Firstly, the company reported their full year results and, no surprise, the business performance was much below 2019. From their press release:
Financial results for the fourth quarter and fiscal year 2020:
- Consolidated fourth quarter sales of $256.9 million decreased 23.2% as compared to the prior year period; fiscal year 2020 consolidated sales of $1,851.1 million decreased 9.0% as compared to the prior year.
- Consolidated fourth quarter GAAP net loss was $(40.3) million, compared to a net loss of $(46.2) million in the prior year period. Consolidated fiscal year 2020 GAAP net loss was $(38.3) million, compared to a net loss of $(24.4) million in the prior year.
- Consolidated fourth quarter non-GAAP Adjusted EBITDA loss was $(20.7) million, compared to non-GAAP Adjusted EBITDA of $19.7 million in the prior year; fiscal year 2020 consolidated non-GAAP Adjusted EBITDA was $42.2 million, compared to non-GAAP Adjusted EBITDA of $104.9 million in the prior year.
- Consolidated fourth quarter non-GAAP Adjusted Earnings was $(28.1) million, compared to non-GAAP Adjusted Earnings of $0.5 million in the prior year period; fiscal year 2020 consolidated non-GAAP Adjusted Earnings was $(21.1) million, compared to non-GAAP Adjusted Earnings of $25.4 million in the prior year.
Operational highlights for the fiscal year 2020:
- Progressed on the execution of a number of strategic initiatives; all of which remained on target prior to the onset of the COVID-19 pandemic, which has accelerated the demand and need to scale such key initiatives.
- Continued to drive subscriptions for the Company’s bartleby® suite of solutions, gaining more than 170,000 subscribers in fiscal year 2020, representing over 200% growth over fiscal year 2019 new subscribers.
- Achieved a six-fold increase in fiscal year 2020 bartleby revenue versus prior year; bartleby peak Spring traffic increased over 10x year-over-year and almost 3x versus peak Fall traffic.
- Completed initial build of the Company’s next generation eCommerce platform; recently executed selective launch with expected further roll-out throughout fiscal year 2021 to grow increased high-margin general merchandise sales.
- Continued to grow the BNC First Day® inclusive access programs, with revenue increasing 91% year-over-year.
- Increased adoption of BNC First Day Complete, with eleven campus partners utilizing the complete access model in the upcoming Fall Term 2020, increasing from four in fiscal year 2020.
- Continued to win new business for both physical and virtual bookstores, including the University of Nevada, Reno, Western Kentucky University, Front Range Community College and The City Colleges of Chicago.
- Provided valuable solutions to schools to help mitigate the COVID-19 on-campus learning disruption utilizing BNED’s virtual store offerings and course material fulfillment capabilities, its BNC First Day offering, and its digital bartleby offerings to help students continue to perform while studying remotely.
While the company is excited about their online subscription study tools and products, the revenue base is still low versus the overall company. 2020 full year DSS revenues of $24mm were 10% higher versus 2019 but saw a 21% increase in the 4th quarter which could bode well for future growth during the COVID period. However, any suggestion this line item compensates for the decline in retail sales in the short to medium term would be misguided.
Later in the week, the company also announced they have reached a cooperation agreement with Outerbridge Investment LLC a key investor which will result in Outerbridge placing board members on the B&N Education board. From the press release:
Earlier in 2020, the company enacted a short term shareholder rights plan otherwise known as a poison pill defence to ward off unwanted suitors. (Press Release)Pursuant to the cooperation agreement, Outerbridge will vote all of its shares in favor of all the persons nominated by the Board to serve as directors of the Company at the 2020 Annual Meeting, which will include Mr. Robinson. Additionally, pursuant to the agreement, the Company has agreed to nominate Zachary Levenick as a director candidate for election at the 2020 Annual Meeting. Outerbridge has also agreed to abide by certain customary standstill provisions. The full agreement between BNED and Outerbridge will be filed in a Form 8-K with the U.S. Securities and Exchange Commission.“We have engaged in a constructive dialogue with BNED over the past year and are pleased to have reached this agreement in support of BNED’s future,” said Rory Wallace, Chief Investment Officer of Outerbridge. “With its unique set of offerings that serve digital, virtual and in-person education, and its highly differentiated retail business, BNED has a special opportunity not only to deliver value to its shareholders and to all stakeholders in the higher education system, but to help shape the future of the industry by stepping forward in this time of disruption. The Company has demonstrated its ability to manage expenses and liquidity while simultaneously growing bartleby® and its inclusive access offerings, First Day® and First Day Complete at an impressive, and accelerating, rate. We remain deeply committed to BNED, which we believe to be an investment opportunity with tremendous standalone and strategic value, and are excited to continue our engagement with management and the Board as we pursue our common goal of enhancing shareholder value.”Morgan Stanley & Co. is acting as financial advisor to the Company and Gibson, Dunn & Crutcher LLP is acting as legal counsel to the Company. Olshan Frome Wolosky LLP is acting as legal counsel to Outerbridge.
BNED is trending higher over the past six months but remains significantly below its 52 week high.
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