What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-03-12 compared with 2023-12-07 · 392 added, 275 removed, 652 unchanged (51% of the section changed)

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We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes.

We offer our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required course materials on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately.

The BNC First Day discounted price is offered as a course fee or included in tuition.

During the 26 weeks ended October 28, 2023, BNC First Day total revenue increased by $73 million, or 39%, to $261 million compared to $188 million during the prior year period.

We offer our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte) and students are billed the below market rate directly by the institution as a course charge or included in tuition.

During the 39 weeks ended January 27, 2024, BNC First Day total revenue increased by $136 million, or 44%, to $445 million compared to $309 million during the prior year period.

These programs have allowed us to reverse historical long-term trends in course materials revenue declines as the growth of our BNC First Day programs offsets declines in a la carte courseware sales and closed store sales.

We expect to continue to introduce scalable and advanced solutions focused largely on the student and customer experience, expand our e-commerce capabilities and accelerate such capabilities through our service providers, Fanatics Retail Group Fulfillment, LLC, Inc.

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D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L Relationship”), win new accounts, and expand our revenue opportunities through strategic relationships.

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

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

As our service providers, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools from Fanatics and Lids on our behalf to drive increased value for customers and accelerate growth of our logo general merchandise business.

During the 26 weeks ended October 28, 2023, Retail Gross Comparable Store general merchandise sales increased by 1.1%.

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.

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Business in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023.

Financing Arrangements

During the 13 and 26 weeks ended October 28, 2023, we amended our existing Credit Agreement and Term Loan Agreement to, extend the maturity dates and modify various terms to provide additional liquidity.

For additional information, see Item 1.

Financial Statements - Note 7.

Sale of DSS Segment

During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment.

On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20 million, net of certain transaction fees, severance costs, escrow, and other considerations.

During the 26 weeks ended October 28, 2023, we recorded a Gain on Sale of Business of $3.1 million in Loss from Discontinued Operations, Net, related to the sale.

Net cash proceeds from the sale were used for debt repayment and provided additional funds for working capital needs under our Credit Facility.

For additional information, see Note 2.

Summary of Significant Accounting Policies.

Cost Savings Initiative

During Fiscal 2023, we implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

We reduced our workforce, eliminated duplicate administrative headcounts at all levels, implemented improved system development processes to reduce maintenance costs, reduced capital expenditures, and evaluated operating contractual obligations for cost savings.

Over the last year, we have achieved annualized savings of $30 million to $35 million from these cost savings initiatives.

Additionally, during Fiscal 2024, Management's planned to implement further cost savings measures, including reduction of gross capital expenditures, amounting to approximately $25 million, of which approximately $14 million has been achieved during the 26 weeks ended October 28, 2023.

Management believes that these plans are within its control and will be focused on implementing as outlined.

BNC First Day Equitable and Inclusive Access Programs

The BNC First Day discounted price is offered as a course fee or included in tuition.

We offer our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte) and students are billed the below market rate directly by the institution as a course charge or included in tuition.

• First Day Complete is adopted by an institution and includes the majority of undergraduate classes (and on occasion graduate classes), providing students both physical and digital materials.

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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, and improve predictability of our future results.

The growth of our BNC First Day programs offsets declines in a la carte courseware sales and closed store sales.

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

We plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our schools by Fiscal 2025, with continued relative adoption of this model thereafter.

The following table summarizes our BNC First Day sales for the 13 and 26 weeks ended October 28, 2023 and October 29, 2022:

We have seen many institutions adopt First Day Complete in Fiscal 2024 and plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond.

The following table summarizes our BNC First Day sales for the 13 and 39 weeks ended January 27, 2024 and January 28, 2023:

Dollars in millions 13 weeks ended 39 weeks ended

October 28, 2023 October 29, 2022 Var $ Var % October 28, 2023 October 29, 2022 Var $ Var %

January 27, 2024 January 28, 2023 Var $ Var % January 27, 2024 January 28, 2023 Var $ Var %

First Day Complete Sales

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$ 184.0 $ 120.7 $ 63.3 52% $ 445.1 $ 309.1 $ 136.0 44%

First Day Complete Fall 2023 Fall 2022 Var # Var %

First Day Complete Spring 2024 Spring 2023 Var # Var %

Number of campus stores 160 116 44 38%

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Under the related service provider agreements, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our general merchandise business.

On our behalf, 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.

Fanatics, operates as our service provider, including processing consumer personal information on our behalf, using their cutting-edge e-commerce and technology expertise to offer our campus store websites expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform.

Coupled with Lids, 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.

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Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and Lids owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital.

During the fourth quarter of Fiscal 2023, assets related to our DSS Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment.

We completed the sale of the previous DSS Segment during the first quarter of Fiscal 2024.

Financing Arrangements and Strategic Review

Pursuant to the July 28, 2023 Credit Agreement amendment, the Board established a committee consisting of three independent directors to explore, consider, solicit expressions of interest or proposals for, respond to any communications, inquiries or proposals regarding, and advise as to all strategic alternatives to effect a “Specified Liquidity Transaction” (as defined in the Credit Agreement).

The Board continues its ongoing review of a broad range of strategic alternatives available to the Company, including but not limited to potential capital raises, asset divestitures, a sale of the business, and pursuit of standalone growth plans.

The Board has not set a timetable for the conclusion of this review, nor has it made any decisions

related to any further actions at this time.

There can be no assurance that the review will result in any transaction or other strategic change or outcome.

Cost Savings Initiative

During Fiscal 2023, we implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

Over the course of Fiscal 2024, we have achieved annualized savings of approximately $30 million to $35 million from the Fiscal 2023 cost savings initiatives.

Additionally, during Fiscal 2024, Management's plan to implement further cost savings measures, including reduction of gross capital expenditures, amounting to approximately $25 million, of which approximately $18 million has been achieved during the 39 weeks ended January 27, 2024.

Management believes that these plans are within its control and will be focused on implementing these cost savings measures.

On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20 million, net of certain transaction fees, severance costs, escrow, and other considerations.

During the 39 weeks ended January 27, 2024, we recorded a Gain on Sale of Business of $3.5 million in Loss from Discontinued Operations, Net, related to the sale.

Net cash proceeds from the sale were used for debt repayment and provided additional funds for working capital needs under our Credit Facility.

For additional information, see Note 2.

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

The Retail Segment offers our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required course materials on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately.

The BNC First Day discounted price is offered as a course fee or included in tuition.

The Retail Segment offers our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte) and students are billed the below market rate directly by the institution as a course charge or included in tuition.

Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

During the 26 weeks ended October 28, 2023, we opened 31 stores and closed 126 stores in the Retail Segment, with estimated net annual sales of $60 million as we pruned some under-performing, less profitable stores, satellite stores, and certain other contracts were awarded to competitors.

We plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our stores by Fiscal 2025, with continued relative adoption of this model thereafter.

During the 39 weeks ended January 27, 2024, we opened 41 stores and closed 135 stores in the Retail Segment with estimated net annual sales of $65 million as we pruned some under-performing, less profitable stores, satellite stores, and certain other contracts were awarded to competitors.

We have seen many institutions adopt First Day Complete in Fiscal 2024 and plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond.

Wholesale Segment

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Our business is highly seasonal.

Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates.

For example, our retail business is seasonal, particularly with respect to textbook sales and rentals, with the major portion of sales and operating profit realized during the second and third fiscal quarters when college students generally purchase and rent textbooks for the upcoming semesters and lowest in the first and fourth fiscal quarters.

Our quarterly results also may fluctuate depending on the timing of the start of the various schools’ semesters, the revenue impact of accounting principles with respect to the recognition of revenue associated with our equitable and inclusive access programs, the ability to secure inventory on a timely basis, as well as shifts in our fiscal calendar dates.

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

Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April.

Our retail business is highly seasonal, with the major portion of sales and operating profit realized during the second and third fiscal quarters, when college students generally purchase and rent textbooks for the upcoming semesters.

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

See Revenue Recognition and Deferred Revenue discussion below.

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores.

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When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor.

As a higher percentage of our sales shift to BNC First Day equitable and inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and schools with cash inflows collected from schools, including modifying payment terms in existing and future school contracts.

As the concentration of digital product sales increases, revenue will be recognized earlier during the academic term as digital textbook revenue is recognized when the customer accesses the digital content compared to:

(i) the rental of physical textbook where revenue is recognized over the rental period, and (ii) ala carte courseware sales where revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores.

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

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Enrollment trends, specifically at community colleges, generally correlate with changes in the economy and unemployment factors, e.g., low unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment trends, as students generally enroll to obtain skills that are in demand in the workforce.

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

traditional 18-24 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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We are experiencing growing competition from alternative media and alternative sources of textbooks and other course materials.

In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, publishers, including Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, including student-to-student transactions over the Internet, and multi-title subscription access.

In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, and publishers, including Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, including student-to-student transactions over the Internet, and multi-title subscription access.

• Suppliers, Supply Chain and Inventory.

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Our First Day Complete and First Day programs 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 schools by Fiscal 2025, we cannot guarantee that we will be able to achieve these plans within these timeframes or at all.

While we have seen many institutions adopt First Day Complete in Fiscal 2024 and plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond, we cannot guarantee that we will be able to achieve these plans within these timeframes or at all.

Additionally, the United States Department of Education has recently proposed regulatory changes that, if adopted as proposed, could impact equitable and inclusive access models across the higher education industry.

• A Large Number of Traditional Campus Bookstores Have Yet to be Outsourced.

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We expect awards of new accounts resulting in new physical and virtual store openings will continue to be an important driver of future growth in our business.

We also expect that certain less profitable or non-essential bookstores we operate may close.

We also expect that certain less profitable or non-essential bookstores we operate may close, as we focus on the profitability of our stores.

The scope of any such store closures remains uncertain, although we are not aware, at this time, of any significant volume of stores which we operate that are likely to close or have informed us of upcoming closures.

The growth of our BNC First Day programs offsets declines in a la carte courseware sales and closed store sales.

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

For additional discussion of our trends and other factors affecting our business, see Part I - Item 1.

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We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, and other services.

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Our selling and administrative expenses consist primarily of store payroll and store operating expenses.

Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, and finance and accounting.

Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to a specific reporting segment and are recorded in Corporate Services as discussed in the Overview - Segments discussion above.

Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated

to a specific reporting segment and are recorded in Corporate Services as discussed in the Overview - Segments discussion above.

Results of Operations - Summary - Continuing Operations (a)

13 weeks ended 39 weeks ended

Dollars in thousands October 28,

2023 October 29,

2022 October 28,

2023 October 29,

Dollars in thousands January 27,

2024 January 28,

2023 January 27,

2024 January 28,

Product sales and other (b)

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Total sales $ 456,673 $ 438,054 $ 1,331,213 $ 1,301,361

Net income (loss) from continuing operations $ 24,854 $ 24,168 $ (25,117) $ (26,154)

Loss from continuing operations $ (9,928) $ (22,134) $ (35,045) $ (48,288)

Adjusted Earnings (non-GAAP) - Continuing Operations (c) $ (717) $ (11,999) $ (16,927) $ (37,492)

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13 weeks ended 39 weeks ended

2023 October 29,

2022 October 28,

2023 October 29,

2024 January 28,

2023 January 27,

2024 January 28,

Product sales and other 91.0 % 89.9 % 93.0 % 92.6 %

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Depreciation and amortization expense 2.2 2.3 2.3 2.4

Impairment loss (non-cash) 1.3 1.4 0.4 0.5

Restructuring and other charges 0.7 0.9 0.9 0.4

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On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20 million, net of certain transaction fees, severance costs, escrow, and other considerations.

During the 26 weeks ended October 28, 2023, we recorded a Gain on Sale of Business of $3.1 million in Loss from Discontinued Operations, Net, related to the sale.

During the 39 weeks ended January 27, 2024, we recorded a Gain on Sale of Business of $3.5 million in Loss from Discontinued Operations, Net, related to the sale.

Net cash proceeds from the sale were used for debt repayment and to provide additional funds for working capital needs under our Credit Facility.

13 weeks ended 39 weeks ended

Dollars in thousands October 28,

2023 October 29,

2022 October 28,

2023 October 29,

Dollars in thousands January 27,

2024 January 28,

2023 January 27,

2024 January 28,

Total sales $ — $ 9,010 $ 2,784 $ 26,659

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Restructuring costs (c)

11 1,848 3,308 1,848

Transaction costs — — 13 —

Operating loss (674) (1,941) (1,071) (4,240)

Operating income (loss) 289 (2,787) (782) (7,027)

Income tax expense — 128 20 297

Loss from discontinued operations, net of tax $ (674) $ (2,024) $ (1,091) $ (4,409)

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $0 and $1.6 million for the 13 weeks ended October 28, 2023 and October 29, 2022, respectively, and $0 and $3.2 million for the 26 weeks ended October 28, 2023 and October 29, 2022, respectively.

(b) During the 26 weeks ended October 28, 2023, we recognized an impairment loss (non-cash) of $0.6 million (both pre-tax and after-tax), comprised of $0.1 million and $0.5 million of property and equipment and operating lease right-of-use assets, respectively, on the condensed consolidated statement of operations as part of discontinued operations.

(c) During the 26 weeks ended October 28, 2023, we recognized restructuring and other charges of $3.3 million comprised of severance and other employee termination costs.

Results of Operations - Continuing Operations - 13 and 26 weeks ended October 28, 2023 compared with the 13 and 26 weeks ended October 29, 2022

13 weeks ended October 28, 2023

Income (loss) from discontinued operations, net of tax $ 289 $ (2,915) $ (802) $ (7,324)

(a) Cost of sales and gross profit for the DSS Segment includes amortization expense (non-cash) related to content development costs of $0 and $1.7 million for the 13 weeks ended January 27, 2024 and January 28, 2023, respectively, and $0 and $4.9 million for the 39 weeks ended January 27, 2024 and January 28, 2023, respectively.

(b) During the 39 weeks ended January 27, 2024, we recognized an impairment loss (non-cash) of $0.6 million (both pre-tax and after-tax), comprised of $0.1 million and $0.5 million of property and equipment and operating lease right-of-use assets, respectively, on the condensed consolidated statement of operations as part of discontinued operations.

(c) During the 39 weeks ended January 27, 2024, we recognized restructuring and other charges of $3.3 million comprised of severance and other employee termination costs.

Results of Operations - Continuing Operations - 13 and 39 weeks ended January 27, 2024 compared with the 13 and 39 weeks ended January 28, 2023

13 weeks ended January 27, 2024

Dollars in thousands Retail Wholesale Corporate Services Eliminations Total

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Depreciation and amortization expense 8,817 1,321 10 — 10,148

Impairment loss (non-cash) 5,798 — — — 5,798

Restructuring and other charges — — 3,413 — 3,413

Operating income (loss) $ 3,235 $ 3,404 $ (8,515) $ 2,797 $ 921

13 weeks ended October 29, 2022

13 weeks ended January 28, 2023

Dollars in thousands Retail Wholesale Corporate Services Eliminations Total

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Depreciation and amortization expense 8,749 1,357 6 — 10,112

Impairment loss (non-cash) 6,008 — — — 6,008

Restructuring and other charges 1,452 931 1,744 — 4,127

Operating income (loss) $ 30,547 $ 218 $ (5,352) $ 3,258 $ 28,671

26 weeks ended October 28, 2023

Operating (loss) income $ (10,036) $ 817 $ (7,322) $ 1,464 $ (15,077)

39 weeks ended January 27, 2024

Dollars in thousands Retail Wholesale Corporate Services Eliminations Total

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Depreciation and amortization expense 26,694 3,852 30 — 30,576

Impairment loss (non-cash) 5,798 — — — 5,798

Restructuring and other charges 555 526 11,239 — 12,320

Operating income (loss) $ 14,268 $ 5,351 $ (26,566) $ 1,972 $ (4,975)

26 weeks ended October 29, 2022

39 weeks ended January 28, 2023

Dollars in thousands Retail Wholesale Corporate Services Eliminations Total

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Depreciation and amortization expense 27,147 4,076 41 — 31,264

Impairment loss (non-cash) 6,008 — — — 6,008

Restructuring and other charges 1,452 931 2,379 — 4,762

Operating (loss) income $ (14,029) $ 2,454 $ (20,281) $ (157) $ (32,013)

The following table summarizes our sales for the 13 and 26 weeks ended October 28, 2023 and October 29, 2022:

The following table summarizes our sales for the 13 and 39 weeks ended January 27, 2024 and January 28, 2023:

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022 Var $ Var % October 28, 2023 October 29, 2022 Var $ Var %

Dollars in thousands January 27, 2024 January 28, 2023 Var $ Var % January 27, 2024 January 28, 2023 Var $ Var %

Product sales and other $ 415,375 $ 393,745 $ 21,630 5.5% $ 1,237,723 $ 1,204,806 $ 32,917 2.7%

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Total Sales $ 456,673 $ 438,054 $ 18,619 4.3% $ 1,331,213 $ 1,301,361 $ 29,852 2.3%

The sales increase during the 13 and 26 weeks ended October 28, 2023 is primarily related to higher course material sales, primarily at our BNC First Day programs.

The sales increase during the 13 and 39 weeks ended January 27, 2024 is primarily related to higher course material sales, primarily at our BNC First Day programs, offset by declines in a la carte courseware sales, including lower sales from closed stores.

See Retail discussion below.

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Sales variances 13 weeks ended 39 weeks ended

Dollars in millions October 28, 2023 October 28, 2023

Dollars in millions January 27, 2024 January 27, 2024

Retail Sales (a)

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Retail sales subtotal:

$ 18.2 $ 27.9

Wholesale Sales $ (1.8) $ (0.2)

Eliminations (d)

$ 1.2 $ (0.1)

Total sales variance:

$ 18.6 $ 29.9

(a) Logo general merchandise sales for the Retail Segment are recognized on a net basis as commission revenue in the condensed consolidated financial statements.

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13 weeks ended 39 weeks ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Number of Stores:

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End of period 717 555 1,272 785 603 1,388 717 555 1,272 785 603 1,388

We plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our stores by Fiscal 2025, with continued relative adoption of this model thereafter.

Generally, sales are impacted by revenue from net new/closed stores, increased campus traffic, and an increase in the number of on campus activities and events, such as graduations, athletic events, alumni events and prospective student campus tours, as schools approach a more traditional campus experience.

We continued to experience higher sales related to our BNC First Day programs and higher general merchandise gross sales, especially for graduation products, logo products, and cafe and convenience products, as on campus traffic continues to grow compared to the prior year.

Retail sales increased by $0.7 million, or 0.1%, to $599.3 million during the 13 weeks ended October 28, 2023 from $598.6 million during the 13 weeks ended October 29, 2022.

• Product sales and other increased by $1.4 million, or 0.2%, to $558.7 million during the 13 weeks ended October 28, 2023 from $557.3 million during the 13 weeks ended October 29, 2022.

During the 13 weeks ended October 28, 2023, total course material product sales increased by $19.0 million, or 4.6%, to $435.4 million, compared to the prior year period, primarily due to the growth of our BNC First Day programs discussed below;

total general merchandise product net sales decreased by $17.6 million, or 14.4%, to $105.0 million, compared to the prior year period, primarily due lower commissions received for logo general merchandise part of the F/L Relationship-related agreements, under which the commission rates adjusts as the relationship matured, offset by higher graduation product sales.

Effective August 1, 2023, our commission rates received for logo general merchandise increases for an estimated one year period under the terms of the July 2023 Term Loan Credit Agreement amendment.

Retail Gross Comparable Store Sales for general merchandise decreased by 1.7% compared to the prior year period as discussed below.

Service and other revenue remained flat at $18.2 million compared to the prior year period.

• Total course material rental income decreased by $0.7 million, or 1.6%, to $40.7 million during the 13 weeks ended October 28, 2023 from $41.3 million during the 13 weeks ended October 29, 2022 primarily due to the increased shift to digital course materials.

• Revenue from both of our BNC First Day equitable and inclusive access programs increased during the 13 weeks ended October 28, 2023 compared to the prior year period as follows:

During the 39 weeks ended January 27, 2024, we opened 41 stores and closed 135 stores in the Retail Segment, with estimated net annual sales of $65 million as we pruned some under-performing, less profitable stores, satellite stores, and certain other contracts were awarded to competitors.

We have seen many institutions adopt First Day Complete in Fiscal 2024 and plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond.

Generally, sales are impacted by revenue from net new/closed stores, conversion to BNC First Day programs, increased campus traffic, and an increase in the number of on campus activities and events, such as graduations, athletic events, alumni events and prospective student campus tours.

Retail sales increased by $18.2 million, or 4.3%, to $439.4 million during the 13 weeks ended January 27, 2024 from $421.2 million during the 13 weeks ended January 28, 2023.

• Product sales and other increased by $21.2 million, or 5.6%, to $398.1 million during the 13 weeks ended January 27, 2024 from $376.9 million during the 13 weeks ended January 28, 2023.

◦ Course material product sales increased by $31.0 million, or 10.8%, to $317.7 million during the 13 weeks ended January 27, 2024, compared to $286.7 million in the prior year period, primarily due to the growth of our BNC First Day programs, which increased by $63.3 million, or 52%, to $184.0 million, offset by a decline of $35.4 million in a la carte courseware sales, including lower sales from closed stores.

Dollars in millions 13 weeks ended

October 28, 2023 October 29, 2022 Var $ Var %

January 27, 2024 January 28, 2023 Var $ Var %

First Day Complete Sales

4 unchanged sentences

$ 184.0 $ 120.7 $ 63.3 52%

Retail sales increased by $9.7 million, or 1.2%, to $844.8 million during the 26 weeks ended October 28, 2023 from $835.1 million during the 26 weeks ended October 29, 2022.

• Product sales and other increased by $9.7 million, or 1.2%, to $792.6 million during the 26 weeks ended October 28, 2023 from $782.9 million during the 26 weeks ended October 29, 2022.

During the 26 weeks ended October 28, 2023, total course material product sales increased by $26.6 million, or 4.9%, to $573.9 million, compared to the prior year period, primarily due to the growth of our BNC First Day programs discussed below;

total general merchandise product net sales decreased by $17.8 million, or 8.4%, to $193.7 million, compared to the prior year period, primarily due to lower commissions for logo general merchandise part of the F/L Relationship-related agreements, under which the commission rates adjusts as the relationship matured, offset by higher graduation product sales.

Effective August 1, 2023, our commission rates received for logo general merchandise increases for an estimated one year period under the terms of the July 2023 Term Loan Credit Agreement amendment.

Retail Gross Comparable Store Sales for general merchandise increased by 1.1% compared to the prior year period as discussed below.

Service and other revenue increased by $0.9 million to $25.0 million, compared to the prior year period, primarily due to improvements in marketplace sales and return reserves, partially by lower other income for non-return rental penalty fees.

• Total course material rental income remained flat at $52.2 million during both 26 weeks ended October 28, 2023 and October 29, 2022 primarily due to the increased shift to digital course materials.

• Revenue from both of our BNC First Day equitable and inclusive access programs increased during the 26 weeks ended October 28, 2023 compared to the prior year period as follows:

◦ General merchandise product net sales decreased by $9.0 million, or 11.0%, to $72.8 million, compared to $81.8 million in the prior year period, primarily due to a lower average commission rate resulting in lower commissions received for logo general merchandise as part of the F/L Relationship-related agreements, under which the commission rates adjust as the relationship matures, as well as the impact of closed stores, lower trade books and cafe and convenience product sales.

Retail Gross Comparable Store Sales for general merchandise decreased by $5.7 million, or 4.6%, compared to the prior year period as discussed below.

◦ Service and other revenue decreased by $0.8 million, or 9.9%, to $7.6 million, compared to $8.4 million in the prior year period, primarily due to lower marketplace sales.

• Rental income for course materials decreased by $3.0 million, or 6.8%, to $41.3 million during the 13 weeks ended January 27, 2024 from $44.3 million during the 13 weeks ended January 28, 2023 primarily due to the increased shift to digital course materials, offset by the growth in rental income resulting from the adoption of our BNC First Day programs.

Retail sales increased by $27.9 million, or 2.2%, to $1,284.2 million during the 39 weeks ended January 27, 2024 from $1,256.3 million during the 39 weeks ended January 28, 2023.

• Product sales and other increased by $30.9 million, or 2.7%, to $1,190.7 million during the 39 weeks ended January 27, 2024 from $1,159.8 million during the 39 weeks ended January 28, 2023.

◦ Course material product sales increased by $57.4 million, or 6.9%, to $891.6 million during the 39 weeks ended January 27, 2024, compared to $834.2 million in the prior year period, primarily due to the growth of our BNC First Day programs, which increased by $136.0 million, or 44%, to $445.1 million, offset by a decline of $78.1 million in a la carte courseware sales, including lower sales from closed stores.

Dollars in millions 39 weeks ended

October 28, 2023 October 29, 2022 Var $ Var %

January 27, 2024 January 28, 2023 Var $ Var %

First Day Complete Sales

4 unchanged sentences

$ 445.1 $ 309.1 $ 136.0 44%

First Day Complete Fall 2023 Fall 2022 Var # Var %

First Day Complete Spring 2024 Spring 2023 Var # Var %

Number of campus stores 160 116 44 38%

2 unchanged sentences

(a) Total undergraduate and post graduate student enrollment (as reported by National Center for Education Statistics).

◦ General merchandise product net sales decreased by $26.7 million, or 9.1%, to $266.5 million, compared to $293.3 million in the prior year period, primarily due to a lower average commission rate resulting in lower commissions received for logo general merchandise as part of the F/L Relationship-related agreements, under which the commission rates adjust as the relationship matures, as well as the impact from closed stores, lower trade books and cafe and convenience product sales, offset by higher graduation and supplies product sales.

Retail Gross Comparable Store Sales for general merchandise decreased by $2.0 million, or 0.4%, compared to the prior year period as discussed below.

◦ Service and other revenue increased by $0.2 million to $32.6 million, compared to $32.4 million in the prior year period, primarily due to higher other income for non-return rental penalty fees, offset by lower marketplace sales.

• Rental income for course materials decreased by $3.1 million, or 3.2%, to $93.5 million during the 39 weeks ended January 27, 2024 from $96.6 million during the 39 weeks ended January 28, 2023 primarily due to the increased shift to

digital course materials, offset by the growth in rental income resulting from the adoption of our BNC First Day programs.

Retail Gross Comparable Store Sales

6 unchanged sentences

As a result, our calculation of comparable store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

The increase in course material sales was primarily due to the growth of BNC First Day equitable and inclusive access programs (as discussed above), partially offset by a shift to lower cost options and more affordable solutions, including digital offerings.

The decrease in general merchandise sales during the 13 weeks ended October 28, 2023 are primarily related to lower logo product sales.

The increase in general merchandise sales during the 26 weeks ended October 28, 2023 was primarily due to higher sales related to graduation products and logo products, and cafe and convenience products.

The increase in course material sales was primarily due to the growth of BNC First Day equitable and inclusive access programs (as discussed above), offset by declines in a la carte courseware sales.

The decrease in general merchandise sales are primarily related to lower logo product sales, as well as lower trade books and cafe and convenience product sales, offset by higher graduation and supplies product sales.

Retail Gross Comparable Store Sales variances by category for the 13 and 39 week periods are as follows:

13 weeks ended 39 weeks ended

Dollars in millions October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Dollars in millions January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Textbooks (Course Materials) $ 43.8 14.1 % $ 21.3 7.4 % $ 78.3 8.8 % $ 2.9 0.3 %

1 unchanged sentence

Total Retail Gross Comparable Store Sales $ 38.1 8.8 % $ 23.9 5.9 % $ 76.3 5.7 % $ 45.5 3.6 %

Wholesale sales decreased by $0.2 million, or 0.7% to $20.9 million during the 13 weeks ended October 28, 2023 from $21.1 million during the 13 weeks ended October 29, 2022.

Wholesale sales decreased by $1.8 million, or 4.6% to $37.2 million during the 13 weeks ended January 27, 2024 from $39.0 million during the 13 weeks ended January 28, 2023.

The decrease is primarily due to lower gross sales of $4.5 million, partially offset by lower returns and allowances of $2.7 million compared to the prior year period.

Wholesale sales decreased by $0.2 million, or 0.2% to $96.9 million during the 39 weeks ended January 27, 2024 from $97.1 million during the 39 weeks ended January 28, 2023.

The decrease is primarily due to higher returns and allowances of $2.0 million, partially offset by higher gross sales of $1.8 million compared to the prior year period.

Wholesale sales increased by $1.6 million, or 2.7% to $59.8 million during the 26 weeks ended October 28, 2023 from $58.2 million during the 26 weeks ended October 29, 2022.

The increase is primarily due to higher gross sales of $6.2 million compared to the prior year period, partially offset by higher returns and allowances of $4.6 million.

Cost of Sales and Gross Margin

Our cost of sales increased as a percentage of sales to 77.7% during the 13 weeks ended October 28, 2023 compared to 77.3% during the 13 weeks ended October 29, 2022.

Our gross margin decreased by $1.9 million, or 1.4%, to $136.2 million, or 22.3% of sales, during the 13 weeks ended October 28, 2023 from $138.1 million, or 22.7% of sales during the 13 weeks ended October 29, 2022.

Our cost of sales increased as a percentage of sales to 78.6% during the 26 weeks ended October 28, 2023 compared to 77.5% during the 26 weeks ended October 29, 2022.

Our gross margin decreased by $7.3 million, or 11.5%, to $186.9 million, or 21.4% of sales, during the 26 weeks ended October 28, 2023 from $194.1 million, or 22.5% of sales during the 26 weeks ended October 29, 2022.

The following table summarizes the Retail cost of sales for the 13 and 26 weeks ended October 28, 2023 and October 29, 2022:

Our cost of sales increased as a percentage of sales to 78.1% during the 13 weeks ended January 27, 2024 compared to 77.9% during the 13 weeks ended January 28, 2023.

Our gross margin increased by $3.0 million, or 3.1%, to $100.0 million, or 21.9% of sales, during the 13 weeks ended January 27, 2024 from $97.0 million, or 22.1% of sales during the 13 weeks ended January 28, 2023.

Our cost of sales increased as a percentage of sales to 78.4% during the 39 weeks ended January 27, 2024 compared to 77.6% during the 39 weeks ended January 28, 2023.

Our gross margin decreased by $4.2 million, or 1.5%, to $286.9 million, or 21.6% of sales, during the 39 weeks ended January 27, 2024 from $291.1 million, or 22.4% of sales during the 39 weeks ended January 28, 2023.

The following table summarizes the Retail cost of sales for the 13 and 39 weeks ended January 27, 2024 and January 28, 2023:

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 % of

Related Sales October 29, 2022 % of

Related Sales October 28, 2023 % of

Related Sales October 29, 2022 % of

Dollars in thousands January 27, 2024 % of

Related Sales January 28, 2023 % of

Related Sales January 27, 2024 % of

Related Sales January 28, 2023 % of

Related Sales

5 unchanged sentences

$ 350,203 79.7% $ 332,333 78.9% $ 1,019,179 79.4% $ 983,955 78.3%

The following table summarizes the Retail gross margin for the 13 and 26 weeks ended October 28, 2023 and October 29, 2022:

The following table summarizes the Retail gross margin for the 13 and 39 weeks ended January 27, 2024 and January 28, 2023:

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 % of

Related Sales October 29, 2022 % of

Related Sales October 28, 2023 % of

Related Sales October 29, 2022 % of

Dollars in thousands January 27, 2024 % of

Related Sales January 28, 2023 % of

Related Sales January 27, 2024 % of

Related Sales January 28, 2023 % of

Related Sales

4 unchanged sentences

$ 89,243 20.3% $ 88,926 21.1% $ 265,063 20.6% $ 272,421 21.7%

For the 13 and 26 weeks ended October 28, 2023, the Retail Product and other gross margin as a percentage of sales decreased as discussed below:

• For the 13 weeks ended October 28, 2023, Product and other gross margin as a percentage of sales decreased (70 basis points), driven primarily by lower margin rates for course materials (155 basis points) due to higher markdowns, including markdowns related to closed stores;

and lower general merchandise sales, primarily from closed stores, and an unfavorable sales mix (20 basis points) due to the shift to digital course materials.

These decreases in gross margin rate were partially offset by increased sales from higher margin First Day Complete course material sales, and lower contract costs as a percentage of sales related to our college and university contracts (100 basis points) as a result of the shift to digital and First Day models and lower performing school contracts not renewed.

• For the 26 weeks ended October 28, 2023, Product and other gross margin as a percentage of sales decreased (120 basis points), driven primarily by lower margin rates for course materials (195 basis points) due to higher markdowns, including markdowns related to closed stores, and lower general merchandise sales, primarily from closed stores, and an unfavorable sales mix (60 basis points) due to the shift to digital course materials.

These decreases in gross margin rate were partially offset by increased sales from higher margin First Day Complete course material sales, and lower contract costs as a percentage of sales related to our college and university contracts (130 basis points) as a result of the shift to digital and First Day models and lower performing school contracts not renewed.

As part of the F/L Relationship-related agreements, the commission rates adjust as the relationship matures.

Effective August 1, 2023, our commission rates received for logo general merchandise increases for an estimated one year period under the terms of the July 2023 Term Loan Credit Agreement amendment.

For the 13 and 26 weeks ended October 28, 2023, the Retail Rental gross margin as a percentage of sales increased driven primarily by favorable rental mix due to improved availability of used textbook inventory, partially offset by higher rental margin rates.

The cost of sales and gross margin for Wholesale were $14.9 million, or 71.0% of sales, and $6.1 million, or 29.0% of sales, respectively, during the 13 weeks ended October 28, 2023.

The cost of sales and gross margin for Wholesale was $15.7 million or 74.2% of sales and $5.5 million or 25.8% of sales, respectively, during the 13 weeks ended October 29, 2022.

The gross margin rate increased during the 13 weeks ended October 28, 2023 primarily due to lower markdowns, lower product costs, and lower warehouse costs, partially offset by an increase in the returns and allowances.

The cost of sales and gross margin for Wholesale were $47.9 million, or 80.1% of sales, and $11.9 million, or 19.9% of sales, respectively, during the 26 weeks ended October 28, 2023.

The cost of sales and gross margin for Wholesale was $45.8 million or 78.8% of sales and $12.4 million or 21.2% of sales, respectively, during the 26 weeks ended October 29, 2022.

The gross margin rate decreased during the 26 weeks ended October 28, 2023 primarily due to an increase in the returns and allowances and higher product costs, partially offset by lower markdowns.

For the 13 and 39 weeks ended January 27, 2024, the Retail Product and other gross margin as a percentage of sales decreased as discussed below:

• For the 13 weeks ended January 27, 2024, Product and other gross margin as a percentage of sales was flat primarily from increased sales of $63.3 million from higher margin First Day Complete course material sales, and lower contract costs as a percentage of sales related to our college and university contracts as a result of the shift to digital and First Day models and lower performing school contracts not renewed (90 basis points), were partially offset by lower margin rates for course materials due to higher markdowns, including markdowns related to closed stores (70 basis points), and lower general merchandise sales, primarily from closed stores, a lower average commission rate and an unfavorable sales mix due to the shift to digital course materials (20 basis points).

• For the 39 weeks ended January 27, 2024, Product and other gross margin as a percentage of sales decreased (90 basis points), driven primarily by lower margin rates for course materials due to higher markdowns, including markdowns related to closed stores, and lower general merchandise sales, primarily from closed stores and a lower average commission rate (170 basis points) and an unfavorable sales mix due to the shift to digital course materials (35 basis points).

These decreases in gross margin rate were partially offset by increased sales of $136.0 million from higher margin First Day Complete course material sales, and lower contract costs as a percentage of sales related to our college and university contracts as a result of the shift to digital and First Day models, and lower performing school contracts not renewed (115 basis points).

For the 13 and 39 weeks ended January 27, 2024, the Retail Rental gross margin as a percentage of sales decreased driven primarily by lower rental margin rates, higher markdowns and unfavorable rental mix, partially offset by lower contract costs as a percentage of sales related to our college and university contracts as a result of the shift to digital and the adoption of our BNC First Day models and lower performing school contracts not renewed.

The cost of sales and gross margin for Wholesale were $29.2 million, or 78.5% of sales, and $8.0 million, or 21.5% of sales, respectively, during the 13 weeks ended January 27, 2024.

The cost of sales and gross margin for Wholesale was $32.3 million or 82.9% of sales and $6.7 million or 17.1% of sales, respectively, during the 13 weeks ended January 28, 2023.

The gross margin rate increased during the 13 weeks ended January 27, 2024 primarily due to lower returns and allowances and lower warehouse costs, partially offset by higher markdowns.

The cost of sales and gross margin for Wholesale were $77.1 million, or 79.5% of sales, and $19.9 million, or 20.5% of sales, respectively, during the 39 weeks ended January 27, 2024.

The cost of sales and gross margin for Wholesale was $78.1

million or 80.4% of sales and $19.0 million or 19.6% of sales, respectively, during the 39 weeks ended January 28, 2023.

The gross margin rate increased during the 39 weeks ended January 27, 2024 primarily due to lower warehouse costs, partially offset by higher product costs and higher markdowns.

Intercompany Eliminations

During the 13 weeks ended October 28, 2023 and October 29, 2022, our sales eliminations were $(9.9) million and $(11.1) million, respectively.

During the 26 weeks ended October 28, 2023 and October 29, 2022, our sales eliminations were $(30.0) million and $(30.0) million, respectively.

During the 13 weeks ended January 27, 2024 and January 28, 2023, our sales eliminations were $(19.9) million and $(22.2) million, respectively.

During the 39 weeks ended January 27, 2024 and January 28, 2023, our sales eliminations were $(50.0) million and $(52.2) 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 October 28, 2023 and October 29, 2022, the cost of sales eliminations were $(14.6) million and $(14.3) million, respectively.

During the 26 weeks ended October 28, 2023 and October 29, 2022, the cost of sales eliminations were $(29.2) million and $(28.3) million, respectively.

During the 13 weeks ended January 27, 2024 and January 28, 2023, the cost of sales eliminations were $(22.7) million and $(23.6) million, respectively.

During the 39 weeks ended January 27, 2024 and January 28, 2023, the cost of sales eliminations were $(51.9) million and $(51.9) 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 October 28, 2023 and October 29, 2022, the gross margin eliminations were $4.6 million and $3.2 million, respectively.

During the 26 weeks ended October 28, 2023 and October 29, 2022, the gross margin eliminations were $(0.8) million and $(1.7) million, respectively.

During the 13 weeks ended January 27, 2024 and January 28, 2023, the gross margin eliminations were $2.8 million and $1.4 million, respectively.

During the 39 weeks ended January 27, 2024 and January 28, 2023, the gross margin eliminations were $2.0 million and $(0.3) 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.

1 unchanged sentence

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 % of

Sales October 29, 2022 % of

Sales October 28, 2023 % of

Sales October 29, 2022 % of

Dollars in thousands January 27, 2024 % of

Sales January 28, 2023 % of

Sales January 27, 2024 % of

Sales January 28, 2023 % of

Total Selling and Administrative Expenses

$ 79,756 17.5% $ 91,841 21.0% $ 243,193 18.3% $ 281,136 21.6%

During the 13 weeks ended October 28, 2023, selling and administrative expenses decreased by $13.0 million, or 13.1%, to $86.0 million from $99.0 million during the 13 weeks ended October 29, 2022.

During the 26 weeks ended October 28, 2023, selling and administrative expenses decreased by $25.9 million, or 13.7%, to $163.4 million from $189.3 million during the 26 weeks ended October 29, 2022.

During the 13 weeks ended January 27, 2024, selling and administrative expenses decreased by $12.1 million, or 13.2%, to $79.8 million from $91.8 million during the 13 weeks ended January 28, 2023.

During the 39 weeks ended January 27, 2024, selling and administrative expenses decreased by $37.9 million, or 13.5%, to $243.2 million from $281.1 million during the 39 weeks ended January 28, 2023.

The variances by segment are discussed below.

During the 13 weeks ended October 28, 2023, Retail selling and administrative expenses decreased by $12.9 million, or 14.3%, to $77.2 million from $90.1 million during the 13 weeks ended October 29, 2022.

This decrease was primarily due to cost savings initiatives comprised of a $11.9 million decrease in comparable store payroll expense, new/closed store payroll expense and related operating costs, and a $4.1 million decrease in corporate payroll expense, infrastructure and product development costs, partially offset by a $3.1 million increase in incentive plan compensation expense due to the reversal of the incentive accrual in the prior year.

During the 26 weeks ended October 28, 2023, Retail selling and administrative expenses decreased by $22.7 million, or 13.4%, to $146.4 million from $169.1 million during the 26 weeks ended October 29, 2022.

This decrease was primarily due to cost savings initiatives comprised of a $17.9 million decrease in comparable store payroll expense, new/closed store payroll expense and related operating costs, and a $5.7 million decrease in corporate payroll expense, infrastructure and product development costs, partially offset by an $0.8 million increase in incentive plan compensation expense.

During the 13 weeks ended October 28, 2023, Wholesale selling and administrative expenses decreased by $0.4 million, or 9.7%, to $3.5 million from $3.9 million during the 13 weeks ended October 29, 2022.

During the 13 weeks ended January 27, 2024, Retail selling and administrative expenses decreased by $11.4 million, or 13.7%, to $71.4 million from $82.8 million during the 13 weeks ended January 28, 2023.

This decrease was primarily due to cost savings initiatives comprised of a $7.9 million decrease in comparable store payroll expense, new/closed store payroll expense and related operating costs, and a $3.4 million decrease in corporate payroll expense, infrastructure and product development costs.

During the 39 weeks ended January 27, 2024, Retail selling and administrative expenses decreased by $34.1 million, or 13.5%, to $217.7 million from $251.8 million during the 39 weeks ended January 28, 2023.

This decrease was primarily due to cost savings initiatives comprised of a $25.7 million decrease in comparable store payroll expense, new/closed store payroll expense and related operating costs, and a $8.4 million decrease in corporate payroll expense, infrastructure and product development costs.

During the 13 weeks ended January 27, 2024, Wholesale selling and administrative expenses decreased by $0.3 million, or 8.2%, to $3.3 million from $3.6 million during the 13 weeks ended January 28, 2023.

The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $0.4 million, partially offset by higher operating expenses of $0.1 million.

During the 26 weeks ended October 28, 2023, Wholesale selling and administrative expenses decreased by $1.1 million, or 14.0%, to $6.9 million from $8.0 million during the 26 weeks ended October 29, 2022.

The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $1.1 million and lower incentive plan compensation expense of $0.1 million, partially offset by higher operating expenses of $0.1 million.

During the 39 weeks ended January 27, 2024, Wholesale selling and administrative expenses decreased by $1.4 million, or 12.2%, to $10.2 million from $11.6 million during the 39 weeks ended January 28, 2023.

The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $1.6 million, partially offset by higher operating expenses of $0.2 million.

Corporate Services

During the 13 weeks ended October 28, 2023, Corporate Services' selling and administrative expenses increased by $0.2 million, or 4.2%, to $5.3 million from $5.1 million during the 13 weeks ended October 29, 2022.

The increase in costs was primarily due to higher incentive plan compensation expense of $0.9 million due to the reversal of the incentive accrual in the prior year, partially offset by lower operating costs of $0.4 million and lower payroll expense of $0.3 million.

During the 26 weeks ended October 28, 2023, Corporate Services' selling and administrative expenses decreased by $2.1 million, or 17.0%, to $10.2 million from $12.3 million during the 26 weeks ended October 29, 2022.

The decrease in costs was primarily due to cost savings initiatives comprised of lower incentive plan compensation expense of $0.6 million, lower payroll expense of $0.8 million, and lower operating costs of $0.7 million.

During the 13 weeks ended January 27, 2024, Corporate Services' selling and administrative expenses decreased by $0.5 million, or 8.6%, to $5.1 million from $5.6 million during the 13 weeks ended January 28, 2023.

The decrease was primarily due to lower payroll expense of $0.3 million and lower operating costs of $0.2 million.

During the 39 weeks ended January 27, 2024, Corporate Services' selling and administrative expenses decreased by $2.6 million, or 14.4%, to $15.3 million from $17.9 million during the 39 weeks ended January 28, 2023.

The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $1.8 million and lower operating costs of $0.8 million.

Depreciation and Amortization Expense

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 % of

Sales October 29, 2022 % of

Sales October 28, 2023 % of

Sales October 29, 2022 % of

Dollars in thousands January 27, 2024 % of

Sales January 28, 2023 % of

Sales January 27, 2024 % of

Sales January 28, 2023 % of

Total Depreciation and Amortization Expense

$ 10,148 2.2% $ 10,112 2.3% $ 30,576 2.3% $ 31,264 2.4%

Depreciation and amortization expense decreased by $0.1 million, or 0.8%, to $10.2 million during the 13 weeks ended October 28, 2023 from $10.3 million during the 13 weeks ended October 29, 2022.

Depreciation and amortization expense decreased by $0.7 million, or 3.4%, to $20.4 million during the 26 weeks ended October 28, 2023 from $21.1 million during the 26 weeks ended October 29, 2022.

The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal 2023.

Depreciation and amortization expense was flat at $10.1 million for both the 13 weeks ended January 27, 2024 and the 13 weeks ended January 28, 2023.

Depreciation and amortization expense decreased by $0.7 million, or 2.2%, to $30.6 million during the 39 weeks ended January 27, 2024 from $31.3 million during the 39 weeks ended January 28, 2023.

The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal 2024 and Fiscal 2023.

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 and 39 weeks ended January 27, 2024, 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 $5.8 million (both pre-tax and after-tax), comprised of $0.4 million, $2.7 million, and $2.7 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the condensed consolidated statement of operations.

During the 13 and 39 weeks ended January 28, 2023, 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 $6.0 million (both pre-tax and after-tax), comprised of $0.7 million, $1.7 million, and $3.6 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, 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 6.

Fair Value Measurements .

Restructuring and other charges

During the 13 and 26 weeks ended October 28, 2023, we recognized restructuring and other charges totaling $4.3 million and $8.9 million, respectively, comprised primarily of $4.3 million and $7.8 million, respectively, for costs primarily associated with professional service costs for restructuring as discussed below and process improvements and $0 and $1.1 million, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost savings initiatives.

During the 13 and 39 weeks ended January 27, 2024, we recognized restructuring and other charges totaling $3.4 million and $12.3 million, respectively, comprised primarily of $3.4 million and $11.2 million, respectively, for costs primarily associated with professional service costs for restructuring as discussed below and process improvements, and $0 and $1.1 million, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost savings initiatives.

Restructuring and other expenses associated with the costs of this committee, as well as other related professional service costs, are expected to decrease when the Company concludes on a strategic alternative.

During the 13 and 26 weeks ended October 29, 2022, we recognized restructuring and other charges totaling $0.3 million and $0.6 million, respectively, comprised primarily of professional service costs for restructuring and process improvements.

During the 13 and 39 weeks ended January 28, 2023, we recognized restructuring and other charges totaling $4.1 million and $4.8 million, respectively, comprised primarily of $2.8 million in each period for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $1.3 million and $2.0 million, respectively, primarily for costs primarily associated with professional service costs for restructuring and process improvements.

Operating Income (Loss)

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 % of

Sales October 29, 2022 % of

Sales October 28, 2023 % of

Sales October 29, 2022 % of

Dollars in thousands January 27, 2024 % of

Sales January 28, 2023 % of

Sales January 27, 2024 % of

Sales January 28, 2023 % of

Total Operating Income (Loss) $ 921 0.2% $ (15,077) (3.5)% $ (4,975) (0.3)% $ (32,013) (2.5)%

Our operating income was $35.8 million during the 13 weeks ended October 28, 2023, compared to $28.7 million during the 13 weeks ended October 29, 2022.

Our operating income was $0.9 million during the 13 weeks ended January 27, 2024, compared to operating loss of $(15.1) million during the 13 weeks ended January 28, 2023.

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

For the 13 weeks ended October 28, 2023, excluding the $4.3 million of restructuring and other charges, discussed above, operating income was

$40.1 million (or 6.6% of sales).

For the 13 weeks ended October 29, 2022, excluding the $0.3 million of restructuring and other charges, discussed above, operating income was $29.0 million (or 4.8% of sales).

Our operating loss was $(5.9) million during the 26 weeks ended October 28, 2023, compared to $(16.9) million during the 26 weeks ended October 29, 2022.

For the 13 weeks ended January 27, 2024, operating income, excluding the $5.8 million of impairment loss (non-cash) and the $3.4 million of restructuring and other charges, discussed above, was $10.1 million (or 2.2% of sales).

For the 13 weeks ended January 28, 2023, operating loss, excluding the $6.0 million of impairment loss (non-cash) and the $4.1 million of restructuring and other charges, discussed above, was $(5.0) million (or (1.1)% of sales).

Our operating loss was $(5.0) million during the 39 weeks ended January 27, 2024, compared to $(32.0) million during the 39 weeks ended January 28, 2023.

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

For the 26 weeks ended October 28, 2023, excluding the $8.9 million of restructuring and other charges, discussed above, operating income was $3.0 million (or 0.3% of sales).

For the 26 weeks ended October 29, 2022, excluding the $0.6 million of restructuring and other charges, discussed above, operating loss was $(16.3) million (or (1.9)% of sales).

For the 39 weeks ended January 27, 2024, operating income, excluding the $5.8 million of impairment loss (non-cash) and the $12.3 million of restructuring and other charges, discussed above, was $13.1 million (or 1.0% of sales).

For the 39 weeks ended January 28, 2023, operating loss, excluding the $6.0 million of impairment loss (non-cash) and the $4.8 million of restructuring and other charges, discussed above, was $(21.2) million (or (1.6)% of sales).

Interest Expense, Net

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Dollars in thousands January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Interest Expense, Net $ 10,620 $ 6,918 $ 29,538 $ 15,672

Net interest expense increased by $5.8 million to $10.7 million during the 13 weeks ended October 28, 2023 from $4.9 million during the 13 weeks ended October 29, 2022.

Net interest expense increased by $10.2 million to $18.9 million during the 26 weeks ended October 28, 2023 from $8.8 million during the 26 weeks ended October 29, 2022.

The increase was primarily due to higher borrowings and higher interest rates compared to the prior year period.

Income Tax (Benefit) Expense

Net interest expense increased by $3.7 million to $10.6 million during the 13 weeks ended January 27, 2024 from $6.9 million during the 13 weeks ended January 28, 2023.

Net interest expense increased by $13.9 million to $29.5 million during the 39 weeks ended January 27, 2024 from $15.7 million during the 39 weeks ended January 28, 2023.

Interest expense increased by $13.9 million compared to the prior year period, comprised of $7.2 million resulting from higher borrowings and higher interest rates and $6.3 million resulting from increased amortization of deferred financing costs.

The following table disaggregates interest expense for the 13 and 39 week periods:

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 Effective Rate October 29, 2022 Effective Rate October 28, 2023 Effective Rate October 29, 2022 Effective Rate

Income Tax (Benefit) Expense

Dollars in thousands January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Interest Incurred

Credit Facility

$ 5,747 $ 5,215 $ 18,286 $ 11,910

We recorded an income tax expense of $0.3 million on pre-tax income of $25.2 million during the 13 weeks ended October 28, 2023, which represented an effective income tax rate of 1.2% and we recorded an income tax benefit of $(0.4) million on a pre-tax income of $23.8 million during the 13 weeks ended October 29, 2022, which represented an effective income tax rate of (1.6)%.

We recorded an income tax expense of $0.3 million on pre-tax loss of $(24.8) million during the 26 weeks ended October 28, 2023, which represented an effective income tax rate of (1.2)% and we recorded an income tax expense of $0.5 million on a pre-tax loss of $(25.7) million during the 26 weeks ended October 29, 2022, which represented an effective income tax rate of (1.8)%.

The effective tax rate for the 13 and 26 weeks ended October 28, 2023 is higher than the prior year comparable period due to the utilization of the discrete tax provision methodology in the current year.

907 853 3,074 2,213

Total Interest Incurred

$ 6,654 $ 6,068 $ 21,360 $ 14,123

Amortization of Deferred Financing Costs

Credit Facility $ 3,662 $ 396 $ 7,456 $ 1,187

Term Loan 312 462 924 871

Total Amortization of Deferred Financing Costs

$ 3,974 $ 858 $ 8,380 $ 2,058

Interest Income, net of expense

$ (8) $ (8) $ (202) $ (509)

Total Interest Expense

$ 10,620 $ 6,918 $ 29,538 $ 15,672

Cash interest paid during the 39 weeks ended January 27, 2024 and January 28, 2023 was $19,640 and $13,406, respectively.

Income Tax Expense

13 weeks ended 39 weeks ended

Dollars in thousands January 27, 2024 Effective Rate January 28, 2023 Effective Rate January 27, 2024 Effective Rate January 28, 2023 Effective Rate

Income Tax Expense $ 229 (2.4)% $ 139 (0.6)% $ 532 (1.5)% $ 603 (1.3)%

We recorded an income tax expense of $0.2 million on pre-tax loss of $(9.7) million during the 13 weeks ended January 27, 2024, which represented an effective income tax rate of (2.4)% and we recorded an income tax expense of $0.1 million on a pre-tax loss of $(22.0) million during the 13 weeks ended January 28, 2023, which represented an effective income tax rate of (0.6)%.

We recorded an income tax expense of $0.5 million on pre-tax loss of $(34.5) million during the 39 weeks ended January 27, 2024, which represented an effective income tax rate of (1.5)% and we recorded an income tax expense of $0.6 million on a pre-tax loss of $(47.7) million during the 39 weeks ended January 28, 2023, which represented an effective income tax rate of (1.3)%.

The effective tax rate for the 13 weeks ended January 27, 2024 is lower than the prior year comparable period due to immaterial return to provision adjustments recorded in the prior year period.

The effective tax rate for the 39 weeks ended January 27, 2024 is materially consistent with the prior year comparable period.

For additional information, see Item 1.

1 unchanged sentence

Income Taxes.

Net Income (Loss) from Continuing Operations

Net Loss from Continuing Operations

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Net Income (Loss) from Continuing Operations $ 24,854 $ 24,168 $ (25,117) $ (26,154)

As a result of the factors discussed above, net income from continuing operations was $24.9 million during the 13 weeks ended October 28, 2023, compared with $24.2 million during the 13 weeks ended October 29, 2022 and net loss from continuing operations was $(25.1) million during the 26 weeks ended October 28, 2023, compared with $(26.2) million during the 26 weeks ended October 29, 2022.

Adjusted Earnings (non-GAAP) is $29.1 million during the 13 weeks ended October 28, 2023, compared with $24.4 million during the 13 weeks ended October 29, 2022.

Adjusted Earnings (non-GAAP) is $(16.2) million during the 26 weeks ended October 28, 2023, compared with $(25.5) million during the 26 weeks ended October 29, 2022.

Dollars in thousands January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Net Loss from Continuing Operations $ (9,928) $ (22,134) $ (35,045) $ (48,288)

As a result of the factors discussed above, net loss from continuing operations was $(9.9) million during the 13 weeks ended January 27, 2024, compared with $(22.1) million during the 13 weeks ended January 28, 2023 and net loss from continuing operations was $(35.0) million during the 39 weeks ended January 27, 2024, compared with $(48.3) million during the 39 weeks ended January 28, 2023.

Adjusted Earnings (non-GAAP) is $(0.7) million during the 13 weeks ended January 27, 2024, compared with $(12.0) million during the 13 weeks ended January 28, 2023.

Adjusted Earnings (non-GAAP) is $(16.9) million during the 39 weeks ended January 27, 2024, compared with $(37.5) million during the 39 weeks ended January 28, 2023.

See Adjusted Earnings (non-GAAP) discussion below.

16 unchanged sentences

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.

For a discussion regarding the Seasonality of our business, see See Management Discussion and Analysis - Seasonality discussion above.

Consolidated Adjusted Earnings (non-GAAP) - Continuing Operations

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Net income (loss) from continuing operations (a)

Dollars in thousands January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Net loss from continuing operations (a)

$ (9,928) $ (22,134) $ (35,045) $ (48,288)

3 unchanged sentences

Reconciling items

Content amortization (non-cash)

Impairment loss (non-cash) (a)

$ 5,798 $ 6,008 $ 5,798 $ 6,008

Content amortization (non-cash)

Restructuring and other charges (b)

8 unchanged sentences

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Net income (loss) from continuing operations (a)

Dollars in thousands January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Net loss from continuing operations (a)

$ (9,928) $ (22,134) $ (35,045) $ (48,288)

2 unchanged sentences

10,620 6,918 29,538 15,672

Income tax expense (benefit) 314 (383) 303 464

Income tax expense 229 139 532 603

Impairment loss (non-cash) (c)

5,798 6,008 5,798 6,008

Content amortization (non-cash)

9 unchanged sentences

The following is Adjusted EBITDA - Continuing Operations by Segment for the 13 and 26 weeks ended October 28, 2023 and October 29, 2022.

Adjusted EBITDA - by Segment 13 weeks ended October 28, 2023

The following is Adjusted EBITDA - Continuing Operations by Segment for the 13 and 39 weeks ended January 27, 2024 and January 28, 2023.

Adjusted EBITDA - by Segment 13 weeks ended January 27, 2024

Dollars in thousands Retail Wholesale Corporate Services (b)

5 unchanged sentences

Income tax expense — — 229 — 229

Impairment loss (non-cash) (a)

5,798 — — — 5,798

Content amortization (non-cash) — — — — —

Restructuring and other charges (c)

1 unchanged sentence

Adjusted EBITDA (non-GAAP) $ 17,850 $ 4,725 $ (5,092) $ 2,797 $ 20,280

Adjusted EBITDA - by Segment 13 weeks ended October 29, 2022

Adjusted EBITDA - by Segment 13 weeks ended January 28, 2023

Dollars in thousands Retail Wholesale Corporate Services (b)

Eliminations Total

Net income (loss) from continuing operations (a)

Net (loss) income from continuing operations (a)

$ (10,036) $ 817 $ (14,379) $ 1,464 $ (22,134)

2 unchanged sentences

Income tax benefit — — 139 — 139

Impairment loss (non-cash) (a)

6,008 — — — 6,008

Content amortization (non-cash) — — — — —

2 unchanged sentences

Adjusted EBITDA (non-GAAP) $ 6,173 $ 3,105 $ (5,572) $ 1,464 $ 5,170

Adjusted EBITDA - by Segment 26 weeks ended October 28, 2023

Adjusted EBITDA - by Segment 39 weeks ended January 27, 2024

Dollars in thousands Retail Wholesale Corporate Services (b)

5 unchanged sentences

Income tax expense — — 532 — 532

Impairment loss (non-cash) (a)

5,798 — — — 5,798

Content amortization (non-cash) — — — — —

Restructuring and other charges (c)

1 unchanged sentence

Adjusted EBITDA (non-GAAP) $ 47,315 $ 9,729 $ (15,297) $ 1,972 $ 43,719

Adjusted EBITDA - by Segment 26 weeks ended October 29, 2022

Adjusted EBITDA - by Segment 39 weeks ended January 28, 2023

Dollars in thousands Retail Wholesale Corporate Services (b)

5 unchanged sentences

Income tax expense — — 603 — 603

Impairment loss (non-cash) (a)

6,008 — — — 6,008

Content amortization (non-cash) 26 — — — 26

8 unchanged sentences

Adjusted EBITDA (non-GAAP) - Discontinued Operations 13 weeks ended 39 weeks ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Loss from discontinued operations (a)

January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Income (loss) from discontinued operations (a)

$ 289 $ (2,915) $ (802) $ (7,324)

13 unchanged sentences

13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Net cash flows provided by (used in) operating activities from continuing operations $ 72,698 $ 38,680 $ ( 47,160 ) $ 10,073

Capital expenditures (a)

Dollars in thousands January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Net cash flows used in operating activities from continuing operations (a)

$ (36,061) $ (31,321) $ ( 83,221 ) $ ( 21,248 )

Capital expenditures (b)

3,263 4,877 11,459 21,700

Cash interest 5,668 6,105 19,640 13,406

1 unchanged sentence

Free Cash Flow (non-GAAP) $ (44,874) $ (42,304) $ (114,590) $ (40,772)

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

(a) See Liquidity and Capital Resources - Sources and Uses of Cash Flow discussion below.

The increase in Net cash flows used in operating activities from continuing operations is due to higher accounts receivables and higher inventory levels primarily related to our increased adoption of our BNC First Day equitable and inclusive access sales;

higher payments for interest expense;

and higher payables due to delayed payments to vendors for inventory purchases and expenses, as a result of borrowing capacity limitations under our credit facility.

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.

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

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

1 unchanged sentence

Capital Expenditures 13 weeks ended 39 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Dollars in thousands January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Physical store capital expenditures $ 1,158 $ 1,700 $ 5,106 $ 12,248

10 unchanged sentences

Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales are generally highest in the second and third fiscal quarters, when college students generally purchase textbooks for the upcoming Fall and Spring semesters, respectively.

As of October 28, 2023, we had $35.3 million of cash on hand, including $20.3 million of restricted cash related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Relationship-related agreements.

As of January 27, 2024, we had $15.0 million of cash on hand, including $6.9 million of restricted cash primarily related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Relationship-related agreements.

Our business was significantly negatively impacted by the COVID-19 pandemic during the years ended April 30, 2022 and May 1, 2021, as many schools adjusted their learning models and on-campus activities.

Although most academic institutions have since reopened after the COVID-19 pandemic, the lingering impacts of the pandemic have resulted in changes in customer behaviors, lower enrollments, and an evolving educational landscape which continued to impact our financial results during the year ended April 29, 2023.

Although most academic institutions have since reopened after the COVID-19 pandemic, the lingering impacts of the pandemic have resulted in changes in customer behaviors, lower enrollments, and an evolving educational landscape, including increased competition and disintermediation, which continued to impact our financial results during the year ended April 29, 2023.

Some institutions are still providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes.

The impact of COVID-19 store closings, as well as lower earnings during the year ended April 29, 2023, resulted in the loss of cash flows and increased borrowings that we would not otherwise have expected to incur.

We recognized Net Income from Continuing Operations of $24.9 million and $24.2 million for the 13 weeks ended October 28, 2023 and October 29, 2022, respectively, and a Net Loss from Continuing Operations of $(25.1) million and $(26.2) million for the 26 weeks ended October 28, 2023 and October 29, 2022, respectively, and we incurred a Net Loss from Continuing Operations of $(90.1) million, $(61.6) million, and $(133.6) million for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Our Cash Flow (Used In) Provided by Operating Activities from Continuing Operations were $(47.2) million and $10.1 million for the 26 weeks ended October 28, 2023 and October 29, 2022, respectively, and were $90.5 million, $(16.2) million, and $27.0 million, for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

We recognized Net Loss from Continuing Operations of $(9.9) million and $(22.1) million for the 13 weeks ended January 27, 2024 and January 28, 2023 , respectively, and a Net Loss from Continuing Operations of $(35.0) million and $(48.3) million for the 39 weeks ended January 27, 2024 and January 28, 2023 , respectively, and we incurred a Net Loss from Continuing Operations of $(90.1) million, $(61.6) million, and $(133.6) million for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Our Cash Flow (Used In) Provided by Operating Activities from Continuing Operations were $(83.2) million and $(21.2) million for the 39 weeks ended January 27, 2024 and January 28, 2023 , respectively, and were $90.5 million, $(16.2) million, and $27.0 million, for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

The tightening of our available credit commitments, including the elimination and repayment of our FILO Facility in fiscal year 2023 of $40.0 million, had a significant impact on our liquidity during fiscal year 2023 and fiscal year 2024, including our ability to make timely vendor payments and school commission payments.

Our losses and projected cash needs, combined with our current liquidity level, raised substantial doubt about our ability to continue as a going concern as of the year ended April 29, 2023, which Management subsequently remediated by implementing a plan to improve the Company’s liquidity and successfully alleviate substantial doubt including (1) raising additional liquidity an d (2) taking additional operational restructuring actions.

Our losses and projected cash needs, combined with our current liquidity levels and the maturity of our Credit Facility, which becomes due on December 28, 2024, raises substantial doubt about our ability to continue as a going concern.

The Company's ability to continue as a going concern is contingent upon the successful execution of management's plan to improve the Company’s liquidity, including (1) raising additional liquidity and (2) continuing to take additional operational restructuring actions to achieve the required levels of liquidity to support the operations of the business.

The Board has not set a timetable for the conclusion of this review, nor has it made any decisions related to any further actions at this time.

There can be no assurance that the review will result in any transaction or other strategic change or outcome.

Debt amendments

3 unchanged sentences

There can be no guarantee or assurances that any such transaction or transactions be consummated.

We must pay (i) a fee of 0.50% of the outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment (as defined in the Credit Agreement) on the closing date (in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment (as defined in the Credit Agreement)) and (ii) a fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2, 2024 and an Event of Default (as defined in the Credit Agreement).

We must pay (i) a fee of 0.50% of the

outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment (as defined in the Credit Agreement) on the closing date (in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment (as defined in the Credit Agreement)) and (ii) a fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2, 2024 and an Event of Default (as defined in the Credit Agreement).

On July 28, 2023, we amended our Term Loan to (i) extend the maturity date of the Term Loan Agreement to April 7, 2025, (ii) allow for interest to be paid in kind until September 2, 2024, (iii) amend the 1.50% anniversary fee to recur on June 7 of each year that the Term Loan Agreement remains outstanding, with 2024 fee deferred to the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement) and (iv) amend certain negative covenants and affirmative and add certain additional covenants.

2 unchanged sentences

The amendment introduced a Specified Liquidity Transaction Fee of $3.8 million that would become due and payable at the earlier to occur of (1) January 31, 2024, to the extent a Specified Liquidity Transaction (as defined in the Credit Agreement) has not been consummated prior to such date (or such later date that is up to thirty days thereafter to the extent agreed to in writing by the Administrative Agent in its sole discretion) or (b) an Event of Default under the Credit Agreement.

On December 12, 2023, we amended our existing Credit Agreement to, among other things:

(i) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) at all times to be greater than the greater of (x) 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and (y) (A) $32.5 million or, subject to the satisfaction of certain conditions relating to the repayment of the Credit Agreement in full, (B) (a) $20 million for the period of December 8, 2023 through January 12, 2024, (b) $25 million for the period from January 26, 2024 through February 9, 2024, (c) $25 million for the period of April 1, 2024 through April 30, 2024 and (d) $30 million for the period of May 1, 2024 through May 31, 2024, and (ii) revise certain reporting requirements under the Credit Agreement.

The amendment also revised the Specified Liquidity Transaction Fee introduced in the October 2023 Credit Agreement Amendment such that the $3.8 million became due, upon the effective date of the December 2023 amendment and was paid on January 31, 2024.

On March 12, 2024, we amended our existing Credit Agreement to, among other things, (i) revise certain reporting requirements under the Credit Agreement and (ii) set certain milestones for liquidity and refinancing contingency plans, with respect to which we must execute a binding commitment no later than April 3, 2024 (as may be extended by the administrative agent to April 10, 2024).

See Part I - Risk Factors - We are dependent upon access to the capital markets, bank credit facilities, and short-term vendor financing for liquidity needs in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023 .

Operational restructuring plans

1 unchanged sentence

Over the last year, we have achieved annualized savings of $30 million to

$35 million from these cost savings initiatives.

Management believes that these plans are within its control and will be focused on implementing as outlined.

During the 13 weeks ended October 28, 2023, Net Income from Continuing Operations increased by $0.7 million compared to the prior year period.

Excluding interest expense and restructuring and other charges Net Income from Continuing Operations improved by $10.5 million during the 13 weeks ended October 28, 2023 compared to the prior year period.

During the 26 weeks ended October 28, 2023, Net Loss from Continuing Operations decreased by $1.1 million compared to the prior year period.

Excluding interest expense and restructuring and other charges Net Loss from Continuing Operations decreased by $19.5 million during the 26 weeks ended October 28, 2023 compared to the prior year period.

The improvements in Net Income from Continuing Operations during the 13 and 26 weeks are primarily due to operational improvements and cost savings initiatives.

Management believes that the expected impact on our liquidity and cash flows resulting from the debt amendments and the operational initiatives outlined above are sufficient to enable the Company to meet its obligations for at least twelve months from the issuance date of these condensed consolidated financial statements and to continue to alleviate the conditions that initially raised substantial doubt about the Company's ability to continue as a going concern.

Over the course of Fiscal 2024, we have achieved annualized savings of approximately $30 million to $35 million from the Fiscal 2023 cost savings initiatives.

Management believes that these plans are within its control and will be focused on implementing these cost savings measures.

During the 13 weeks ended January 27, 2024, Net Loss from Continuing Operations improved by $12.2 million, or 55%, compared to the prior year period.

Net Income (Loss) from Continuing Operations, Excluding interest expense, impairment loss (non-cash) and restructuring and other charges, improved by $15.0 million during the 13 weeks ended January 27, 2024 compared to the prior year period.

During the 39 weeks ended January 27, 2024, Net Loss from Continuing Operations improved by $13.3 million, or 28%, compared to the prior year period.

Net Income (Loss) from Continuing Operations, excluding interest expense, impairment loss (non-cash) and restructuring and other charges, improved by $34.4 million during the 39 weeks ended January 27, 2024 compared to the prior year period.

The improvements in Net Loss from Continuing Operations during the 13 and 39 weeks are primarily due to operational improvements including successful implementation of our BNC First Day programs, and cost savings initiatives.

13 weeks ended 39 weeks ended

Dollars in millions

January 27, 2024 January 28, 2023 Var $ Var % January 27, 2024 January 28, 2023 Var $ Var %

Net loss from continuing operations

$ (9.9) $ (22.1) $ 12.2 55% $ (35.0) $ (48.3) $ 13.3 28%

Reconciling items:

Interest Expense (a)

$ 10.6 $ 6.9 $ 3.7 54% $ 29.5 $ 15.7 $ 13.8 88%

Impairment loss (non-cash)

5.8 6.0 (0.2) (3)% 5.8 6.0 (0.2) (3)%

Restructuring and other charges

3.4 4.1 (0.7) (17)% 12.3 4.8 7.5 156%

Total Reconciling items

$ 19.8 $ 17.0 $ 2.8 16% $ 47.6 $ 26.5 $ 21.1 80%

Net Income (Loss) from Continuing Operations Excluding Interest Expense, Impairment Loss and Restructuring and Other Charges

$ 9.9 $ (5.1) $ 15.0 294% $ 12.6 $ (21.8) $ 34.4 158%

(a) Interest expense increased by $13.9 million compared to the prior year period, comprised of $7.2 million resulting from higher borrowings and higher interest rates and $6.3 million resulting from increased amortization of deferred financing costs.

For additional information, see Deferred Financing Costs and Interest Expense below.

Sources and Uses of Cash Flow - Continuing Operations

39 weeks ended

Dollars in thousands October 28, 2023 October 29, 2022

Net cash flows (used in) provided by operating activities from continuing operations

$ (47,160) $ 10,073

Dollars in thousands January 27, 2024 January 28, 2023

Net cash flows used in operating activities from continuing operations $ (83,221) $ (21,248)

Net cash flows used in investing activities from continuing operations (11,381) (21,128)

1 unchanged sentence

Net change in cash, cash equivalents, and restricted cash from continuing operations $ (34,709) $ 14,046

As of October 28, 2023 and October 29, 2022, we had restricted cash of $20.3 million and $15.6 million, respectively, comprised of $19.4 million and $14.7 million, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $0.9 million for both periods in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

As of January 27, 2024 and January 28, 2023, we had restricted cash of $6.9 million and $18.3 million, respectively, comprised of $6.0 million and $17.4 million, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $0.9 million for both periods in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities from Continuing Operations

3 unchanged sentences

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.

For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, as payments are received from the summer and winter selling season when our wholesale business sell textbooks and other course materials for retail distribution.

2 unchanged sentences

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

Cash flows used in operating activities from continuing operations during the 26 weeks ended October 28, 2023 were $(47.2) million compared to cash flows provided by operating activities of $10.1 million during the 26 weeks ended October 29, 2022.

This decrease in cash flows used in operating activities from continuing operations of $57.3 million was

primarily due to changes in working capital, including higher accounts receivables of $56.0 million and higher inventory levels of $34.6 million primarily related to our increased adoption of our BNC First Day equitable and inclusive access sales for Fall term;

Cash flows used in operating activities from continuing operations during the 39 weeks ended January 27, 2024 were $(83.2) million compared to $(21.2) million during the 39 weeks ended January 28, 2023.

This increase in cash flows used in operating activities from continuing operations of $62.0 million was primarily due to changes in working capital, including higher accounts receivables of $81.7 million and higher inventory levels of $88.2 million primarily related to our increased adoption of our BNC First Day equitable and inclusive access sales;

higher payments for interest expense of $6.2 million;

offset by higher payables of $28.2 million due to delayed payments to vendors for inventory purchases and expenses, which were delayed resulting from lower borrowing base availability.

by higher payables of $78.0 million due to delayed payments to vendors for inventory purchases and expenses, as a result of borrowing capacity limitations under our credit facility.

Cash Flow from Investing Activities from Continuing Operations

Cash flows used in investing activities from continuing operations during the 26 weeks ended October 28, 2023 were $(8.1) million compared to $(16.6) million during the 26 weeks ended October 29, 2022.

Cash flows used in investing activities from continuing operations during the 39 weeks ended January 27, 2024 were $(11.4) million compared to $(21.1) million during the 39 weeks ended January 28, 2023.

The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments, enhancements to internal systems and websites, and new store construction.

Capital expenditures totaled $8.2 million and $16.8 million during the 26 weeks ended October 28, 2023 and October 29, 2022, respectively.

Capital expenditures totaled $11.5 million and $21.7 million during the 39 weeks ended January 27, 2024 and January 28, 2023, respectively.

Cash Flow from Financing Activities from Continuing Operations

Cash flows provided by financing activities from continuing operations during the 26 weeks ended October 28, 2023 were $41.2 million compared to $23.7 million during the 26 weeks ended October 29, 2022.

Cash flows provided by financing activities from continuing operations during the 39 weeks ended January 27, 2024 were $59.9 million compared to $56.4 million during the 39 weeks ended January 28, 2023.

This net change of $3.5 million is primarily due to higher net borrowings of $10.0 million, partially offset by higher payments for deferred financing costs of $7.2 million.

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Maturity Date

October 28, 2023 October 29, 2022

January 27, 2024 January 28, 2023

Credit Facility December 28, 2024 $ 224,067 $ 255,600

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sub-total 255,817 285,600

Deferred financing costs (1,871) (1,555)

Deferred financing costs, Term Loan (a)

(1,559) (1,743)

Total debt $ 254,258 $ 283,857

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Total debt $ 254,258 $ 283,857

(a) For additional information on Credit Facility and Term Loan deferred financing costs, see Deferred Financing Costs below.

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended from time to time including on October 10, 2023, July 28, 2023, May 24, 2023, March 8, 2023, March 31, 2021 and March 1, 2019, under which the lenders originally committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount of $400.0 million (the “Credit Facility”) effective from the March 1, 2019 amendment.

We have a credit agreement (the “Credit Agreement”), amended from time to time including on December 12, 2023, October 10, 2023, July 28, 2023, May 24, 2023, March 8, 2023, March 31, 2021 and March 1, 2019, under which the lenders originally committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount of $400.0 million (the “Credit Facility”) effective from the March 1, 2019 amendment.

We had the option to request an increase in commitments under the Credit Facility of up to $100.0 million, subject to certain restrictions.

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March 2023 Credit Agreement Amendment

On March 8, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement by six months to August 29, 2024, (ii) reduce the commitments under the Credit Agreement by $20.0 million to $380.0 million, (iii) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.375% per annum, in the case of interest accruing based on a Secured Overnight Financing Rate, and 2.375%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (iv) reduce advance rates with respect to the borrowing base (x) by 500 basis points upon the achievement of certain liquidity events, which may include a sale of equity interests or of assets (a “Specified Event”), or, if such a Specified Event shall not have occurred, on May 31, 2023 (see discussion below) and (y) by an additional 500 basis points on September 29, 2023, (v) amend certain negative covenants and add certain additional covenants, (vi) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) to be at all times greater than the greater of 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and $32.5 million and (vii) require repayment of the loans under the Credit Agreement upon a Specified Event.

For additional information related to

the Credit Agreement amendment, see the Company’s Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.

As noted above, the amendment requires the achievement of a Special Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms of the Credit Agreement).

On March 8, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement by six months to August 29, 2024, (ii) reduce the commitments under the Credit Agreement by $20.0 million to $380.0 million, (iii) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.375% per annum, in the case of interest accruing based on a Secured Overnight Financing Rate, and 2.375%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (iv) reduce advance rates with respect to the borrowing base (x) by 500 basis points upon the achievement of certain liquidity events, which may include a sale of equity interests or of assets (a “Specified Event”), or, if such a Specified Event shall not have occurred, no later than May 31, 2023 (see discussion below) and (y) by an additional 500 basis points on September 29, 2023, (v) amend certain negative covenants and add certain additional covenants, (vi) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) to be at all times greater than the greater of 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and $32.5 million and (vii) require repayment of the loans under the Credit Agreement upon a Specified Event.

For additional

information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.

As noted above, the amendment required the achievement of a Special Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms of the Credit Agreement).

Summary of Significant Accounting Policies for information related to the sale of our DSS segment on May 31, 2023 .

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For additional information related to the Credit Agreement amendment, see the Company's Report on Form 8-K filed with the SEC on July 28, 2023.

During the 26 weeks ended October 28, 2023, we incurred debt issuance costs totaling $11.5 million related to the July 2023 Credit Agreement amendment.

During the 39 weeks ended January 27, 2024, we incurred debt issuance costs totaling $11.5 million related to the July 2023 Credit Agreement amendment.

The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the condensed consolidated balance sheets, and subsequently amortized ratably over the term of the Credit Agreement.

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is up to thirty days thereafter to the extent agreed to in writing by the Administrative Agent in its sole discretion) or (b) an Event of Default under the Credit Agreement.

During the 26 weeks ended October 28, 2023, we incurred debt issuance costs totaling $1.4 million related to the October 2023 Credit Agreement amendment.

As of October 28, 2023, and through the date of this filing, we were in compliance with all debt covenants under the Credit Agreement.

During the 39 weeks ended January 27, 2024, we incurred debt issuance costs totaling $1.4 million related to the October 2023 Credit Agreement amendment.

December 2023 Credit Agreement Amendment

On December 12, 2023, we amended our existing Credit Agreement to, among other things:

The amendment also revised the Specified Liquidity Transaction Fee introduced in the October 2023 Credit Agreement Amendment such that the $3.8 million became due and was paid on January 31, 2024.

During the 39 weeks ended January 27, 2024, we incurred debt issuance costs totaling $4.1 million related to the December 2023 Credit Agreement amendment.

For additional information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated December 12, 2023 and filed with the SEC on December 13, 2023.

March 2024 Credit Agreement Amendment

As of January 27, 2024, and through the date of this filing, we were in compliance with all debt covenants under the Credit Agreement.

The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the Credit Facility.

This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company and a pledge of equity from subsidiaries, exclusive of real estate).

During the 26 weeks ended October 28, 2023, we borrowed $284.7 million and repaid $234.0 million under the Credit Agreement, and had outstanding borrowings of $204.9 million as of October 28, 2023, comprised entirely of borrowings under the Credit Facility.

During the 26 weeks ended October 29, 2022, we borrowed $318.2 million and repaid $321.9 million under the Credit Agreement, and had outstanding borrowings of $222.0 million as of October 29, 2022, comprised entirely of borrowings under the Credit Facility.

As of October 28, 2023 and October 29, 2022, we have issued $0.5 million and $4.8 million, respectively, in letters of credit under the Credit Facility.

During the 39 weeks ended January 27, 2024, we borrowed $454.5 million and repaid $384.5 million under the Credit Agreement, and had outstanding borrowings of $224.1 million as of January 27, 2024, comprised entirely of borrowings under the Credit Facility.

During the 39 weeks ended January 28, 2023, we borrowed $482.0 million and repaid $452.1 million under the Credit Agreement, and had outstanding borrowings of $255.6 million as of January 28, 2023, comprised entirely of borrowings under the Credit Facility.

As of January 27, 2024 and January 28, 2023, we have issued $3.6 million and $4.8 million, respectively, in letters of credit under the Credit Facility.

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered into an amendment to our existing Credit Agreement, which permitted us to incur the Term Loan Facility (as defined below).

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The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility.

During the 26 weeks ended October 28, 2023, we incurred $0.9 million for interest in kind on the Term Loan and repaid $0 under the Term Loan Credit Agreement, with $30.9 million of outstanding borrowings as of October 28, 2023.

During the 26 weeks ended October 29, 2022, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of October 29, 2022.

During the 39 weeks ended January 27, 2024, we incurred $1.8 million for interest in kind on the Term Loan and repaid $0 under the Term Loan Credit Agreement, with $31.8 million of outstanding borrowings as of January 27, 2024.

During the 39 weeks ended January 28, 2023, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of January 28, 2023.

March 2023 Term Loan Credit Agreement Amendment

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We paid a fee of $0.05 million on the amendment closing date to the lenders under the Term Loan Credit Agreement.

The debt issuance costs have been deferred and are presented as a reduction to long-term borrowings in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

July 2023 Term Loan Credit Agreement Amendment

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For additional information, see the Company's Report on Form 8-K filed with the SEC on July 28, 2023.

During the 26 weeks ended October 28, 2023, we incurred debt issuance costs totaling $0.4 million related to the July 2023 Term Loan Credit Agreement amendment.

During the 39 weeks ended January 27, 2024, we incurred debt issuance costs totaling $0.4 million related to the July 2023 Term Loan Credit Agreement amendment.

The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly.

All interest on the Term Loan prior to the July 29, 2023 was paid in cash.

During the 13 weeks ended October 28, 2023, all interest on the Term Loan was incurred in kind as permitted under the July 2023 Term Loan Amendment.

All interest on the Term Loan prior to July 29, 2023 was paid in cash.

During the 13 weeks ended October 28, 2023 and 13 weeks ended January 27, 2024, all interest on the Term Loan was incurred in kind as permitted under the July 2023 Term Loan Amendment.

The Term Loans do not amortize prior to maturity.

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The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that, upon repayment of the Term Loan Credit Agreement (and, if applicable, any replacement credit facility thereof), we may incur second lien secured debt in an aggregate principal amount not to exceed $75.0 million.

Deferred Financing Costs

The debt issuance costs have been deferred and are presented as noted below in the consolidated balance sheets, and are subsequently amortized ratably over the term of respective debt.

Dollars in thousands As of

Balance Sheet Location

Maturity Date/

Amortization Term

January 27, 2024 January 28, 2023

Credit Facility - Prepaid and Other Current Assets

December 28, 2024 $ 14,570 $ 1,583

Credit Facility - Other noncurrent assets

Credit Facility - sub-total

Term Loan - Contra Debt

April 7, 2025 1,559 1,743

Total deferred financing costs

$ 16,129 $ 3,458

Interest Expense

During the 13 weeks ended October 28, 2023 and October 29, 2022, we recognized interest expense of $10.7 million and $4.9 million, respectively, and during the 26 weeks ended October 28, 2023 and October 29, 2022, we recognized interest expense of $18.9 million and $8.8 million, respectively.

Cash interest paid during the 26 weeks ended October 28, 2023 and October 29, 2022 was $14.0 million and $7.3 million, respectively.

During the 13 weeks ended January 27, 2024 and January 28, 2023, we recognized interest expense of $10.6 million and $6.9 million, respectively, and during the 39 weeks ended January 27, 2024 and January 28, 2023, we recognized interest expense of $29.5 million and $15.7 million, respectively.

The following table disaggregates interest expense for the 13 and 39 week periods:

13 weeks ended 39 weeks ended

Dollars in thousands January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Interest Incurred

Credit Facility $ 5,747 $ 5,215 $ 18,286 $ 11,910

Term Loan 907 853 3,074 2,213

Total Interest Incurred $ 6,654 $ 6,068 $ 21,360 $ 14,123

Amortization of Deferred Financing Costs

Credit Facility $ 3,662 $ 396 $ 7,456 $ 1,187

Term Loan 312 462 924 871

Total Amortization of Deferred Financing Costs $ 3,974 $ 858 $ 8,380 $ 2,058

Interest Income, net of expense $ (8) $ (8) $ (202) $ (509)

Total Interest Expense $ 10,620 $ 6,918 $ 29,538 $ 15,672

Cash interest paid during the 39 weeks ended January 27, 2024 and January 28, 2023 was $19.6 million and $13.4 million, respectively.

Income Tax Implications on Liquidity

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As a result of the tax year-end change, there is no longer a long-term tax payable associated with the LIFO reserve in other long-term liabilities.

As of October 28, 2023, we recognized a current income tax receivable for net operating loss carrybacks in prepaid and other current assets on the condensed consolidated balance sheet.

As of January 27, 2024, we recognized a current income tax receivable for net operating loss carrybacks in prepaid and other current assets on the condensed consolidated balance sheet.

We received refunds of $7.8 million in Fiscal 2022 and a $15.8 million refund in Fiscal 2023.

We expect to receive additional refunds of approximately $10.0 million.

We received an $8.5 million refund (including $0.9 million in interest) on February 16, 2024 and we expect to receive additional refunds of approximately $2.4 million.

Share Repurchases

During the 13 and 26 weeks ended October 28, 2023, we did not repurchase any of our Common Stock under the stock repurchase program.

As of October 28, 2023, approximately $26.7 million remains available under the stock repurchase program.

During the 13 and 26 weeks ended October 28, 2023, we repurchased 66,852 and 144,750 of our Common Stock, respectively, outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

During the 13 and 39 weeks ended January 27, 2024, we did not repurchase any of our Common Stock under the stock repurchase program.

As of January 27, 2024, approximately $26.7 million remains available under the stock repurchase program.

During the 13 and 39 weeks ended January 27, 2024, we repurchased 3,135 and 147,885 of our Common Stock, respectively, 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 October 28, 2023, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

As of January 27, 2024, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Critical Accounting Policies

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• our ability to satisfy future capital and liquidity requirements;

• our ability to continue as a going concern;

• our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms;

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• the pace of equitable access adoption in the marketplace is slower than anticipated and our ability to successfully convert the majority of our institutions to our BNC First Day ® equitable and inclusive access course material models or successfully compete with third parties that provide similar equitable and inclusive access solutions;

• the United States Department of Education has recently proposed regulatory changes that, if adopted as proposed, could impact equitable and inclusive access models across the higher education industry;

• the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various strategic and restructuring initiatives, may not be fully realized or may take longer than expected;

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• risks associated with counterfeit and piracy of digital and print materials;

• risks associated with data privacy, information security and intellectual property;

• risks associated with the potential loss of control over personal information;

• risks associated with the potential misappropriation of our intellectual property;

• disruptions to our information technology systems, infrastructure, data, supplier systems, and customer ordering and payment systems due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations;

• disruption of or interference with third party web service providers and our own proprietary technology;

• disruption of or interference with third party service providers and our own proprietary technology;

• risks associated with the impact that public health crises, epidemics, and pandemics, such as the COVID-19 pandemic, have on the overall demand for BNED products and services, our operations, the operations of our suppliers, service providers, and campus partners, and the effectiveness of our response to these risks;

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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