What changed in this filing

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Item 1A. Risk Factors

2023-07-31 compared with 2022-06-29 · 131 added, 113 removed, 262 unchanged (48% of the section changed)

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Because of the following risks and uncertainties, as well as other factors affecting our financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Risks Relating to the COVID-19 Pandemic

The impact of public health crises, epidemics, and pandemics, such as the COVID-19 pandemic, including the duration, spread, severity, and any recurrences thereof, and the impact such public health crises have on the overall demand for BNED products and services, our operations, and the operations of our suppliers and other business partners is uncertain and difficult to predict, but the COVID-19 pandemic and the measures taken to contain it has had a material adverse effect on our business and revenues to date and may have a material adverse effect on our business, financial condition, results of operations, stock price, and liquidity in the future.

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

economy and financial markets, 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.

Our business, results of operations and financial condition were adversely affected by the COVID-19 pandemic in the fourth quarter of 2020, especially beginning in mid-March, and such impact has continued throughout Fiscal 2022.

The COVID-19 pandemic, and measures taken to contain it, have subjected our business, results of operations, financial condition, stock price and liquidity to a number of material risks and uncertainties, all of which may continue or worsen.

Many colleges and K-12 schools were required or opted to cease or limit in-person classes in an attempt to limit the spread of COVID-19 and ensure the safety of their students and faculty.

Although most academic institutions have reopened, some are still utilizing online learning as an alternative to traditional in-person instruction.

An increase in the spread of COVID-19 variants or other public health crises could force schools to close again.

In addition, as a result of individual health concerns or financial difficulties, enrollment could be negatively impacted.

If colleges and schools are required to or choose to close or significantly fewer students and visitors are on campus, we may experience lower customer engagement with our products and services, which could lead to a materially adverse impact on our business and result of operations.

Public health crises, epidemics, and pandemics, such as COVID-19, related governmental reactions and economic conditions may have a negative impact on our business, liquidity, results of operations, and stock price due to the occurrence of some, or all, of the following events or circumstances:

• the closing or limited operations of our campus retail stores;

• reductions in government funding of education could negatively impact the budgets of public educational institutions and K-12 schools, which could impact the demand for our products and services;

• our inability to realize our expected return on textbooks in our print textbook library as educators transition to online curriculums and the lack of supply of used textbooks as a result of limited on-campus buyback opportunities;

• disruptions to the operations of our logistics and distribution partners, which could impact our ability to timely deliver our print textbooks to students;

• our partners’ inability to fill our textbook or general merchandise orders due to disruptions to their operations, supply chains or overwhelming demand from their own customers;

• system interruptions that slow our website or make our website unavailable as our third-party software and service providers experience increased usage;

• a significant reduction in U.S.

economic activity and increased unemployment, which could lead to decreased enrollment and consumer spending;

• the potential negative impact on the health of our employees, particularly if a significant number of them are impacted, could affect our ability to ensure business continuity during the period of disruption related to the pandemic;

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related controls, as well as introduce operational risk, including an increased vulnerability to potential cyber security attacks;

• actions we have taken and may take in the future in response to the COVID-19 pandemic, including significantly reducing our non-essential capital expenditures, reducing our workforce, and other cost reduction efforts, may negatively impact our operations.

Taken individually, or together in any combination, the above could cause a material adverse effect on our business, financial condition, results of operations, and liquidity, although the extent of the potential effect will depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the public health crisis, the short-term and long-term economic impact of the public health crisis, the actions taken to mitigate the impact of the public health crisis, the availability of vaccinations and the pace of economic and financial market recovery when the public health crisis subsides, among others.

In addition, our results of operations significantly impact our determination of whether we will record a valuation allowance against certain deferred tax assets.

If economic conditions caused by the COVID-19 pandemic specifically do not recover as currently estimated by management or current market factors change, there could be a further impact on our results of operations.

It is possible we will conclude, in future periods that a higher valuation allowance, than has currently been recorded, will be appropriate.

Further, many of the Risk Factors described in this report may be more likely to occur and be further intensified as a result of the impact of the COVID-19 pandemic.

Risks Relating to Our Business and Industry

We are dependent upon access to the capital markets, bank credit facilities, and short-term vendor financing for liquidity needs.

We must have sufficient sources of liquidity to fund working capital requirements.

The combination of cash-on-hand, cash flow received from operations, funds available under our credit agreements and short-term vendor financing must be sufficient to meet our normal working capital and debt service requirements for at least the next twelve months.

If these sources of liquidity do not satisfy our requirements, we may not operate as a going concern and will need to seek additional financing.

In addition, 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.

Additional financing may not be available to us on favorable terms when required or at all.

Failure to secure adequate financing when required could lead to going concern issues, the consequences of which would have a severe negative impact upon our business.

These factors could also 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.

Accordingly, if the economy worsens, our business, results of operations and financial condition could be materially and adversely affected.

If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience substantial dilution.

There can be no assurances that such financing can or will be obtained at any time in the future if needed.

In addition, as noted above, our liquidity is dependent in part on the availability of funds under our credit agreements.

If we are not able to comply with the covenants under our credit agreements, we may need to seek consents, waivers and/or amendments to our credit agreements from our lenders to avoid an event of default thereunder.

Although we have been successful in negotiating consents, waivers and /or amendments to our credit agreements, we may be unsuccessful in negotiating any further consents, waivers and/or amendments to any such agreements as we may deem necessary.

Further, the terms of any such consents, waivers and /or amendments may be less favorable than the current terms of our credit agreements or may impose additional restrictions on the operations of our business.

Under such circumstances, our business and liquidity could be materially and adversely affected.

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies.

We face significant competition for our products and services, and we expect such competition to increase.

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We face competition from other college bookstore operators and educational content providers, including Follett Corporation, a contract operator of campus bookstores;

Texas Book Company, bookstore management and operations;

Textbook Brokers and Texas Book Company, bookstore management and operations providers;

and BBA Solutions, a college textbook retailer.

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We face competition from e-Textbook/digital content providers, VitalSource Technologies, Inc., and Red Shelf.

Our wholesale business competes with Amazon, BBA Solutions, Nebraska Book Company, and Texas Book Company.

Our wholesale business competes with Amazon, BBA Solutions, and Texas Book Company.

Competitors that compete with our general merchandise offerings include Amazon, Sodexo and Aramark, online retailers, physical and online office supply stores and local and national retailers that offer college themed and other general merchandise.

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As a consequence, in addition to being competitive in the services we provide to our customers, our textbook business faces significant price competition.

Some of our competitors have adopted, and may continue to adopt, aggressive pricing policies and devote substantial resources to marketing, website and systems development.

In addition, a variety of business models are being pursued for the provision of print and digital textbooks, some of which may be more profitable or successful than our business model.

Some of our competitors have adopted, and may continue to adopt, aggressive pricing policies and devote substantial resources to marketing, website and

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systems development.

In addition, a variety of business models are being pursued for the provision of print and digital textbooks, some of which may be more profitable or successful than our business model, including our BNC First Day equitable and include access models.

Furthermore, the market for course materials is diluted from counterfeiting and piracy of digital and print copies or illegal copies of selected chapters made by students or others;

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and sharing or non-purchase of required course materials by students.

Our Digital Student Solutions business faces competition from other providers of online instruction platforms and other direct-to-student writing skills, study tools and tutor services, such as Chegg.com, CourseHero, Grammarly, and Quizlet.

As we develop a wider range of products and services, our competitive landscape will change and include other competitors in the broader student services market.

We have been focused on expanding these offerings, in many instances through the acquisition of other companies, like Student Brands, LLC, or through commercial arrangements.

In Fiscal 2019, we launched bartleby textbook solutions and expert question and answers, our first internally developed product within DSS, on bartleby.com .

Our newer products and services, or any other products and services we may introduce or acquire, may not be integrated effectively into our business, achieve or sustain profitability or achieve market acceptance at levels sufficient to justify our investment.

Our ability to fully integrate new products and services into our platforms or achieve satisfactory financial results from them is unproven.

Because we have a limited history in operating a fully digital platform, and the market for our products and services, including newly acquired or developed products and services, is rapidly evolving, it is difficult for us to predict our operating results, particularly with respect to our newer offerings, and the ultimate size of the market for our products and services.

If the market for a learning platform does not develop as we expect, or if we fail to address the needs of this market, our business will be harmed.

We have encountered and will continue to encounter these risks and, if we do not manage them successfully, our business, financial condition, results of operations and prospects may be materially and adversely affected.

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Our business depends on our ability to attract and retain talented employees, including senior management.

Management believes that our continued success will depend to a significant extent upon the efforts and abilities of certain of our executive officers and senior management, many of whom have significant experience and strong commercial relationships in our industry and capital market relationships.

The loss of any of these individuals could harm our business, financial condition and results of operations.

We do not maintain “key man” life insurance on any of our officers or other employees.

Experienced management and technical, marketing and support personnel in our industry are in high demand, and competition for their talents is intense.

The COVID-19 pandemic and the measures taken to contain it has had a material adverse effect on our business, financial condition, results of operations, stock price, and liquidity, which has impacted our recruitment and retention of employees.

In addition, changes we make to our current and future work environments may not meet the needs or expectations of our employees or may be perceived as less favorable compared to other companies’ policies, which could negatively impact our ability to hire and retain qualified personnel.

The loss of any of our executive officers or other key employees, the failure to successfully transition key roles, or the inability to hire, train, retain, and manage qualified personnel, could harm our business.

We also rely on a significant number of personnel to operate our stores, fulfillment network, and carry out our other operations.

Failure to successfully hire, train, manage, and retain sufficient personnel to meet our needs can strain our operations, increase payroll and other costs, and harm our business and reputation.

In addition, changes in laws and regulations applicable to employees, independent contractors, and temporary personnel could increase our payroll costs, decrease our operational flexibility, and negatively impact how we are able to staff our operations and supplement our workforce.

We are also subject to labor union efforts to organize groups of our employees from time to time.

These organizational efforts, if successful, decrease our operational flexibility, which could adversely affect our operating efficiency.

In addition, our response to any organizational efforts could be perceived negatively and harm our business and reputation.

We may not be able to enter into new managed bookstore contracts or successfully retain or renew our managed bookstore contracts on profitable terms.

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The retail price charged to the consumer for textbooks is set by our contracts with colleges and universities to be a maximum markup based on the publishers’ costs and as colleges continue to focus on affordability those prices have been reduced, which has negatively impacted our revenue and margin and further reductions could continue to have a negative impact.

Even if we have the right to terminate a contract, we may be reluctant to do so even when a contract is unprofitable due to, among other factors, the potential effect on our reputation.

In addition, we may face significant competition in retaining existing physical and virtual store contracts and when renewing those contracts as they expire.

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We may not be successful in retaining our current contracts, renewing our current contracts or renewing our current contracts on terms that provide us the opportunity to improve or maintain the profitability of managing stores that are the subject matter of such contracts.

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We face the risk of disruption of supplier relationships.

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During Fiscal 2023, our four largest retail suppliers, excluding our wholesale business which fulfills orders for all our physical and virtual bookstores, accounted for approximately 28% of our merchandise purchased, with the largest supplier accounting for approximately 8% of our merchandise purchased.

Our wholesale business sources over 90% of its inventory from two primary channels, approximately 50% from retail bookstores (including our retail bookstores) and approximately 44% from third-party suppliers.

Our wholesale business sources over 90% of its inventory from two primary channels, approximately 54% from third-party suppliers and approximately 38% from retail bookstores (including our retail bookstores).

While we believe that our relationships with our suppliers are good, suppliers may modify the terms of these relationships due to general economic conditions or otherwise or, especially with respect to wholesale inventory, publishers could terminate distribution to wholesalers, including our wholesale business.

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, 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.

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.

Furthermore, certain of our merchandise is sourced indirectly from outside the United States.

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With respect to our wholesale business, the demand for used and new textbooks is typically greater than the available supply, and our wholesale business is highly dependent upon its ability to build its textbook inventory from publishers and suppliers in advance of the selling season.

These publisher and

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supplier relationships are not generally governed by long-term contracts and publishers and suppliers could choose not to sell to us.

These publisher and supplier relationships are not generally governed by long-term contracts and publishers and suppliers could choose not to sell to us.

Any negative impact on our ability to build our textbook inventory could have an adverse impact on financial results.

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These programs, if successful, will result in a substantial decrease in the supply of those titles from the used textbook inventory supply, which impacts our wholesale business.

Our wholesale business is a national distributor for rental textbooks offered through McGraw-Hill Education's consignment rental program (which includes approximately 860 titles) and Pearson Education’s consignment rental program (which includes approximately 698 titles).

Our wholesale business is a national distributor for rental textbooks offered through McGraw-Hill Educations consignment rental program (which includes approximately 1,016 titles) and Pearson Education’s consignment rental program (which includes approximately 817 titles).

Through its centrally located, advanced distribution center, our wholesale business offers the seamless integration of these consignment rental programs and centralized administration and distribution to approximately 1,576 stores, including our Retail Segment stores.

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In addition, the profit margins associated with the traditional distribution model are fairly predictable and constant, but the move to a model of increased consignment rental programs combined with pressure to provide more affordable course materials to students could result in lower profit margins for a substantial part of our wholesale and retail business.

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Our wholesale business may not be able to manage its inventory levels effectively, which may lead to excess inventory or inventory obsolescence.

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This may lead to excess or obsolete inventory that might have to be sold at a deep discount, which may impact its revenues and profit margin and may have a negative impact on our financial condition and results of operations.

Shipping is a critical part of our business and changes in, or disruptions to, our shipping arrangements have in the past and may in the future adversely affect our business, financial condition and results of operations.

We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers.

An inability to negotiate acceptable terms with these companies or performance problems, staffing limitations, union strikes, or other difficulties experienced by these companies or by our own transportation systems, including as a result of labor market constraints and related costs, could negatively impact our operating results and customer experience.

In addition, our ability to receive inbound inventory efficiently and ship completed orders to customers also may be negatively affected by natural or human-caused disasters (including public health crises) or extreme weather (including as a result of climate change), geopolitical events and security issues, labor or trade disputes, and similar events.

We currently rely on a limited number of third-party global providers to deliver inventory to us and completed orders to our customer.

If we are not able to negotiate acceptable pricing and other terms with these providers, or if these providers experience performance problems or other difficulties in processing our orders or delivering our products to customers, it could negatively impact our results of operations and our customers’ experience.

Furthermore, changes to the terms of our shipping arrangements or the imposition of surcharges or surge pricing have in the past and may in the future adversely impact our margins and profitability.

We have from time to time experienced increased shipping costs as a result, and these costs may continue to increase in the future.

We may not be able to or choose to pass such increases on to our customers in the future.

The COVID-19 pandemic or any future pandemic, epidemic or outbreak of an infectious disease may also continue to adversely affect workforces and supply chains globally, potentially impacting the operations of our third-party shipping providers, which could negatively impact our business and results of operations.

Our ability to receive inbound inventory efficiently and ship merchandise to customers, including at costs to which we are accustomed, may also be negatively affected by other factors beyond our and/or these providers’ control, including pandemic, weather, fire, flood, power loss, earthquakes, acts of war, or terrorism or other events specifically impacting other shipping partners, such as labor disputes or shortages, financial difficulties, system failures and other disruptions to the operations of the shipping companies on which we rely.

For example, a strike by employees of any of our third-party global providers or a port worker strike, work slow-down or other transportation disruption could significantly disrupt our business.

We have in the past experienced, and may in the future experience, shipping delays for reasons outside of our control.

Our business is dependent on the overall economic environment, college enrollment and consumer spending patterns.

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To the extent we are unable to attract new students or students spend less generally, our business could be adversely affected.

Our business depends on our ability to attract and retain talented employees, including senior management.

The loss of any of these individuals could harm our business, financial condition and results of operations.

We do not maintain “key man” life insurance on any of our officers or other employees.

Experienced management and technical, marketing and support personnel in our industry are in high demand, and competition for their talents is intense.

If we are less successful in our recruiting efforts, or if we are unable to retain key employees, our ability to develop and deliver successful products and services may be adversely affected.

Our business is seasonal.

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Sales attributable to our wholesale business are generally highest in our first, second and third quarter as it sells textbooks for retail distribution.

Less than satisfactory net sales during our peak fiscal quarters could have a material adverse effect on our financial condition or operating results for the year, and our results of operations from those quarters may not be sufficient to cover any losses that may be incurred in the other fiscal quarters of the year.

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 equitable and inclusive access offerings, cash collection from the school generally occurs after the student 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 equitable and inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors with cash inflows collected from schools, including modifying payment terms in existing and future school contracts.

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For both retail and wholesale, cash flows from operating activities are typically a use of cash in the fourth fiscal quarter, when sales volumes are materially lower than the other quarters.

Our quarterly cash flows also may fluctuate depending on the timing of the start of the various school’s semesters, as well as shifts in our fiscal calendar dates.

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

Our international operations could result in additional risks.

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A failure to comply with applicable laws and regulations could result in regulatory enforcement actions, as well as substantial civil and criminal penalties assessed against us and our employees.

We are dependent upon access to the capital markets, bank credit facilities, and short-term vendor financing for liquidity needs.

We must have sufficient sources of liquidity to fund working capital requirements.

We believe that the combination of cash-on-hand, cash flow received from operations, funds available under our credit agreements and short-term vendor financing will be sufficient to meet our normal working capital and debt service requirements for at least the next twelve months.

If these sources of liquidity do not satisfy our requirements, we may need to seek additional financing.

In addition, we may require additional capital in the future to sustain or grow our business.

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 could materially adversely affect our costs of borrowing, and our financial position and results of operations would be adversely impacted.

Accordingly, if the economy worsens, our business, results of operations and financial condition could be materially and adversely affected.

The impact of public health crises, epidemics, and pandemics, such as the COVID-19 pandemic, could have a material adverse effect on our business, financial condition, results of operations, stock price, and liquidity.

Our business, results of operations and financial condition were adversely affected by the COVID-19 pandemic in Fiscal 2021 and Fiscal 2022.

• the closing or limited operations of our campus retail stores;

• reductions in government funding of education could negatively impact the budgets of public educational institutions and K-12 schools, which could impact the demand for our products and services;

• disruptions to the operations of our logistics and distribution partners, which could impact our ability to timely deliver our print textbooks to students;

• our partners’ inability to fill our textbook or general merchandise orders due to disruptions to their operations, supply chains or overwhelming demand from their own customers;

• system interruptions that slow our website or make our website unavailable as our third-party software and service providers experience increased usage;

• a significant reduction in U.S.

economic activity and increased unemployment, which could lead to decreased enrollment and consumer spending;

• governmental orders have forced many of our on-site and management office employees to work remotely, which may adversely impact our ability to effectively manage our business and maintain our financial reporting processes and related controls, as well as introduce operational risk, including an increased vulnerability to potential cyber security attacks.

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Risks relating to our Strategic Plan

Our results also depend on the successful implementation of our strategic initiative to grow our digital products and services.

Our results also depend on the successful implementation of our strategic initiatives, including implementation of our BNC First Day equitable and inclusive access course material models.

We may not be able to implement this strategy successfully, on a timely basis, or at all.

In response to our changing business environment and to adapt to industry trends, we are focused on our digital initiatives to retain and expand existing customer relationships, acquire new accounts, expand sales channels and marketing efforts, integrate and develop direct-to-student digital solutions, and develop and market higher education digital products.

While we believe we have the capital resources, experience, management resources and internal systems to successfully operate our digital business, we may not be successful in implementing this strategy.

The implementation of our digital strategy is a complex process and relies on leveraging our core products, services and relationships to help accelerate the adoption of our new digital products and services.

Success of our future operating results will be dependent upon rapid customer adoption of our new digital products and services and our ability to scale our business to meet customer demand appropriately.

If colleges and universities, faculty and students are not receptive to our new products and services or our new products and services do not meet the expectations of these constituencies, there could be a negative impact on the implementation of our strategy.

In response to our changing business environment and to adapt to industry trends, we are focused on offering course materials sales through our equitable and inclusive access First Day Complete and First Day models to meet the market demands of reducing costs to students and 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, which have been observed at those schools where such programs have been adopted.

We are moving quickly and decisively to accelerate our First Day Complete strategy.

While we plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our campus stores in Fiscal 2025, we cannot guarantee that we will be able to achieve these plans within these timeframes or at all.

While we believe we have the capital resources, experience, management resources and internal systems to successfully implement our BNC First Day equitable and inclusive access models across our client portfolio, we may not be successful in implementing this strategy.

The implementation of this strategy is a complex process and relies on leveraging our services and relationships to help accelerate the adoption of our First Day Complete strategy.

The success of our future operating results will be dependent upon rapid customer adoption of BNC First Day equitable and inclusive access models and our ability to scale our business to meet customer demand appropriately.

If colleges and universities, faculty and students are not receptive to our BNC First Day equitable and inclusive access models or these models do not meet the expectations of these constituencies, there could be a negative impact on the implementation of our strategy.

To successfully execute on this strategy, we need to continue to further evolve the focus of our organization towards the delivery of cost effective and unique solutions for our customers.

Any failure to successfully execute this strategy could adversely affect our operating results.

Further, even if successfully implemented, our business strategy may not ultimately produce positive results.

Part of our strategy includes pursuing strategic acquisitions and partnerships, and we may not be able to identify and successfully complete such transactions.

Part of our strategy includes the successful execution of strategic acquisitions and partnerships, including our strategic partnership with VitalSource Technologies, Inc.

(“VST”) and the F/L Partnership which may not be successful.

As part of our strategy, we will continue to seek, and may, in the future acquire, businesses or business operations, or enter into other business transactions to grow our business and expand our product and service offerings.

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In addition, we compete for acquisitions with other potential acquirers, some of which may have greater financial or operational resources than we do.

This competition may increase costs of acquiring desirable businesses, and, as a result, we may be unable to make acquisitions or be forced to pay more or agree to less advantageous acquisition terms for the businesses that we are able to acquire.

Any strategic acquisitions or investments that we are able to identify and complete may also involve a number of risks, including our inability to successfully or profitably integrate, operate, maintain and manage our newly acquired operations or employees;

the diversion of our management’s attention from our existing

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business to integrate operations and personnel;

the diversion of our management’s attention from our existing business to integrate operations and personnel;

possible material adverse effects on our results of operations during the integration process;

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Acquisitions may also have unanticipated tax, legal, regulatory and accounting ramifications, including recording goodwill and non-amortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges and incurring amortization expenses related to certain intangible assets.

A strategic partnership between two independent businesses is a complex, costly, and time-consuming process that will require significant management attention and resources.

Realizing the benefits of our strategic partnerships, particularly our relationship with VST and the F/L Partnership, will depend in part on our ability to work with our strategic partners to integrate our systems, simplify the customer experience, offer compelling solutions to our customers, and maintain financially beneficial terms.

Setting up and maintaining the operations and processes of these strategic partnerships may cause us to incur significant costs, disrupt our business and, if implemented ineffectively, would limit the expected benefits to us.

The failure to successfully and timely implement and operate our strategic partnerships could harm our ability to realize the anticipated benefits of these partnerships and could adversely affect our results of operations.

We intend to offer new products and solutions to students to grow our business.

If our efforts are not successful, our business and financial results would be adversely affected.

Our ability to attract and retain students and increase their engagement with our learning platform depends on our ability to connect them with the product, person or service they need to save time, save money, and get homework help.

For example, in Fiscal 2019, we launched bartleby textbook solutions and expert question and answers, our first internally-developed product within DSS, on bartleby.com .

The markets for these new products and services may be unproven, and these products may include technologies and business models with which we have little or no prior development or operating experience or may significantly change our existing products and services.

In addition, we may be unable to obtain long-term licenses from third-party content providers necessary to allow a product or service, including a new or planned product or service, to function.

If our new or enhanced products and services fail to engage our students or attract new students, or if we are unable to obtain content from third parties that students want, we may fail to grow our student base or generate sufficient revenues, operating margin or other value to justify our investments, and our business would be adversely affected.

In the future, we may invest in new products and services and other initiatives to generate revenues, but there is no guarantee these approaches will be successful.

Acquisitions of new companies, products and services create integration risk, while development of new products and services and enhancements to existing products and services involve significant time, labor and expense, and are also subject to risks and challenges, including managing the length of the development cycle, entry into new markets, integration into our existing business, legal and regulatory compliance, evolution in sales and marketing methods, and maintenance and protection of intellectual property and proprietary rights.

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methods, and maintenance and protection of intellectual property and proprietary rights.

If we are not successful with our new products and services, we may not be able to maintain or increase our revenues as anticipated or recover any associated acquisition or development costs, and our financial results could be adversely affected.

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Also, in connection with our student financial aid platform and the processing of college and university debit cards, we have access to certain student personal information that has been provided to us by the colleges and universities we serve.

Our handling and use of personal information is subject to applicable international, federal and state privacy and information security laws and regulations and industry standards, such as the Payment Card Industry Data Security Standard.

Our handling and use of personal information is subject to applicable federal and state privacy and information security laws and regulations and industry standards, such as the Payment Card Industry Data Security Standard.

As an entity that provides services to institutions of higher education, we are contractually bound to handle certain personal information from student education records in accordance with the requirements of Family Educational Rights and Privacy Act (“FERPA”).

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In addition, even if we materially comply with all applicable laws, regulations and industry standards, and even though we have taken significant steps to protect non-deidentified personal information, e.g., encrypting such personal information in transit and at rest, we could experience a data security breach, and our reputation could be damaged, possibly resulting in a material breach of contract with one or more of our clients, litigation, and/or lost future sales or decreased usage of credit and debit card products.

Further, in the event that we disclose unencrypted, deidentified student information in violation of our contractual FERPA obligations, the U.S.

Department of Education could require a client to suspend our access to their student information for at least five years.

Further, in the event that we disclose unencrypted, non-deidentified student information in violation of our contractual FERPA obligations, the U.S.

Department of Education could require a client to suspend our access to their student information.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

A party that is able to circumvent our security measures could misappropriate our proprietary information or our customers' and employees' personal information, and cause interruption in our operations.

Any compromise of our data security could result in a violation of applicable laws, regulations or industry standards, significant legal and financial exposure beyond the scope or limits of insurance coverage, increased operating costs associated with remediation, equipment acquisitions or disposal, and added personnel, and a loss of confidence in our security measures, which could harm our business or affect investor

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Data security breaches may also result from non-malicious and non-technical means (for example, inadvertent actions by an employee).

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Although most of our operations are in the United States, we do have some operations and offer some services and products internationally.

Our international operations subject us to a complex array of international laws and regulations relating to the collection, use, retention, disclosure, security and transfer of personally identifiable data.

Many jurisdictions have passed laws in this area, and other jurisdictions are considering imposing additional restrictions.

The interpretation and application of data protection laws in the United States, Europe, and elsewhere are rapidly evolving.

The interpretation and application of data protection laws in the United States and elsewhere are rapidly evolving.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our current data practices.

Complying with applicable international laws and regulations could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

Further, although we continue to implement internal controls and procedures designed to protect our proprietary and confidential information, and deidentified customer and employee personal data, including sensitive personal data, in order to comply with privacy and information security laws, and regulations, our facilities, and systems may be vulnerable to security breaches and other data loss, including cyber-attacks.

Further, although we continue to implement internal controls and procedures designed to protect our proprietary and confidential information, and non-deidentified customer and employee personal data, including sensitive personal data, in order to comply with privacy and information security laws, and regulations, our facilities, and systems may be vulnerable to security breaches and other data loss, including cyber-attacks.

Such a security breach or data loss could lead to negative publicity, damage to our reputation, exposure to litigation and liability, theft, modification or destruction of proprietary information and personal data, damage to or inaccessibility of critical systems, manufacture of defective products, production downtimes, operational disruptions and remediation and other significant costs, which could adversely affect our reputation, financial condition and results of operations.

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Computer malware, viruses, hacking and phishing attacks could harm our business and results of operations.

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Any technical problem with, cyber-attack on, or loss of access to such third parties’ systems, servers or technologies could result in the inability of our students to rent or purchase print textbooks, interfere with access to our digital content and other online products and services or result in the theft of end-user personal information.

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Our reliance on AWS or other third-party providers makes us vulnerable to any errors, interruptions, or delays in their operations.

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states pertaining directly or indirectly to commercial email regulate unsolicited commercial emails, create civil and criminal penalties for emails containing fraudulent headers and control other abusive online marketing practices;

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Federal Trade Commission (the “FTC”) has guidelines that impose responsibilities on companies with respect to communications with consumers and impose fines and liability for failure to comply with rules with respect to advertising or marketing or sales practices they may deem misleading or deceptive;

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• The Restore Online Shopper Confidence Act (“ROSCA”), and similar state laws, impose requirements and restrictions on online services that automatically charge payment cards on a periodic basis to renew a subscription service, if the consumer does not cancel the service;

• The General Data Protection Regulation (“GDPR”) became effective on May 18, 2018.

This European Union (“EU”) law governing data practices and privacy applies to all of our activities conducted from an establishment in the EU or related to certain of our products and services offered in the EU, and imposes a range of new compliance obligations regarding the handling of personal data;

• The California Consumer Privacy Act (“CCPA”) became effective on January 1, 2020, with enforcement commencing on July 1, 2020.

CCPA provides consumers the right to know what personal data companies collect, how it is used, and the right to access, delete and opt out of sale of their personal information to third parties.

CCPA, as amended, provides California consumers the right to know what personal data companies collect, how it is used, and the right to access, delete and opt out of sale of their personal information to third parties.

It also expands the definition of personal information and gives consumers increased privacy rights and protections for that information.

The CCPA also includes additional requirements for California consumers under the age of 16;

• The California Privacy Rights Act (“CPRA”) took effect on December 16, 2020, but most provisions of CPRA will not become operative until January 1, 2023.

The California Privacy Rights Act (“CPRA”) took effect on December 16, 2020, and became fully operative on January 1, 2023.

CPRA amends and adds to CCPA by strengthening rights of California consumers, further restricting business use of consumer personal information, and establishing a new government agency for enforcement;

• The Virginia Consumer Data Protection Act (“VCDPA”), similar in scope to CCPA, will also go into effect on January 1, 2023.

• The Virginia Consumer Data Protection Act (“VCDPA”), similar in scope to CCPA, went into effect on January 1, 2023.

VCDPA is the second U.S.

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VCDPA also defines the “sale” of personal information narrowly, including only exchanges for monetary consideration;

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• Colorado is the third state to enact a comprehensive data privacy statute, the Colorado Privacy Act (“CPA”).

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Although similar in scope to VCDPA, CPA defines “sale” of personal information in the same manner as CCPA, which includes any exchange for monetary or any other valuable consideration;

• The fourth U.S.

state privacy law to be enacted, the Utah Consumer Privacy Act (“UCPA”), is somewhat narrower in scope than other state privacy laws, and adopts the VCDPA’s definition of “sale” of personal information.

• The Connecticut Data Privacy Act (“CTDPA”) also takes effect July 1, 2023.

CTDPA protects a Connecticut consumer acting in an individual or household context, but does not protect an individual acting in an employment context.

• The Utah Consumer Privacy Act (“UCPA”) adopts the VCDPA’s definition of “sale” of personal information.

UCPA goes into effect on December 31, 2023;

• On April 29, 2022, the Connecticut General Assembly advanced a bill that is likely to become the fifth state privacy law in the U.S.

The Connecticut bill, which resembles UCPA, CPA and VCDPA, would take effect on July 1, 2023.

In the absence of federal consumer privacy legislation, at least ten other U.S.

states have active privacy legislation bills pending.

• On March 29, 2023, Iowa became the sixth state to pass a comprehensive consumer privacy law, joining Utah, Connecticut, Colorado, Virginia and California.

The Iowa Consumer Data Protection Act will go into effect on January 1, 2025;

• On May 1, 2023, Indiana became the seventh state to pass similar data privacy legislation, the Indiana Data Privacy Law, which will become effective January 1, 2026.

• The Tennessee Information Protection Act, enacted on May 11, 2023, will go into effect on July 1, 2024.

• On May 19, 2023, Montana became the ninth state to enact comprehensive consumer privacy law, the Montana Consumer Data Privacy Act, which goes into effect October 1, 2024.

Even if no applicable laws or regulations are further enacted, we may discontinue use or support of these activities if we become concerned that students or potential students deem them intrusive or they otherwise adversely affect our goodwill and brand.

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We are subject to laws and regulations applicable to our business.

These laws and regulations may cover taxation, data privacy, information security, our access to student financial aid, pricing and availability of educational materials, competition and/or antitrust, content, copyrights, distribution, college distribution, mobile communications, electronic contracts and other communications, consumer protection, the provision of online payment services, unencumbered Internet access to our services, the design and operation of websites and mobile application (including complying with the Americans with Disabilities Act), digital content (including governmental investigations and litigation relating to the agency pricing model for digital content distribution), the characteristics and quality of products and services and labor and employee benefits (including the costs associated with complying with the Patient Protection and Affordable Care Act or any legislation enacted in connection with repeal of the Affordable Care Act).

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associated with complying with the Patient Protection and Affordable Care Act or any legislation enacted in connection with repeal of the Affordable Care Act).

Changes in applicable federal, state, local or international laws, rules or regulations relating to these matters could increase regulatory compliance requirements in addition to increasing our costs of doing business or otherwise impact our business.

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We have invested significant amounts of resources in the hardware and software to develop this system.

We rely on the expertise of our engineering and software development teams to maintain and enhance the equipment and software used for our distribution

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We rely on the expertise of our engineering and software development teams to maintain and enhance the equipment and software used for our distribution operations.

We cannot be sure that the maintenance and enhancements we make to our distribution operations will achieve the intended results or otherwise be of value to students.

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Laws and regulations may not adequately protect our trademarks and similar proprietary rights.

We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or diminish the value of our trademarks and other proprietary or licensed rights.

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may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or diminish the value of our trademarks and other proprietary or licensed rights.

We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights.

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We have in the past and may continue to receive communications from publishers alleging that certain textbooks sold or rented by us are counterfeit.

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When receiving such communications, we cooperate, and will continue to cooperate in the future, with such publishers in identifying fraudulent textbooks and removing them from our inventory.

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to maintain the licensed trademarks.

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Risks Relating to our Common Stock and the Securities Market

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• our quarterly or annual earnings or those of other companies in our industries;

• our ability to obtain financing as needed;

• our ability to obtain financing as needed, when needed, and on favorable terms;

• the terms of any financing through the issuance of additional equity or equity-linked securities;

• announcements by us or our competitors of significant acquisitions or dispositions;

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These provisions may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of the Company, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their Common Stock at a price above the prevailing market price.

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Our Amended and Restated By-laws designate courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees.

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Alternatively, if a court were to find this provision of our Amended and Restated By-laws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions.

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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-K

Item 1A. Risk Factors