Market Overview

Barnes & Noble Education Reports Second Quarter 2018 Financial Results

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Consolidated Sales Increase 15% in the Second Quarter and 23% Year to
Date

Net Income Increases $19.1 Million in the Second Quarter and $12.2
Million Year to Date

Initial Benefits Recognized from Recent Acquisitions

Barnes
& Noble Education, Inc. (NYSE:
BNED), a leading provider of
educational products and services solutions for higher education and
K-12 institutions, today reported sales and earnings for the second
quarter for fiscal year 2018. The Company has two reportable segments:
Barnes & Noble College Booksellers, LLC ("BNC") and MBS Textbook
Exchange, LLC ("MBS").

Financial highlights for the second quarter 2018 and fiscal year to
date 2018:

  • Consolidated sales of $886.9 million increased 15.1%, as compared to
    the prior year period; year to date consolidated sales of $1,242.6
    million increased 23.0% as compared to the prior year period.
  • Consolidated second quarter GAAP net income of $48.4 million, as
    compared to $29.3 million in the prior year period; year to date GAAP
    net income of $13.6 million, as compared to $1.4 million in the prior
    year period.
  • Consolidated second quarter non-GAAP Adjusted EBITDA of $102.4
    million, an increase of $32.0 million, as compared to the prior year
    period; year to date non-GAAP Adjusted EBITDA of $70.0 million, an
    increase of $36.1 million, as compared to the prior year period.
  • Consolidated second quarter non-GAAP Adjusted Earnings of $49.9
    million, as compared to $29.7 million in the prior year period; year
    to date non-GAAP Adjusted Earnings of $20.1 million, as compared to
    $3.8 million in the prior year period.

Operational highlights for the second quarter 2018:

  • Expanded reach of BNED Courseware, offering Open Educational Resources
    ("OER") content to approximately 13,000 students at community
    colleges, four-year public universities and four-year private
    universities.
  • Continued to recognize benefits from the MBS integration, as MBS
    contributed $134.9 million in sales and $19.2 million of Adjusted
    EBITDA in the second quarter of fiscal year 2018.
  • Completed the acquisition of Student Brands, LLC, a leading
    direct-to-student subscription-based writing services business, on
    August 3, 2017 for $57.4 million. Student Brands contributed $4.5
    million in sales and $2.4 million of Adjusted EBITDA to BNC's results
    in the second quarter of fiscal year 2018.
  • Renewed partnership with Target Corporation to promote its brand and
    college essentials to BNED customer base for the Fall of 2018.

"Our substantially increased financial results in the second quarter
reflect the contributions of our recent acquisitions of MBS and Student
Brands. While both of these teams continue to perform financially, we
are even more encouraged by their respective potential contributions to
BNED's longer term competitive position," said Michael P. Huseby,
Chairman and Chief Executive Officer, Barnes & Noble Education. "Given
our evolving industry, we remain focused on transforming our business to
become a leading aggregator and distributor of both physical and digital
educational content, and on developing expanded direct-to-student
digital services that we can offer both in and outside of our managed
stores footprint. With the addition of Student Brands and our recently
announced partnership with The Princeton Review, we are building what we
plan to offer as a full suite of such services."

Second Quarter 2018 and Year to Date Results

Results for the 13 and 26 weeks of fiscal 2018 and fiscal 2017 are
as follows:

       
$ in millions   13 and 26 Weeks Selected Data (unaudited)  

13 Weeks

       

13 Weeks

       

26 Weeks

       

26 Weeks

  Q2 2018     Q2 2017    

2018

   

2017

 
Total Sales $886.9 $770.7 $1,242.6 $1,009.9
Net Income $48.4 $29.3 $13.6 $1.4

 

 

 

 

Non-GAAP(1)

Adjusted EBITDA

$102.4

$70.4

$70.0

$33.9

Adjusted Earnings $49.9 $29.7 $20.1 $3.8
 
(1) These non-GAAP financial measures have been reconciled in the
attached schedules to the most directly comparable GAAP measure as
required under SEC rules regarding the use of non-GAAP financial
measures.
 

Consolidated second quarter sales of $886.9 million increased $116.2
million, or 15.1%, as compared to the prior year period. This increase
was primarily attributable to the contributions from the MBS and Student
Brands acquisitions, net new stores opened at BNC, partially offset by
the impact from declining comparable store sales at BNC.

Comparable store sales at BNC decreased 4.4% for the quarter
representing approximately $33.8 million in revenue. The decrease is
primarily attributable to textbook sales, which were down 5.0% compared
with a decrease of 3.7% in the prior year period and a decrease in
general merchandise sales of 1.9% compared with a decrease of 1.3% in
the prior year period.

Second quarter net income was $48.4 million, or $1.03 per diluted share,
compared to net income of $29.3 million, or $0.63 per diluted share, in
the prior year period. The current year's fiscal quarter has 47.0
million diluted shares outstanding, while the prior year period had 46.6
million diluted shares outstanding. The Company reported non-GAAP
Adjusted Earnings of $49.9 million during the quarter, compared with
$29.7 million in the prior year period.

The Company's Adjusted EBITDA was $102.4 million for the quarter, as
compared to $70.4 million in the prior year period, an increase due
primarily to the contributions from the MBS and Student Brands
acquisitions, partially offset by the impact from lower comparable store
sales at BNC.

As a result of the acquisition of MBS on February 27, 2017 and the
acquisition of Student Brands on August 3, 2017, the condensed
consolidated financial statements for the 13 weeks and 26 weeks ended
October 28, 2017 include the financial results of MBS and Student
Brands. All material intercompany accounts and transactions have been
eliminated in consolidation. The condensed consolidated financial
statements for the 13 weeks and 26 weeks ended October 28, 2016 do not
include any financial results of MBS and Student Brands.

Outlook

For fiscal year 2018, the Company expects sales at BNC to be relatively
flat, while BNC comparable store sales are projected to decline in the
low-to mid-single digit percentage point range year over year. In
addition, the Company expects consolidated sales to be in the range of
$2.25 billion to $2.35 billion before intercompany eliminations. The
Company expects BNED's consolidated Adjusted EBITDA to be in a range of
$105 million to $120 million. Capital expenditures are expected to be
approximately $50 million, an increase from fiscal 2017 due to new store
growth at BNC.

Conference Call

A conference call with Barnes & Noble Education, Inc. senior management
will be webcast at 10:00 a.m. Eastern Time on Tuesday, December 5, 2017
and can be accessed at the Barnes & Noble Education corporate website at www.bned.com.

Barnes & Noble Education expects to report fiscal 2018 third quarter
results on or about March 6, 2018.

ABOUT BARNES & NOBLE EDUCATION, INC.

Barnes & Noble Education, Inc. (NYSE:BNED), a leading
provider of educational products and services solutions for higher
education and K-12 institutions, enhances the academic and social
purpose of educational institutions. Through its Barnes & Noble College
and MBS subsidiaries, Barnes & Noble Education operates 1,483 physical
and virtual bookstores and serves more than 6 million students and
faculty, and offers a suite of digital software, content and services
including direct-to-student study tools. The Company also operates one
of the largest textbook wholesale distribution channels in the United
States. Barnes & Noble Education acts as a strategic partner to drive
student success, provide value and support to students and faculty, and
create loyalty and improve retention, while supporting the financial
goals of our college and university partners.

BNED companies include: Barnes
& Noble College Booksellers, LLC
, MBS
Textbook Exchange, LLC
, BNED
LoudCloud, LLC
, Student
Brands, LLC
, and Promoversity,
LLC
. General information on Barnes & Noble Education may be obtained
by visiting the Company's corporate website: www.bned.com.

Forward-Looking Statements

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