What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-09-02 compared with 2021-03-09 · 241 added, 349 removed, 365 unchanged (62% of the section changed)

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References to “MBS” refer to our subsidiary MBS Textbook Exchange, LLC.

References to “Student Brands ” refer to our subsidiary Student Brands, LLC.

Description of Business

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The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands.

We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities, increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect the changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, as we improve our e-commerce capabilities through investments we are making in new systems, processes and people.

We believe the BNC and MBS brands are synonymous with innovation in bookselling and campus retail, 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 for leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our recent merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

(“Fanatics”) and Fanatics Lids College, Inc.

(“FLC”) (collectively referred to herein as the “FLC Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the FLC Partnership.

Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo and emblematic general merchandise business.

We believe the Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States.

Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

For additional information related to our business, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

Wolfram|Alpha Agreement

During the first quarter of Fiscal 2022, we launched Math Solver , a new bartleby ® product feature that is powered by Wolfram|Alpha best-in-class computation engine.

Math Solver allows students to access an interactive digital calculator that provides real-time, step-by-step explanations for even the most advanced math problems in subjects such as Algebra, Pre-Calc, Calculus.

Partnership with Fanatics and FLC

In December 2020, we entered into a new merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

('Fanatics") and Fanatics Lids College, Inc.

Through this partnership, we will receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our high margin general merchandise business.

Fanatics’ cutting-edge e-commerce and technology expertise will offer our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform.

Coupled with FLC, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores will have improved access to trend and sales performance data on licensees, product styles, and design treatments.

FLC has agreed to purchase our logo and emblematic general merchandise inventory, which we expect to be finalized during our fiscal 2021 fourth quarter.

We will maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores.

We will also work closely with our campus partners to ensure that each campus store will maintain unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand.

We will leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites.

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

We expect to go live with this partnership beginning in the second calendar quarter of 2021.

Additionally, Fanatics, Inc.

In December 2020, we entered into the FLC Partnership.

Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform.

Coupled with FLC, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.

We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores.

We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand.

We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites.

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

In December 2020, Fanatics, Inc.

and Lids Holdings, Inc.

jointly made a $15,000 strategic equity investment in BNED and received 2,307,692 common shares of BNED in exchange.

We expect to use these proceeds for general corporate purposes.

jointly made a strategic equity investment in BNED.

On April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement, we sold our logo and emblematic general merchandise inventory to FLC, which was finalized during the first quarter of Fiscal 2022.

As contemplated by the FLC Partnership's e-commerce agreement, we began to transition certain of our e-commerce sites to Fanatics e-commerce sites for logo and emblematic products during the first quarter of Fiscal 2022.

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic general merchandise sales on a gross basis in the prior year.

For additional information, see Item 1.

Financial Statements - Note 2.

Equity and Earnings Per Share .

Wolfram|Alpha Agreement

In December 2020, we entered into an agreement with Wolfram|Alpha to develop a math solver as a new feature in our bartleby suite of homework help and learning solutions.

math solver will allow students to access an interactive digital calculator that provides real-time, step-by-step explanations for even the most advanced math problems.

Summary of Significant Accounting Policies - Merchandise Inventories .

COVID-19 Business Impact

Our business experienced an unprecedented and significant impact as a result of COVID-19 related campus store closures.

Our business experienced an unprecedented and significant negative impact as a result of COVID-19 related campus store closures.

Beginning in March 2020, colleges and universities nationwide began to close their campuses in light of safety concerns and as a result of local and state issued stay-at-home orders.

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We developed and implemented plans to safely reopen our campus stores based on national, state and local guidelines, as well as the campus policies set by the school administration.

Colleges and universities in the United States continue to adjust their plans for each academic term, with some implementing shortened semesters or choosing to remain fully virtual in order to best protect students and faculty.

As many schools adjusted their learning model and curtailed on-campus activities in response to the pandemic, our flexible offerings ensured that students were equipped with their course materials regardless of whether schools resumed classes on campus, remotely or via a hybrid learning model.

Our fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning model and on-campus activities in response to the pandemic.

Fewer students have returned to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

While many big athletic conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s high-margin general merchandise business.

Additionally, sales were impacted by overall enrollment declines in higher education.

Financial Statements - Note 2.

Summary of Significant Accounting Policies - Evaluation of Goodwill and Other Long-Lived Assets related to the impairment loss (non-cash) recognized during the 13 weeks ended January 30, 3021.

The COVID-19 impact on higher education remains a fluid situation, and we are committed to supporting our campus partners through our flexible offerings and our ability to quickly pivot to ensure uninterrupted service as institutions manage the safety of their campuses.

There is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve.

We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including the Delta variant, on enrollments, university budgets, athletics and other areas that directly affect our business operations .

Although most schools expect to return to a traditional on-campus environment for learning in the upcoming Fall semester, as well as host traditional on campus sporting activities and events, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to determine when our operations can begin returning to normal levels of business.

If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations.

For additional information, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021 .

We have three reportable segments:

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Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products.

The majority of the physical campus bookstores have school-branded e-commerce sites which we operate and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts.

The majority of the physical campus bookstores have school-branded e-commerce sites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts.

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

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• Overall Economic Environment, College Enrollment and Consumer Spending Patterns.

Our business is affected by the COVID-19 pandemic, 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.

• Impact of COVID-19 :

Our business is affected by the impact of the COVID-19 pandemic, 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.

• Impact of the COVID-19 Pandemic :

The COVID-19 pandemic has materially and adversely impacted certain segments of the U.S.

economy, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors, and there is significant uncertainty as to timing of stabilization and recovery, including the ability to gain adequate herd-immunity levels through vaccine programs and their resilience to future virus variants.

Many colleges and K-12 schools have been required to cease in-person classes in an attempt to limit the spread of the COVID-19 pandemic and ensure the safety of their students.

Although many institutions have reopened, academic institutions are considering alternatives to traditional in-person instruction, including on-line learning and significantly reduced classroom size.

Additionally, many big athletic conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s high-margin general merchandise business.

Many colleges and K-12 schools have been required to cease in-person classes in an attempt to limit the spread of the COVID-19 virus and ensure the safety of their students.

Although many academic institutions have reopened, they are considering alternatives to traditional in-person instruction, including online learning and significantly reduced classroom sizes.

Additionally, while many athletic conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s high-margin general merchandise business.

• Economic Environment :

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economic activity and increased unemployment could lead to decreased enrollment and consumer spending.

Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional

18-24 year-old college age.

Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional 18-24 year-old college age.

Online degree program enrollments continue to grow, even in the face of declining overall higher education enrollment.

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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 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.

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Our condensed consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”).

The results of operations reflected in our consolidated financial statements are presented on a consolidated basis.

All material intercompany accounts and transactions have been eliminated in consolidation.

Our sales are primarily derived from the sale of course materials, which include new, used and digital textbooks, and at college and university bookstores which we operate, we sell high margin general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products.

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Results of Operations - Summary

13 weeks ended 39 weeks ended

Dollars in thousands January 30,

2021 January 25,

2020 January 30,

2021 January 25,

13 weeks ended

Dollars in thousands July 31,

2021 August 1,

Product sales and other $ 227,770 $ 193,210

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Total sales $ 240,794 $ 204,014

Net (loss) income $ (48,289) $ (1,693) $ (87,426) $ 2,083

Net loss $ (44,346) $ (46,652)

Adjusted Earnings (non-GAAP) (a)

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

13 weeks ended 39 weeks ended

2021 January 25,

2020 January 30,

2021 January 25,

13 weeks ended

2021 August 1,

Product sales and other 94.6 % 94.7 %

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Product and other cost of sales (a)

84.5 78.2 83.5 77.8

Rental cost of sales (a)

66.6 59.2 65.4 59.0

Total cost of sales 75.1 84.9

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Depreciation and amortization expense 5.2 6.9

Impairment loss (non-cash) 6.7 — 2.3 —

Restructuring and other charges 1.1 2.8

Operating (loss) income (15.6) % (0.5) % (9.6) % 0.7 %

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

Results of Operations - 13 and 39 weeks ended January 30, 2021 compared with the 13 and 39 weeks ended January 25, 2020

13 weeks ended, January 30, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Product sales and other $ 349,558 $ 39,465 $ 7,206 $ — $ (22,727) $ 373,502

Rental income 38,111 — — — — 38,111

Total sales 387,669 39,465 7,206 — (22,727) 411,613

Cost of sales:

Product and other cost of sales 308,752 28,807 1,324 — (23,276) 315,607

Rental cost of sales 25,394 — — — — 25,394

Total cost of sales 334,146 28,807 1,324 — (23,276) 341,001

Gross profit 53,523 10,658 5,882 — 549 70,612

Selling and administrative expenses 75,921 4,336 6,015 6,491 (55) 92,708

Depreciation and amortization expense 9,806 1,614 1,863 24 — 13,307

$ (32,204) $ 4,708 $ (1,996) $ (6,515) $ 604 (35,403)

Impairment loss (non-cash) 27,630

Restructuring and other charges 1,669

Operating loss (17.2) % (28.9) %

13 weeks ended, January 25, 2020

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

Results of Operations - 13 weeks ended July 31, 2021 compared with the 13 weeks ended August 1, 2020

13 weeks ended, July 31, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

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Operating loss $ (41,453)

39 weeks ended, January 30, 2021

13 weeks ended, August 1, 2020

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

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$ (51,420) $ 11,671 $ (1,455) $ (5,277) $ (6,763) (53,244)

Impairment loss (non-cash) 27,630

Restructuring and other charges 5,671

Operating loss $ (58,915)

39 weeks ended, January 25, 2020

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Product sales and other $ 1,354,684 $ 179,515 $ 17,024 $ — $ (76,775) $ 1,474,448

Rental income 119,729 — — — — 119,729

Total sales 1,474,413 179,515 17,024 — (76,775) 1,594,177

Cost of sales:

Product and other cost of sales 1,080,909 137,827 3,186 — (75,522) 1,146,400

Rental cost of sales 70,635 — — — — 70,635

Total cost of sales 1,151,544 137,827 3,186 — (75,522) 1,217,035

Gross profit 322,869 41,688 13,838 — (1,253) 377,142

Selling and administrative expenses 274,253 13,664 13,715 15,829 (182) 317,279

Depreciation and amortization expense 35,372 4,531 6,543 96 — 46,542

$ 13,244 $ 23,493 $ (6,420) $ (15,925) $ (1,071) 13,321

Impairment loss (non-cash) 433

Restructuring and other charges 3,240

Operating income $ 9,648

The following table summarizes our sales for the 13 and 39 weeks ended January 30, 2021 and January 25, 2020:

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 January 25, 2020 % January 30, 2021 January 25, 2020 %

The following table summarizes our sales for the 13 weeks ended July 31, 2021 and August 1, 2020:

13 weeks ended

Dollars in thousands July 31, 2021 August 1, 2020 %

Product sales and other $ 227,770 $ 193,210 17.9%

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Total Sales $ 240,794 $ 204,014 18.0%

Sales decreased by $90.7 million, or 18.1%, to $411.6 million during the 13 weeks ended January 30, 2021 from $502.3 million during the 13 weeks ended January 25, 2020.

Sales decreased by $383.1 million, or 24.0%, to $1,211.1 million during the 39 weeks ended January 30, 2021 from $1,594.2 million during the 39 weeks ended January 25, 2020.

The sales decrease is primarily related to the impact from temporary store closings related to COVID-19, as well as lower in store foot traffic, lower enrollments and fewer on-campus events due to COVID-19.

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

Sales variances 13 weeks ended 39 weeks ended

Dollars in millions January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Sales increased by $36.8 million, or 18.0%, to $240.8 million during the 13 weeks ended July 31, 2021 from $204.0 million during the 13 weeks ended August 1, 2020.

The sales increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

The first quarter is typically a low revenue quarter, consisting primarily of summer courses.

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

Sales variances 13 weeks ended

Dollars in millions July 31, 2021 August 1, 2020

New stores $ 10.3 $ 7.9

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Comparable stores (a)

(83.3) (37.9) (384.0) (99.0)

Textbook rental deferral 0.2 (6.4)

Service revenue (b)

1.8 (1.4) (1.9) (3.9)

0.6 0.3 2.2 (5.9)

Retail sales subtotal:

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$ 36.8 $ (115.6)

(a) Comparable store sales includes sales from physical stores that have been open for an entire fiscal year period and virtual store sales for the period, does not include sales from closed stores for all periods presented, and digital agency sales are included on a gross basis.

(b) Service revenue includes Promoversity, brand partnerships, shipping and handling, digital content, software, services, and revenue from other programs.

(a) Effective April 2021, as contemplated by the FLC Partnership's merchandising agreement, logo and emblematic general merchandise sales were fulfilled by FLC.

During the first quarter of Fiscal 2022, as contemplated by the FLC Partnership's e-commerce agreement, we began to transition certain of our e-commerce sites to Fanatics e-commerce sites for logo and emblematic products.

For Comparable Store Sales details, see below.

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

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

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See discussion of intercompany activities and eliminations below.

Retail sales decreased by $70.3 million, or 15.4%, to $387.7 million during the 13 weeks ended January 30, 2021 from $458.0 million during the 13 weeks ended January 25, 2020.

Retail sales decreased by $351.5 million, or 23.8%, to $1,123.0 million during the 39 weeks ended January 30, 2021 from $1,474.4 million during the 39 weeks ended January 25, 2020.

Retail added 88 new stores and closed 66 stores (not including temporary store closings due to COVID-19) during the 39 weeks ended January 30, 2021, ending the period with a total of 1,441 stores.

13 weeks ended 39 weeks ended

January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Retail sales increased by $51.7 million, or 32.6%, to $210.5 million during the 13 weeks ended July 31, 2021 from $158.8 million during the 13 weeks ended August 1, 2020.

Retail added 53 new stores and closed 41 stores (not including temporary store closings due to COVID-19) during the 13 weeks ended July 31, 2021, ending the period with a total of 1,429 stores.

13 weeks ended

July 31, 2021 August 1, 2020

Number of Stores:

Physical Virtual Physical Virtual Physical Virtual Physical Virtual

Physical Virtual Physical Virtual

Number of stores at beginning of period 769 648 772 647

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Number of stores at end of period 784 645 772 670

Product and other sales for Retail for the 13 weeks ended January 30, 2021 decreased by $59.8 million, or 14.6% to $349.6 million from $409.4 million during the 13 weeks ended January 25, 2020.

Product and other sales for Retail for the 39 weeks ended January 30, 2021 decreased by $324.3 million, or 23.9% to $1,030.4 million from $1,354.7 million during the 39 weeks ended January 25, 2020.

Product and other sales for Retail for the 13 weeks ended July 31, 2021 increased by $49.5 million, or 33.5% to $197.5 million from $148.0 million during the 13 weeks ended August 1, 2020.

The sales increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

Product and other sales are impacted by comparable store sales (as noted in the chart below), new store openings and store closings, as well as the impact from the COVID-19 pandemic.

Sales were impacted by the temporary store closings due to COVID-19 earlier in the fiscal year, as well as the impact of fewer students returning to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

While many big-conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s high-margin general merchandise business.

Sales were impacted by the temporary store closings due to the COVID-19 pandemic in the prior year, as well as the impact of fewer students returning to campus, as many schools

implemented a remote learning model and curtailed on-campus classes and activities.

While many big-conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s general merchandise business.

Additionally, sales were impacted by overall enrollment declines in higher education.

Textbook (Course Materials) revenue for Retail decreased primarily due to lower new and used textbook and other course materials sales, while First Day (our inclusive access program), digital and eTextbook revenue increased.

General merchandise sales for Retail decreased primarily due to lower emblematic apparel sales (as many athletic events were canceled due to COVID-19), lower supply product sales and lower graduation product sales (primarily due to COVID-19 related campus closures).

We have made continued progress in the development of our next generation e-commerce platform, which launched in Fiscal 2021 to deliver increased high-margin general merchandise sales.

Rental income for Retail for the 13 weeks ended January 30, 2021 decreased by $10.5 million, or 21.6% to $38.1 million from $48.6 million during the 13 weeks ended January 25, 2020.

Rental income for Retail for the 39 weeks ended January 30, 2021 decreased by $27.2 million, or 22.7% to $92.6 million from $119.7 million during the 39 weeks ended January 25, 2020.

Rental income is impacted by comparable store sales, new store openings and store closings.

The decrease in rental income is primarily due to decreased rental activity due to the COVID-19 pandemic as discussed above and the impact of increased digital offerings.

Comparable store sales for Retail decreased for the 13 and 39 week sales period.

Comparable store sales were impacted primarily by COVID-19 related campus temporary store closures, lower enrollment and on-campus events (all discussed above), a shift to lower cost options and more affordable solutions, including digital offerings, increased consumer purchases directly from publishers and other online providers, lower general merchandise sales (including graduation products and logo products for athletic events).

These decreases were partially offset by increased First Day, digital and eTextbook revenue.

Consistent with prior years, the Spring Rush period extended beyond the quarter due to later school openings and the continued pattern of students buying course materials later in the semester.

Factoring in the fiscal month of February, comparable store sales decreased 26.7% on a year to date basis.

Comparable store sales variances for Retail by category for the 13 and 39 week periods are as follows:

Comparable Store Sales variances - Retail 13 weeks ended 39 weeks ended

Dollars in millions January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

First Day (our inclusive access program), digital and eTextbook revenue increased, due to a shift to lower cost options and more affordable solutions, including digital offerings.

First Day sales increased approximately 200% compared to the prior year period.

To supplement the Total Sales table presented above in accordance with generally accepted accounting principles (“GAAP”), the Company uses the non-GAAP financial measure of Retail Gross Comparable Store Sales.

Retail Gross Comparable Store Sales (non-GAAP) includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from closed stores for all periods presented.

As contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics.

For Retail Gross Comparable Store Sales (non-GAAP), sales for logo and emblematic general merchandise fulfilled by FLC, Fanatics and digital agency sales are included on a gross basis.

We believe the current Retail Gross Comparable Store Sales (non-GAAP) calculation method reflects the manner in which management views comparable sales, as well as the seasonal nature of our business.

Retail Gross Comparable Store Sales (non-GAAP) variances for Retail by category for the 13 week periods are as follows:

Retail Gross Comparable Store Sales (non-GAAP) variances 13 weeks ended

Dollars in millions July 31, 2021 August 1, 2020

Textbooks (Course Materials) $ 23.1 21.9 % $ (11.3) (10.1) %

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Trade Books 1.9 151.1 % (7.7) (85.2) %

Total Comparable Store Sales $ (88.5) (19.9) % $ (34.4) (7.3) % $ (397.7) (28.0) % $ (85.4) (5.7) %

Comparable store sales includes sales from physical stores that have been open for an entire fiscal year period and virtual store sales for the period, does not include sales from closed stores for all periods presented, and digital agency sales are included on a gross basis.

Wholesale sales decreased by $27.5 million, or 41.1% to $39.5 million during the 13 weeks ended January 30, 2021 from $67.0 million during the 13 weeks ended January 25, 2020.

Wholesale sales decreased by $23.4 million, or 13.0% to $156.1 million during the 39 weeks ended January 30, 2021 from $179.5 million during the 39 weeks ended January 25, 2020.

The decrease is primarily due to decreased gross sales impacted by the COVID-19 pandemic, partially offset by a lower returns and allowances.

DSS total sales increased by $0.8 million, or 12.0% to $7.2 million during the 13 weeks ended January 30, 2021 from $6.4 million during the 13 weeks ended January 25, 2020.

DSS total sales increased by $2.0 million, or 11.8% to $19.0 million during the 39 weeks ended January 30, 2021 from $17.0 million during the 39 weeks ended January 25, 2020.

Sales increased primarily due to an increase in bartleby subscription sales.

Total Retail Gross Comparable Store Sales (non-GAAP) $ 73.6 49.8 % $ (106.6) (42.8) %

Rental income for Retail for the 13 weeks ended July 31, 2021 increased by $2.2 million, or 20.5% to $13.0 million from $10.8 million during the 13 weeks ended August 1, 2020.

Rental income is impacted by comparable store sales, new store openings and store closings.

The increase in rental income is primarily due to increased rental activity due to the temporary store closings due COVID-19 pandemic in the prior year discussed above.

Wholesale sales decreased by $35.8 million, or 44.6% to $44.5 million during the 13 weeks ended July 31, 2021 from $80.3 million during the 13 weeks ended August 1, 2020.

The decrease is primarily due to decreased gross sales impacted by the COVID-19 pandemic, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, partially offset by a lower returns and allowances.

During the prior year period, the Wholesale operations assumed direct-to-student fulfillment of course material orders for the Retail Segment campus bookstores that were not fully operational due to COVID-19 campus store closures, whereas the sales shifted back to the physical bookstores in the current period.

DSS total sales increased by $2.4 million, or 41.4% to $8.3 million during the 13 weeks ended July 31, 2021 from $5.9 million during the 13 weeks ended August 1, 2020.

Sales increased primarily due to an increase in subscription sales.

Cost of Sales and Gross Margin

Our cost of sales increased as a percentage of sales to 82.8% during the 13 weeks ended January 30, 2021 compared to 76.4% during the 13 weeks ended January 25, 2020.

Our gross margin decreased by $47.9 million, or 40.4%, to $70.6 million, or 17.2% of sales, during the 13 weeks ended January 30, 2021 from $118.5 million, or 23.6% of sales during the 13 weeks ended January 25, 2020.

Our cost of sales increased as a percentage of sales to 82.1% during the 39 weeks ended January 30, 2021 compared to 76.3% during the 39 weeks ended January 25, 2020.

Our gross margin decreased by $160.4 million, or 42.5%, to $216.7 million, or 17.9% of sales, during the 39 weeks ended January 30, 2021 from $377.1 million, or 23.7% of sales during the 39 weeks ended January 25, 2020.

The following table summarizes the Retail cost of sales for the 13 and 39 weeks ended January 30, 2021 and January 25, 2020:

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 % of

Related Sales January 25, 2020 % of

Related Sales January 30, 2021 % of

Related Sales January 25, 2020 % of

Our cost of sales decreased as a percentage of sales to 75.1% during the 13 weeks ended July 31, 2021 compared to 84.9% during the 13 weeks ended August 1, 2020.

Our gross margin increased by $29.2 million, or 94.5%, to $60.0 million, or 24.9% of sales, during the 13 weeks ended July 31, 2021 from $30.9 million, or 15.1% of sales during the 13 weeks ended August 1, 2020.

During the 13 weeks ended July 31, 2021, we recognized a merchandise inventory loss of $0.4 million in cost of goods sold in the Retail Segment discussed below.

Excluding the merchandise inventory loss, cost of goods sold and gross margin was 74.9% and 25.1%, respectively, of sales during the 13 weeks ended July 31, 2021 compared to 84.9% and 15.1%, respectively, of sales during the 13 weeks ended August 1, 2020.

For additional information, see Item 1.

Financial Statements - Note 2.

Summary of Significant Accounting Policies - Merchandise Inventories.

The following table summarizes the Retail cost of sales for the 13 weeks ended July 31, 2021 and August 1, 2020:

13 weeks ended

Dollars in thousands July 31, 2021 % of

Related Sales August 1, 2020 % of

Related Sales

5 unchanged sentences

$ 162,326 77.1% $ 142,641 89.8%

The following table summarizes the Retail gross margin for the 13 and 39 weeks ended January 30, 2021 and January 25, 2020:

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 % of

Related Sales January 25, 2020 % of

Related Sales January 30, 2021 % of

Related Sales January 25, 2020 % of

The following table summarizes the Retail gross margin for the 13 weeks ended July 31, 2021 and August 1, 2020:

13 weeks ended

Dollars in thousands July 31, 2021 % of

Related Sales August 1, 2020 % of

Related Sales

4 unchanged sentences

$ 48,143 22.9% $ 16,135 10.2%

For the 13 weeks ended January 30, 2021, the Retail gross margin as a percentage of sales decreased as discussed below:

• Product and other gross margin decreased (785 basis points), driven primarily by an unfavorable sales mix (445 basis points) due to lower high-margin general merchandise sales of approximately $59.1 million and the shift to lower margin digital courseware, and lower margin rates (380 basis points) due to higher markdowns, partially offset by lower contract costs as a percentage of sales related to our college and university contracts (40 basis points) resulting from contract renewals and new store contracts.

• Rental gross margin decreased (745 basis points), driven primarily by higher contract costs as a percentage of sales related to our college and university contracts (795 basis points), partially offset by higher rental margin rates (40 basis points) and favorable rental mix (10 basis points).

For the 39 weeks ended January 30, 2021, the Retail gross margin as a percentage of sales decreased as discussed below:

• Product and other gross margin decreased (730 basis points), driven primarily by an unfavorable sales mix (475 basis points) due to lower high-margin general merchandise sales of approximately $247.0 million and the shift to lower margin digital courseware, and lower margin rates (325 basis points) due to higher markdowns, partially offset by lower contract costs as a percentage of sales related to our college and university contracts (70 basis points) resulting from contract renewals and new store contracts.

• Rental gross margin decreased (640 basis points), driven primarily by higher contract costs as a percentage of sales related to our college and university contracts (670 basis points) and unfavorable rental mix (40 basis points), partially offset by higher rental margin rates (70 basis points).

The cost of sales and gross margin for Wholesale were $28.8 million, or 73.0% of sales, and $10.7 million, or 27.0% of sales, respectively, during the 13 weeks ended January 30, 2021.

The cost of sales and gross margin for Wholesale was $52.8 million or 78.8% of sales and $14.2 million or 21.2% of sales, respectively, during the 13 weeks ended January 25, 2020.

The cost of sales and gross margin for Wholesale were $118.0 million, or 75.6% of sales, and $38.1 million, or 24.4% of sales, respectively, during the 39 weeks ended January 30, 2021.

The cost of sales and gross margin for Wholesale was $137.8 million or 76.8% of sales and $41.7 million or 23.2% of sales, respectively, during the 39 weeks ended January 25, 2020.

The gross margin rate increased during the 13 and 39 weeks ended January 30, 2021 primarily due to the favorable impact of returns and allowances and lower markdowns, partially offset by an unfavorable sales mix.

The gross margin for the DSS segment was $5.9 million, or 81.6% of sales, during the 13 weeks ended January 30, 2021 and $5.3 million, or 82.1% of sales, during the 13 weeks ended January 25, 2020.

The gross margin for the DSS segment was $15.3 million, or 80.4% of sales, during the 39 weeks ended January 30, 2021 and $13.8 million, or 81.3% of sales, during the 39 weeks ended January 25, 2020.

For the 13 weeks ended July 31, 2021, the Retail gross margin as a percentage of sales increased as discussed below:

• Product and other gross margin increased (1,250 basis points), driven primarily by higher margin rates (1,215 basis points) due to lower inventory reserves and lower markdowns and a favorable sales mix (160 basis points) due to higher general merchandise sales, partially offset by higher contract costs as a percentage of sales related to our college and university contracts (90 basis points) resulting from contract renewals and new store contracts, and an inventory merchandise loss of $0.4 million (30 basis points) related to the final sale of our logo and emblematic general merchandise inventory below cost to FLC.

• Rental gross margin increased (1,765 basis points), driven primarily by lower contract costs as a percentage of sales related to our college and university contracts (1,215 basis points) and higher rental margin rates (690 basis points), partially offset by an unfavorable rental mix (140 basis points).

The cost of sales and gross margin for Wholesale were $34.1 million, or 76.6% of sales, and $10.4 million, or 23.4% of sales, respectively, during the 13 weeks ended July 31, 2021.

The cost of sales and gross margin for Wholesale was $63.5 million or 79.1% of sales and $16.8 million or 20.9% of sales, respectively, during the 13 weeks ended August 1, 2020.

The gross margin rate increased during the 13 weeks ended July 31, 2021 primarily due to lower markdowns and a favorable sales mix, partially offset by the unfavorable impact of returns and allowances.

The gross margin for the DSS segment was $7.0 million, or 84.7% of sales, during the 13 weeks ended July 31, 2021 and $4.7 million, or 80.8% of sales, during the 13 weeks ended August 1, 2020.

The high gross margins are driven primarily by high margin subscription service revenue earned.

The decrease in gross margin for the 13 and 39 weeks ended January 30, 2021 is primarily due to increased amortization of content development costs for bartleby textbook solutions of $0.3 million and $0.8 million, respectively.

Intercompany Eliminations

During the 13 weeks ended January 30, 2021 and January 25, 2020, our sales eliminations were $(22.7) million and $(29.1) million, respectively.

During the 39 weeks ended January 30, 2021 and January 25, 2020, our sales eliminations were $(87.0) million and $(76.8) million, respectively.

During the 13 weeks ended July 31, 2021 and August 1, 2020, our sales eliminations were $(22.5) million and $(40.9) million, respectively.

These sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

During the 13 weeks ended January 30, 2021 and January 25, 2020, the cost of sales eliminations were $(23.3) million and $(28.4) million, respectively.

During the 39 weeks ended January 30, 2021 and January 25, 2020, the cost of sales eliminations were $(85.2) million and $(75.5) million, respectively.

During the 13 weeks ended July 31, 2021 and August 1, 2020, the cost of sales eliminations were $(16.9) million and $(34.2) million, respectively.

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

During the 13 weeks ended January 30, 2021 and January 25, 2020, the gross margin eliminations were $0.5 million and $(0.8) million, respectively.

During the 39 weeks ended January 30, 2021 and January 25, 2020, the gross margin eliminations were $(1.8) million and $(1.3) million, respectively.

During the 13 weeks ended July 31, 2021 and August 1, 2020, the gross margin eliminations were $(5.5) million and $(6.8) million, respectively.

The gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods.

Selling and Administrative Expenses

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 % of

Sales January 25, 2020 % of

Sales January 30, 2021 % of

Sales January 25, 2020 % of

13 weeks ended

Dollars in thousands July 31, 2021 % of

Sales August 1, 2020 % of

Total Selling and Administrative Expenses

$ 86,235 35.8% $ 70,043 34.3%

During the 13 weeks ended January 30, 2021, selling and administrative expenses decreased by $13.5 million, or 12.7%, to $92.7 million from $106.2 million during the 13 weeks ended January 25, 2020.

During the 39 weeks ended January 30, 2021, selling and administrative expenses decreased by $62.6 million, or 19.7%, to $254.7 million from $317.3 million during the 39 weeks ended January 25, 2020.

During the 13 weeks ended July 31, 2021, selling and administrative expenses increased by $16.2 million, or 23.1%, to $86.2 million from $70.0 million during the 13 weeks ended August 1, 2020.

The variances by segment are as follows:

During the 13 weeks ended January 30, 2021, Retail selling and administrative expenses decreased by $15.9 million, or 17.4%, to $75.9 million from $91.9 million during the 13 weeks ended January 25, 2020.

This decrease was primarily due to a $13.1 million decrease in stores payroll and operating expenses, including comparable stores, lower virtual stores and new/closed stores payroll and operating expenses, and a decrease of $2.8 million in corporate payroll, infrastructure costs, product development costs and digital operations costs.

During the 39 weeks ended January 30, 2021, Retail selling and administrative expenses decreased by $64.0 million, or 23.3%, to $210.3 million from $274.2 million during the 39 weeks ended January 25, 2020.

This decrease was primarily due to a $53.6 million decrease in stores payroll and operating expenses, including comparable stores, primarily due to furloughed store employees, lower virtual stores and new/closed stores payroll and operating expenses, and a decrease of $10.4 million in corporate payroll, infrastructure costs, product development costs and digital operations costs.

Wholesale selling and administrative expenses remained flat at $4.3 million for both the 13 weeks ended January 30, 2021 and January 25, 2020.

During the 39 weeks ended January 30, 2021, Wholesale selling and administrative expenses decreased by $1.4 million or 10.2% to $12.3 million from $13.7 million during the 39 weeks ended January 25, 2020.

The decrease in selling and administrative expenses was primarily driven by lower payroll and operating costs.

During the 13 weeks ended January 30, 2021, DSS selling and administrative expenses increased by $1.0 million or 20.6% to $6.0 million from $5.0 million during the 13 weeks ended January 25, 2020.

During the 39 weeks ended January 30, 2021, DSS selling and administrative expenses increased by $1.3 million or 9.8% to $15.0 million from $13.7 million during the 39 weeks ended January 25, 2020.

The increase in costs was primarily driven by higher professional services and advertising costs.

During the 13 weeks ended July 31, 2021, Retail selling and administrative expenses increased by $11.4 million, or 20.0%, to $68.4 million from $57.0 million during the 13 weeks ended August 1, 2020.

This increase was primarily due to a $12.1 million increase in stores payroll and operating expenses including comparable stores, virtual stores and new/closed stores payroll and operating expenses, partially offset by a $0.8 million decrease in corporate payroll, infrastructure and product development costs.

The payroll increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

Wholesale selling and administrative expenses increased by $0.2 million, or 5.3%, to $4.0 million from $3.8 million during the 13 weeks ended August 1, 2020.

The increase in selling and administrative expenses was primarily driven by higher compensation-related expense and higher operating expenses.

During the 13 weeks ended July 31, 2021, DSS selling and administrative expenses increased by $2.4 million, or 59.7%, to $6.4 million from $4.0 million during the 13 weeks ended August 1, 2020.

The increase in costs was primarily driven by higher operating costs invested in the business to continue to increase sales.

Corporate Services

During the 13 weeks ended January 30, 2021, Corporate Services' selling and administrative expenses increased by $1.3 million or 25.9% to $6.5 million from $5.2 million during the 13 weeks ended January 25, 2020.

During the 39 weeks ended January 30, 2021, Corporate Services' selling and administrative expenses increased by $1.4 million or 8.9% to $17.2 million from $15.8 million during the 39 weeks ended January 25, 2020.

During the 13 weeks ended July 31, 2021, Corporate Services' selling and administrative expenses increased by $2.2 million, or 42.0%, to $7.4 million from $5.2 million during the 13 weeks ended August 1, 2020.

The increase was primarily due to higher compensation-related expense and higher operating expenses.

Depreciation and Amortization Expense

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 % of

Sales January 25, 2020 % of

Sales January 30, 2021 % of

Sales January 25, 2020 % of

13 weeks ended

Dollars in thousands July 31, 2021 % of

Sales August 1, 2020 % of

Total Depreciation and Amortization Expense

$ 12,624 5.2% $ 14,063 6.9%

Depreciation and amortization expense decreased by $1.8 million, or 12.0%, to $13.3 million during the 13 weeks ended January 30, 2021 from $15.1 million during the 13 weeks ended January 25, 2020.

Depreciation and amortization expense decreased by $6.0 million, or 12.8%, to $40.6 million during the 39 weeks ended January 30, 2021 from $46.5 million during the 39 weeks ended January 25, 2020.The decrease was primarily attributable to lower depreciation related to closed stores and lower capital expenditures.

Impairment loss (non-cash)

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

During the 13 weeks ended January 30, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $27.6 million, $20.5 million after-tax, comprised of $5.1 million, $13.3 million, $6.3 million and $2.9 million of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

For additional information, see Item 1.

Financial Statements - Note 2.

Summary of Significant Accounting Policies and Note 8.

Fair Value Measurements .

During the 39 weeks ended January 25, 2020, we recognized an impairment loss (non-cash) of $0.4 million in the Retail segment related to net capitalized development costs for a project which were not recoverable.

Depreciation and amortization expense decreased by $1.4 million, or 10.2%, to $12.6 million during the 13 weeks ended July 31, 2021 from $14.1 million during the 13 weeks ended August 1, 2020.

The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during the third quarter of Fiscal 2021.

Restructuring and other charges

During the 13 and 39 weeks ended January 30, 2021, we recognized restructuring and other charges totaling $1.7 million and $10.7 million, respectively, comprised primarily of $1.3 million and $5.8 million, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, $0.2 million and $4.6 million, respectively, for professional service costs related to restructuring, process improvements, the financial advisor strategic review process, costs related to development and integration associated with Fanatics and FLC

partnership agreements and shareholder activist activities, and $0.2 million and $0.3 million, respectively, related to liabilities for a facility closure.

During the 13 and 39 weeks ended January 25, 2020, we recognized restructuring and other charges totaling $0.2 million and $3.2 million, respectively, comprised primarily of $0 and $0.8 million, respectively, for severance and other employee termination and benefit costs associated with several management changes and the elimination of various positions as part of cost reduction objectives, and $0.2 million and $2.4 million, respectively, related to professional service costs related to restructuring, process improvements, shareholder activist activities, and costs related to liabilities for a facility closure.

Operating (Loss) Income

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 % of

Sales January 25, 2020 % of

Sales January 30, 2021 % of

Sales January 25, 2020 % of

Total Operating (Loss) Income $ (64,702) (15.6)% $ (2,971) (0.5)% $ (116,884) (9.6)% $ 9,648 0.7%

Our operating loss was $(64.7) million during the 13 weeks ended January 30, 2021, compared to an operating loss of $(3.0) million during the 13 weeks ended January 25, 2020.

The increase in operating loss is due to the matters discussed above.

For the 13 weeks ended January 30, 2021, excluding the $27.6 million of impairment loss (non-cash) and the $1.7 million of restructuring and other charges, discussed above, operating loss was $(35.4) million (or 8.6% of sales).

For the 13 weeks ended January 25, 2020, excluding the $0.2 million of restructuring and other charges, discussed above, operating loss was $(2.8) million (or 0.6% of sales).

Our operating loss was $(116.9) million during the 39 weeks ended January 30, 2021, compared to an operating income of $9.6 million during the 39 weeks ended January 25, 2020.

The decrease in operating income is due to the matters discussed above.

For the 39 weeks ended January 30, 2021, excluding the impairment loss (non-cash) of $27.6 million and the $10.7 million of restructuring and other charges, discussed above, operating loss was $(78.5) million (or 6.5%).

For the 39 weeks ended January 25, 2020, excluding the $3.2 million of restructuring and other charges and impairment loss (non-cash) of $0.4 million, discussed above, operating income was $13.3 million (or 0.8% of sales).

During the 13 weeks ended July 31, 2021, we recognized restructuring and other charges totaling $2.6 million comprised primarily of $1.5 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($2.4 million is included in accrued liabilities in the consolidated balance sheet as of July 31, 2021), $1.0 million for professional service costs related to restructuring, process improvements, costs related to development and integration associated with the FLC Partnership, and shareholder activist activities, and $0.1 million related to liabilities for a facility closure.

During the 13 ended August 1, 2020, we recognized restructuring and other charges totaling $5.7 million comprised of $3.4 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives ($10.6 million is included in accrued liabilities in the consolidated balance sheet as of August 1, 2020), and $2.1 million for professional service costs related to restructuring, process improvements, and shareholder activities, and $0.2 million related to liability for a facility closure.

Operating Loss

13 weeks ended

Dollars in thousands July 31, 2021 % of

Sales August 1, 2020 % of

Total Operating Loss $ (41,453) (17.2)% $ (58,915) (28.9)%

Our operating loss was $(41.5) million during the 13 weeks ended July 31, 2021, compared to an operating loss of $(58.9) million during the 13 weeks ended August 1, 2020.

The decrease in operating loss is due to the matters discussed above.

For the 13 weeks ended July 31, 2021, excluding the $0.4 million of merchandise inventory loss and the $2.6 million of restructuring and other charges, discussed above, operating loss was $(38.4) million (or (15.9)% of sales).

For the 13 weeks ended August 1, 2020, excluding the $5.7 million of restructuring and other charges, discussed above, operating loss was $(53.2) million (or (26.1)% of sales).

Interest Expense, Net

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

13 weeks ended

Dollars in thousands July 31, 2021 August 1, 2020

Interest Expense, Net $ 2,494 $ 2,653

Net interest expense increased by $0.4 million, or 21.4%, to $2.3 million during the 13 weeks ended January 30, 2021 from $1.9 million during the 13 weeks ended January 25, 2020.

Net interest expense remained flat at $5.9 million during both the 39 weeks ended January 30, 2021 and January 25, 2020.

Income Tax (Benefit) Expense

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 Effective Rate January 25, 2020 Effective Rate January 30, 2021 Effective Rate January 25, 2020 Effective Rate

Income Tax (Benefit) Expense $ (18,724) 27.9% $ (3,182) 65.3% $ (35,334) 28.8% $ 1,683 44.7%

We recorded an income tax benefit of $(18.7) million on a pre-tax loss of $(67.0) million of during the 13 weeks ended January 30, 2021, which represented an effective income tax rate of 27.9% and we recorded an income tax benefit of $(3.2) million on a pre-tax loss of $(4.9) million during the 13 weeks ended January 25, 2020, which represented an effective income tax rate of 65.3%.

We recorded an income tax benefit of $(35.3) million on a pre-tax loss of $(122.8) million of during the 39 weeks ended January 30, 2021, which represented an effective income tax rate of 28.8% and we recorded income tax expense of $1.7 million on pre-tax income of $3.8 million during the 39 weeks ended January 25, 2020, which represented an effective income tax rate of 44.7%.

The effective tax rate for the 13 and 39 weeks ended January 30, 2021 is lower as compared to the comparable prior year due to permanent differences.

Net (Loss) Income

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Net (loss) income $ (48,289) $ (1,693) $ (87,426) $ 2,083

As a result of the factors discussed above, net loss was $(48.3) million during the 13 weeks ended January 30, 2021, compared with net loss of $(1.7) million during the 13 weeks ended January 25, 2020 and net loss was $(87.4) million during the 39 weeks ended January 30, 2021, compared with net income of $2.1 million during the 39 weeks ended January 25, 2020.

Adjusted Earnings (non-GAAP) is $(25.6) million during the 13 weeks ended January 30, 2021, compared with $(0.7) million during the 13 weeks ended January 25, 2020 and Adjusted Earnings (non-GAAP) is $(56.2) million during the 39 weeks ended January 30, 2021, compared with $7.0 million during the 39 weeks ended January 25, 2020.

Net interest expense decreased by $0.2 million, or 6.0%, to $2.5 million during the 13 weeks ended July 31, 2021 from $2.7 million during the 13 weeks ended August 1, 2020.

The decrease was primarily due to lower borrowings compared to the prior year.

Income Tax Expense (Benefit)

13 weeks ended

Dollars in thousands July 31, 2021 Effective Rate August 1, 2020 Effective Rate

Income Tax Expense (Benefit) $ 399 (0.9)% $ (14,916) 24.2%

We recorded an income tax expense of $0.4 million on a pre-tax loss of $(43.9) million during the 13 weeks ended July 31, 2021, which represented an effective income tax rate of (0.9)% and we recorded an income tax benefit of $(14.9) million on a pre-tax loss of $(61.6) million during the 13 weeks ended August 1, 2020, which represented an effective income tax rate of 24.2%.

The effective tax rate for the 13 weeks ended July 31, 2021 is lower as compared to the comparable prior year due to the assessment of the realization of deferred tax assets.

13 weeks ended

Dollars in thousands July 31, 2021 August 1, 2020

Net loss $ (44,346) $ (46,652)

As a result of the factors discussed above, net loss was $(44.3) million during the 13 weeks ended July 31, 2021, compared with net loss of $(46.7) million during the 13 weeks ended August 1, 2020.

Adjusted Earnings (non-GAAP) is $(40.0) million during the 13 weeks ended July 31, 2021, compared with $(41.7) million during the 13 weeks ended August 1, 2020.

See Adjusted Earnings (non-GAAP) discussion below.

Use of Non-GAAP Measures - Adjusted Earnings and Adjusted EBITDA

To supplement our results prepared in accordance with GAAP, we use the measure of Adjusted Earnings and Adjusted EBITDA, which are non-GAAP financial measures under Securities and Exchange Commission (the “SEC”) regulations.

We define Adjusted Earnings as net income as adjusted for items that are subtracted from or added to net income.

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

To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we use the measure of Adjusted Earnings, Adjusted EBITDA, and Free Cash Flow, which are non-GAAP financial measures under Securities and Exchange Commission (the “SEC”) regulations.

We define Adjusted Earnings as net income adjusted for certain reconciling items that are subtracted from or added to net income.

We define Adjusted EBITDA as net income plus (1) depreciation and amortization;

(2) interest expense and (3) income taxes, (4) as adjusted for items that are subtracted from or added to net income.

To properly and prudently evaluate our business, we encourage you to review our consolidated financial statements included elsewhere in the Form 10-K for the year ended May 2, 2020, the reconciliation of Adjusted Earnings to net income and the reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below.

We define Free Cash Flow as Adjusted EBITDA less capital expenditures, cash interest and cash taxes.

To properly and prudently evaluate our business, we encourage you to review our condensed consolidated financial statements included elsewhere in this Form 10-K, the reconciliation of Adjusted Earnings to net income and the reconciliation of Adjusted EBITDA to net income, 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.

6 unchanged sentences

We believe that the inclusion of Adjusted Earnings and Adjusted EBITDA results provides investors useful and important information regarding our operating results.

We believe that Free Cash Flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements and assists investors in their understanding of our operating profitability and liquidity as we manage the business to maximize margin and cash flow.

Adjusted Earnings (non-GAAP)

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Net (loss) income $ (48,289) $ (1,693) $ (87,426) $ 2,083

13 weeks ended

Dollars in thousands July 31, 2021 August 1, 2020

Net loss $ (44,346) $ (46,652)

Reconciling items, after-tax (below)

22,717 945 31,213 4,928

Adjusted Earnings (non-GAAP) $ (40,014) $ (41,716)

Reconciling items, pre-tax

Impairment loss (non-cash) (a)

$ 27,630 $ — $ 27,630 $ 433

Merchandise inventory loss (a)

Content amortization (non-cash)

1,314 1,064 3,700 2,973

Restructuring and other charges (a)

1,669 205 10,727 3,240

Reconciling items, pre-tax 4,332 6,835

Pro forma income tax impact (b)

7,896 324 10,844 1,718

Pro forma income tax impact (a)(b)

Reconciling items, after-tax $ 4,332 $ 4,936

2 unchanged sentences

Adjusted EBITDA (non-GAAP)

13 weeks ended 39 weeks ended

Dollars in thousands January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Net (loss) income $ (48,289) $ (1,693) $ (87,426) $ 2,083

13 weeks ended

Dollars in thousands July 31, 2021 August 1, 2020

Net loss $ (44,346) $ (46,652)

Depreciation and amortization expense 12,624 14,063

Content amortization (non-cash)

1,314 1,064 3,700 2,973

Interest expense, net 2,494 2,653

Income tax (benefit) expense (18,724) (3,182) (35,334) 1,683

Impairment loss (non-cash) (a)

27,630 — 27,630 433

Income tax expense (benefit) 399 (14,916)

Merchandise inventory loss (a)

Content amortization (non-cash)

Restructuring and other charges (a)

1,669 205 10,727 3,240

Adjusted EBITDA (non-GAAP) (a)

1 unchanged sentence

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

The following is Adjusted EBITDA by segment for the 13 and 39 weeks ended January 30, 2021 and January 25, 2020.

Adjusted EBITDA - by Segment 13 weeks ended January 30, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Elimination (b)

Sales $ 387,669 $ 39,465 $ 7,206 $ — $ (22,727) $ 411,613

Cost of sales (a)

333,970 28,807 186 — (23,276) 339,687

Gross profit 53,699 10,658 7,020 — 549 71,926

Selling and administrative expenses

75,921 4,336 6,015 6,491 (55) 92,708

Adjusted EBITDA (non-GAAP) $ (22,222) $ 6,322 $ 1,005 $ (6,491) $ 604 $ (20,782)

Adjusted EBITDA - by Segment 13 weeks ended January 25, 2020

Dollars in thousands Retail Wholesale DSS Corporate Services Elimination (b)

Sales $ 457,988 $ 66,996 $ 6,435 $ — $ (29,127) $ 502,292

Cost of sales (a)

357,988 52,761 298 — (28,354) 382,693

Gross profit 100,000 14,235 6,137 — (773) 119,599

Selling and administrative expenses

91,860 4,312 4,987 5,154 (129) 106,184

Adjusted EBITDA (non-GAAP) $ 8,140 $ 9,923 $ 1,150 $ (5,154) $ (644) $ 13,415

Adjusted EBITDA - by Segment 39 weeks ended January 30, 2021

The following is Adjusted EBITDA by segment for the 13 weeks ended July 31, 2021 and August 1, 2020.

Adjusted EBITDA - by Segment 13 weeks ended July 31, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Elimination (b)

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Adjusted EBITDA (non-GAAP) $ (19,622) $ 6,414 $ 1,692 $ (7,444) $ (5,537) $ (24,497)

Adjusted EBITDA - by Segment 39 weeks ended January 25, 2020

Adjusted EBITDA - by Segment 13 weeks ended August 1, 2020

Dollars in thousands Retail Wholesale DSS Corporate Services Elimination (b)

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Adjusted EBITDA (non-GAAP) $ (40,640) $ 12,966 $ 1,664 $ (5,244) $ (6,763) $ (38,017)

(a) For the 13 weeks ended January 30, 2021, gross margin excludes $0.2 million and $1.1 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 39 weeks ended January 30, 2021, gross margin excludes $0.6 million and $3.1 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 13 weeks ended January 25, 2020, gross margin excludes $0.2 million and $0.9 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 39 weeks ended January 25, 2020, gross margin excludes $0.6 million and $2.4 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

(a) For the 13 weeks ended July 31, 2021, gross margin excludes $0.2 million and $1.1 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 13 weeks ended July 31, 2021, gross margin also excludes a merchandise inventory loss of $0.4 million in the Retail Segment.

For the 13 weeks ended August 1, 2020, gross margin excludes $0.2 million and $1.0 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

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

Free Cash Flow (non-GAAP)

13 weeks ended

Dollars in thousands July 31, 2021 August 1, 2020

Adjusted EBITDA (non-GAAP) $ (24,497) $ (38,017)

Capital expenditures (a)

Cash interest 1,682 1,960

Cash taxes 254 5,937

Free Cash Flow (non-GAAP) $ (37,803) $ (52,969)

(a) Purchases of property and equipment are also referred to as capital expenditures.

Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, digital initiatives and enhancements to internal systems and our website.

The following table provides the components of total purchases of property and equipment:

Capital Expenditures 13 weeks ended

Dollars in thousands July 31, 2021 August 1, 2020

Physical store capital expenditures $ 3,893 $ 3,137

Product and system development 3,624 2,325

Content development costs 2,847 1,076

Other 1,006 517

Total Capital Expenditures $ 11,370 $ 7,055

Liquidity and Capital Resources

Our primary sources of cash are net cash flows from operating activities, funds available under our credit agreement and short-term vendor financing.

As of January 30, 2021, we had $150.8 million outstanding borrowings under the Credit Agreement.

As of July 31, 2021, we had $203.7 million outstanding borrowings under the Credit Agreement.

See Financing Arrangements discussion below.

COVID-19 Impact

Our business experienced an unprecedented and significant impact as a result of COVID-19 related campus store closures.

COVID-19 Business Impact

Our business experienced an unprecedented and significant negative impact as a result of COVID-19 related campus store closures.

Beginning in March 2020, colleges and universities nationwide began to close their campuses in light of safety concerns and as a result of local and state issued stay-at-home orders.

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We developed and implemented plans to safely reopen our campus stores based on national, state and local guidelines, as well as the campus policies set by the school administration.

Fewer students have returned to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

Additionally, sales were impacted by overall enrollment declines in higher education.

Financial Statements - Note 2.

Summary of Significant Accounting Policies - Evaluation of Goodwill and Other Long-Lived Assets related to the impairment loss (non-cash) recognized during the 13 weeks ended January 30, 3021.

We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

Certain elements of this plan were implemented in late Fiscal 2020, while other actions are planned for

We anticipate meaningful annualized cost savings from this program, the majority of which is expected to be realized beginning in Fiscal 2021.

The first half of Fiscal 2021 was significantly impacted by COVID-19 related campus store closures, as well as lower enrollments due to COVID-19 and fewer on campus events.

We cannot accurately predict the duration or extent of the impact of COVID-19 on enrollments, university budgets, athletics and other areas that directly affect our business operations.

There is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve.

Although most schools currently expect to return to a traditional on-campus environment for learning in the upcoming Fall semester, as well as host traditional on campus sporting activities and events, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

For additional information, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021 .

We believe that our future cash from operations, access to borrowings under the Credit Facility, FILO Facility and short-term vendor financing will provide adequate resources to fund our operating and financing needs for the foreseeable future.

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There can be no assurances that we will have access to capital markets on acceptable terms.

Sale of Treasury Shares

In December 2020, we entered into a new merchandising partnership with Fanatics and FLC which included a strategic equity investment in the Company.

Fanatics, Inc.

and Lids Holdings, Inc.

jointly purchased an aggregate 2,307,692 of our common shares (issued from treasury shares) for $15 million, representing a share price of $6.50 per share.

The premium price paid above the fair market value of our common stock at closing was approximately $4.1 million and was recognized as a contract liability ($0.2 million in accrued liabilities and $3.9 million in other long-term liabilities on our condensed consolidated balance sheet) which is expected to be earned over the term of the merchandising contracts for Fanatics and FLC.

We expect to use these proceeds for general corporate purposes.

Additionally, FLC has agreed to purchase our logo and emblematic general merchandise inventory, which we expect to be finalized during our fiscal 2021 fourth quarter.

For additional information regarding the merchandising partnership, see Item 1.

Financial Statements - Note 1.

Organization - Partnership with Fanatics and FLC and Note 7.

EPS and Earnings Per Share - Sale of Treasury Shares.

Sources and Uses of Cash Flow

13 weeks ended

Dollars in thousands January 30, 2021 January 25, 2020

Dollars in thousands July 31, 2021 August 1, 2020

Cash, cash equivalents, and restricted cash at beginning of period $ 16,814 $ 9,008

Net cash flows provided by operating activities 41,586 92,007

Net cash flows used in operating activities (17,462) (53,149)

Net cash flows used in investing activities (11,020) (7,140)

Net cash flows used in financing activities (13,925) (68,865)

Net cash flows provided by financing activities 24,885 59,518

Cash, cash equivalents, and restricted cash at end of period $ 13,217 $ 8,237

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These shifts in timing may affect the comparability of our results across periods.

Cash flows provided by operating activities during the 39 weeks ended January 30, 2021 were $41.6 million compared to $92.0 million during the 39 weeks ended January 25, 2020.

This decrease in cash provided by operating activities of $50.4 million was primarily due to a net loss in current year period compared to net income in the prior year period, an increase in other long-term liabilities due to sale of treasury shares at a premium (discussed above), and changes in inventory and working capital.

As discussed above, our operations were highly impacted by COVID-19 related campus store closures.

Cash flows used in operating activities during the 13 weeks ended July 31, 2021 were $(17.9) million compared to $(53.1) million during the 13 weeks ended August 1, 2020.

This decrease in cash used in operating activities of $35.2 million was primarily due to higher earnings in the current year period compared to the prior year period, and changes in working capital.

As discussed above, our operations were highly impacted by COVID-19 related campus store closures in the prior year period.

Cash Flow from Investing Activities

Cash flows used in investing activities during the 39 weeks ended January 30, 2021 were $(26.0) million compared to $(27.3) million during the 39 weeks ended January 25, 2020.

The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments associated with content development, digital initiatives, enhancements to internal systems, renewing existing contracts and new store construction and lower payments to acquire businesses and the change in other noncurrent assets for contractual obligations.

Capital expenditures totaled $25.9 million and $26.8 million during the 39 weeks ended January 30, 2021 and January 25, 2020, respectively.

Cash flows used in investing activities during the 13 weeks ended July 31, 2021 were $(11.0) million compared to $(7.1) million during the 13 weeks ended August 1, 2020.

The increase in cash used in investing activities is primarily due to higher capital expenditures and contractual capital investments associated with content development, digital initiatives, enhancements to internal systems and websites, renewing existing contracts and new store construction.

Capital expenditures totaled $11.4 million and $7.1 million during the 13 weeks ended July 31, 2021 and August 1, 2020, respectively.

Cash Flow from Financing Activities

Cash flows used in financing activities during the 39 weeks ended January 30, 2021 were $(13.9) million compared to $(68.9) million during the 39 weeks ended January 25, 2020.

This net change of $55.0 million is primarily due to lower net borrowings under the credit agreement and the sale of treasury shares of $10.9 million (discussed above).

Cash flows provided by financing activities during the 13 weeks ended July 31, 2021 were $24.9 million compared to $59.5 million during the 13 weeks ended August 1, 2020.

This net change of $34.6 million is primarily due to lower net borrowings under the credit agreement.

Financing Arrangements

We have a credit agreement (the “Credit Agreement”), amended March 1, 2019, under which the lenders committed to provide us with a 5-year asset-backed revolving credit facility in an aggregate committed principal amount of $400 million (the “Credit Facility”) effective from the date of the amendment.

We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5-year asset-backed revolving credit facility in an aggregate committed principal amount of $400 million (the “Credit Facility”).

We have the option to request an increase in commitments under the Credit Facility of up to $100 million, subject to certain restrictions.

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The agreement includes an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100 million incremental facility maintaining the maximum availability under the Credit Agreement at $500 million.

During the 39 weeks ended January 30, 2021, we borrowed $547.6 million and repaid $571.5 million under the Credit Agreement, with $150.8 million of outstanding borrowings as of January 30, 2021, comprised entirely of outstanding borrowings under the Credit Facility.

During the 39 weeks ended January 25, 2020, we borrowed $383.4 million and repaid $451.0 million under the Credit Agreement, with $65.9 million of outstanding borrowings as of January 25, 2020, comprised entirely of outstanding borrowings under the Credit Facility.

As of both January 30, 2021 and January 25, 2020, we have issued $4.8 million in letters of credit under the Credit Facility.

On March 31, 2021, we were granted a waiver to the availability test condition to the current draw under the FILO Facility.

During the 13 weeks ended July 31, 2021, we borrowed $71.7 million and repaid $45.6 million under the Credit Agreement, with $203.7 million of outstanding borrowings as of July 31, 2021, comprised of $153.7 million and $50.0 million under the Credit Facility and FILO Facility, respectively.

During the 13 weeks ended August 1, 2020, we borrowed $186.7 million and repaid $126.8 million under the Credit Agreement, with $234.6 million of outstanding borrowings as of August 1, 2020, comprised entirely of outstanding borrowings under the Credit Facility.

As of both July 31, 2021 and August 1, 2020, we have issued $4.8 million in letters of credit under the Credit Facility.

For additional information including interest terms and covenant requirements related to the Credit Facility and FILO Facility, refer to Part II - Item 7.

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Income Tax Implications on Liquidity

As of January 30, 2021, other long-term liabilities includes $25.7 million related to the long-term tax payable associated with the LIFO reserve.

As of July 31, 2021, other long-term liabilities includes $25.3 million related to the long-term tax payable associated with the LIFO reserve.

The LIFO reserve is impacted by changes in the consumer price index ("CPI") and is dependent on the inventory levels at the end of our tax year (on or about January 31st) which is in the middle of our second largest selling cycle.

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We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months.

We have filed our federal income tax returns for the tax year ended January 2021, as well claims for refunds for cash taxes paid in prior years.

We expect to receive an aggregate refund of approximately $30.5 million.

Share Repurchases

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Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.

During the 39 weeks ended January 30, 2021, we did not repurchase any of our Common Stock under the stock repurchase program.

As of January 30, 2021, approximately $26.7 million remains available under the stock repurchase program.

During the 39 weeks ended January 30, 2021, we repurchased 414,174 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

During the 13 weeks ended July 31, 2021, we did not repurchase any of our Common Stock under the stock repurchase program.

As of July 31, 2021, approximately $26.7 million remains available under the stock repurchase program.

During the 13 weeks ended July 31, 2021, we repurchased 130,135 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Contractual Obligations

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Off-Balance Sheet Arrangements

As of January 30, 2021, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

As of July 31, 2021, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Critical Accounting Policies

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

Recent Accounting Pronouncements

Financial Statements — Note 3.

Recent Accounting Pronouncements of this Form 10-Q for information related to new accounting pronouncements.

Disclosure Regarding Forward-Looking Statements

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Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others:

• risks associated with COVID-19 and the governmental responses to it, including its impact across our businesses on demand and operations, as well as on the operations of our suppliers and other business partners, and the effectiveness of our actions taken in response to these risks;

• risks associated with COVID-19 and the governmental responses to it, including its impacts across our businesses on demand and operations, as well as on the operations of our suppliers and other business partners, and the effectiveness of our actions taken in response to these risks;

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis