other gross margin increased (60 basis points), driven primarily by a favorable sales mix (85 basis points) due to higher general merchandise sales and higher margin rates (10 basis points) due to 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.

~~For the 13 and 39 weeks ended January 28,~~July 29, 2023, the Retail Rental gross margin as a percentage of sales increased driven primarily by ~~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 resulting from contract renewals and new store contracts.~~rental margin rates.

Wholesale

The cost of sales and gross margin for Wholesale were ~~$32.3~~$33.0 million, or ~~82.9%~~85.1% of sales, and ~~$6.7~~$5.8 million, or ~~17.1%~~14.9% of sales, respectively, during the 13 weeks ended ~~January 28,~~July 29, 2023. The cost of sales and gross margin for Wholesale was ~~$28.9~~$30.2 million or ~~78.1%~~81.4% of sales and ~~$8.1~~$6.9 million or ~~21.9%~~18.6% of sales, respectively, during the 13 weeks ended ~~January 29,~~July 30, 2022.

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 gross margin rate decreased during ~~both~~ the 13 ~~and 39~~ weeks ended ~~January 28,~~July 29, 2023 primarily due to higher ~~markdowns.~~

~~DSS~~

~~The gross margin for~~product costs and an increase in the ~~DSS segment was $7.2 million, or 79.9% of sales, during the 13 weeks ended January 28, 2023~~returns and $7.9 million, or 84.1% of sales, during the 13 weeks ended January 29, 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. The high gross margins are driven primarilyallowances, partially offset by ~~high margin subscription service revenue earned.~~lower markdowns.

Intercompany Eliminations

During the 13 weeks ended ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, our sales eliminations were ~~$(22.2)~~$(20.1) million and ~~$(18.4) million, respectively. During the 39 weeks ended January 28, 2023 and January 29, 2022, our sales eliminations were $(52.2) million and $(52.8)~~$(18.9) 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 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, the cost of sales eliminations were ~~$(23.6)~~$(14.6) million and ~~$(20.2) million, respectively. During the 39 weeks ended January 28, 2023 and January 29, 2022, the cost of sales eliminations were $(51.9) million and $(53.2)~~$(14.0) million, respectively. 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

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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.

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During the 13 weeks ended ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, the gross margin eliminations were ~~$1.4~~$(5.5) million and ~~$1.8 million, respectively. During the 39 weeks ended January 28, 2023 and January 29, 2022, the gross margin eliminations were $(0.3) million and $0.4~~$(4.9) 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
Dollars in thousands	Dollars in thousands	January 28, 2023		% of Sales	January 29, 2022		% of Sales	January 28, 2023		% of Sales	January 29, 2022		% of Sales	Dollars in thousands	July 29, 2023		% of Sales	July 30, 2022		% of Sales
Total Selling and Administrative Expenses	Total Selling and Administrative Expenses	$	99,473	22.3%	$	101,460	25.2%	$	305,045	23.0%	$	295,597	23.3%	Total Selling and Administrative Expenses	$	77,476	29.3%	$	90,341	35.5%

During the 13 weeks ended ~~January 28,~~July 29, 2023, selling and administrative expenses decreased by ~~$2.0~~$12.9 million, or ~~2.0%~~14.2%, to ~~$99.5~~$77.5 million from ~~$101.5~~$90.3 million during the 13 weeks ended January 29, 2022. During the 39 weeks ended January 28, 2023, selling and administrative expenses increased by $9.4 million, or 3.2%, to $305.0 million from $295.6 million during the 39 weeks ended January 29,July 30, 2022. The variances by segment are discussed ~~by segment~~ below.

Retail

During the 13 weeks ended ~~January 28,~~July 29, 2023, Retail selling and administrative expenses decreased by ~~$1.9~~$9.8 million, or ~~2.2%~~12.4%, to ~~$82.7~~$69.2 million from ~~$84.6~~$79.0 million during the 13 weeks ended ~~January 29,~~July 30, 2022. This decrease was primarily due to cost savings initiatives comprised of a ~~$3.0~~$6.0 million decrease in comparable store payroll expense, new/closed store payroll expense and related operating costs, ~~primarily due to cost initiatives implemented during the quarter,~~a $1.6 million decrease in corporate payroll expense, infrastructure and product development costs, and a ~~$1.3~~$2.2 million decrease in incentive plan compensation expense, including compensation expense related to phantom share awards, partially offset by a $1.5 million increase in net new/closed store payroll and operating costs, and a $1.0 million increase in corporate payroll, infrastructure and product development costs.

During the 39 weeks ended January 28, 2023, Retail selling and administrative expenses increased by $9.3 million, or 3.9%, to $251.8 million from $242.5 million during the 39 weeks ended January 29, 2022. This increase was primarily due to an increase in store payroll and operating costs at new/closed stores and comparable stores of $6.8 million and $1.3 million, respectively, and an $8.7 million increase in corporate payroll, infrastructure and product development 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 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.~~expense.

Wholesale

Wholesale selling and administrative expenses decreased by ~~$0.4~~$0.7 million, or ~~9.6%~~18.0%, to ~~$3.5~~$3.4 million from ~~$3.9~~$4.1 million during the 13 weeks ended ~~January 29,~~July 30, 2022. The decrease was primarily ~~driven by~~due to cost savings initiatives comprised of lower ~~compensation expense of $0.3 million, including incentive plan compensation expense, and lower operating costs of $0.1 million.~~

Wholesale selling and administrative expenses decreased by $0.7 million, or 6.2%, to $11.6 million from $12.3 million during the 39 weeks ended January 29, 2022. The decrease was primarily driven by lower compensation expense, including incentive plan compensationpayroll expense 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. 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 $2.4 million, or 11.1%, to $23.9 million from $21.5 million during the 39 weeks ended January 29, 2022. The increase in costs was primarily driven by an increase of $1.4 million in compensation expense and an increase of $1.6 million in operating costs invested in the business associated with product development, sales and infrastructure costs aimed at increasing revenue, partially offset by lower incentive plan compensation expense of ~~$0.6~~$0.1 million.

~~DSS has begun to 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 28, 2023, Corporate Services' selling and administrative expenses increased by $0.4 million, or 8.1%, to $5.6 million from $5.2 million during the 13 weeks ended January~~July 29, 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~~$2.3 million, or ~~8.0%~~31.8%, to ~~$17.9~~$4.9 million from ~~$19.4~~$7.2 million during the 3913 weeks ended ~~January 29,~~July 30, 2022. The decrease in costs was primarily due to cost savings initiatives comprised of lower incentive plan compensation expense of $1.5 million, lower payroll expense of $0.6 million, and lower operating 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~~$0.2 million.

Depreciation and Amortization Expense


		13 weeks ended						39 weeks ended							13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		% of Sales	January 29, 2022		% of Sales	January 28, 2023		% of Sales	January 29, 2022		% of Sales	Dollars in thousands	July 29, 2023		% of Sales	July 30, 2022		% of Sales
Total Depreciation and Amortization Expense	Total Depreciation and Amortization Expense	$	10,618	2.4%	$	12,179	3.0%	$	33,910	2.6%	$	36,755	2.9%	Total Depreciation and Amortization Expense	$	10,253	3.9%	$	10,896	4.3%

Depreciation and amortization expense decreased by ~~$1.6~~$0.6 million, or ~~12.8%~~5.9%, to ~~$10.6~~$10.3 million during the 13 weeks ended ~~January 28,~~July 29, 2023 from ~~$12.2~~$10.9 million during the 13 weeks ended January 29, 2022. Depreciation and amortization expense decreased by $2.8 million, or 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,July 30, 2022. The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal ~~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.

~~For additional information, see~~ ~~Item 1. Financial Statements - Note 2. Summary of Significant Accounting Policies~~ ~~and~~ ~~Note 6. Fair Value Measurements~~.2023.

Restructuring and other charges

During the 13 ~~and 39~~ weeks ended ~~January 28,~~July 29, 2023, we recognized restructuring and other charges totaling ~~$6.0~~$4.6 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 $0 and $3.1 million, respectively. The $3.1 million for the 39 weeks ended January 29, 2022 is comprised primarily of $1.3$1.1 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost ~~reduction objectives,~~savings initiatives, and ~~$1.8~~$3.5 million for costs primarily associated with professional service costs for restructuring and process ~~improvements,~~improvements.

During the 13 weeks ended July 30, 2022, we recognized restructuring and ~~development and integration~~other charges totaling $0.4 million, comprised primarily of costs primarily associated with ~~the F/L Partnership.~~

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professional service costs for restructuring and process improvements.

Operating Loss


		13 weeks ended						39 weeks ended							13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		% of Sales	January 29, 2022		% of Sales	January 28, 2023		% of Sales	January 29, 2022		% of Sales	Dollars in thousands	July 29, 2023		% of Sales	July 30, 2022		% of Sales
Total Operating Loss	Total Operating Loss	$	(17,864)	(4.0)%	$	(33,135)	(8.2)%	$	(39,040)	(3.1)%	$	(49,281)	(3.9)%	Total Operating Loss	$	(41,728)	(15.8)%	$	(45,607)	(17.9)%

Our operating loss was ~~$(17.9)~~$(41.7) million during the 13 weeks ended ~~January 28,~~July 29, 2023, compared to operating loss of ~~$(33.1)~~$(45.6) million during the 13 weeks ended ~~January 29,~~July 30, 2022. The decrease in operating loss is due to the matters discussed above. For the

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13 weeks ended ~~January 28,~~July 29, 2023, excluding the ~~$6.0 million of impairment loss (non-cash) and $6.0~~$4.6 million of restructuring and other charges, discussed above, operating loss was ~~$(5.9)~~$(37.1) million (or ~~(1.3)~~(14.0)% of sales). For the 13 weeks ended ~~January 29,~~July 30, 2022, excluding the ~~$6.4 million of impairment loss (non-cash), discussed above, operating loss was $(26.7) million (or (6.6)% of sales).~~

Our operating loss was $(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. 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$0.4 million of restructuring and other charges, discussed above, operating loss was ~~$(26.4)~~$(45.2) 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 $3.1 million of restructuring and other charges, discussed above, operating loss was $(39.4) million (or (3.1)(17.8)% of sales).

Interest Expense, Net


		13 weeks ended				39 weeks ended					13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022		Dollars in thousands	July 29, 2023		July 30, 2022
Interest Expense, Net	Interest Expense, Net	$	6,918	$	3,051	$	15,672	$	7,809	Interest Expense, Net	$	8,254	$	3,868

Net interest expense increased by ~~$3.9~~$4.4 million to ~~$6.9~~$8.3 million during the 13 weeks ended ~~January 28,~~July 29, 2023 from ~~$3.1~~$3.9 million during the 13 weeks ended ~~January 29, 2022. Net interest expense increased by $7.9 million to $15.7 million during the 39 weeks ended January 28, 2023 from $7.8 million during the 39 weeks ended January 29,~~July 30, 2022. The increase was primarily due to higher borrowings and higher interest rates compared to the prior year.

Income Tax (Benefit) Expense


		13 weeks ended						39 weeks ended							13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		Effective Rate	January 29, 2022		Effective Rate	January 28, 2023		Effective Rate	January 29, 2022		Effective Rate	Dollars in thousands	July 29, 2023		Effective Rate	July 30, 2022		Effective Rate
Income Tax Expense		$	267	(1.1)%	$	615	(1.7)%	$	900	(1.6)%	$	811	(1.4)%
Income Tax (Benefit) Expense														Income Tax (Benefit) Expense	$	(11)	0%	$	847	(1.7)%

We recorded an income tax ~~expense~~benefit of ~~$0.3~~$(0.01) million on pre-tax loss of ~~$(24.8)~~$(50.0) million during the 13 weeks ended ~~January 28,~~July 29, 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)%.~~

~~We recorded an income tax expense of $0.9 million on pre-tax loss of $(54.7) million during the 39 weeks ended January 28, 2023, which represented an effective income tax rate of (1.6)%~~0% and we recorded an income tax expense of $0.8 million on a pre-tax loss of ~~$(57.1)~~$(49.5) million during the 3913 weeks ended ~~January 29,~~July 30, 2022, which represented an effective income tax rate of ~~(1.4)~~(1.7)%.

The effective tax rate for the 13 weeks ended ~~January 28,~~July 29, 2023 is ~~higher as compared to~~lower than the prior year comparable period due to ~~state~~the utilization of the discrete tax adjustments recorded in the prior year. The effective tax rate for the 39 weeks ended January 28, 2023 is lower as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable lossprovision methodology in the current year.

For additional information, see ~~Table of Contents~~Item 1. Financial Statements -

Note 12. Income Taxes.

Net Loss from Continuing Operations


		13 weeks ended				39 weeks ended					13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022		Dollars in thousands	July 29, 2023		July 30, 2022
Net loss		$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)
Net Loss from Continuing Operations										Net Loss from Continuing Operations	$	(49,971)	$	(50,322)

As a result of the factors discussed above, net loss from continuing operations was ~~$(25.0)~~$(50.0) million during the 13 weeks ended ~~January 28,~~July 29, 2023, compared with ~~net loss of $(36.8)~~$(50.3) million during the 13 weeks ended January 29, 2022. As a result of the factors discussed above, net loss was $(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,July 30, 2022.

Adjusted Earnings (non-GAAP) is ~~$(11.4)~~$(45.3) million during the 13 weeks ended ~~January 28,~~July 29, 2023, compared with ~~$(28.9)~~$(49.9) million during the 13 weeks ended ~~January 29, 2022. Adjusted Earnings (non-GAAP) is $(38.1) million during the 39 weeks ended January 28, 2023, compared with $(44.0) million during the 39 weeks ended January 29,~~July 30, 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 from continuing operations adjusted for certain reconciling items that are subtracted from or added to net income (loss). from continuing operations. We define Adjusted EBITDA as net income (loss) from continuing operations 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). from continuing operations. 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), from continuing operations, the reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss), from continuing operations, and the reconciliation of Adjusted EBITDA by Segment to net income (loss) from continuing operations 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.

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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.

~~Table of Contents~~

Consolidated Adjusted Earnings (non-GAAP) - Continuing Operations


		13 weeks ended				39 weeks ended					13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022		Dollars in thousands	July 29, 2023		July 30, 2022
Net loss		$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)
Net loss from continuing operations (a)										Net loss from continuing operations (a)	$	(49,971)	$	(50,322)
Reconciling items (below)	Reconciling items (below)	13,669		7,855		17,499		13,896		Reconciling items (below)	4,633		401
Adjusted Earnings (non-GAAP)	Adjusted Earnings (non-GAAP)	$	(11,380)	$	(28,946)	$	(38,113)	$	(44,005)	Adjusted Earnings (non-GAAP)	$	(45,338)	$	(49,921)

Reconciling items	Reconciling items									Reconciling items
Impairment loss (non-cash) (a)		$	6,008	$	6,411	$	6,008	$	6,411
Merchandise inventory loss (a)		—		—		—		434

Content amortization (non-cash)	Content amortization (non-cash)	1,686		1,398		4,881		3,984		Content amortization (non-cash)	$	—	$	26
Restructuring and other charges ~~(a)~~(b)	Restructuring and other charges ~~(a)~~(b)	5,975		46		6,610		3,067		Restructuring and other charges ~~(a)~~(b)	4,633		375

Reconciling items ~~(b)~~(c)	Reconciling items ~~(b)~~(c)	$	13,669	$	7,855	$	17,499	$	13,896	Reconciling items ~~(b)~~(c)	$	4,633	$	401

(a)During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

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

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

Consolidated Adjusted EBITDA (non-GAAP) - Continuing Operations


		13 weeks ended				39 weeks ended					13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022		Dollars in thousands	July 29, 2023		July 30, 2022
Net loss		$	(25,049)	$	(36,801)	$	(55,612)	$	(57,901)
Net loss from continuing operations (a)										Net loss from continuing operations (a)	$	(49,971)	$	(50,322)
Add:	Add:									Add:
Depreciation and amortization expense	Depreciation and amortization expense	10,618		12,179		33,910		36,755		Depreciation and amortization expense	10,253		10,896
Interest expense, net	Interest expense, net	6,918		3,051		15,672		7,809		Interest expense, net	8,254		3,868
Income tax expense		267		615		900		811
Impairment loss (non-cash) (a)		6,008		6,411		6,008		6,411
Merchandise inventory loss (a)		—		—		—		434
Income tax (benefit) expense										Income tax (benefit) expense	(11)		847

Content amortization (non-cash)(d)	Content amortization (non-cash)(d)	1,686		1,398		4,881		3,984		Content amortization (non-cash)(d)	—		26
Restructuring and other charges ~~(a)~~(c)	Restructuring and other charges ~~(a)~~(c)	5,975		46		6,610		3,067		Restructuring and other charges ~~(a)~~(c)	4,633		375
Adjusted EBITDA (Non-GAAP) - Continuing Operations										Adjusted EBITDA (Non-GAAP) - Continuing Operations	$	(26,842)	$	(34,310)
Adjusted EBITDA (Non-GAAP) - Discontinued Operations										Adjusted EBITDA (Non-GAAP) - Discontinued Operations	$	427	$	889
Adjusted EBITDA (Non-GAAP) - Total										Adjusted EBITDA (Non-GAAP) - Total	$	(26,415)	$	(33,421)

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

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

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


Adjusted EBITDA - by Segment	Adjusted EBITDA - by Segment	13 weeks ended January 28, 2023												Adjusted EBITDA - by Segment	13 weeks ended July 29, 2023
Dollars in thousands	Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total		Dollars in thousands	Retail		Wholesale		Corporate Services(b)		Eliminations		Total
Net (loss) income		$	(10,036)	$	817	$	(2,787)	$	(14,507)	$	1,464	$	(25,049)
Net (loss) income from continuing operations (a)														Net (loss) income from continuing operations (a)	$	(28,374)	$	603	$	(16,752)	$	(5,448)	$	(49,971)
Add:	Add:													Add:
Depreciation and amortization expense	Depreciation and amortization expense	8,749		1,357		506		6		—		10,618		Depreciation and amortization expense	8,966		1,277		10		—		10,253
Interest expense, net	Interest expense, net	—		—		—		6,918		—		6,918		Interest expense, net	—		—		8,254		—		8,254
Income tax expense		—		—		—		267		—		267
Impairment loss (non-cash) (a)		6,008		—		—		—		—		6,008
Income tax benefit														Income tax benefit	—		—		(11)		—		(11)

Content amortization (non-cash)		—		—		1,686		—		—		1,686

Restructuring and other charges ~~(b)~~(c)	Restructuring and other charges ~~(b)~~(c)	1,452		931		1,848		1,744		—		5,975		Restructuring and other charges ~~(b)~~(c)	526		526		3,581		—		4,633
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	6,173	$	3,105	$	1,253	$	(5,572)	$	1,464	$	6,423	Adjusted EBITDA (non-GAAP)	$	(18,882)	$	2,406	$	(4,918)	$	(5,448)	$	(26,842)

~~Table of Contents~~

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
Content amortization (non-cash) 79 — 1,319 — — 1,398
Restructuring and other charges (b)
30 — — 16 — 46
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	Adjusted EBITDA - by Segment	39 weeks ended January 29, 2022												Adjusted EBITDA - by Segment	13 weeks ended July 30, 2022
Dollars in thousands	Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total		Dollars in thousands	Retail		Wholesale		Corporate Services(b)		Eliminations		Total
Net (loss) income		$	(31,887)	$	7,750	$	(5,286)	$	(29,034)	$	556	$	(57,901)
Net (loss) income from continuing operations (a)														Net (loss) income from continuing operations (a)	$	(34,540)	$	1,419	$	(12,322)	$	(4,879)	$	(50,322)
Add:	Add:													Add:
Depreciation and amortization expense	Depreciation and amortization expense	27,015		4,060		5,627		53		—		36,755		Depreciation and amortization expense	9,529		1,349		18		—		10,896
Interest expense, net	Interest expense, net	—		—		—		7,809		—		7,809		Interest expense, net	—		—		3,868		—		3,868
Income tax expense	Income tax expense	—		—		—		811		—		811		Income tax expense	—		—		847		—		847
Impairment loss (non-cash) (a)		6,411		—		—		—		—		6,411
Merchandise inventory loss (b)		434		—		—		—		—		434

Content amortization (non-cash)	Content amortization (non-cash)	350		—		3,634		—		—		3,984		Content amortization (non-cash)	26		—		—		—		26
Restructuring and other charges ~~(b)~~(c)	Restructuring and other charges ~~(b)~~(c)	2,113		—		—		954		—		3,067		Restructuring and other charges ~~(b)~~(c)	—		—		375		—		375
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	4,436	$	11,810	$	3,975	$	(19,407)	$	556	$	1,370	Adjusted EBITDA (non-GAAP)	$	(24,985)	$	2,768	$	(7,214)	$	(4,879)	$	(34,310)

(a) During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations. Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

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

(c) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement and Term Loan Agreement which 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.


Adjusted EBITDA (non-GAAP) - Discontinued Operations	13 weeks ended
	July 29, 2023		July 30, 2022
Loss from discontinued operations (a)	$	(417)	$	(2,385)
Add:
Depreciation and amortization expense	—		1,637
Income tax expense	20		86
Content amortization (non-cash)	—		1,551
Gain on sale of business	(3,068)		—
Impairment loss (non-cash)	610		—
Restructuring and other charges	3,287		—
Transaction costs	(5)		—
Adjusted EBITDA (Non-GAAP) - Discontinued Operations	$	427	$	889

~~(b) See~~(a) ~~Management Discussion~~During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and ~~Analysis and Results~~Discontinued Operations. Net Loss from Continuing Operations excludes the results of ~~Operations~~operations related to the DSS Segment for all years reported above. ~~discussion above.~~For additional information, see Note 2. Summary of Significant Accounting Policies.

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Free Cash Flow (non-GAAP)


		13 weeks ended				39 weeks ended					13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022		Dollars in thousands	July 29, 2023		July 30, 2022
Net cash flows (used in) provided by operating activities		$	(31,958)	$	(16,375)	$	(22,582)	$	7,901
Net cash flows used in operating activities from continuing operations										Net cash flows used in operating activities from continuing operations	$	(119,858)	$	(28,607)
Less:	Less:									Less:
Capital expenditures (a)	Capital expenditures (a)	6,326		12,129		26,899		33,393		Capital expenditures (a)	4,219		7,530
Cash interest	Cash interest	6,105		2,320		13,406		5,982		Cash interest	5,534		2,933
Cash taxes	Cash taxes	1		(38)		(15,582)		(7,816)		Cash taxes	345		122
Free Cash Flow (non-GAAP)	Free Cash Flow (non-GAAP)	$	(44,390)	$	(30,786)	$	(47,305)	$	(23,658)	Free Cash Flow (non-GAAP)	$	(129,956)	$	(39,192)

(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	Capital Expenditures	13 weeks ended				39 weeks ended				Capital Expenditures	13 weeks ended
Dollars in thousands	Dollars in thousands	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022		Dollars in thousands	July 29, 2023		July 30, 2022
Physical store capital expenditures	Physical store capital expenditures	$	1,700	$	5,081	$	12,248	$	12,561	Physical store capital expenditures	$	2,205	$	4,496
Product and system development	Product and system development	2,972		4,398		8,584		11,878		Product and system development	1,763		2,486
Content development costs		1,168		2,037		4,481		6,749

Other	Other	486		613		1,586		2,205		Other	251		548
Total Capital Expenditures	Total Capital Expenditures	$	6,326	$	12,129	$	26,899	$	33,393	Total Capital Expenditures	$	4,219	$	7,530

Liquidity and Capital Resources

The accompanying condensed consolidated financial statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.

Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”), management must evaluate whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these condensed consolidated financial statements are issued. In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date of these condensed consolidated financial statements if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

Our primary sources of cash are net cash flows from operating activities, funds available under our ~~credit agreement~~Credit Agreement, Term Loan Agreement, and short-term vendor financing. Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales are generally highest in the second and third fiscal quarters, when college students generally purchase textbooks for the upcoming Fall and Spring semesters, respectively. As of ~~January 28,~~July 29, 2023, we had ~~$255.6~~$19.3 million ~~and $30.0~~of cash on hand, including $10.7 million ~~outstanding borrowings under~~of restricted cash related to segregated funds for commission due to Fanatics for logo merchandise sales as per the ~~Credit Agreement and Term Loan Agreement, respectively. See~~ ~~Financing Arrangements~~ ~~discussion below.~~

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 $20,000 to $380,000. 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 ~~Financing Arrangements~~ ~~below~~.

We believe that our future cash from operations, access to borrowings under the Credit Agreement and 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~~merchandising partnership agreement.

Our business ~~has been~~was significantly negatively impacted by the COVID-19 pandemic during the years ended April 30, 2022 and May 1, 2021, as many schools adjusted their learning models and on-campus activities. ~~However, on campus traffic continues~~Although most academic institutions have since reopened after the COVID-19 pandemic, the lingering impacts of the pandemic have resulted in changes in customer behaviors, lower enrollments, and an evolving educational landscape which continued to ~~grow from increased campus events and activities, as compared to the last two years. Our third quarter 2022~~impact our financial 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~~year ended April 29, 2023. Some institutions are still providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes. The impact of COVID-19 ~~pandemic are lessening,~~store closings, as well as lower earnings during the year ended April 29, 2023, resulted in the loss of cash flows and increased borrowings that 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~~would not otherwise have expected to incur.

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~~directly affect~~We incurred a Net Loss from Continuing Operations of $(50.9) million and $(50.3) million for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively, and we incurred a Net Loss from Continuing Operations of $(90.1) million, $(61.6) million, and $(133.6) million for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively. Our Cash Flow Used In Operating Activities from Continuing Operations were $(119.9) million and $(28.6) million for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively, and were $90.5 million, $(16.2) million, and $27.0 million, for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively. The tightening of our ~~business operations~~. ~~Although most four~~available credit commitments, including the elimination and repayment of our seasonal borrowing facility (FILO Facility) of $40.0 million, has had a significant impact on our liquidity during the 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,~~ended April 29, 2023, 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,~~make timely vendor payments and school commission payments, resulting in a positive cash flow from operations offset by a use of cash for financing activities.

Our losses and projected cash needs, combined with our current liquidity level, raised substantial doubt about our ability to continue as a going concern as of the year ended April 29, 2023, which Management subsequently remediated by implementing a plan to improve the Company’s liquidity and successfully alleviate substantial doubt including ~~textbooks~~(1) raising additional liquidity and (2) taking additional operational restructuring actions.

Debt amendments

On July 28, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement to December 28, 2024, (ii) reduce advance rates with respect to the borrowing base by 1000 basis points on September 2, 2024 (in lieu of the reductions previously contemplated for September 2023), (iii) subject to the conditions set forth in such amendment, add a CARES Act tax refund claim to the borrowing base, from April 1, 2024 through July 31, 2024, (iv) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) at all times greater than the greater of (x) 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and ~~general merchandise offerings.~~(y) (A) $32.5 million minus, subject to the conditions set forth in such amendment, (B) (a) $7.5 million for the period of April 1, 2024 through and including April 30, 2024, (b) $2.5 million for the period of May 1, 2024 through and including May 31, 2024 and (c) $0 at all other times, (v) add a minimum Consolidated EBITDA (as defined in the Credit Agreement) financial maintenance covenant, and (vi) amend certain negative and affirmative covenants and add certain additional covenants, all as more particularly set forth in such amendment. The amendment also requires that we appoint a Chief Restructuring Officer and that, by August 11, 2023, we (i) appoint two independent members to the board of directors of the Company from prospective candidates that have been previously disclosed to the Administrative Agent and the Lenders and (ii) appoint a committee of the board of directors of the Company to consist of three board members (two of whom will be the new independent directors), and as of the date of this filing, we have satisfied such requirements. The committee’s responsibilities will include, among other things, to explore, consider, solicit expressions of interest or proposals for, respond to any communications, inquiries or proposals regarding, and advise as to all strategic alternatives to effect a “Specified Liquidity Transaction” (as defined in the Credit Agreement). There can be no guarantee or assurances that any such transaction or transactions be consummated. We must pay (i) a fee of 0.50% of the outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment (as defined in the Credit Agreement) on the closing date (in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment (as defined in the Credit Agreement)) and (ii) a fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2, 2024 and an Event of Default (as defined in the Credit Agreement).

On July 28, 2023, we amended our Term Loan to (i) extend the maturity date of the Term Loan Agreement to April 7, 2025, (ii) allow for interest to be paid in kind until September 2, 2024, (iii) amend the 1.50% anniversary fee to recur on June 7 of each year that the Term Loan Agreement remains outstanding, with 2024 fee deferred to the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement) and (iv) amend certain negative covenants and affirmative and add certain additional covenants. We must pay a fee of $0.05million to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

Operational restructuring plans

We ~~will continue~~have implemented a significant cost reduction program designed to ~~assess~~streamline our operations, maximize productivity and drive profitability. We have taken steps to significantly reduce our workforce, eliminated duplicate administrative headcounts at all levels, implemented improved system development processes to reduce maintenance costs, reduced capital expenditures, and evaluated operating contractual obligations for cost savings. We have achieved meaningful cost savings from this program of approximately $17.0 million during the second half of the year ended April 29, 2023. These initiatives are expected to provide annualized savings of $30.0million to $35.0million in Fiscal 2024. Management's plans over the next twelve months include the further reduction of gross capital expenditures and other cost saving measures of approximately $25.0million. Management believes that these plans are within its control and probable of being implemented on a timely basis.

During the 13 weeks ended July 29, 2023, Net Loss from Continuing Operations decreased by $0.3million compared to the prior year period. During the 13 weeks ended July 29, 2023, Net Loss from Continuing Operations, excluding interest expense and restructuring and other charges, improved by $9.0 million primarily due to operational improvements and cost

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savings initiatives. As discussed below, our first quarter is generally a low sales period, as the majority of sales and operating profit will ~~continue to consider~~be realized during the ~~guidance of local governments~~second and ~~our campus partners to determine how to operate our bookstores in~~third quarters.

Management believes that 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 furtherexpected impact on our ~~results of operations, financial condition~~liquidity and cash flows resulting from ~~operations.~~the debt amendments and the operational initiatives outlined above are sufficient to enable the Company to meet its obligations for at least twelve months from the issuance date of these condensed consolidated financial statements and to continue to alleviate the conditions that initially raised substantial doubt about the Company's ability to continue as a going concern.

See Part I - Risk Factors - We are dependent upon access to the capital markets, bank credit facilities, and short-term vendor financing for liquidity needs in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023.

Sources and Uses of Cash Flow - Continuing Operations

39 weeks ended
Dollars in thousands January 28, 2023 January 29, 2022
Cash, cash equivalents, and restricted cash at beginning of period $ 21,934 $ 16,814
Net cash flows (used in) provided by operating activities (22,582) 7,901
Net cash flows used in investing activities (26,327) (32,659)
Net cash flows provided by financing activities 56,422 20,686
Cash, cash equivalents, and restricted cash at end of period $ 29,447 $ 12,742


	13 weeks ended
Dollars in thousands	July 29, 2023		July 30, 2022
Net cash flows used in operating activities from continuing operations	$	(119,858)	$	(28,607)
Net cash flows used in investing activities from continuing operations	(4,141)		(7,530)
Net cash flows provided by financing activities from continuing operations	93,176		33,429

Net change in cash, cash equivalents, and restricted cash from continuing operations	$	(30,823)	$	(2,708)

As of ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, we had restricted cash of ~~$18.3~~$11.6 million and ~~$2.8~~$7.5 million, respectively, comprised of ~~$17.4~~$10.7 million and ~~$1.9~~$6.6 million, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the ~~F/L~~Lids Partnership's merchandising agreement and $0.9 million 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 from Continuing Operations

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 our BNC First Day programs, ~~and~~ the timing of cash collection from our school partners may shift to periods subsequent to when the ~~third fiscal quarter which has been a source of cash has shifted to the fourth quarter.~~revenue is recognized. When a school adopts our BNC First Day ~~inclusive~~equitable and ~~equitable~~inclusive access offerings, cash collection from the school generally occurs after the ~~student~~institution's 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 BNC First Day ~~inclusive~~equitable and ~~equitable~~inclusive 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.~~schools, including modifying payment terms in existing and future school contracts. For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and ~~fourth~~third fiscal quarters, as payments are received from the summer and winter selling season when ~~they~~our wholesale business 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 used in operating activities from continuing operations during the 3913 weeks ended ~~January 28,~~July 29, 2023 were ~~$(22.6)~~$(119.9) million compared to ~~cash flows provided by operating activities $7.9~~$(28.6) million during the 3913 weeks ended ~~January 29,~~July 30, 2022. This ~~decrease~~increase in cash flows ~~provided by~~used in operating activities from continuing operations of ~~$30.5~~$91.3 million was primarily due to ~~changes in our working capital in our third quarter~~timing of payables primarily due to delayed payments to vendors for inventory purchases and expenses, which were delayed resulting from lower borrowing base availability, increased accounts receivables primarily related to our increased adoption of our BNC First Day equitable and 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~~for Summer terms; and higher ~~receivables, offset by higher payables and right-of-use payments during the third quarter in the current year period compared to the prior year period.~~interest expense paid.

Cash Flow from Investing Activities from Continuing Operations

Cash flows used in investing activities from continuing operations during the 3913 weeks ended ~~January 28,~~July 29, 2023 were ~~$(26.3)~~$(4.1) million compared to ~~$(32.7)~~$(7.5) million during the 3913 weeks ended ~~January 29,~~July 30, 2022. The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments, ~~associated with content development, digital initiatives,~~

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enhancements to internal systems and websites, and new store construction. Capital expenditures totaled ~~$26.9~~$4.2 million and ~~$33.4~~$7.5 million during the 3913 weeks ended ~~January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, respectively.

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Cash Flow from Financing Activities from Continuing Operations

Cash flows provided by financing activities from continuing operations during the 3913 weeks ended ~~January 28,~~July 29, 2023 were ~~$56.4~~$93.2 million compared to ~~$20.7~~$33.4 million during the 3913 weeks ended ~~January 29,~~July 30, 2022. This net change of ~~$35.7~~$59.8 million is primarily due to higher net ~~borrowings.~~borrowings and higher payments for deferred financing costs.

Financing Arrangements


	As of
	July 29, 2023		July 30, 2022
Credit Facility	$	249,735	$	190,300
FILO Facility	—		40,000
Term Loan	30,000		30,000
sub-total	279,735		260,300
Less: Deferred financing costs	(2,072)		(1,750)
Total debt	$	277,663	$	258,550
Balance Sheet classification:
Short-term borrowings	$	—	$	40,000
Long-term borrowings	277,663		218,550
Total debt	$	277,663	$	258,550

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended from time to time including on July 28,2023, May 24, 2023, March 8, 2023, March 31, 2021 and March 1, 2019, under which the lenders originally committed to provide us with a ~~5-year~~5 year asset-backed revolving credit facility in an aggregate committed principal amount of ~~$400~~$400.0 million (the “Credit Facility”) effective from the March 1, 2019 amendment. We had the option to request an increase in commitments under the Credit Facility of up to ~~$100~~$100.0 million, subject to certain restrictions. Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs. The agreement included an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a ~~$100~~$100.0 million maintaining the maximum availability under the Credit Agreement at ~~$500~~$500.0 million. ~~From and after~~As of July 31, 2022, the FILO Facility was repaid and eliminated according to its terms and future commitments under the FILO Facility were reduced to $0. ~~As of January 28,~~

March 2023 ~~we were in compliance with all debt covenants under the~~ Credit ~~Agreement.~~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~~$20.0 million to ~~$380~~$380.0 million, (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 (see discussion below) 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 $32.5 million and (vii) require repayment of the loans under the Credit Agreement upon a Specified Event. ~~In addition,~~For additional information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.

As noted above, the amendment requires the achievement of a ~~Specified~~Special Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms foof the Credit Agreement). See Note 2. Summary of Significant Accounting Policies for information related to the sale of our DSS segment on May 31, 2023.

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $4.1 million related to the March 2023 Credit Agreement amendment. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the condensed consolidated balance sheets, and subsequently amortized ratably over the term of the credit agreement.

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May 2023 Credit Agreement Amendment

July 2023 Credit Agreement Amendment

On July 28, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement to December 28, 2024, (ii) reduce advance rates with respect to the borrowing base by 1000 basis points on September 2, 2024 (in lieu of the reductions previously contemplated for September 2023), (iii) subject to the conditions set forth in such amendment, add a CARES Act tax refund claim to the borrowing base, from April 1, 2024 through July 31, 2024, (iv) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) at all times greater than the greater of (x) 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and (y) (A) $32.5 million minus, subject to the conditions set forth in such amendment, (B) (a) $7,500 for the period of April 1, 2024 through and including April 30, 2024, (b) $2,500 for the period of May 1, 2024 through and including May 31, 2024 and (c) $0 at all other times, (v) add a minimum Consolidated EBITDA (as defined in the Credit Agreement) financial maintenance covenant, and (vi) amend certain negative and affirmative covenants and add certain additional covenants, all as more particularly set forth in such amendment. The amendment also requires that we appoint a Chief Restructuring Officer and that, by August 11, 2023, we (i) appoint two independent members to the board of directors of the Company from prospective candidates that have been previously disclosed to the Administrative Agent and the Lenders and (ii) appoint a committee of the board of directors of the Company to consist of three board members (two of whom will be the new independent directors). The committee’s responsibilities will include, among other things, to explore, consider, solicit expressions of interest or proposals for, respond to any communications, inquiries or proposals regarding, and advise as to all strategic alternatives to effect a “Specified Liquidity Transaction” (as defined in the Credit Agreement). There can be no guarantee or assurances that any such transaction or transactions be consummated. We must pay (i) a fee of 0.50% of the outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment (as defined in the Credit Agreement) on the closing date (in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment (as defined in the Credit Agreement)) and (ii) a fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2, 2024 and an Event of Default (as defined in the Credit Agreement).

During the 3913 weeks ended ~~January 28,~~July 29, 2023, we incurred debt issuance costs totaling $11.0 million related to the July 2023 Credit Agreement amendment. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the condensed consolidated balance sheets, and subsequently amortized ratably over the term of the credit agreement.

As of July 29, 2023, and through the date of this filing, we were in compliance with all debt covenants under the Credit Agreement.

The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the Credit Facility. This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company and a pledge of equity from subsidiaries, exclusive of real estate).

During the 13 weeks ended July 29, 2023, we borrowed ~~$512.0~~$145.2 million and repaid ~~$452.1~~$49.6 million under the Credit Agreement, ~~with $255.6 million of~~and had outstanding borrowings of $249.7 million as of ~~January 28,~~July 29, 2023, comprised entirely of borrowings under the Credit Facility. During the 3913 weeks ended ~~January 29,~~July 30, 2022, we borrowed ~~$463.2~~$117.2 million and repaid ~~$440.4~~$112.6 million under the Credit Agreement, ~~with $200.4 million of~~and had outstanding borrowings of $230,300 as of ~~January 29,~~July 30, 2022, comprised ~~entirely~~$190.3 million and $40.0 million of borrowings under the Credit ~~Facility.~~Facility and FILO Facility, respectively. As of ~~both January 28,~~July 29, 2023 and ~~January 29,~~July 30, 2022, we have issued $0.6 million and $4.8 million, respectively, in letters of credit under the Credit Facility.

~~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 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 into an amendment to our existing Credit ~~Agreement.~~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 $30.0 million (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”). and matures on June 7, 2024. 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 3913 weeks ended ~~January 28,~~ July 29,

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2023, we borrowed ~~$30.0 million~~$0 and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of ~~January 28,~~July 29, 2023.

~~We incurred debt issuance costs totaling $2.6~~ During the 13 weeks ended July 30, 2022, we borrowed $30.0 million ~~related to~~and repaid $0 under 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

March 2023 Term Loan ~~Facility.~~Credit Agreement Amendment

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

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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.~~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.~~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).

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $0.4 million related to the March 2023 Term Loan Credit Agreement amendment. We paid a fee of $0.05 million on the amendment closing date to the lenders under 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 condensed consolidated balance sheets, and subsequently amortized ratably over the term of the credit agreement.

~~For additional information related to the~~July 2023 Term Loan Credit Agreement ~~amendment and~~Amendment

On July 28, 2023, we amended our Term Loan to (i) extend the maturity date of the Term Loan Agreement ~~amendment, see~~to April 7, 2025, (ii) allow for interest to be paid in kind until September 2, 2024, (iii) amend the ~~Company’s Report~~1.50% anniversary fee to recur on ~~Form 8-K dated March 8,~~June 7 of each year that the Term Loan Agreement remains outstanding, with 2024 fee deferred to the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement) and (iv) amend certain negative covenants and affirmative and add certain additional covenants. We must pay a fee of $0.05 million to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

During the 13 weeks ended July 29, 2023, we incurred debt issuance costs totaling $0.4 million related to the July 2023 Term Loan Credit Agreement amendment. The debt issuance costs have been deferred and ~~filed with~~are presented as prepaid and other current assets and other noncurrent assets in the ~~SEC~~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. To date, all interest on ~~March 9, 2023.The~~the term loan has been paid in cash. The Term Loans do not amortize prior to maturity.

Income Tax Implications on Liquidity

For the fiscal year ended April 30, 2022, we filed an application to change our tax year from January to April under the automatic consent provisions. As a result of the tax year-end change, there is no longer a long-term tax payable associated with the LIFO reserve in other long-term liabilities.

~~We have filed our federal~~As of July 29, 2023, we recognized a current income tax ~~returns~~receivable for net operating loss carrybacks in prepaid and other current assets on the ~~tax year ended January 2021, which included claims for $33.6 million in refunds for cash taxes paid in prior years.~~condensed consolidated balance sheet. We received refunds of $7.8 million in Fiscal 2022 and a $15.8 million ~~on August 29, 2022 (Fiscal 2023).~~refund in Fiscal 2023. We expect to receive additional refunds of approximately $10.0 million.

Share Repurchases

During the 3913 weeks ended ~~January 28,~~July 29, 2023, we did not repurchase any of our Common Stock under the stock repurchase program. As of ~~January 28,~~July 29, 2023, approximately $26.7 million remains available under the stock repurchase program.

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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 April ~~30, 2022.~~29, 2023.

Off-Balance Sheet Arrangements

As of ~~January 28,~~July 29, 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 April ~~30, 2022.~~29, 2023.

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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 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:

•the amount of our indebtedness and ability to comply with covenants applicable to current and /or 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;

•our ability to maintain adequate liquidity levels to support ongoing inventory purchases and related vendor payments in a timely manner;

•our ability to attract and retain employees;

•the pace of equitable access adoption in the marketplace is slower than anticipated and our ability to successfully convert the majority of our institutions to our BNC First Day®equitable and inclusive access course material models or successfully compete with third parties that provide similar equitable and inclusive access solutions;

•the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various strategic and restructuring initiatives, may not be fully realized or may take longer than expected;

•dependency on strategic partnerships, such as with VitalSource Technologies, Inc. and the Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L Partnership”), and the potential for adverse operational and financial changes to these partnerships, may adversely impact our business;

•non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings;

•decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores;

•general competitive conditions, including actions our competitors and content providers may take to grow their businesses;

•the risk of changes in price or in formats of course materials by publishers, which could negatively impact revenues and margin;

•changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers;

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•work stoppages or increases in labor costs;

•possible increases in shipping rates or interruptions in shipping services;

•a decline in college enrollment or decreased funding available for students;

•decreased consumer demand for our products, low growth or declining sales;

•the general economic environment and consumer spending patterns;

•trends and challenges to our business and in the locations in which we have stores;

•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, including the adoption of artificial intelligence technologies for educational content;

•risks associated with counterfeit and piracy of digital and print materials;

•risks associated with data privacy, information security and intellectual property;

•disruptions to our information technology systems, infrastructure, data, supplier systems, and customer ordering and payment systems due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations;

•disruption of or interference with third party web service providers and our own proprietary technology;

•risks associated with the impact that public health crises, epidemics, and pandemics, such as the COVID-19 pandemic, ~~including the duration, spread, severity, and any recurrences thereof, and the impact such public health crises~~ have on the overall demand for BNED products and services, our operations, the operations of our suppliers and other business partners, and the effectiveness of our response to these risks;

•~~general competitive conditions, including actions our competitors and content providers may take to grow their businesses;~~

•~~a decline in college enrollment or decreased funding available for students;~~

•~~decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores;~~

•~~implementation of our digital strategy may not result in the expected growth in our digital sales and/or profitability;~~

•~~risk that digital sales growth does not exceed the rate of investment spend;~~

•the performance of our online, digital and other initiatives, integration of and deployment of, additional products and services including new digital channels, and enhancements to higher education digital products;

•~~the inability to achieve the expected cost savings during the anticipated time frame, and the inability to implement our cost saving initiatives in a timely and efficient manner;~~

•~~the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues and margin;~~

•~~the general economic environment and consumer spending patterns;~~

•~~decreased consumer demand for our products, low growth or declining sales;~~

•~~the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various acquisitions, may not be fully realized or may take longer than expected;~~

•~~the integration of the operations of various acquisitions into our own may also increase the risk of our internal controls being found ineffective;~~

•~~changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers;~~

•~~our ability to successfully implement our strategic initiatives including our ability to identify, compete for and execute upon additional acquisitions and strategic investments;~~

•~~risks associated with operation or performance of MBS Textbook Exchange, LLC’s point-of-sales systems that are sold to college bookstore customers;~~

•~~technological changes;~~

•~~risks associated with counterfeit and piracy of digital and print materials;~~

•~~our international operations could result in additional risks;~~

•~~our ability to attract and retain employees;~~

•~~risks associated with data privacy, information security and intellectual property;~~

•~~trends and challenges to our business and in the locations in which we have stores;~~

•~~non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings;~~

•~~disruptions to our information technology systems, infrastructure and data due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations;~~

~~Table of Contents~~

•~~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 thelingering impacts that public health crises may have on the ability of our suppliers to manufacture or source products, particularly from outside of the United States;

•changes in domestic and international laws or regulations, including U.S. tax reform, changes in tax rates, laws and regulations, as well as related guidance;

•enactment of laws or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest based online advertising, ~~recurring billing~~ or similar marketing and sales activities;

•~~the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing;~~

•~~our ability to satisfy future capital and liquidity requirements;~~

•~~our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms;~~

•adverse results from litigation, governmental investigations, tax-related proceedings, or audits;

•changes in accounting standards; and

•the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I - Item 1A in our Annual Report on Form 10-K for the fiscal year ended April ~~30, 2022.~~29, 2023.

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 April ~~30, 2022.~~29, 2023.

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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~~Principal 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~~ Based upon 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 on management’s evaluation, the Chief Executive Officer and ~~Chief~~Principal 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.~~level as of July 29, 2023.

Management has not identified any changes in the Company’s internal control over financial reporting that occurred during the ~~third~~first 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 3913 weeks ended ~~January 28,~~July 29, 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 April ~~30, 2022.~~29, 2023.

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

Issuer Purchases of Equity Securities

The following table provides information as of ~~January 28,~~July 29, 2023 with respect to shares of Common Stock we purchased during the ~~third~~first quarter of Fiscal ~~2023:~~2024:


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~~April 30, ~~2022~~2023 - ~~November 26, 2022~~May 27, 2023	—	$	—	—	$	26,669,324
~~November 27, 2022~~May 28, 2023 - ~~December 31, 2022~~July 1, 2023	—	$	—	—	$	26,669,324
~~January 1,~~July 2, 2023 - ~~January 28,~~July 29, 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.

During the 3913 weeks ended ~~January 28,~~July 29, 2023, we did not repurchase any shares of our Common Stock under the stock repurchase program.

Item 5. Other Information

~~None~~

Securities Trading Plans of Directors and Executive Officers

During the period covered by this Quarterly Report on Form 10-Q, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits


10.1						~~Resignation Letter,~~Seventh Amendment, dated as of ~~December 1, 2022 between~~May 24, 2023, among the Company, as the lead borrower, the other borrowers party thereto, the lenders party thereto and ~~David W.B. Nenke, filed~~Bank of America, N.A., as ~~Exhibit 10.1~~administrative agent and collateral agent for the lenders, to the Credit Agreement, dated as of August 3, 2015, referenced in the Report on Form 8-K filed with the SEC on ~~December 6,~~May 31, 2023.

10.2						Second Amendment, dated as of May 24, 2023, among the Company, as borrower, certain subsidiaries of the Company party thereto as guarantors, TopLids LendCo, LLC and Vital Fundco, LLC, as lenders, and TopLids LendCo, LLC, as administrative agent and collateral agent for the lenders, to the Term Loan Credit Agreement, dated as of June 7, 2022, referenced in the Report on Form 8-K filed with the SEC on May 31, 2023.

10.3						Eighth Amendment, dated as of July 28, 2023, among the Company, as the lead borrower, the other borrowers party thereto, the lenders party thereto and ~~incorporated herein by reference.~~Bank of America, N.A., as administrative agent and collateral agent for the lenders, to the Credit Agreement, dated as of August 3, 2015, referenced in the Report on Form 8-K filed with the SEC on July 28, 2023.

10.4						Third Amendment, dated as of July 28, 2023, among the Company, as borrower, certain subsidiaries of the Company party thereto as guarantors, TopLids LendCo, LLC and Vital Fundco, LLC, as lenders, and TopLids LendCo, LLC, as administrative agent and collateral agent for the lenders, to the Term Loan Credit Agreement, dated as of June 7, 2022, referenced in the Report on Form 8-K filed with the SEC on July 28, 2023.

10.5						Severance Letter Agreement and General Release and Waiver, dated as of May 3, 2023, between Barnes & Noble Education, Inc. and David Henderson, referenced in the Annual Report on Form 10-K filed with the SEC on July 31, 2023.

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~~and Principal 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~~Principal 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)

*Filed herewith.

**Furnished herewith.

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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~~MICHAEL P. HUSEBY
						~~Thomas D. Donohue~~Michael P. Huseby
						Chief ~~Financial~~Executive Officer
						(principal financial officer)

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

~~March 9,~~

September 6, 2023

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	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)
Property and equipment, net	$	708	$	—	$	708	$	742	$	3	$	739
Operating lease right-of-use assets	3,002		1,305		1,697		3,299		1,506		1,793
Intangible assets, net	3,599		—		3,599		3,745		77		3,668
Other noncurrent assets	4		—		4		211		—		211
Total	$	7,313	$	1,305	$	6,008	$	7,997	$	1,586	$	6,411


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


	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)


	39 weeks ended January 28, 2023
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:
Product sales and other	$	1,159,821	$	97,161	$	26,659	$	—	$	(52,176)	$	1,231,465
Rental income	96,555		—		—		—		—		96,555
Total sales	1,256,376		97,161		26,659		—		(52,176)		1,328,020
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	931,539		78,139		5,283		—		(51,890)		963,071
Rental cost of sales	52,416		—		—		—		—		52,416
Total cost of sales	983,955		78,139		5,283		—		(51,890)		1,015,487
Gross profit	272,421		19,022		21,376		—		(286)		312,533
Selling and administrative expenses	251,843		11,561		23,909		17,861		(129)		305,045
Depreciation and amortization expense	27,147		4,076		2,646		41		—		33,910
Impairment loss (non-cash)	6,008		—		—		—		—		6,008
Restructuring and other charges	1,452		931		1,848		2,379		—		6,610
Operating (loss) income	$	(14,029)	$	2,454	$	(7,027)	$	(20,281)	$	(157)	$	(39,040)