Barnes & Noble Education Inc.
03/10/2026 | Press release | Distributed by Public on 03/10/2026 14:23
Quarterly Report for Quarter Ending January 31, 2026 (Form 10-Q)
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 "MBS" refer to our subsidiary MBS Textbook Exchange, LLC.
This Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The forward-looking statements involve risks and uncertainties. Please reference the disclosure regarding forward-looking statements for more information.
Overview
Restatement of Previously Issued Consolidated Financial Statements
The accompanying condensed consolidated financial statements and related disclosures reflect the restatement of the Company's previously issued consolidated financial statements and interim financial information, as described in the Company's Annual Report on Form 10-K for the fiscal year ended May 3, 2025 (the "Annual Report"). The restatement corrected errors primarily related to the accounting for cost of digital sales and lease arrangements associated with the Company's store operating agreements.
The restatement was completed and fully reflected in the Annual Report on Form 10-K for the fiscal year ended May 3, 2025 filed with the SEC on December 23, 2025, including the restated consolidated financial statements for fiscal year ended April 27, 2024 and the restated unaudited quarterly financial information for affected interim periods. Refer to Note 3, Restatement of Previously Issued Consolidated Financial Statements, and Note 21, Restatement of Quarterly Financial Information (Unaudited), in the Annual Report on Form 10-K for the fiscal year ended May 3, 2025 filed with the SEC on December 23, 2025, for a complete description of the nature and impact of the restatement.
There have been no additional restatements or revisions to previously issued financial statements since the filing of the Annual Report.
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, and inventory management hardware and software providers. We operate 1,120 physical and virtual bookstores, delivering essential educational content and general merchandise within a dynamic omnichannel retail environment.
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 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® affordable access course material programs, consisting of First Day Complete and First Day, which provide faculty-required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition. These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which has been observed at those schools where such programs have been adopted, and improve predictability of our future results. We are moving quickly to accelerate our BNC First Day® programs strategy. Institutions continued to adopt BNC First Day® programs during the first three quarters of Fiscal 2026.
We expect to continue to introduce scalable and advanced solutions focused largely on the student and customer experience, expand our e-commerce capabilities and accelerate such capabilities through our service providers, Fanatics Retail Group Fulfillment, LLC ("Fanatics") and Fanatics Lids College, Inc. D/B/A "Lids" ("Lids") (and together with Fanatics, referred to herein as the "F/L Relationship"), win new accounts, and expand our revenue opportunities through strategic relationships. We expect gross comparable store general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the F/L Relationship. Fanatics and Lids, acting on our behalf as our service providers, provide 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 & Noblebrand (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.
For additional information related to our business, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended May 3, 2025 filed with the SEC on December 23, 2025.
BNC First Day®Affordable Access Course Material Programs
We provide product and service offerings designed to address the most pressing issues in higher education, including 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® affordable access course material programs, consisting of First Day Complete and First Day, which provide faculty-required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition.
•First Day Completeis adopted by an institution and includes all or the majority of undergraduate classes (and on occasion graduate classes), providing students both physical and digital materials. The First Day Completemodel drives substantially greater unit sales and sell-through for the bookstore.
•First Dayis adopted by a faculty member for a single course, and students receive primarily digital course materials through their school's learning management system ("LMS").
Offering course materials through our affordable access, First Day Complete and First Day models is an 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 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. These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which has been observed at those schools where such programs have been adopted, and improve predictability of our future results. We are moving quickly to accelerate our BNC First Day®programs strategy. Institutions continued to adopt BNC First Day®programs during the first three quarters of Fiscal 2026.
The following table summarizes our BNC First Day® sales:
| Dollars in millions | 13 weeks ended | 39 weeks ended | |||||||||||||||||||||||||||||||||||||||||||||
| January 31, 2026 | January 25, 2025 | Var $ | Var % | January 31, 2026 | January 25, 2025 | Var $ | Var % | ||||||||||||||||||||||||||||||||||||||||
|
First Day CompleteSales
|
$ | 190.5 | $ | 141.9 | $ | 48.6 | 34.2% | $ | 460.0 | $ | 342.7 | $ | 117.3 | 34.2% | |||||||||||||||||||||||||||||||||
|
First DaySales
|
$ | 103.1 | $ | 80.4 | $ | 22.7 | 28.2% | $ | 242.0 | 196.3 | $ | 45.7 | 23.3% | ||||||||||||||||||||||||||||||||||
|
Total BNC First Day®Sales
|
$ | 293.6 | $ | 222.3 | $ | 71.3 | 32.1% | $ | 702.0 | $ | 539.0 | $ | 163.0 | 30.2% | |||||||||||||||||||||||||||||||||
Financing Arrangements
On June 10, 2024, we completed various transactions (the "Transactions"), including an equity rights offering (the "Rights Offering"), private equity investment (the "Private Investment"), a term loan debt conversion (the "Term Loan Debt Conversion"), and credit facility refinancing (the "A&R Credit Facility Refinancing"), to substantially deleverage our Consolidated Balance Sheet. These Transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs, which will also allow us to strategically invest in innovation and continue to execute our strategic initiatives, including but not limited to the growth of our First Day Complete program. Upon closing of the Transactions on June 10, 2024:
•We received gross proceeds of $95.0 million of new equity capital through a $50.0 million new Private Investment led by Immersion Corporation and a $45.0 million Rights Offering. The Private Investment and Rights Offering infused approximately $85.5 million of net cash proceeds after transaction costs. The transactions resulted in Immersion Corporation obtaining a controlling interest in the Company.
•Our existing Term Loan lenders, TopLids and VitalSource, converted approximately $34.0 million of outstanding principal and accrued and unpaid interest into our Common Stock (the "Term Loan Debt Conversion"). We recognized a loss on extinguishment of debt of $55.2 million in the condensed consolidated Statement of Operations in connection with the Term Loan Debt Conversion which represents the difference between the Common stock fair value issued upon conversion and the net carrying value of the Term loan, plus unamortized deferred financing costs related to the Term Loan. As a result of the Term Loan Debt Conversion, the Term Loan and its related agreements were terminated.
•We refinanced our existing credit facility providing access to a $325.0 million facility maturing in 2028. The Credit Facility Refinancing has meaningfully enhanced our financial flexibility and reduced our annual interest expense.
On September 19, 2024, we entered into an at-the market ("ATM") sales agreement (the "September ATM Sales Agreement") with BTIG, LLC ("BTIG") under which we sold the maximum of $40.0 million of our Common Stock. from time to time at a weighted-average price of $10.06 per share and received $39.2 million in proceeds, net of commissions. BTIG, as the sales agent sold the shares based upon our instructions (including as to price, time or size limits or other customary parameters or conditions). We paid BTIG a commission of 2% of the gross sales proceeds of the Common Stock sold under the September ATM Sales Agreement. We were not obligated to make any sales of Common Stock under the September ATM Sales Agreement.
On December 20, 2024, we entered into an additional ATM sales agreement with BTIG (the "December ATM Sales Agreement"), under which we sold the maximum of $40.0 million of our Common Stock from time to time at a weighted-average price of $10.42 per share and received $39.2 million in proceeds, net of commissions. BTIG, as the sales agent, sold the shares based upon our instructions (including as to price, time or size limits or other customary parameters or conditions). We paid BTIG a commission of 2% of the gross sales proceeds of the Common Stock sold under the December ATM Sales Agreement. We were not obligated to make any sales of Common Stock under the December ATM Sales Agreement.
For additional information, see the Liquidity and Capital Resources in our Management's Discussion and Analysis of Financial Condition and Results of Operations, in Item 2. below.
Cost Savings Initiative
We continually seek to streamline our operations, maximize productivity and drive profitability to achieve significant cost reductions. Over the past few fiscal years, we have reduced 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. In addition, we continue to close under-performing stores, and evaluate opportunities to refinance our debt.
Segments
We identify our segments in accordance with the way our business is managed. Management determined that a realignment of the Company's operating and reporting segments was necessary to better reflect the operations of the organization. Following the change in Chief Executive Officer and financing transactions in June 2024, we streamlined operations to focus on a centralized management structure to support company-wide procurement, marketing and selling, delivery and customer service. Given the change in how the overall business is managed and how the current Chief Executive Officer (the current Chief Operating Decision Maker ("CODM") assesses performance and allocates resources, we combined the operating results of the prior two segments, Retail and Wholesale, into one operating and reporting segment. Prior period disclosures have been restated to reflect the change to one segment.
Seasonality
Our business is highly seasonal, particularly with respect to textbook sales and rentals, with the major portion of sales and operating profit realized during the second and third fiscal quarters when college students generally purchase and rent textbooks for the upcoming semesters and lowest in the first and fourth fiscal quarters. The Company's quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in its fiscal calendar dates. During the current fiscal year, the Company experienced a modest increase in the number of academic start periods occurring in the 13 and 39 weeks ended January 31, 2026, compared to the prior year, primarily due to differences in the fiscal calendar week alignment year over year.
Product sales are recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized upon delivery of the digital content as product revenue in our condensed consolidated financial statements. 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 and is recognized as rental income in our condensed consolidated financial statements. Rental revenue and margin dollars deferral from third fiscal quarter is higher compared to prior year due to the growth of the BNC First Day® programs. Depending on the product mix offered under the BNC First 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®affordable access course material 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®affordable access course material offerings, cash collection from the school generally occurs after the 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®affordable access course material program offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools. As the concentration of digital product sales increases, revenue will be recognized earlier during the academic term as digital textbook revenue is recognized when the digital content is made available to the customer compared to: (i) the rental of physical textbooks where revenue is recognized over the rental period, and (ii) a la carte courseware sales where revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores.
Trends, Competition and Other Business Conditions Affecting Our Business
The market for educational materials 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, College Enrollment and Consumer Spending Patterns.Our business is affected by capital markets, the overall economic environment, funding levels at colleges and universities, by changes in enrollments at colleges and universities, and spending on course materials and general merchandise.
•Capital Market Trends: We may require additional capital in the future to sustain or grow our 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: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 customers. In the Spring and Fall of 2025, we observed increased year-over-year 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. Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional 18 to 24 year-old college age. Online degree program enrollments continue to grow, which impacts the level of in-store traffic for general merchandise sales, just as for cafe and convenience products.
•Regulatory Trends: In 2025, numerous actions and proposals by the federal government have created uncertainty for public and private college institutions, as well as their students. These actions and proposals include: restrictions on issuances of student visas, deportation of foreign students; reduced federal funding for colleges and universities; and reductions to, or the elimination of, student loan programs and potentially the elimination of the U.S. Department of Education itself. Should any of these actions and policies move forward, they, or even the threat of these actions continue, could negatively impact student enrollment at U.S. colleges and universities, decrease operating budgets, and adversely affect our business and operating results and financial condition.
•Increased Use of Open Educational Resources ("OER"), Online and Digital Platforms as Companions or Alternatives to Traditional Course 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.
•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, and publishers, including Cengage Learning, McGraw-Hill Education and Pearson Education, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, including student-to-student transactions over the 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. Since the demand for used textbooks has historically been greater than the available supply, our financial results are highly dependent upon our wholesale business' ability to build its textbook inventory from suppliers in advance of the selling season. Some textbook publishers have begun to supply textbooks pursuant to consignment or rental programs which could impact used textbook supplies in the future. Additionally, our wholesale business 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 BNC First Day Completeaffordable access course material program, which relies upon timely receipt of 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.
•First Day Completeand First DayModels. Offering course materials sales through our affordable access, First Day Completeand First Day models is a key, and increasingly important, strategic initiative of ours to meet the market demands of substantially reduced pricing to students. Our First Day Completeand First Dayprograms contribute to improved student outcomes, while increasing our market share, revenue and relative gross profits of 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. These programs have allowed us to reverse historical long-term trends in course materials revenue declines as the growth of our BNC First Day® programs offsets declines in a la carte courseware sales and closed store sales. We continue to move quickly to accelerate our First Day Completeand First Daystrategy. Institutions continued to adopt our BNC First Day® programs during the three quarters of Fiscal 2026. 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 affordable access course material programs) 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, as we focus on the profitability of our stores. We are moving quickly and decisively to accelerate our First Day Complete strategy.
For additional discussion of our trends and other factors affecting the Company's business, seePart I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended May 3, 2025.
Results of Operations
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.
Our sales are primarily derived from the sale of course materials, which include new, used, rental and digital textbooks and 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, and other services.
Our cost of sales primarily includes costs such as merchandise costs, textbook rental 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.
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 professional services.
Results of Operations - Summary (a)
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
| Dollars in thousands |
January 31, 2026 |
January 25, 2025 |
January 31, 2026 |
January 25, 2025 |
|||||||||||||||||||
| As Restated | As Restated | ||||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| Product sales and other | $ | 471,825 | $ | 419,663 | $ | 1,344,215 | $ | 1,230,263 | |||||||||||||||
| Rental income | 43,267 | 43,162 | 103,451 | 98,115 | |||||||||||||||||||
| Total sales | $ | 515,092 | $ | 462,825 | $ | 1,447,666 | $ | 1,328,378 | |||||||||||||||
| Gross profit | $ | 96,098 | $ | 93,750 | $ | 281,312 | $ | 267,223 | |||||||||||||||
|
Income (loss) before income tax
|
$ | 9,737 | $ | 13,834 | $ | 19,737 | $ | (46,051) | |||||||||||||||
|
Net income (loss)
|
$ | 6,655 | $ | 17,942 | $ | 13,388 | $ | (42,821) | |||||||||||||||
|
Adjusted Net income (loss) (non-GAAP)(a)
|
$ | 8,207 | $ | 15,948 | $ | 18,784 | $ | (40,955) | |||||||||||||||
|
Adjusted EBITDA (non-GAAP) (a)
|
$ | 23,600 | $ | 24,750 | $ | 61,884 | $ | 58,652 | |||||||||||||||
(a)Adjusted net income (loss) and Adjusted EBITDA are non-GAAP financial measures. See Use of Non-GAAP Measuresdiscussion below.
Results of Operations - 13 and 39 weeks ended January 31, 2026 compared with the 13 and 39 weeks ended January 25, 2025
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
| Dollars in thousands |
January 31, 2026 |
January 25, 2025 |
January 31, 2026 |
January 25, 2025 |
|||||||||||||||||||
| Sales: |
As Restated
|
As Restated
|
|||||||||||||||||||||
| Product sales and other | $ | 471,825 | $ | 419,663 | $ | 1,344,215 | $ | 1,230,263 | |||||||||||||||
| Rental income | 43,267 | 43,162 | 103,451 | 98,115 | |||||||||||||||||||
| Total sales | 515,092 | 462,825 | 1,447,666 | 1,328,378 | |||||||||||||||||||
| Cost of sales (exclusive of depreciation and amortization expense): | |||||||||||||||||||||||
| Product and other cost of sales | 394,782 | 343,559 | 1,109,131 | 1,005,970 | |||||||||||||||||||
| Rental cost of sales | 24,212 | 25,516 | 57,223 | 55,185 | |||||||||||||||||||
| Total cost of sales | 418,994 | 369,075 | 1,166,354 | 1,061,155 | |||||||||||||||||||
| Gross profit | 96,098 | 93,750 | 281,312 | 267,223 | |||||||||||||||||||
| Selling and administrative expenses | 72,551 | 71,561 | 217,714 | 211,524 | |||||||||||||||||||
| Depreciation and amortization expense | 7,427 | 7,827 | 24,237 | 29,440 | |||||||||||||||||||
| Impairment loss (non-cash) | 456 | 1,713 | 456 | 1,713 | |||||||||||||||||||
|
Other (income) expense
|
1,043 | (6,268) | 6,654 | (2,800) | |||||||||||||||||||
|
Operating income
|
$ | 14,621 | $ | 18,917 | $ | 32,251 | $ | 27,346 | |||||||||||||||
| Percentage of Total Sales: | 13 weeks ended | 39 weeks ended | |||||||||||||||||||||
|
January 31, 2026 |
January 25, 2025 |
January 31, 2026 |
January 25, 2025 |
||||||||||||||||||||
|
As Restated
|
As Restated
|
||||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| Product sales and other | 91.6 | % | 90.7 | % | 92.9 | % | 92.6 | % | |||||||||||||||
| Rental income | 8.4 | 9.3 | 7.1 | 7.4 | |||||||||||||||||||
| Total sales | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||||||
| Cost of sales (exclusive of depreciation and amortization expense): | |||||||||||||||||||||||
|
Product and other cost of sales (a)
|
83.7 | 81.9 | 82.5 | 81.8 | |||||||||||||||||||
|
Rental cost of sales (a)
|
56.0 | 59.1 | 55.3 | 56.2 | |||||||||||||||||||
| Total cost of sales | 81.3 | 79.7 | 80.6 | 79.9 | |||||||||||||||||||
| Gross margin | 18.7 | 20.3 | 19.4 | 20.1 | |||||||||||||||||||
| Selling and administrative expenses | 14.1 | 15.5 | 15.0 | 15.9 | |||||||||||||||||||
| Depreciation and amortization expense | 1.4 | 1.7 | 1.7 | 2.2 | |||||||||||||||||||
| Impairment loss (non-cash) | 0.1 | 0.4 | - | 0.1 | |||||||||||||||||||
|
Other (income) expense
|
0.2 | (1.4) | 0.5 | (0.2) | |||||||||||||||||||
|
Operating income
|
2.9 | % | 4.1 | % | 2.2 | % | 2.1 | % | |||||||||||||||
(a)Represents the percentage these costs bear to the related sales, instead of total sales.
Overview
For the 13 weeks ended January 31, 2026 revenue increased by 11.3%, or $52.3 million, from last year to $515.1 million, primarily driven by growth in our BNC First Day®programs and a net increase in physical and virtual locations. Gross Comparable Store Sales increased by $33.8 million or 7.2%, during the quarter, driven by revenues from BNC First Day®programs which increased by $71.3 million, or 32.1%. Net income decreased by $11.3 million, or 62.9% to $6.7 million, compared to $17.9 million in the prior year. Adjusted EBITDA decreased by $1.2 million, or 4.7%, to $23.6 million from $24.8 million last year, in part due to a decrease in gross margins that is a result of certain timing differences in revenue recognition during the spring rush selling season, as well as investigation costs and other expense incurred in the current period.
For the 39 weeks ended January 31, 2026 revenue increased by 9.0%, or $119.3 million, from last year to $1,447.7 million, primarily driven by growth in our BNC First Day®programs and a net increase in physical and virtual locations which has helped to improve profitability. Gross Comparable Store Sales increased by $86.3 million, or 6.3%, driven by revenues from BNC First Day®programs which increased by $163.0 million, or 30.2%, helping to offset much of the decline from closed
stores in total revenue. Net income increased by $56.2 million, or 131.3% to $13.4 million, compared to $(42.8) million in the prior year. Adjusted EBITDA improved by $3.2 million, or 5.5%, to $61.9 million from $58.7 million last year, primarily driven by revenue growth from the expansion of our BNC First Day® programs, which drove higher comparable store sales, as well as the closure of unprofitable stores, partially offset by investigation-related costs incurred during the current period.
Sales
The following table summarizes our sales for the 13 and 39 weeks ended January 31, 2026 and January 25, 2025:
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 | January 25, 2025 | Var $ | Var % | January 31, 2026 | January 25, 2025 | Var $ | Var % | |||||||||||||||||||||||||||||||||||||||
|
As Restated
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Product sales and other | $ | 471,825 | $ | 419,663 | $ | 52,162 | 12.4% | $ | 1,344,215 | $ | 1,230,263 | $ | 113,952 | 9.3% | |||||||||||||||||||||||||||||||||
| Rental income | 43,267 | 43,162 | $ | 105 | 0.2% | 103,451 | 98,115 | $ | 5,336 | 5.4% | |||||||||||||||||||||||||||||||||||||
| Total Sales | $ | 515,092 | $ | 462,825 | $ | 52,267 | 11.3% | $ | 1,447,666 | $ | 1,328,378 | $ | 119,288 | 9.0% | |||||||||||||||||||||||||||||||||
Sales increased during the 13 and 39 weeks ended January 31, 2026, primarily due to higher comparable store sales, new store sales, and new adoptions of our BNC First Day®programs. Also contributing to the increase in sales is the shift in the fiscal year and the academic calendar year discussed above. These increases were offset by lower sales resulting from closed stores. The components of the sales 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 31, 2026 | January 31, 2026 | ||||||||||||
| New stores | $ | 35.2 | $ | 82.0 | ||||||||||
| Closed stores | (16.2) | (46.7) | ||||||||||||
|
Comparable stores (a)
|
41.2 | 92.3 | ||||||||||||
| Textbook rental deferral | (9.4) | (5.5) | ||||||||||||
|
Other (b)
|
0.8 | (3.5) | ||||||||||||
| Total sales variance: | $ | 51.6 | $ | 118.6 | ||||||||||
(a) Logo general merchandise sales are recognized on a net basis as commission revenue in the condensed consolidated financial statements. For Gross Comparable Store Sales details, see below.
(b) Other revenue includes brand partnership marketing, fulfillment operations, liquidation sales, shipping and handling, marketplace sales, certain accounting adjusting items related to return reserves, and other deferred items.
The following is a store count summary for physical stores and virtual stores.
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| January 31, 2026 | January 25, 2025 | January 31, 2026 | January 25, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Stores: | Physical | Virtual | Total | Physical | Virtual | Total | Physical | Virtual | Total | Physical | Virtual | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning of period | 656 | 472 | 1,128 | 653 | 509 | 1,162 | 653 | 493 | 1,146 | 707 | 538 | 1,245 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Opened | 6 | 2 | 8 | 5 | 8 | 13 | 43 | 13 | 56 | 25 | 24 | 49 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Closed | 14 | 2 | 16 | 9 | 2 | 11 | 48 | 34 | 82 | 83 | 47 | 130 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| End of period | 648 | 472 | 1,120 | 649 | 515 | 1,164 | 648 | 472 | 1,120 | 649 | 515 | 1,164 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
During the 39 weeks ended January 31, 2026, we opened 56 stores and closed 82 stores. The Company's strategic initiative is to close under-performing and less profitable stores.
Generally, sales are impacted by revenue from net new/closed stores, conversion to BNC First Day®programs, increased campus traffic, and an increase in the number and timing of on campus activities and events, such as graduations, athletic events, alumni events, merchandising and marketing programs, and prospective student campus tours.
Our total sales increased by $52.3 million, or 11.3%, to $515.1 million during the 13 weeks ended January 31, 2026 from $462.8 million during the 13 weeks ended January 25, 2025.
•Product sales and other increased by $52.2 million, or 12.4%, to $471.8 million during the 13 weeks ended January 31, 2026 from $419.7 million during the 13 weeks ended January 25, 2025.
◦Course material product sales increased by $53.5 million, or 17.6%, to $357.8 million during the 13 weeks ended January 31, 2026, compared to $304.2 million in the prior year period. The increase was primarily related to higher comparable store sales and new store sales primarily due to organic growth in our BNC First Day®programs, which increased by $71.3 million, or 32.1%, to $293.6 million, offset by lower sales resulting from closed stores.
| Dollars in millions | 13 weeks ended | |||||||||||||||||||||||||
| January 31, 2026 | January 25, 2025 | Var $ | Var % | |||||||||||||||||||||||
|
First Day CompleteSales
|
$ | 190.5 | $ | 141.9 | $ | 48.6 | 34.2% | |||||||||||||||||||
|
First DaySales
|
103.1 | $ | 80.4 | $ | 22.7 | 28.2% | ||||||||||||||||||||
|
Total BNC First Day®Sales
|
$ | 293.6 | $ | 222.3 | $ | 71.3 | 32.1% | |||||||||||||||||||
◦Gross Comparable Store Sales for course materials increased by $43.7 million, or 12.2%, compared to the prior year period as discussed below.
◦General merchandise product net sales decreased by $(2.2) million, or (2.2)%, to $95.1 million, compared to $97.3 million in the prior year period, primarily due to lower emblematic product sales. Gross Comparable Store Sales for general merchandise decreased by $(9.9) million, or (8.6)%, compared to the prior year period as discussed below.
◦Service and other revenue increased by $0.8 million, or 4.6%, to $18.9 million, compared to $18.1 million in the prior year period, primarily due to higher rental penalty fees and higher marketplace sales, offset by lower liquidation sales, lower web deferrals revenue, lower shipping and handling and lower partnership marketing income.
•Rental income for course materials increased by $0.1 million, or 0.2%, to $43.3 million during the 13 weeks ended January 31, 2026 from $43.2 million during the 13 weeks ended January 25, 2025 primarily due to the growth of our BNC First Day®programs, offset by lower recognition of deferred rental income due to the shift in the calendar year versus the academic school year, closed stores and the shift to digital products.
Our total sales increased by $119.3 million, or 9.0%, to $1,447.7 million during the 39 weeks ended January 31, 2026 from $1,328.4 million during the 39 weeks ended January 25, 2025.
•Product sales and other, increased by $114.0 million, or 9.3%, to $1,344.2 million during the 39 weeks ended January 31, 2026 from $1,230.3 million during the 39 weeks ended January 25, 2025.
◦Course material product sales increased by $116.9 million, or 13.6%, to $974.6 million during the 39 weeks ended January 31, 2026, compared to $857.7 million in the prior year period. The increase was primarily related to higher comparable store sales and new store sales primarily due to our BNC First Day®programs, which increased by $163.0 million, or 30.2%, to $702.0 million, offset by lower sales resulting from closed stores.
| Dollars in millions | 39 weeks ended | |||||||||||||||||||||||||
| January 31, 2026 | January 25, 2025 | Var $ | Var % | |||||||||||||||||||||||
|
First Day CompleteSales
|
$ | 460.0 | $ | 342.7 | $ | 117.3 | 34.2% | |||||||||||||||||||
|
First DaySales
|
242.0 | $ | 196.3 | $ | 45.7 | 23.3% | ||||||||||||||||||||
|
Total BNC First Day®Sales
|
$ | 702.0 | $ | 539.0 | $ | 163.0 | 30.2% | |||||||||||||||||||
◦Gross Comparable Store Sales for course materials increased by $93.7 million, or 9.6%, compared to the prior year period as discussed below.
◦General merchandise product net sales increased by $0.4 million, or 0.2%, to $302.5 million, compared to $302.1 million in the prior year period. Gross Comparable Store Sales for general merchandise decreased by $(7.4) million, or (1.9)%, compared to the prior year period as discussed below.
◦Service and other revenue decreased by $3.5 million, or 4.9%, to $67.0 million, compared to $70.5 million in the prior year period, primarily due to lower liquidation sales, lower web deferrals revenue, lower shipping and handling and lower partnership marketing income, offset by higher rental penalty fees and higher marketplace sales.
•Rental income for course materials increased by $5.4 million, or 5.4%, to $103.5 million during the 39 weeks ended January 31, 2026 from $98.1 million during the 39 weeks ended January 25, 2025 primarily due to the growth of our BNC First Day®programs, offset by lower rentals due to closed stores and the shift to digital products.
Gross Comparable Store Sales
To supplement the Total Sales table presented above, the Company uses Gross Comparable Store Sales as a key performance indicator. 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 Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis in Gross Comparable Store Sales compared to a net basis as commission revenue in our condensed consolidated financial statements.
We believe the current 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. 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 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.
The increase in course material sales for the 39 weeks ended January 31, 2026 was primarily due to the growth of BNC First Day®affordable access course material programs (as discussed above), offset by declines in a la carte courseware sales. The decrease in general merchandise sales are primarily related to lower logo sales, graduation product sales due to timing of graduation events shifting to fourth quarter of Fiscal 2025 from first quarter of Fiscal 2026.
Gross Comparable Store Sales variances by category for the 13 and 39 week periods are as follows:
| 13 weeks ended | 39 weeks ended | |||||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in millions | January 31, 2026 | January 25, 2025 | January 31, 2026 | January 25, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Textbooks (Course Materials) | $ | 43.7 | 12.2 | % | $ | 23.3 | 6.8 | % | $ | 93.7 | 9.6 | % | $ | 67.6 | 7.3 | % | ||||||||||||||||||||||||||||||||||
| General Merchandise | (9.9) | (8.6) | % | 6.8 | 6.1 | % | (7.4) | (1.9) | % | (3.2) | (0.8) | % | ||||||||||||||||||||||||||||||||||||||
| Total Gross Comparable Store Sales | $ | 33.8 | 7.2 | % | $ | 30.1 | 6.6 | % | $ | 86.3 | 6.3 | % | $ | 64.4 | 4.8 | % | ||||||||||||||||||||||||||||||||||
Cost of Sales and Gross Margin
Our cost of sales increased as a percentage of sales to 81.3% during the 13 weeks ended January 31, 2026 compared to 79.7% during the 13 weeks ended January 25, 2025. Our gross margin increased by $2.3 million, or 2.5%, to $96.1 million, or 18.7% of sales, during the 13 weeks ended January 31, 2026 from $93.8 million, or 20.3% of sales during the 13 weeks ended January 25, 2025.
Our cost of sales increased as a percentage of sales to 80.6% during the 39 weeks ended January 31, 2026 compared to 79.9% during the 39 weeks ended January 25, 2025. Our gross margin increased by $14.1 million, or 5.3%, to $281.3 million, or 19.4% of sales, during the 39 weeks ended January 31, 2026 from $267.2 million, or 20.1% of sales during the 39 weeks ended January 25, 2025.
The following table summarizes the cost of sales:
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 |
% of Related Sales |
January 25, 2025 |
% of Related Sales |
January 31, 2026 |
% of Related Sales |
January 25, 2025 |
% of Related Sales |
|||||||||||||||||||||||||||||||||||||||
| As Restated | As Restated | ||||||||||||||||||||||||||||||||||||||||||||||
| Product and other cost of sales | $ | 394,782 | 83.7% | $ | 343,559 | 81.9% | $ | 1,109,131 | 82.5 | % | $ | 1,005,970 | 81.8 | % | |||||||||||||||||||||||||||||||||
| Rental cost of sales | 24,212 | 56.0% | 25,516 | 59.1% | 57,223 | 55.3 | % | 55,185 | 56.2 | % | |||||||||||||||||||||||||||||||||||||
| Total Cost of Sales | $ | 418,994 | 81.3% | $ | 369,075 | 79.7% | $ | 1,166,354 | 80.6 | % | $ | 1,061,155 | 79.9 | % | |||||||||||||||||||||||||||||||||
The following table summarizes the gross margin:
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 |
% of Related Sales |
January 25, 2025 |
% of Related Sales |
January 31, 2026 |
% of Related Sales |
January 25, 2025 |
% of Related Sales |
|||||||||||||||||||||||||||||||||||||||
| As Restated | As Restated | ||||||||||||||||||||||||||||||||||||||||||||||
| Product and other gross margin | $ | 77,043 | 16.3% | $ | 76,104 | 18.1% | $ | 235,084 | 17.5 | % | $ | 224,293 | 18.2 | % | |||||||||||||||||||||||||||||||||
| Rental gross margin | 19,055 | 44.0% | 17,646 | 40.9% | 46,228 | 44.7 | % | 42,930 | 43.8 | % | |||||||||||||||||||||||||||||||||||||
| Gross Margin | $ | 96,098 | 18.7% | $ | 93,750 | 20.3% | $ | 281,312 | 19.4 | % | $ | 267,223 | 20.1 | % | |||||||||||||||||||||||||||||||||
For the 13 weeks ended January 31, 2026, the gross margin as a percentage of sales decreased as discussed below:
•Product and other gross margin decreased (180 basis points), primarily due to lower margin rates (320 basis points) due to reduced logo and non-logo general merchandise sales and higher markdowns related to closed stores, partially, offset by lower contract costs as a percentage of sales (140 basis points) related to our college and university contracts as a result of the shift to digital and First Day models and lower performing school contracts not renewed.
•Rental gross margin as a percentage of sales increased driven primarily by higher rental margin rates, offset by higher contract costs as a percentage of sales related to our college and university contracts.
For the 39 weeks ended January 31, 2026, the gross margin as a percentage of sales decreased as discussed below:
•Product and other gross margin decreased (70 basis points), primarily due to lower margin rates (190 basis points) due to logo and non-logo general merchandise sales, offset by lower contract costs as a percentage of sales (120 basis points) related to our college and university contracts as a result of the shift to digital and First Day models and lower performing school contracts not renewed.
•Rental gross margin as a percentage of sales increased driven primarily by lower contract costs as a percentage of sales related to our college and university contracts, offset by lower rental margin rates.
Selling and Administrative Expenses
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 |
% of Sales |
January 25, 2025 |
% of Sales |
January 31, 2026 |
% of Sales |
January 25, 2025 |
% of Sales |
|||||||||||||||||||||||||||||||||||||||
|
As Restated
|
As Restated
|
||||||||||||||||||||||||||||||||||||||||||||||
| Total Selling and Administrative Expenses | $ | 72,551 | 14.1% | $ | 71,561 | 15.5% | $ | 217,714 | 15.0% | $ | 211,524 | 15.9% | |||||||||||||||||||||||||||||||||||
During the 13 weeks ended January 31, 2026, selling and administrative expenses increased by $1.0 million, or 1.4%, to $72.6 million from $71.6 million during the 13 weeks ended January 25, 2025. This increase was primarily due to a $0.4 million increase in payroll and related operating costs, and a $0.6 million increase in incentive plan expense.
During the 39 weeks ended January 31, 2026, selling and administrative expenses increased by $6.2 million, or 2.9%, to $217.7 million from $211.5 million during the 39 weeks ended January 25, 2025. This increase was primarily due to a $3.1 million increase in payroll and related operating costs, and a $3.1 million increase in incentive plan expense.
Depreciation and Amortization Expense
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 |
% of Sales |
January 25, 2025 |
% of Sales |
January 31, 2026 |
% of Sales |
January 25, 2025 |
% of Sales |
|||||||||||||||||||||||||||||||||||||||
|
As Restated
|
As Restated | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Depreciation and Amortization Expense | $ | 7,427 | 1.4% | $ | 7,827 | 1.7% | $ | 24,237 | 1.7% | $ | 29,440 | 2.2% | |||||||||||||||||||||||||||||||||||
Depreciation and amortization expense decreased by $0.4 million, to $7.4 million during the 13 weeks ended January 31, 2026 from $7.8 million during the 13 weeks ended January 25, 2025. The decrease was primarily attributable to lower depreciable assets and intangibles, offset by capital additions and accelerated intangible amortization related to closed stores.
Depreciation and amortization expense decreased by $5.2 million, to $24.2 million during the 39 weeks ended January 31, 2026 from $29.4 million during the 39 weeks ended January 25, 2025. The decrease was primarily attributable to lower depreciable assets and intangibles, offset by capital additions and accelerated intangible amortization related to closed stores.
Impairment Loss
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 31, 2026, we evaluated certain of our store-level long-lived assets for impairment. Based on the results of the impairment tests, we recognized an impairment loss of $0.5 million (both pre-tax and after-tax), comprised of 0.2 million, $0.1 million, and $0.2 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 27, 2025, we evaluated certain of our store-level long-lived assets for impairment. Based on the results of the impairment tests, we recognized an impairment loss of $1.7 million (both pre-tax and after-tax), comprised of 0.3 million, $0.3 million, and $1.1 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the condensed consolidated statement of operations.
Other (income) expense
During the 13 and 39 weeks ended January 31, 2026, the Company recognized other (income) expense totaling $1.0 million and $6.7 million, respectively, comprised of Investigation related costs.
During the 13 and 39 weeks ended January 25, 2025, the Company recognized other expense totaling $(6.3) million and $(2.8) million, respectively, comprised primarily of $(7.6) million and $(9.0) million, respectively, related to the termination of liabilities related to a frozen retirement benefit plan; $0 and $2.1million, respectively, related to severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction initiatives, $0 and $2.0 million, respectively, of severance primarily related to the resignation of the former Chief Executive Officer on June 11, 2024, of which $(1.8) million is included in accrued liabilities in the condensed Consolidated Balance Sheet as of October 26, 2024), nil and $0.9 million, respectively, for legal and advisory professional service costs for restructuring and process improvements and other charges; and $1,300 related to the settlement of a class action lawsuit and related legal fees.
Operating Income
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 |
% of Sales |
January 25, 2025 |
% of Sales |
January 31, 2026 |
% of Sales |
January 25, 2025 |
% of Sales |
|||||||||||||||||||||||||||||||||||||||
|
As Restated
|
As Restated
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Total Operating Income
|
$ | 14,621 | 2.9% | $ | 18,917 | 4.1% | $ | 32,251 | 2.2% | $ | 27,346 | 2.1% | |||||||||||||||||||||||||||||||||||
Our operating income was $14.6 million during the 13 weeks ended January 31, 2026, compared to operating income of $18.9 million during the 13 weeks ended January 25, 2025. The decrease in operating income is due to the matters discussed above.
Our operating income was $32.3 million during the 39 weeks ended January 31, 2026, compared to operating income of $27.3 million during the 39 weeks ended January 25, 2025. The increase in operating income is due to the matters discussed above.
Loss on extinguishment of debt
On June 10, 2024, our existing Term Loan lenders converted approximately $34.0 million of outstanding principal and accrued and unpaid interest into our Common Stock. We recognized a loss on extinguishment of debt of $55.2 million during the 39 weeks ended January 25, 2025 in the condensed consolidated Statement of Operations in connection with the Term Loan Debt Conversion which represents the difference between the Common Stock fair value issued upon conversion and the net carrying value of the Term Loan, plus unamortized deferred financing costs related to the Term Loan. As a result of the Term Loan Debt Conversion, the Term Loan and its related documentation was terminated. There were no debt conversions in the comparable prior period. See Item 1. Financial Statements -Note 6.Equityand Note 10.Debt.
Interest Expense, Net
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 | January 25, 2025 | January 31, 2026 | January 25, 2025 | |||||||||||||||||||
| Interest Expense, Net | $ | 4,884 | $ | 5,083 | $ | 12,514 | $ | 18,164 | |||||||||||||||
Net interest expense decreased by $0.2 million to $4.9 million during the 13 weeks ended January 31, 2026 from $5.1 million during the 13 weeks ended January 25, 2025. Interest expense decreased primarily due to lower borrowings and lower interest rates. Interest expense for the 13 weeks and 39 weeks ended January 31, 2026 includes $0.3 and $1.0, respectively, of waiver fees incurred in connection with the Investigation.
Net interest expense decreased by $5.7 million to $12.5 million during the 39 weeks ended January 31, 2026 from $18.2 million during the 39 weeks ended January 25, 2025. Interest expense decreased primarily due to lower borrowings and lower interest rates.
Income Tax (Benefit) Expense
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 | Effective Rate | January 25, 2025 | Effective Rate | January 31, 2026 | Effective Rate | January 25, 2025 | Effective Rate | |||||||||||||||||||||||||||||||||||||||
|
Income Tax (Benefit) Expense
|
$ | 3,082 | 31.7% | $ | (4,108) | (29.7)% | $ | 6,349 | 32.2% | $ | (3,230) | 7.0% | |||||||||||||||||||||||||||||||||||
We recorded an income tax expense of $3.1 million on pre-tax income of $9.7 million during the 13 weeks ended January 31, 2026, which represented an effective income tax rate of 31.7% and we recorded an income tax benefit of $(4.1) million on a pre-tax income of $13.8 million during the 13 weeks ended January 25, 2025, which represented an effective income tax rate of (29.7)%. The effective tax rate for the 13 weeks ended January 31, 2026 is higher than the prior year comparable period due to the Internal Revenue Code (IRC) 382 limitation on attribute utilization, increased projections of taxable income, and decrease in the valuation allowance.
We recorded an income tax expense of $6.3 million on pre-tax income of $19.7 million during the 39 weeks ended January 31, 2026, which represented an effective income tax rate of 32.2% and we recorded an income tax benefit of $(3.2) million on a pre-tax loss of $46.1 million during the 39 weeks ended January 25, 2025, which represented an effective income tax rate of 7.0%. The effective tax rate for the 39 weeks ended January 31, 2026 is higher than the prior year comparable period due to the Internal Revenue Code (IRC) 382 limitation on attribute utilization, increased projections of taxable income, and decrease in the valuation allowance.
Net Income (Loss)
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 | January 25, 2025 | January 31, 2026 | January 25, 2025 | |||||||||||||||||||
|
As Restated
|
As Restated
|
||||||||||||||||||||||
| Net Income (Loss) | $ | 6,655 | $ | 17,942 | $ | 13,388 | $ | (42,821) | |||||||||||||||
Net income was $6.7 million during the 13 weeks ended January 31, 2026, compared with Net income of $17.9 million during the 13 weeks ended January 25, 2025. As a result of the factors discussed above, Net income was $13.4 million during the 39 weeks ended October 26, 2024, compared with a net loss $42.8 million during the 39 weeks ended October 28, 2023.
Use of Non-GAAP Measures - Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Free Cash Flow
To supplement our results prepared in accordance with generally accepted accounting principles ("GAAP"), we present certain non-GAAP financial measures, including Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Free Cash Flow. These measures are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934 and Item 10(e) of Regulation S-K.
We define Adjusted Net Income (Loss) as Net income (loss), the most directly comparable GAAP measure, adjusted for certain reconciling items that are subtracted from or added to Net income (loss). We define Adjusted EBITDA as Net income (loss), the most directly comparable GAAP measure, plus (1) depreciation and amortization; (2) interest expense (3) income taxes, and (4) as adjusted for certain other non-cash or non-recurring items, and other adjustments permitted under our A&R Credit Agreement. We define Adjusted Free Cash Flow as cash flows from operating activities, the most directly comparable GAAP measure, less capital expenditures, cash interest and cash taxes.
We consistently calculate these non-GAAP measures using the same methodology each period. Management uses these measures as internal performance metrics to evaluate results at the consolidated level, to plan and forecast performance, to allocate capital, and in connection with performance incentive plans. The Board of Directors and management also use Adjusted EBITDA as one of the primary tools for assessing operating performance and determining capital allocation. We believe that Adjusted Free Cash Flow provides useful additional information about liquidity, including cash available for debt service, working capital requirements, and strategic investments.
We encourage investors to review our condensed consolidated financial statements included elsewhere in this Form 10-Q. Reconciliations of Adjusted Net Income (Loss) to Net income (loss), Adjusted EBITDA to Net income (loss), and Adjusted Free Cash flow to cash flow from operating activities, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance.
These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures of financial performance prepared in accordance with GAAP. In addition, our definitions of these non-GAAP financial measures may differ from those used by other companies, limiting comparability.
For a discussion regarding the Seasonality of our business, see Management Discussion and Analysis - Seasonality discussion above.
Adjusted Net Income (Loss)
| 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 | January 25, 2025 | January 31, 2026 | January 25, 2025 | |||||||||||||||||||
|
As Restated
|
As Restated
|
||||||||||||||||||||||
| Net income (loss) | $ | 6,655 | $ | 17,942 | $ | 13,388 | $ | (42,821) | |||||||||||||||
|
Reconciling items (below)
|
1,552 | (1,994) | 5,396 | 1,866 | |||||||||||||||||||
|
Adjusted Net Income (Loss)
|
$ | 8,207 | $ | 15,948 | $ | 18,784 | $ | (40,955) | |||||||||||||||
| Reconciling items | |||||||||||||||||||||||
|
Impairment loss (a)
|
$ | 456 | $ | 1,713 | $ | 456 | $ | 1,713 | |||||||||||||||
|
Other (income) expense, net of Investigation expenses (a)
|
222 | (6,268) | (251) | (2,800) | |||||||||||||||||||
|
Stock-based compensation expense
|
874 | 2,561 | 5,191 | 2,953 | |||||||||||||||||||
|
Reconciling items
|
$ | 1,552 | $ | (1,994) | $ | 5,396 | $ | 1,866 | |||||||||||||||
Adjusted EBITDA
| 13 weeks ended | 39 weeks ended | |||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 | January 25, 2025 | January 31, 2026 | January 25, 2025 | ||||||||||||||||||||||
|
As Restated
|
As Restated
|
|||||||||||||||||||||||||
| Net income (loss) | $ | 6,655 | $ | 17,942 | $ | 13,388 | $ | (42,821) | ||||||||||||||||||
| Add: | ||||||||||||||||||||||||||
| Depreciation and amortization expense | 7,427 | 7,827 | 24,237 | 29,440 | ||||||||||||||||||||||
| Interest expense, net | 4,884 | 5,083 | 12,514 | 18,164 | ||||||||||||||||||||||
|
Income tax (benefit) expense
|
3,082 | (4,108) | 6,349 | (3,230) | ||||||||||||||||||||||
|
Impairment loss (a)
|
456 | 1,713 | 456 | 1,713 | ||||||||||||||||||||||
|
Loss on extinguishment of debt (a)
|
- | - | - | 55,233 | ||||||||||||||||||||||
|
Other (income) expense, net of Investigation expenses (a)
|
222 | (6,268) | (251) | (2,800) | ||||||||||||||||||||||
|
Stock-based compensation expense
|
874 | 2,561 | 5,191 | 2,953 | ||||||||||||||||||||||
|
Adjusted EBITDA
|
$ | 23,600 | $ | 24,750 | $ | 61,884 | $ | 58,652 | ||||||||||||||||||
(a) See Management Discussion and Analysis and Results of Operations.
Adjusted Free Cash Flow
| 13 weeks ended | 39 weeks ended | |||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 | January 25, 2025 | January 31, 2026 | January 25, 2025 | ||||||||||||||||||||||
|
As Restated
|
As Restated
|
|||||||||||||||||||||||||
|
Net cash flows used in operating activities (a)
|
$ | (29,388) | $ | (41,945) | $ | (30,752) | $ | (138,037) | ||||||||||||||||||
| Less: | ||||||||||||||||||||||||||
|
Capital expenditures (b)
|
3,807 | 2,772 | 11,858 | 9,790 | ||||||||||||||||||||||
| Cash interest | 3,656 | 4,633 | 9,961 | 14,499 | ||||||||||||||||||||||
| Cash taxes | 1,412 | 67 | 1,724 | (2,018) | ||||||||||||||||||||||
|
Adjusted Free Cash Flow
|
$ | (38,263) | $ | (49,417) | $ | (54,295) | $ | (160,308) | ||||||||||||||||||
(a) See Liquidity and Capital Resources - Sources and Uses of Cash Flowdiscussion below.
Given the growth of our 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®affordable access course material offerings, cash collection from the school generally occurs after the 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®affordable access course material offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools.
(b) 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, and enhancements to internal systems and our website. The following table provides the components of total purchases of property and equipment:
| Capital Expenditures | 13 weeks ended | 39 weeks ended | ||||||||||||||||||||||||
| Dollars in thousands | January 31, 2026 | January 25, 2025 | January 31, 2026 | January 25, 2025 | ||||||||||||||||||||||
|
As Restated
|
As Restated
|
|||||||||||||||||||||||||
| Physical store capital expenditures | $ | 1,975 | $ | 1,219 | $ | 7,325 | $ | 5,059 | ||||||||||||||||||
| Product and system development | 1,425 | 1,378 | 3,700 | 4,086 | ||||||||||||||||||||||
| Other | 407 | 175 | 833 | 645 | ||||||||||||||||||||||
| Total Capital Expenditures | $ | 3,807 | $ | 2,772 | $ | 11,858 | $ | 9,790 | ||||||||||||||||||
Liquidity and Capital Resources
Our primary sources of cash are net cash flows from operating activities, funds available under our A&R Credit 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 purchase textbooks for the upcoming Fall and Spring semesters, respectively. As of January 31, 2026, we had $18.4 million of cash on hand, including $8.3 million of restricted cash primarily related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Relationship-related agreements.
On June 10, 2024, we completed the Transactions to substantially deleverage our Consolidated Balance Sheet. These transactions also raised additional capital for repayment of indebtedness and provide additional flexibility for future working capital needs. Additionally, on September 19, 2024 and December 20, 2024, we entered into the September ATM Sales Agreement and the December ATM Sales Agreement, respectively, with BTIG, under which we sold our Common Stock from time to time through BTIG as the sales agent (See Note 6. Equityfor additional information).
We believe that our future cash from operations, access to borrowings under the Credit Facility Refinancing, and short-term vendor financing will provide adequate resources to fund our operating and financing needs for the next twelve months and beyond. 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.
Liquidity
Sources and Uses of Cash Flows
| 39 weeks ended | ||||||||||||||
| Dollars in thousands | January 31, 2026 | January 25, 2025 | ||||||||||||
|
As Restated
|
||||||||||||||
| Net cash flows used in operating activities | $ | (30,752) | $ | (138,037) | ||||||||||
| Net cash flows used in investing activities | (11,781) | (8,998) | ||||||||||||
| Net cash flows provided by financing activities | 32,234 | 135,192 | ||||||||||||
| Net change in cash, cash equivalents, and restricted cash | $ | (10,299) | $ | (11,843) | ||||||||||
As of January 31, 2026 and January 25, 2025, we had restricted cash of $8.3 million and $7.5 million, respectively, comprised of $5.9 million and $5.2 million, respectively, in prepaid and other current assets in the condensed Consolidated Balance Sheets related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $2.4 million and $2.3 million, respectively, in other noncurrent assets in the condensed Consolidated Balance Sheets related to amounts held in trust for future distributions related to employee benefit plans.
Cash Flow from Operating Activities
Our business is highly seasonal. 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, 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®affordable access course material program offerings, cash collection from the school generally occurs after the 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®affordable access course material program offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools. Our quarterly cash flows 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.
Cash Flow from Operating Activities
Cash flows used in operating activities during the 39 weeks ended January 31, 2026 were $(30.8) million compared to $(138.0) million during the 39 weeks ended January 25, 2025. The decrease in cash flows used in operating activities of $107.3 million was primarily driven by favorable working capital changes, including the timing of payments to vendors reflected in higher accounts payable balances. This improvement was partially offset by increased receivables associated with the continued growth of the Company's BNC First Day® affordable access course material programs, as well as increased inventory levels during the period.
Cash Flow from Investing Activities
Cash flows used in investing activities during the 39 weeks ended January 31, 2026 were $(11.8) million compared to $(9.0) million during the 39 weeks ended January 25, 2025. The increase in cash used in investing activities is primarily due to higher capital expenditures, which totaled $11.8 million compared to $9.8 million in the prior year period, primarily related to investments in store construction, internal systems and website enhancements.
Cash Flow from Financing Activities
Cash flows provided by financing activities during the 39 weeks ended January 31, 2026 were $32.2 million compared to $135.2 million during the 39 weeks ended January 25, 2025. The net change of $103.0 million was primarily driven by equity financing transactions completed in the prior year period, including $50.0 million from a new equity investment led by Immersion Corporation, $45.0 million from a fully backstopped Rights Offering, and $78.5 million of proceeds from the sale of Common Stock under the Company's ATM facility. These prior year inflows were partially offset by higher net borrowings during the 39 weeks ended January 31, 2026 compared to the prior year period.
Capital Resources
Financing Arrangements
On June 10, 2024, the Company completed a series of financing and recapitalization Transactions that significantly deleveraged its Consolidated Balance Sheet and enhanced liquidity. The Transactions included equity issuances, the conversion of the Company's term loan indebtedness into equity, and the refinancing of the Company's asset-based revolving credit facility.
As of January 31, 2026, the Company had the full $325 million borrowing capacity available under its revolving credit facility with no borrowing base or collateral limitations, subject to compliance with applicable covenants with $138.4 million outstanding.
In connection with the Transactions, the Company raised $95.0 million of gross equity proceeds through a private investment and a fully backstopped rights offering, resulting in net cash proceeds of approximately $85.5 million after transaction costs. Upon closing, Immersion Corporation obtained a controlling interest in the Company.
Also on the Closing Date, the Company's existing term loan indebtedness was converted into shares of the Company's Common Stock and extinguished. The Company refinanced its asset-based revolving credit facility, which provides aggregate revolving commitments of up to $325.0 million and matures in 2028. Refer to Note 6. Equityand Note 10. Debtfor additional information.
Subsequent to the Closing Date, the Company entered into at-the-market equity sales agreements pursuant to which it sold an aggregate of $80.0 million of Common Stock. The Company maintains an effective shelf registration statement for potential future issuances, however, the shelf registration statement will be available for use again after the date of this filing. It is not considered a source of liquidity as of the date of this filing.
Share Repurchases
During the 39 weeks ended January 31, 2026, we did not repurchase any of our Common Stock under the stock repurchase program. As of January 31, 2026, approximately $26.7 million remains available under the stock repurchase program.
Critical Accounting Estimates
Our policies regarding the use of estimates and other critical accounting policies are consistent with the disclosures in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the fiscal year ended May 3, 2025.
Barnes & Noble Education Inc. published this content on March 10, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 10, 2026 at 20:23 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]