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Item 7. Management’s Discussion and Analysis

2024-07-01 compared with 2023-07-31 · 373 added, 666 removed, 497 unchanged (68% of the section changed)

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

“Fiscal 2024” means the 52 weeks ended April 27, 2024, “Fiscal 2023” means the 52 weeks ended April 29, 2023, “Fiscal 2022” means the 52 weeks ended April 30, 2022, and “Fiscal 2021” means the 52 weeks ended May 1, 2021.

“Fiscal 2024” means the 52 weeks ended April 27, 2024, “Fiscal 2023” means the 52 weeks ended April 29, 2023.

Description of Business

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(“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States.

We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions.

We are also one of the largest textbook wholesalers and inventory management hardware and software providers.

We operate 1,245 physical, virtual, and custom bookstores and serve more than 5.8 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.

For a discussion of our business, see Part I - Item 1.

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

We provide product and service offerings designed to address the most pressing issues in higher education, including 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 requested 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 Fiscal 2023, BNC First Day total revenue increased 48% from the prior year period.

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.

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 merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

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

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

We expect gross general merchandise sales to continue 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 Partnership.

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

During Fiscal 2023, Retail Gross Comparable Store general merchandise sales increased by 8.6%.

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 52 weeks ended April 27, 2024, BNC First Day total revenue increased by $127 million, or 37%, to $474 million compared to $347 million during the prior year period.

These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which has been observed at those schools where such programs have been adopted, and improve predictability of our future results.

In Fiscal 2024, the growth of our BNC First Day programs offset the declines in a la carte courseware sales and closed store sales.

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

Many institutions adopted First Day Complete in Fiscal 2024, and we plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond.

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

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

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

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

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

Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels.

For a discussion of our business, see Part I - Item 1.

Sale of Digital Student Solutions ("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.

Certain assets and liabilities associated with the DSS Segment are presented in our consolidated balance sheets as "Assets Held for Sale" and "Liabilities Held for Sale".

The results of operations related to the DSS Segment are included in the consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of the DSS Segment are also presented separately in our consolidated statements of cash flows.

On May 31, 2023, subsequent to the end of Fiscal 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 first quarter of Fiscal 2024, we expect to record a Gain on Sale of Business in the range of $2.5 million to $4.5 million.

Index to Form 10-K Index to FS

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

Cost Savings Initiative

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

We have taken steps to significantly reduce our workforce during non-rush seasonal sales periods, 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.

We have achieved meaningful cost savings from this program of approximately $17 million during the year ended April 29, 2023.

These initiatives are expected to provide annualized savings of $30 million to $35 million in Fiscal 2024.

Management's plans over the next twelve months include the further reduction of gross capital expenditures and other cost saving measures of approximately $25 million.

Management believes that these plans are within its control and probable of being implemented on a timely basis.

BNC First Day Equitable and Inclusive Access Programs

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

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

The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.

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

The First Day Complete model drives

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substantially greater unit sales and sell-through for the bookstore.

• First Day is adopted by a faculty member for a single course, and students receive primarily digital course materials through their school's learning management system ("LMS").

Offering course materials through our equitable and inclusive access First Day Complete and First Day models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of course material sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.

These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which 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.

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.

For the 2023 Spring Term, 116 campus stores adopted our First Day Complete course materials delivery program, representing approximately 580,000 in total undergraduate student enrollment (as reported by National Center for Education Statistics), compared to 76 campus stores representing approximately 380,000 in total undergraduate student enrollment for the 2022 Spring Term.

During the 52 weeks ended April 29, 2023, First Day Complete sales increased by $93 million to $198 million, or 88%, as compared to $105 million in the prior year period.

Partnership with Fanatics and Lids

In December 2020, we entered into the F/L Partnership.

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

Offering course materials through our equitable and inclusive access First Day Complete and First Day models is an important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of course material sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.

In Fiscal 2024, the growth of our BNC First Day programs offset the declines in a la carte courseware sales and closed store sales.

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

Many institutions adopted First Day Complete in Fiscal 2024, and we 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 52 weeks ended April 27, 2024 and April 29, 2023:

Dollars in millions 52 weeks ended

April 27, 2024 April 29, 2023 $ Increase

First Day Complete Sales

$ 292.7 $ 197.8 $ 94.9 48%

First Day Sales

$ 181.2 $ 148.9 $ 32.3 22%

Total BNC First Day Sales

$ 473.9 $ 346.7 $ 127.2 37%

First Day Complete Spring 2024 Spring 2023 # Increase

Number of campus stores 160 116 44 38%

Estimated enrollment (a)

805,000 580,000 225,000 39%

(a) Total undergraduate and graduate student enrollment as reported by National Center for Education Statistics (NCES) as of October 26, 2023.

Relationship with Fanatics and Lids

In December 2020, we entered into the F/L Relationship.

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.

Through the pending installation of Lids "Custom Zones" at certain stores, our stores will offer a

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differentiated shopping experience, that lets students, parents, alumni, fans, and campus clubs personalize school merchandise that’s sold in the store.

These Custom Zones will drive incremental foot traffic, increase in-store dwell time, and grow sales opportunities.

The installation of traffic counters at certain stores provides comprehensive store analytics that help us optimize the customer experience and business outcomes, by better aligning staffing with peak traffic hours, identifying opportunities to increase conversion, or assessing promotional effectiveness.

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

Effective in April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of our logo general merchandise sales to Lids and Fanatics.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

As the logo and emblematic general merchandise sales are fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic general merchandise sales on a gross basis prior to April 2021.

In December 2020, Fanatics, Inc.

and Lids Holdings, Inc.

jointly made a $15 million strategic equity investment in BNED.

In addition to its equity investment, on June 7, 2022, we entered into a $30 million term loan credit agreement with TopLids LendCo, LLC and Vital Fundco, LLC, another strategic partner.

Index to Form 10-K Index to FS

Financing Arrangements

On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including an equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, to substantially deleverage our consolidated balance sheet.

These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs, which will also allow us to strategically invest in innovation and continue to execute our strategic initiatives, including but not limited to the growth of our First Day Complete program.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data .

COVID-19 Pandemic Business Impact

Our business was significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities.

The impact of COVID-19 store closings during Fiscal 2021 to Fiscal 2022 resulted in the loss of cash flow and increased borrowings that we would not otherwise have expected to incur.

However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years.

We cannot accurately predict the duration or extent of the lingering impact of the COVID-19 pandemic on enrollments, primarily at community colleges and international student enrollment, campus activities, university budgets, athletics, the continuation of remote and hybrid class offerings, and other areas that directly affect our business operations .

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.

Financial Statements and Supplementary Data - Note 17.

Subsequent Events.

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 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 implemented further cost savings measures, including reduction of gross capital expenditures, amounting to approximately $29 million in savings.

We have two reportable segments:

Retail and Wholesale.

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are not allocated to any specific reporting segment and continue to be presented as “Corporate Services”.

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are not allocated to a specific reporting segment and continue to be presented as “Corporate Services”.

The following discussion provides information regarding the three segments.

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The Retail Segment operates 1,245 college, university, and K-12 school bookstores, comprised of 707 physical bookstores and 538 virtual bookstores.

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

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

The Retail Segment also offers equitable and inclusive access programs, which provide faculty requested 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.

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

The majority of the physical campus bookstores have school-branded e-commerce websites, which we operate independently or along with our merchant service providers, and which offer students access to required and recommended 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 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 52 weeks ended April 27, 2024, we opened 46 stores and closed 167 stores in the Retail Segment with estimated net annual sales of $(74) million.

The Company’s strategic initiative is to close under-performing and less profitable stores.

Many institutions adopted First Day Complete in Fiscal 2024, and we plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond.

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.

Wholesale Segment

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Corporate Services represents unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

Index to Form 10-K Index to FS

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,

Index to Form 10-K Index to FS

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.

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.

Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized at the point of sale as product revenue in our consolidated financial statements.

Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized when the customer accesses the digital content as product revenue in our consolidated financial statements.

Revenue from the rental of physical textbooks is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer and is recognized as rental income in our consolidated financial statements.

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Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized.

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

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

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

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

Trends and Other Factors Affecting Our Business

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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 any 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.

Index to Form 10-K Index to FS

Results of Operations Summary - Continuing Operations (a)

For a detailed discussion of Fiscal 2024 and year-over-year comparison to Fiscal 2023, see Results of Operations - Continuing Operations - 52 weeks ended April 27, 2024 compared with the 52 weeks ended April 29, 2023 below.

52 weeks ended

Dollars in thousands April 29, 2023 (a)

April 30, 2022 (b)

May 1, 2021 (b)

Dollars in thousands April 27, 2024 April 29, 2023 (a)

Product sales and other

$ 1,430,456 $ 1,406,655

Rental income 136,679 136,553

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Net loss from continuing operations

Adjusted Earnings (non-GAAP) - Continuing Operations (d)

$ (62,481) $ (90,140)

Adjusted EBITDA (non-GAAP) - Continuing Operations (d)

Adjusted Earnings (non-GAAP) - Continuing Operations (b)

$ (35,906) $ (74,003)

Adjusted EBITDA (non-GAAP) - Continuing Operations (b)

Retail $ 54,488 $ 10,640

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Eliminations 1,033 (25)

Total Adjusted EBITDA (non-GAAP) $ (8,146) $ (10,316) $ (70,116)

Total Adjusted EBITDA (non-GAAP) (b)

$ 45,202 $ (8,146)

(a) 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.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

(b) In Fiscal 2022 and Fiscal 2021, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

(c) Effective in April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of our logo general merchandise sales to Lids and Fanatics.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

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

See Retail Gross Comparable Store Sales details.

(d) Adjusted Earnings and Adjusted EBITDA are a non-GAAP financial measures.

See Adjusted Earnings (non-GAAP) and Adjusted EBITDA (non-GAAP) discussion below.

(b) Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment are non-GAAP financial measures.

See Use of Non-GAAP Measures discussion below.

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

52 weeks ended

Continuing Operations April 29, 2023 April 30, 2022 May 1, 2021

Continuing Operations April 27, 2024 April 29, 2023

Product sales and other 91.3 % 91.2 %

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Product and other cost of sales (a)

79.6 79.0 85.6

Rental cost of sales (a)

54.4 57.5 65.0

Total cost of sales 77.2 77.4

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Results of Operations - Discontinued Operations

The results of operations related to the DSS Segment are included in the consolidated statements of operations as "Loss from discontinued operations, net of tax." On May 31, 2023, subsequent to the end of Fiscal 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 first quarter of Fiscal 2024, we expect to record a Gain on Sale of Business in the range of $2.5 million to $4.5 million.

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

The following table summarizes the operating results of the discontinued operations for the periods indicated:

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.

Certain assets and liabilities associated with the DSS Segment are presented in our consolidated balance sheets as "Assets Held for Sale" and "Liabilities Held for Sale".

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 52 weeks ended April 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.

52 weeks ended

Dollars in thousands April 29, 2023 April 30, 2022 May 1, 2021

Dollars in thousands April 27, 2024 April 29, 2023

Total sales $ 2,784 $ 35,353

Cost of sales (a)

7,156 5,738 5,056

Gross profit (a)

28,197 29,928 22,318

Selling and administrative expenses 3,029 34,137

Depreciation and amortization 3 3,155

Restructuring costs 1,848 — 571

Gain on sale of business (3,545) —

Impairment loss (non-cash) (b)

Restructuring costs (c)

Transaction costs 13 381

Operating loss (710) (11,324)

Income tax expense (benefit) 398 497 (1,891)

Income tax expense

Loss from discontinued operations, net of tax $ (730) $ (11,722)

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $6.6 million, $5.1 million, and $4.3 million for the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $0 million and $6.6 million for the 52 weeks ended April 27, 2024 and April 29, 2023, respectively.

(b) During the 52 weeks ended April 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 consolidated statement of operations as part of discontinued operations.

(c) During the 52 weeks ended April 27, 2024, we recognized restructuring and other charges of $3.3 million, comprised of severance and other employee termination costs, on the consolidated statement of operations as part of discontinued operations.

Index to Form 10-K Index to FS

Results of Operations - Continuing Operations

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52 weeks ended, April 27, 2024 (a)

Dollars in thousands Retail Wholesale Corporate Services Eliminations (b)

Dollars in thousands Retail Wholesale Corporate Services Eliminations Total

Product sales and other $ 1,378,238 $ 112,631 $ — $ (60,413) $ 1,430,456

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571 (813) 19,651 — 19,409

Operating loss from continuing operations $ (35,095) $ (3,050) $ (28,276) $ (25) $ (66,446)

Index to Form 10-K Index to FS

52 weeks ended, April 30, 2022 (a)(c)

Dollars in thousands Retail Wholesale Corporate Services Eliminations (b)

Operating income (loss) from continuing operations

$ 11,457 $ 4,945 $ (39,368) $ 1,033 $ (21,933)

52 weeks ended, April 29, 2023 (a)

Dollars in thousands Retail Wholesale Corporate Services Eliminations Total

Product sales and other $ 1,355,173 $ 106,366 $ — $ (54,884) $ 1,406,655

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2,964 916 6,223 — 10,103

Operating (loss) income from continuing operations $ (37,305) $ 495 $ (24,030) $ 225 $ (60,615)

Operating loss from continuing operations

$ (35,095) $ (3,050) $ (28,276) $ (25) $ (66,446)

(a) 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.

Operating Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

(b) For additional information related to the intercompany activities and eliminations, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 4.

Segment Reporting.

(c) In Fiscal 2022, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

Index to Form 10-K Index to FS

The following table summarizes our sales:

52 weeks ended

Dollars in thousands April 29, 2023 April 30, 2022 %

Dollars in thousands April 27, 2024 April 29, 2023 $ Increase

Product sales and other $ 1,430,456 $ 1,406,655 $ 23,801 1.7%

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Total Sales $ 1,567,135 $ 1,543,208 $ 23,927 1.6%

Our total sales increased by $47.5 million, or 3.2%, to $1,543.2 million during the 52 weeks ended April 29, 2023 from $1,495.7 million during the 52 weeks ended April 30, 2022 which is primarily related to higher course material sales, primarily due to our BNC First Day programs and higher general merchandise sales as many schools approach a more traditional on campus learning experience.

Our total sales increased by $23.9 million, or 1.6%, to $1,567.1 million during the 52 weeks ended April 27, 2024 from $1,543.2 million during the 52 weeks ended April 29, 2023 which is primarily related to higher course material sales, primarily at our BNC First Day programs, and higher graduation product sales, offset by declines in a la carte courseware sales, including lower sales resulting from closed stores.

The components of the sales variances for the 52-week period are reflected in the table below.

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Total sales variance:

Index to Form 10-K Index to FS

(a) Effective in April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of our logo general merchandise sales to Lids and Fanatics.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

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

For Retail Gross Comparable Store Sales details, see below.

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

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

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

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The following is a store count summary for physical stores and virtual stores.

Many of the store closings relate to closing less profitable stores, including satellite store locations.

Fiscal 2024 Fiscal 2023

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End of period 707 538 1,245 774 592 1,366

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 sales, especially for graduation products, logo products, and cafe and convenience products, as on campus traffic continues to grow compared to the prior year.

Sales were negatively impacted by lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings.

During the 52 weeks ended April 27, 2024, we opened 46 stores and closed 167 stores in the Retail Segment, with estimated net annual sales of $(74) million.

The Company’s strategic initiative is to close under-performing and less profitable stores.

Many institutions adopted First Day Complete in Fiscal 2024, and we plan to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond.

Index to Form 10-K Index to FS

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 total sales increased by $23.2 million, or 1.6%, to $1,514.9 million during the 52 weeks ended April 27, 2024 from $1,491.7 million during the 52 weeks ended April 29, 2023.

In addition, our sales and margins were positively impacted in Fiscal 2023 compared to Fiscal 2022 as a result of improved availability of used inventory which was constrained in 2022.

• Product sales and other increased by $23.1 million, or 1.7%, to $1,378.2 million during the 52 weeks ended April 27, 2024 from $1,355.1 million during the 52 weeks ended April 29, 2023.

During the 52 weeks ended April 29, 2023, total course material product sales increased by $16.7 million, or 1.8%, to $927.9 million;

total general merchandise product sales increased by $38.5 million, or 11.1%, to $385.5 million as students return to on campus activities, partially offset by a decrease in service and other revenue of $6.3 million, or 13.2%, to $41.8 million primarily due to lower shipping and handling income resulting from increased in-store order fulfillment.

• Revenue from our BNC First Day equitable and inclusive access programs increased by $112 million, or 48%, to $347 million during the 52 weeks ended April 29, 2023, as compared to $235 million during the 52 weeks ended April 30, 2022.

Specifically, First Day Complete sales increased by $93 million, or 88%, to $198 million during the 52 weeks ended April 29, 2023, as compared to $105 million during the 52 weeks ended April 30, 2022.

First Day sales increased by $19 million, or 15%, to $149 million during the 52 weeks ended April 29, 2023, as compared to $130 million during the 52 weeks ended April 30, 2022.

As of April 29, 2023, 116 campus stores adopted our First Day Complete course materials delivery program for the 2023 Spring Term, representing approximately 580,000 in total undergraduate student enrollment (as reported by National Center for Education Statistics), compared to 76 campus stores representing approximately 380,000 in total undergraduate student enrollment in the 2022 Spring Term.

• Total course material rental income increased by $3.2 million, or 2.4%, to $136.6 million during the 52 weeks ended April 29, 2023 from $133.4 million during the 52 weeks ended April 30, 2022 primarily due to increased rental textbook activity in our First Day Complete program and improved availability of used textbook inventory.

Index to Form 10-K Index to FS

◦ Course material product sales increased by $44.0 million, or 4.7%, to $972.0 million during the 52 weeks ended April 27, 2024, compared to $927.9 million in the prior year period.

The increase was primarily due to the growth of our BNC First Day programs, which increased by $127.2 million, or 36.7%, to $473.9 million, offset by a decline of $83.1 million in a la carte courseware sales, including lower sales resulting from closed stores.

Dollars in millions 52 weeks ended

April 27, 2024 April 29, 2023 $ Increase

First Day Complete Sales

$ 292.7 $ 197.8 $ 94.9 48%

First Day Sales

$ 181.2 $ 148.9 $ 32.3 22%

Total BNC First Day Sales

$ 473.9 $ 346.7 $ 127.2 37%

First Day Complete Spring 2024 Spring 2023 # Increase

Number of campus stores 160 116 44 38%

Estimated enrollment (a)

805,000 580,000 225,000 39%

(a) Total undergraduate and graduate student enrollment as reported by National Center for Education Statistics (NCES) as of October 26, 2023.

◦ General merchandise product net sales decreased by $21.4 million, or 5.6%, to $364.1 million, compared to $385.5 million in the prior year period, primarily due to closed stores, and lower cafe and convenience, trade, and supply product sales, offset by higher graduation product sales and higher emblematic product sales.

Retail Gross Comparable Store Sales for general merchandise increased by $6.6 million, or 1.2%, compared to the prior year period as discussed below.

◦ Service and other revenue increased by $0.4 million, or 1%, to $42.2 million, compared to $41.8 million in the prior year period, primarily due to higher other income for non-return rental penalty fees, offset by lower partnership marketing and marketplace sales.

• Rental income for course materials increased by $0.1 million, or 0.1%, to $136.7 million during the 52 weeks ended April 27, 2024 from $136.6 million during the 52 weeks ended April 29, 2023, primarily due to the growth of our BNC First Day programs, offset by closed stores and the shift to digital products.

Retail Gross Comparable Store Sales

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

For Retail Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis for consistent year-over-year comparison.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

For Retail Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis in Retail Gross Comparable Store Sales compared to a net basis as commission revenue in our consolidated financial statements.

We believe the current Retail Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time.

1 unchanged sentence

Retail Gross Comparable Store Sales are also referred to as "same-store" sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry.

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

The increase in course material sales 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 increase in general merchandise sales was primarily due to higher sales related to graduation products, logo products, and cafe and convenience products, as on campus traffic continues to grow compared to the prior year.

As a result, our calculation of comparable

Index to Form 10-K Index to FS

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), 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 for Retail by category for the 52-week period are as follows:

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Total Retail Gross Comparable Store Sales $ 77.0 5.0% $ 48.0 3.2%

Wholesale sales decreased by $5.9 million, or 5.2%, to $106.4 million during the 52 weeks ended April 29, 2023 from $112.2 million during the 52 weeks ended April 30, 2022.

The decrease is primarily due to a decline in gross sales of $2.0 million from lower customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, and higher returns and allowances of $3.9 million.

Wholesale sales increased by $6.3 million, or 5.9%, to $112.6 million during the 52 weeks ended April 27, 2024 from $106.3 million during the 52 weeks ended April 29, 2023.

The increase is primarily due to lower returns and allowances of $8.0 million, partially offset by a decline in gross sales of $1.7 million from lower customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients.

Cost of Sales and Gross Margin

Our cost of sales increased as a percentage of sales to 77.4% during the 52 weeks ended April 29, 2023 compared to 77.1% during the 52 weeks ended April 30, 2022.

Our cost of sales decreased as a percentage of sales to 77.2% during the 52 weeks ended April 27, 2024 compared to 77.4% during the 52 weeks ended April 29, 2023.

Our gross margin increased by $7.3 million, or 2.1%, to $356.8 million, or 22.8% of sales, during the 52 weeks ended April 27, 2024 from $349.5 million, or 22.6% of sales, during the 52 weeks ended April 29, 2023.

During the 52 weeks ended April 30, 2022, we recognized a merchandise inventory loss of $0.4 million in cost of goods sold in the Retail Segment.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies - Merchandise Inventories.

Index to Form 10-K Index to FS

The variances by segment are discussed by segment below.

The following table summarizes the Retail cost of sales:

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Gross Margin $ 332,947 22.0% $ 331,344 22.2%

For the 52 weeks ended April 29, 2023, the Retail gross margin as a percentage of sales decreased as discussed below:

• Product and other gross margin decreased (50 basis points), driven primarily by lower margin rates (110 basis points) due to higher markdowns, higher inventory reserves, lower general merchandise margin rates, offset by lower shipping costs;

higher contract costs as a percentage of sales related to our college and university contracts (40 basis points) resulting from contract renewals and new store contracts;

partially offset by improved sales mix (95 basis points) primarily due to higher used textbook sales due to lower constraints on inventory availability, offset by lower margins due to a shift in buying patterns from physical textbooks to digital products, and higher general merchandise sales, including logo sales.

• Retail Rental gross margin as a percentage of sales increased driven primarily by higher rental margin rates primarily due to our First Day Complete program and favorable rental mix due to improved availability of used textbook inventory, partially offset by higher contract costs as a percentage of sales related to our college and university contracts resulting from contract renewals and new store contracts.

For the 52 weeks ended April 27, 2024, the Retail gross margin as a percentage of sales remained flat at 22.2% as discussed below:

• Product and other gross margin decreased (20 basis points) driven primarily by lower margin rates for course materials due to higher markdowns, including markdowns related to closed stores (155 basis points), 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, the adoption of our BNC First Day models, and lower renewals for under-performing school contracts (85 basis points) and favorable product sales mix, including higher margin First Day Complete course material sales (50 basis points).

Index to Form 10-K Index to FS

• Retail Rental gross margin as a percentage of sales decreased (30 basis points), driven primarily by lower rental margin rates, higher markdowns, 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, the adoption of our BNC First Day models, and lower renewals for under-performing school contracts, and a favorable rental sales mix.

The cost of sales and gross margin for Wholesale were $89.8 million, or 79.8% of sales, and $22.8 million, or 20.2% of sales, respectively, during the 52 weeks ended April 27, 2024.

The cost of sales and gross margin for Wholesale were $88.1 million, or 82.8% of sales, and $18.3 million, or 17.2% of sales, respectively, during the 52 weeks ended April 29, 2023.

The gross margin decreased to 17.2% during the 52 weeks ended April 29, 2023 from 17.6% during the 52 weeks ended April 30, 2022.

The decrease was primarily due to the unfavorable impact of higher markdowns of $2.3 million and returns and allowances of $0.5 million, partially offset by a favorable sales mix of $1.3 million due to improved availability of used textbook inventory.

The increase gross margin was primarily due to lower returns and allowances of $5.3 million, partially offset by higher cost of product of $0.8 million.

Intercompany Eliminations

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

Index to Form 10-K Index to FS

Selling and Administrative Expenses

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Selling and Administrative Expenses $ 311,574 19.9% $ 357,611 23.2%

During the 52 weeks ended April 29, 2023, selling and administrative expenses increased by $3.6 million, or 1.0%, to $357.6 million from $354.0 million during the 52 weeks ended April 30, 2022.

During the 52 weeks ended April 27, 2024, selling and administrative expenses decreased by $46.0 million, or 12.9%, to $311.6 million from $357.6 million during the 52 weeks ended April 29, 2023.

The variances by segment are discussed by segment below.

For Retail, selling and administrative expenses increased by $5.6 million, or 1.8%, to $320.7 million during the 52 weeks ended April 29, 2023 from $315.1 million during the 52 weeks ended April 30, 2022.

This increase was primarily due to an increase in store payroll and operating costs at new/closed stores of $6.4 million, and a $5.4 million increase in corporate payroll, infrastructure and product development costs, partially offset by a $5.2 million decrease in incentive plan compensation expense and a $1.0 million decrease in store payroll and operating costs at comparable stores.

For Retail, selling and administrative expenses decreased by $42.3 million, or 13.2%, to $278.4 million during the 52 weeks ended April 27, 2024 from $320.7 million during the 52 weeks ended April 29, 2023.

This decrease was primarily due to a $15.0 million decrease in closed stores payroll and related operating costs, cost savings initiatives comprised of a $19.3 million decrease in comparable store payroll expense and related operating costs and a $10.9 million decrease in corporate payroll expense, infrastructure and product development costs, partially offset by a $2.9 million increase in new store payroll expense and related operating costs.

For Wholesale, selling and administrative expenses decreased by $1.6 million, or 10.6%, to $13.4 million during the 52 weeks ended April 27, 2024 from $15.0 million during the 52 weeks ended April 29, 2023.

The decrease was primarily driven by lower compensation related expense, including incentive plan compensation expense.

The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $1.8 million, partially offset by higher operating expenses of $0.2 million.

Corporate Services

Corporate Services' selling and administrative expenses decreased by $2.3 million, or 10.6%, to $19.7 million during the 52 weeks ended April 27, 2024 from $22.0 million during the 52 weeks ended April 29, 2023.

The decrease in costs was primarily due to lower incentive plan compensation costs of $1.8 million, partially offset by higher professional service costs of $0.8 million.

The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $1.5 million and lower operating costs of $0.8 million.

Index to Form 10-K Index to FS

Depreciation and Amortization Expense

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Depreciation and Amortization Expense $ 40,560 2.6% $ 42,163 2.7%

Depreciation and amortization expense remained flat at $42.1 million during both the 52 weeks ended April 29, 2023 and the 52 weeks ended April 30, 2022.

Depreciation and amortization expense decreased by $1.6 million to $40.6 million during the 52 weeks ended April 27, 2024 from $42.2 million during the 52 weeks ended April 29, 2023.

Capital expenditures decreased by $11.0 million during the 52 weeks ended April 27, 2024 compared to the prior year period and depreciable assets and intangibles were lower due to the store impairment loss recognized during Fiscal 2024 and Fiscal 2023.

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During the 52 weeks ended April 29, 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 $6.4 million (both pre-tax and after-tax), comprised of $0.7 million, $1.8 million, $3.7 million and $0.2 million of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the consolidated statement of operations.

Index to Form 10-K Index to FS

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 consolidated statement of operations.

Restructuring and other charges

During the 52 weeks ended April 27, 2024, we recognized restructuring and other charges totaling $19.4 million, comprised primarily of $19.6 million, primarily for costs primarily associated with professional service costs for restructuring and process improvements (see next paragraph below) and $1.1 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, partially offset by a $1.3 million in an actuarial gain related to a frozen retirement benefit plan (non-cash).

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).

Restructuring and other expenses include costs associated with the costs of this committee, as well as other related professional service costs.

These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 17.

Subsequent Events.

During the 52 weeks ended April 29, 2023, we recognized restructuring and other charges totaling $10.1 million, comprised primarily of $4.4 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $5.7 million, primarily for costs primarily associated with professional service costs for restructuring and process improvements.

During the 52 weeks ended April 30, 2022, we recognized restructuring and other charges totaling $1.0 million, comprised primarily of $1.3 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives and $1.8 million for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the F/L Partnership, and shareholder activist activities, partially offset by $2.1 million in an actuarial gain related to a frozen retirement benefit plan (non-cash).

Operating Loss

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Our operating loss was $(21.9) million during the 52 weeks ended April 27, 2024 compared to operating loss of $(66.4) million during the 52 weeks ended April 29, 2023.

This operating loss increase was due to the matters discussed above.

The improvements in operating results were due to the matters discussed above.

For the 52 weeks ended April 27, 2024, excluding the $19.4 million of restructuring and other charges and the $7.2 million impairment loss (non-cash), all discussed above, operating income was $4.6 million (or 0.3% of sales).

Index to Form 10-K Index to FS

For the 52 weeks ended April 29, 2023, excluding the $10.1 million of restructuring and other charges and the $6.0 million impairment loss (non-cash), all discussed above, operating loss was $(50.3) million (or (3.3)% of sales).

For the 52 weeks ended April 30, 2022, excluding the $0.4 million of merchandise inventory loss and write-off, $1.0 million of restructuring and other charges and the $6.4 million impairment loss (non-cash), all discussed above, operating loss was $(52.8) million (or (3.5)% of sales).

Interest Expense, Net

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Interest Expense, Net $ 40,365 $ 22,683

Net interest expense increased by $12.6 million to $22.7 million during the 52 weeks ended April 29, 2023 from $10.1 million during the 52 weeks ended April 30, 2022 primarily due to higher borrowings and higher interest rates compared to the prior year.

Income Tax Expense (Benefit)

Net interest expense increased by $17.7 million to $40.4 million during the 52 weeks ended April 27, 2024 from $22.7 million during the 52 weeks ended April 29, 2023.

Interest expense increased primarily due to higher borrowings, higher interest rates and $10.0 million resulting from increased amortization of deferred financing costs.

The following table disaggregates interest expense for the 52-week period:

52 weeks ended

Dollars in thousands April 27, 2024 April 29, 2023

Interest Incurred

Credit Facility $ 24,409 $ 16,994

Term Loan 3,984 3,078

Total Interest Incurred $ 28,393 $ 20,072

Amortization of Deferred Financing Costs

Credit Facility $ 11,910 $ 1,948

Term Loan 1,240 1,181

Total Amortization of Deferred Financing Costs $ 13,150 $ 3,129

Interest Income, net of expense $ (1,178) $ (518)

Total Interest Expense $ 40,365 $ 22,683

Cash interest paid during the 52 weeks ended April 27, 2024 and April 29, 2023 was $24.9 million and $19.0 million, respectively.

Income Tax Expense

52 weeks ended 52 weeks ended

Dollars in thousands April 27, 2024 Effective Rate April 29, 2023 Effective Rate

Income Tax Expense (Benefit) $ 1,011 (1.1)% $ ( 9,152 ) 12.9%

We recorded an income tax expense of $1.0 million on a pre-tax loss of $(89.1) million during the 52 weeks ended April 29, 2023, which represented an effective income tax rate of (1.1)% and an income tax benefit of $(9.2) million on a pre-tax loss of $(70.7) million during the 52 weeks ended April 30, 2022, which represented an effective income tax rate of 12.9%.

The effective tax rate for the 52 weeks ended April 29, 2023 is significantly lower as compared to the prior year comparable period due to the valuation allowance benefit of changing the tax fiscal year in the prior year.

Impact of U.S.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (The “CARES Act”) was enacted.

We have analyzed the provisions, which provide for a technical correction to allow for full expensing of qualified leasehold improvements, modifications to charitable contribution and net operating loss limitations (“NOLs”), modifications to the deductibility of business interest expense, as well as Alternative Minimum Tax (“AMT”) credit acceleration.

The most significant impact of the legislation for the Company was an income tax benefit of $7.2 million for the carryback of NOLs to higher tax rate years, recorded in Fiscal 2021.

As of April 29, 2023, we reported a current income tax receivable of $10.0 million for NOL carrybacks in prepaid and other current assets on the consolidated balance sheet.

We received a $7.8 million refund in Fiscal 2022, a $15.8 million refund in Fiscal 2023 and expect to receive the additional refunds of approximately $10.0 million.

Index to Form 10-K Index to FS

Income Tax Expense

$ 183 (0.3)% $ 1,011 (1.1)%

We recorded an income tax expense of $0.2 million on a pre-tax loss of $(62.3) million during the 52 weeks ended April 27, 2024, which represented an effective income tax rate of (0.3)% and an income tax expense of $1.0 million on a pre-tax loss of $(89.1) million during the 52 weeks ended April 29, 2023, which represented an effective income tax rate of (1.1)%.

The effective tax rate for the 52 weeks ended April 27, 2024 is materially consistent with the prior year comparable period.

Net Loss from Continuing Operations

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See Adjusted Earnings (non-GAAP) discussion below.

Results of Operations - Continuing Operations

- 52 weeks ended April 30, 2022 compared with the 52 weeks ended May 1, 2021

52 weeks ended, April 30, 2022 (a)

Dollars in thousands Retail Wholesale Corporate Services Eliminations (b)

Product sales and other $ 1,306,310 $ 112,246 $ — $ (56,176) $ 1,362,380

Rental income 133,354 — — — 133,354

Total sales 1,439,664 112,246 — (56,176) 1,495,734

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales

1,040,022 92,464 — (56,243) 1,076,243

Rental cost of sales 76,659 — — — 76,659

Total cost of sales 1,116,681 92,464 — (56,243) 1,152,902

Gross profit 322,983 19,782 — 67 342,832

Selling and administrative expenses

315,124 16,000 23,002 (158) 353,968

Depreciation and amortization expense

36,635 5,418 71 — 42,124

Impairment loss (non-cash) 6,411 — — — 6,411

Restructuring and other charges

2,118 (2,131) 957 — 944

Operating (loss) income from continuing operations $ (37,305) $ 495 $ (24,030) $ 225 $ (60,615)

52 weeks ended, May 1, 2021 (a)

Dollars in thousands Retail Wholesale Corporate Services Eliminations (b)

Product sales and other $ 1,196,320 $ 165,825 $ — $ (89,779) $ 1,272,366

Rental income 134,150 — — — 134,150

Total sales 1,330,470 165,825 — (89,779) 1,406,516

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales

1,047,613 131,142 — (89,822) 1,088,933

Rental cost of sales 87,240 — — — 87,240

Total cost of sales 1,134,853 131,142 — (89,822) 1,176,173

Gross profit 195,617 34,683 — 43 230,343

Selling and administrative expenses

278,149 16,085 22,079 (149) 316,164

Depreciation and amortization expense

39,634 5,461 109 — 45,204

Impairment loss (non-cash) 27,630 — — — 27,630

Restructuring and other charges

5,514 (1,595) 6,188 — 10,107

Operating (loss) income from continuing operations $ (155,310) $ 14,732 $ (28,376) $ 192 $ (168,762)

(a) In Fiscal 2022 and Fiscal 2021, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

(b) For additional information related to the intercompany activities and eliminations, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 4.

Segment Reporting.

Index to Form 10-K Index to FS

The following table summarizes our sales:

52 weeks ended

Dollars in thousands April 30, 2022 May 1, 2021 %

Product sales and other $ 1,362,380 $ 1,272,366 7.1%

Rental income 133,354 134,150 (0.6)%

Total Sales $ 1,495,734 $ 1,406,516 6.3%

Our total sales increased by $89.2 million, or 6.3%, to $1,495.7 million during the 52 weeks ended April 30, 2022 from $1,406.5 million during the 52 weeks ended May 1, 2021.

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

The increase is offset by the negative impact on sales primarily due to lower enrollments, primarily at community colleges and by international students, the continuation of remote and hybrid class offerings and lower logo and emblematic sales as they are reflected in sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021.

For additional information, see Retail Sales discussion below.

The components of the sales variances for the 52 week period are reflected in the table below.

Sales variances 52 weeks ended

April 30, 2022

Dollars in millions

New stores $ 67.2

Closed stores (42.3)

Comparable stores (a)

Textbook rental deferral (1.8)

Service revenue (b)

Retail Sales subtotal:

Wholesale Sales $ (53.6)

Eliminations (d)

Total sales variance:

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

For Retail Gross Comparable Store Sales details, see below.

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

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

(d) Eliminates Wholesale sales and service fees to Retail and Retail commissions earned from Wholesale.

See discussion of intercompany activities and eliminations below.

Retail total sales increased by $109.2 million, or 8.2%, to $1,439.7 million during the 52 weeks ended April 30, 2022 from $1,330.5 million during the 52 weeks ended May 1, 2021.

The following is a store count summary for physical stores and virtual stores.

Many of the store closings relate to closing less profitable stores, including satellite store locations.

Index to Form 10-K Index to FS

Fiscal 2022 Fiscal 2021

Physical Virtual Total Physical Virtual Total

Beginning of period 769 648 1,417 772 647 1,419

Opened 57 35 92 40 58 98

Closed 21 61 82 43 57 100

End of period 805 622 1,427 769 648 1,417

The comparability of Products and other sales, specifically logo and emblematic sales, is impacted by the recognition of logo and emblematic sales on a net basis in our consolidated financial statements during the 52 weeks ended April 30, 2022, as compared to on a gross basis prior to April 4, 2021.

See the Retail Gross Comparable Store Sales discussion below.

Additionally, Product and other sales and Rental income are impacted by the growth of First Day Complete , comparable store sales, new store openings and store closings, as well as the impact from the COVID-19 pandemic.

Sales were impacted by overall enrollment declines in higher education.

Although most four year schools returned to a traditional on-campus environment for learning in the Fall 2021 semester, as well as hosted traditional on campus sporting activities, there is still uncertainty about the extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, and the continuation of remote and hybrid class offerings.

While many college athletic conferences resumed their sport activities, other on campus events, such as parent's weekends or alumni events, continue to be either eliminated or severely restricted, which further impacted our general merchandise business.

As we entered the Spring rush period in early January 2022, we continued to experience the ongoing effects of the COVID-19 pandemic with the surge of the Omicron variant further impacting students return to campus and on-campus activities.

In early January 2022, while the majority of schools brought students back to campus, some schools chose to conduct classes virtually for the beginning of the semester, while other schools chose to delay their start dates (and some schools both delayed the start of the semester and started classes virtually), thus reducing and/or delaying sales.

Product and other sales for Retail increased by $110.0 million, or 9.2%, to $1,306.3 million during the 52 weeks ended April 30, 2022 from $1,196.3 million during the 52 weeks ended May 1, 2021.

During the 52 weeks ended April 30, 2022, course material sales increased by $47.0 million or 5.4% to $911.2 million, and general merchandise sales increased by $72.3 million or 26.3% to $347.0 million, offset by a decrease in service and other revenue of $9.3 million or 16.2% to $48.1 million.

Course material rental income for Retail decreased by $0.8 million, or 0.6%, to $133.4 million during the 52 weeks ended April 30, 2022 from $134.2 million during the 52 weeks ended May 1, 2021.

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

Course material sales were also impacted by lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings.

During the 52 weeks ended April 30, 2022, Retail Gross Comparable Store course material sales increased by 2.3%, as compared to a 15.2% decline a year ago, when the majority of our stores had temporarily closed due to the COVID-19 pandemic.

See Retail Gross Comparable Store Sales discussion below.

The increase in course material sales was reflective of the growth of BNC First Day equitable and inclusive access programs, digital and eTextbook revenue increases, due to a shift to lower cost options and more affordable solutions, including digital offerings.

For the 2022 Spring term, First Day Complete was offered through 76 campus bookstores compared to 14 campus bookstores in the prior year, at schools with over 380,000 in total undergraduate enrollment, up from approximately 62,000 in total undergraduate enrollment in the 2021 Spring term.

Revenue for both of our BNC First Day models increased to $235 million during Fiscal 2022, as compared to $123 million in the prior year period.

During the 52 weeks ended April 30, 2022, logo and emblematic sales are reflected in sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis prior to April 4, 2021.

See Retail Gross Comparable Store Sales discussion below.

During the 52 weeks ended April 30, 2022, Retail Gross Comparable Store general merchandise sales increased by 75.6%, as compared to a 47.0% decline a year ago.

Both results during both periods benefited greatly from the return to an on campus learning experience and the resumption of many activities and events.

Sales for general merchandise, including on-campus cafe and convenience products, and trade merchandise have increased compared to the prior year, when sales were impacted by the temporary store closings due to the COVID-19 pandemic.

Retail Gross Comparable Store Sales

To supplement the Total Sales table presented above, the Company uses Retail Gross Comparable Store Sales as a key performance indicator.

Index to Form 10-K Index to FS

Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis for consistent year-over-year comparison.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

We present this metric as additional useful information about the Company’s operational and financial performance and to allow greater transparency with respect to important metrics used by management for operating and financial decision-making.

Retail Gross Comparable Store Sales variances for Retail by category for the 52 week period are as follows:

Dollars in millions 52 weeks ended

April 30, 2022 May 1, 2021

Textbooks (Course Materials) $ 21.2 2.3 % $ (158.4) (15.2) %

General Merchandise 219.5 75.6 % (256.2) (47.0) %

Total Retail Gross Comparable Store Sales $ 240.7 19.6 % $ (414.6) (26.1) %

Wholesale sales decreased by $53.6 million, or 32.3%, to $112.2 million during the 52 weeks ended April 30, 2022 from $165.8 million during the 52 weeks ended May 1, 2021.

The decrease is primarily due to lower gross sales impacted by the COVID-19 pandemic, including supply constraints resulting from the lack of on campus textbook buyback opportunities during the prior fiscal year, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, partially offset by lower returns and allowances.

During the prior year period, the Wholesale operations assumed direct-to-student fulfillment of course material orders for the Retail Segment campus bookstores that were not fully operational due to COVID-19 campus store closures, whereas the sales shifted back to the physical bookstores in Fiscal 2022.

Cost of Sales and Gross Margin

Our cost of sales decreased as a percentage of sales to 77.1% during the 52 weeks ended April 30, 2022 compared to 83.6% during the 52 weeks ended May 1, 2021.

Our gross margin increased by $112.5 million, or 48.8%, to $342.8 million, or 22.9% of sales, during the 52 weeks ended April 30, 2022 from $230.3 million, or 16.4% of sales, during the 52 weeks ended May 1, 2021.

During the 52 weeks ended April 30, 2022 and May 1, 2021, we recognized a merchandise inventory loss and write-off of $0.4 million and $15.0 million, respectively, in cost of goods sold in the Retail Segment discussed below.

Excluding the merchandise inventory loss and write-off, cost of goods sold and gross margin was 77.1% and 22.9%, respectively, of sales during the 52 weeks ended April 30, 2022 compared to 82.6% and 17.4%, respectively, of sales during the 52 weeks ended May 1, 2021.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 1.

Organization and Note 2.

Summary of Significant Accounting Policies - Merchandise Inventories.

The following table summarizes the Retail cost of sales:

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Related Sales May 1, 2021 % of

Related Sales

Product and other cost of sales

$ 1,040,022 79.6% $ 1,047,613 87.6%

Rental cost of sales

76,659 57.5% 87,240 65.0%

Total Cost of Sales

$ 1,116,681 77.6% $ 1,134,853 85.3%

Index to Form 10-K Index to FS

The following table summarizes the Retail gross margin:

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Related Sales May 1, 2021 % of

Related Sales

Product and other gross margin $ 266,288 20.4% $ 148,707 12.4%

Rental gross margin 56,695 42.5% 46,910 35.0%

Gross Margin $ 322,983 22.4% $ 195,617 14.7%

For the 52 weeks ended April 30, 2022, the Retail gross margin as a percentage of sales increased as discussed below:

• Product and other gross margin increased (800 basis points), driven primarily by a favorable sales mix (410 basis points) due to higher general merchandise sales and higher margin rates (445 basis points) due to lower inventory reserves and lower markdowns, partially offset by an inventory merchandise loss of $0.4 million related to the finalization of the sale of our logo and emblematic general merchandise inventory below cost to Lids which occurred in the fourth quarter in Fiscal 2021.

The increase in margin was also partially offset by higher contract costs as a percentage of sales related to our college and university contracts (60 basis points) resulting from contract renewals and new store contracts.

• Rental gross margin increased (750 basis points), driven primarily by lower contract costs as a percentage of sales related to our college and university contracts (750 basis points) and a favorable rental mix (50 basis points), partially offset by lower rental margin rates (50 basis points).

The cost of sales and gross margin for Wholesale were $92.5 million, or 82.4% of sales, and $19.8 million, or 17.6% of sales, respectively, during the 52 weeks ended April 30, 2022.

The cost of sales and gross margin for Wholesale were $131.1 million, or 79.1% of sales, and $34.7 million, or 20.9% of sales, respectively, during the 52 weeks ended May 1, 2021.

The gross margin decreased to 17.6% during the 52 weeks ended April 30, 2022 from 20.9% during the 52 weeks ended May 1, 2021.

The decrease was primarily due to the unfavorable impact of returns and allowances and higher markdowns, partially offset by a favorable sales mix.

Intercompany Eliminations

During the 52 weeks ended April 30, 2022 and 52 weeks ended May 1, 2021, sales eliminations were $56.2 million and $89.8 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 52 weeks ended April 30, 2022 and 52 weeks ended May 1, 2021, the cost of sales eliminations were $56.2 million and $89.8 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 both 52 weeks periods ended April 30, 2022 and 52 weeks ended May 1, 2021, the gross margin eliminations was $0.1 million.

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

Selling and Administrative Expenses

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Sales May 1, 2021 % of

Selling and Administrative Expenses $ 353,968 23.7% $ 316,164 22.5%

During the 52 weeks ended April 30, 2022, selling and administrative expenses increased by $37.8 million, or 12.0%, to $354.0 million from $316.2 million during the 52 weeks ended May 1, 2021.

The variances by segment are discussed by segment below.

The increase in selling and administrative expenses is primarily related to re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

For Retail, selling and administrative expenses increased by $37.0 million, or 13.3%, to $315.1 million during the 52 weeks ended April 30, 2022 from $278.1 million during the 52 weeks ended May 1, 2021.

This increase was primarily due to a $34.5 million increase in stores payroll and operating expenses including comparable stores, virtual stores and new/closed

Index to Form 10-K Index to FS

stores payroll and operating expenses, and a $2.5 million increase in corporate payroll, infrastructure and product development costs.

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

For Wholesale, selling and administrative expenses decreased by $0.1 million, or 0.5%, to $16.0 million during the 52 weeks ended April 30, 2022 from $16.1 million during the 52 weeks ended May 1, 2021.

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

Corporate Services

Corporate Services' selling and administrative expenses increased by $0.9 million, or 4.2%, to $23.0 million during the 52 weeks ended April 30, 2022 from $22.1 million during the 52 weeks ended May 1, 2021.

The increase was primarily due to higher professional services costs.

Depreciation and Amortization Expense

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Sales May 1, 2021 % of

Depreciation and Amortization Expense $ 42,124 2.8% $ 45,204 3.2%

Depreciation and amortization expense decreased by $3.1 million, or 6.8%, to $42.1 million during the 52 weeks ended April 30, 2022 from $45.2 million during the 52 weeks ended May 1, 2021.

The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal 2022 and Fiscal 2021.

See impairment loss discuss below.

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 .

For information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies and Note 6.

Fair Value Measurements .

During the 52 weeks ended April 30, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

During the 52 weeks ended May 1, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

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

Restructuring and other charges

During the 52 weeks ended April 30, 2022, we recognized restructuring and other charges totaling $1.0 million, comprised primarily of $1.3 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives and $1.8 million for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the F/L Partnership, shareholder activist activities, and liabilities for a facility closure, partially offset by a $2.1 million in an actuarial gain related to a frozen retirement benefit plan (non-cash).

During the 52 weeks ended May 1, 2021, we recognized restructuring and other charges totaling $10.1 million, comprised primarily of $6.0 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, $5.7 million for professional service costs related to restructuring, process improvements, the financial advisor strategic review process, costs related to development and integration associated with F/L partnership agreements and shareholder activist activities, and liabilities for a facility closure, partially offset by a $1.6 million in an actuarial gain related to a frozen retirement benefit plan (non-cash).

Index to Form 10-K Index to FS

Operating Loss

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 % of

Sales May 1, 2021 % of

Operating Loss $ (60,615) (4.1)% $ (168,762) (12.0)%

Our operating loss was $(60.6) million during the 52 weeks ended April 30, 2022 compared to operating loss of $(168.8) million during the 52 weeks ended May 1, 2021.

This operating loss decrease was due to the matters discussed above.

For the 52 weeks ended May 1, 2021, excluding the $15.0 million of merchandise inventory loss and write-off, $10.1 million of restructuring and other charges and the $27.6 million impairment loss (non-cash), all discussed above, operating loss was $(116.1) million (or (8.3)% of sales).

Interest Expense, Net

52 weeks ended

Dollars in thousands April 30, 2022 May 1, 2021

Interest Expense, Net $ 10,096 $ 8,087

Net interest expense increased by $2.0 million to $10.1 million during the 52 weeks ended April 30, 2022 from $8.1 million during the 52 weeks ended May 1, 2021 primarily due to higher borrowings compared to the prior year.

Income Tax Benefit

52 weeks ended 52 weeks ended

Dollars in thousands April 30, 2022 Effective Rate May 1, 2021 Effective Rate

Income Tax Benefit

$ (9,152) 12.9% $ (43,280) 24.5%

We recorded an income tax benefit of $(9.2) million on a pre-tax loss of $(70.7) million during the 52 weeks ended April 30, 2022, which represented an effective income tax rate of 12.9% and an income tax benefit of $(43.3) million on a pre-tax loss of $(176.8) million during the 52 weeks ended May 1, 2021, which represented an effective income tax rate of 24.5%.

The effective tax rate for the 52 weeks ended April 30, 2022 is significantly lower as compared to the prior year comparable period due to the change in pre-tax loss and the change in the assessment of the realization of deferred tax assets as compared to prior year loss carrybacks.

Impact of U.S.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (The “CARES Act”) was enacted.

The most significant impact of the legislation for the Company was an income tax benefit of $7.2 million for the carryback of NOLs to higher tax rate years, recorded in Fiscal 2021.

As of April 30, 2022, we reported a current income tax receivable for NOL carrybacks of $30.5 million in prepaid and other current assets on the consolidated balance sheet.

We received a $7.8 million refund in the second quarter of Fiscal 2022 and expect to receive the additional refunds of approximately $22.7 million.

Net Loss from Continuing Operations

52 weeks ended

Dollars in thousands April 30, 2022 May 1, 2021

Net Loss from Continuing Operations $ (61,559) $ (133,569)

As a result of the factors discussed above, we reported a net loss from continuing operations of $(61.6) million during the 52 weeks ended April 30, 2022, compared with a net loss from continuing operations of $(133.6) million during the 52 weeks ended May 1, 2021.

Adjusted Earnings (non-GAAP) is $(53.4) million during the 52 weeks ended April 30, 2022, compared with $(93.9) million during the 52 weeks ended May 1, 2021.

See Adjusted Earnings (non-GAAP) discussion below.

Index to Form 10-K Index to FS

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

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

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

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

We define Adjusted EBITDA as net income (loss) from continuing operations plus (1) depreciation and amortization;

10 unchanged sentences

Management also uses Adjusted EBITDA by Segment to determine segment capital allocations.

We believe that the inclusion of Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment results provides investors useful and important information regarding our operating results, in a manner that is consistent with management's evaluation of business performance.

We believe that the inclusion of Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment provides investors useful and important information regarding our operating results, in a manner that is consistent with management's evaluation of business performance.

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 Management Discussion and Analysis - Seasonality discussion above.

Consolidated Adjusted Earnings (non-GAAP) - Continuing Operations

52 weeks ended

Dollars in thousands April 29, 2023 April 30, 2022 (a)

May 1, 2021 (a)

Net loss from continuing operations (b)

Dollars in thousands April 27, 2024 April 29, 2023

Net loss from continuing operations (a)

$ (62,481) $ (90,140)

3 unchanged sentences

Reconciling items, pre-tax

Impairment loss (non-cash) (c)

Impairment loss (non-cash) (b)

$ 7,166 $ 6,008

Merchandise inventory loss and write-off (c)

Content amortization (non-cash) (d)

Restructuring and other charges (c)

Content amortization (non-cash) (c)

Restructuring and other charges (b)

19,409 10,103

Reconciling items, pre-tax 16,137 8,175 53,442

Pro forma income tax impact (e)

Reconciling items, after-tax $ 16,137 $ 8,175 $ 39,679

Reconciling items (d)

$ 26,575 $ 16,137

Index to Form 10-K Index to FS

1 unchanged sentence

52 weeks ended

Dollars in thousands April 29, 2023 April 30, 2022 (a)

May 1, 2021 (a)

Net loss from continuing operations (b)

Dollars in thousands April 27, 2024 April 29, 2023

Net loss from continuing operations (a)

$ (62,481) $ (90,140)

2 unchanged sentences

Income tax expense (benefit) 183 1,011

Impairment loss (non-cash) (c)

6,008 6,411 27,630

Merchandise inventory loss and write-off (c)

Content amortization (non-cash) (d)

Restructuring and other charges (c)

Impairment loss (non-cash) (b)

Content amortization (non-cash) (c)

Restructuring and other charges (b)

19,409 10,103

2 unchanged sentences

Adjusted EBITDA (Non-GAAP) - Total $ 44,881 $ (7,492)

(a) In Fiscal 2022 and 2021, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

(b) 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.

(a) 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.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

(d) Earnings are adjusted for amortization expense (non-cash) related to content development costs which are included in cost of goods sold.

(e) Represents the income tax effects of the non-GAAP items.

The following is Adjusted EBITDA - Continuing Operations by Segment for Fiscal 2023, Fiscal 2022, and Fiscal 2021:

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

(c) Amortization expense (non-cash) related to content development costs are included in cost of goods sold on our consolidated statements of operations.

(d) There is no pro forma income tax effect of the non-GAAP items.

The following is Adjusted EBITDA - Continuing Operations by Segment for Fiscal 2024 and Fiscal 2023:

Adjusted EBITDA - by Segment 52 weeks ended April 27, 2024

Dollars in thousands Retail Wholesale Corporate Services (b)

Dollars in thousands Retail Wholesale Corporate Services (a)

Eliminations Total

Net loss from continuing operations (a)

Net income (loss) from continuing operations (b)

$ 11,457 $ 4,945 $ (79,916) $ 1,033 $ (62,481)

4 unchanged sentences

7,166 — — — 7,166

Content amortization (non-cash) (d)

Restructuring and other charges (c)

2 unchanged sentences

Index to Form 10-K Index to FS

Adjusted EBITDA - by Segment 52 weeks ended April 30, 2022 (e)

Dollars in thousands Retail Wholesale Corporate Services (b)

Adjusted EBITDA - by Segment 52 weeks ended April 29, 2023

Dollars in thousands Retail Wholesale Corporate Services (a)

Eliminations Total

Net (loss) income from continuing operations (a)

Net loss from continuing operations (b)

$ (35,095) $ (3,050) $ (51,970) $ (25) $ (90,140)

1 unchanged sentence

Interest expense, net — — 22,683 — 22,683

Income tax benefit — — (9,152) — (9,152)

Impairment loss (non-cash) (c)

6,411 — — — 6,411

Merchandise inventory loss and write-off (c)

434 — — — 434

Content amortization (non-cash) (d)

386 — — — 386

Restructuring and other charges (c)

2,118 (2,131) 957 — 944

Adjusted EBITDA (non-GAAP) $ 8,679 $ 3,782 $ (23,002) $ 225 $ (10,316)

Adjusted EBITDA - by Segment 52 weeks ended May 1, 2021 (e)

Dollars in thousands Retail Wholesale Corporate Services (b)

Eliminations Total

Net (loss) income from continuing operations (a)

Income tax expense

— — 1,011 — 1,011

Depreciation and amortization expense 39,634 5,461 109 — 45,204

Interest expense, net — — 8,087 — 8,087

Income tax benefit — — (43,280) — (43,280)

Impairment loss (non-cash) (c)

6,008 — — — 6,008

Merchandise inventory loss and write-off (c)

14,960 — — — 14,960

Content amortization (non-cash) (d)

745 — — — 745

Restructuring and other charges (c)

1 unchanged sentence

Adjusted EBITDA (non-GAAP) $ 10,640 $ 3,239 $ (22,000) $ (25) $ (8,146)

(a) 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.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

(b) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement which funds our operating and financing needs across the organization.

(a) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement and Term Loan Agreement which fund our operating and financing needs across the organization.

Income taxes are reflected in Corporate Services as we record our income tax provision on a consolidated basis.

(b) 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.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

(d) Earnings are adjusted for amortization expense (non-cash) related to content development costs which are included in cost of goods sold.

(e) In Fiscal 2022 and 2021, our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic.

The impact of which affects the comparability of our results of operations and cash flows.

Index to Form 10-K Index to FS

(d) Amortization expense (non-cash) related to content development costs are included in cost of goods sold on our consolidated statements of operations.

Adjusted EBITDA (non-GAAP) - Discontinued Operations 52 weeks ended

April 29, 2023 April 30, 2022 May 1, 2021

Loss from discontinued operations $ (11,722) $ (7,298) $ (6,241)

April 27, 2024 April 29, 2023

Loss from discontinued operations (a)

$ (730) $ (11,722)

Depreciation and amortization expense 3 3,155

Income tax expense (benefit) 398 497 (1,891)

Income tax expense

Content amortization (non-cash) — 6,594

Gain on sale of business (3,545) —

Impairment loss (non-cash) 610 —

Restructuring and other charges 3,308 1,848

Transaction costs 13 381

Adjusted EBITDA (Non-GAAP) - Total $ 654 $ 5,524 $ 4,491

Adjusted EBITDA (Non-GAAP) - Discontinued Operations $ (321) $ 654

(a) 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.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

For additional information, see Note 2.

Summary of Significant Accounting Policies.

Index to Form 10-K Index to FS

Free Cash Flow (non-GAAP) - Continuing Operations

52 weeks ended

Dollars in thousands April 29, 2023 April 30, 2022 May 1, 2021

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

Dollars in thousands April 27, 2024 April 29, 2023

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

$ ( 1,545 ) $ 90,513

4 unchanged sentences

Free Cash Flow (non-GAAP) $ (33,265) $ 62,402

(a) The tightening of our available credit commitments, including the elimination and repayment of our seasonal borrowing facility (FILO Facility), has had a significant impact on our liquidity during the year ended April 29, 2023, including our ability to make timely vendor payments and school commission payments resulting in a positive cash flow from operations offset by a use of cash for financing activities.

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

Given the growth of our BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized.

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

3 unchanged sentences

52 weeks ended

Dollars in thousands April 29, 2023 April 30, 2022 May 1, 2021

Dollars in thousands April 27, 2024 April 29, 2023

Physical store capital expenditures $ 5,813 $ 13,068

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Liquidity and Capital Resources

During Fiscal 2024, our primary sources of cash are net cash flows from operating activities, funds available under our Credit Agreement, Term Loan Agreement, and short-term vendor financing.

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

As of April 27, 2024, we had $28.6 million of cash on hand, including $18.1 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.

Going Concern evaluation in conjunction with the issuance of the April 27, 2024 Consolidated Financial Statements

The accompanying consolidated financial statements are prepared in accordance with U.S.

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Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”) , management must evaluate whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these consolidated financial statements are issued.

In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date of these consolidated financial statements if (a) it is probable that

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management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

Evaluation in conjunction with the issuance of the April 29, 2023 Consolidated Financial Statements

Our primary sources of cash are net cash flows from operating activities, funds available under our Credit Agreement, Term Loan Agreement, and short-term vendor financing.

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

As of April 29, 2023, we had $30.9 million of cash on hand, including $16.7 million of restricted cash related to segregated funds for commission due to Fanatics for logo merchandise sales as per the merchandising partnership agreement.

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, and Cash Flow Provided By (Used In) Operating Activities from Continuing Operations of $90.5 million, $(16.2) million, and $27.0 million, respectively.

The tightening of our available credit commitments, including the elimination and repayment of our seasonal borrowing facility (FILO Facility) of $40.0 million, has had a significant impact on our liquidity during the year ended April 29, 2023, including our ability to make timely vendor payments and school commission payments resulting in a positive cash flow from operations offset by a use of cash for financing activities.

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.

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.

Our losses and projected cash needs, combined with our current liquidity level, initially raised substantial doubt about our ability to continue as a going concern.

As discussed below, Management’s plan to improve the Company’s liquidity and successfully alleviate substantial doubt includes (1) raising additional liquidity a nd (2) taking additional operational restructuring actions.

Debt amendments

On July 28, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement to December 28, 2024, (ii) reduce advance rates with respect to the borrowing base by 1000 basis points on September 2, 2024 (in lieu of the reductions previously contemplated for September 2023), (iii) subject to the conditions set forth in such amendment, add a CARES Act tax refund claim to the borrowing base, from April 1, 2024 through July 31, 2024, (iv) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) at all times greater than the greater of (x) 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and (y) (A) $32.5 million minus, subject to the conditions set forth in such amendment, (B) (a) $7.5 million for the period of April 1, 2024 through and including April 30, 2024, (b) $2.5 million for the period of May 1, 2024 through and including May 31, 2024 and (c) $0 at all other times, (v) add a minimum Consolidated EBITDA (as defined in the Credit Agreement) financial maintenance covenant, and (vi) amend certain negative and affirmative covenants and add certain additional covenants, all as more particularly set forth in such amendment.

The amendment also requires that we appoint a Chief Restructuring Officer and that, by August 11, 2023, we (i) appoint two independent members to the board of directors of the Company from prospective candidates that have been previously disclosed to the Administrative Agent and the Lenders and (ii) appoint a committee of the board of directors of the Company to consist of three board members (two of whom will be the new independent directors).

The committee’s responsibilities will include, among other things, 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).

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).

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

Our primary sources of cash are net cash flows from operating activities and funds available under our Credit Facility.

Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales

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the Termination Date (as defined in the Term Loan Agreement) and (iv) amend certain negative and affirmative covenants and add certain additional covenants.

We must pay a fee of $0.05 million to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

Operational restructuring plans

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

reduced capital expenditures, and evaluated operating contractual obligations for cost savings.

We have achieved meaningful cost savings from this program of approximately $17 million d uring the year ended April 29, 2023.

These initiatives are expected to provide annualized savings of $30 million to $35 million in Fiscal 2024.

Management's plans over the next twelve months include the further reduction of gross capital expenditures and other cost saving measures of approximately $25 million.

Management believes that these plans are within its control and probable of being implemented on a timely basis.

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 consolidated financial statements and alleviate the conditions that initially raised substantial doubt about the Company's ability to continue as a going concern.

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.

are generally highest in the second and third fiscal quarters, when college students generally purchase textbooks for the upcoming Fall and Spring semesters, respectively.

The tightening of our available credit commitments, including the elimination and repayment of our seasonal borrowing facility (FILO Facility) of $40.0 million, has had a significant impact on our liquidity during Fiscal 2023 and Fiscal 2024, including our ability to make timely vendor payments and school commission payments.

Our recurring losses and projected cash needs, combined with our current liquidity levels and the maturity of our Credit Facility and Term Loan, which were originally scheduled to become due on December 28, 2024 and April 7, 2025, respectively, raised substantial doubt about our ability to continue as a going concern beyond twelve months from the issuance of our third quarter financial statements as of March 12, 2024 as disclosed in our previously filed Quarterly Report on Form 10-Q.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 7.

Debt and Note 17.

Subsequent Events.

As a result of the equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, all executed on June 10, 2024, Management concluded that substantial doubt about the Company's ability to continue as a going concern no longer exists.

Sources and Uses of Cash Flow - Continuing Operations

Dollars in thousands Fiscal 2023 Fiscal 2022 Fiscal 2021

Net cash flows provided by (used in) operating activities from continuing operations $ 90,513 $ (16,195) $ 27,049

Dollars in thousands Fiscal 2024 Fiscal 2023

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

$ (1,545) $ 90,513

Net cash flows used in investing activities from continuing operations (13,992) (24,501)

Net cash flows (used in) provided by financing activities from continuing operations (49,675) 45,721 11,799

Net cash flows (used in) financing activities from continuing operations

(5,699) (49,675)

Net change in cash, cash equivalents, and restricted cash from continuing operations $ (21,236) $ 16,337

As of April 29, 2023, April 30, 2022 and May 1, 2021, we had cash of $14.2 million, $8.8 million and $7.4 million, respectively.

As of April 29, 2023, April 30, 2022, and May1, 2021, we had restricted cash of $16.7 million, $11.5 million, and $8.8 million, respectively, comprised of $15.8 million, $10.6 million, and $7.9 million, respectively, in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Partnership's merchandising agreement and $0.9 million as of the end of each period in other noncurrent assets in the consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

As of April 27, 2024 and April 29, 2023, we had cash of $10.5 million and $14.2 million, respectively.

As of April 27, 2024 and April 29, 2023, we had restricted cash of $18.1 million and $16.7 million, respectively, comprised of $17.1 million and $15.8 million, respectively, in prepaid and other current assets in the consolidated balance sheet primarily related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $1.0 million and $0.9 million, respectively, in other noncurrent assets in the consolidated balance sheets related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities from Continuing Operations

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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.

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.

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

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

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

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

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Cash flows provided by operating activities from continuing operations during Fiscal 2023 were $90.5 million compared to cash flows used in operating activities from continuing operations of $(16.2) million during Fiscal 2022.

This increase in cash flows provided by operating activities from continuing operations of $106.7 million was primarily due to improved accounts receivables collections primarily related to our increased adoption of our BNC First Day equitable and inclusive access sales;

timing of payables ($82.3 million) primarily due to delayed payments to vendors for inventory purchases and expenses and lower right-of-use payments, all of which were delayed resulting from lower borrowing base availability;

and higher tax refunds of $7.2 million.

Cash flows provided by operating activities from continuing operations were offset by lower earnings and higher interest expense paid of $10.9 million.

Cash flows used in operating activities from continuing operations during Fiscal 2024 were $(1.5) million compared to cash flows provided by operating activities from continuing operations of $90.5 million during Fiscal 2023.

This decrease in cash provided by operating activities of $43.2 million was primarily due to $41.8 million of proceeds received in Fiscal 2021 from the sale of logo merchandise inventory to Lids pursuant to the F/L Partnership agreements and changes in working capital, including higher accounts receivables outstanding and higher inventory purchases, partially offset by improved earnings in Fiscal 2022 compared to Fiscal 2021 and lower tax payments of $14.0 million.

Our operations were highly impacted by the COVID-19 pandemic related campus store closures in Fiscal 2021, resulting in lower operating costs and lower inventory purchases in Fiscal 2021.

The increase in

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cash flows used in operating activities from continuing operations of $92.1 million was primarily due to the timing of payables ($63.1 million) to vendors for inventory purchases and expenses, all of which were delayed resulting from lower borrowing base availability under our credit facility, lower accounts receivables collections ($55.1 million) compared to the prior year, and higher payments for interest expense ($5.9 million), offset by higher earnings ($27.7 million).

Cash Flow from Investing Activities from Continuing Operations

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Capital expenditures totaled $(14.1) million and $(25.1) million during Fiscal 2024 and Fiscal 2023, respectively.

Cash flows used in investing activities from continuing operations during Fiscal 2022 were $(32.7) million compared to $(27.2) million during Fiscal 2021.

The increase in cash used in investing activities is primarily due to higher capital expenditures of $(33.6) million during Fiscal 2022 compared to $(27.6) million during Fiscal 2021.

Cash Flow from Financing Activities from Continuing Operations

Cash flows used in financing activities from continuing operations during Fiscal 2023 were $(49.7) million compared to cash flows provided by financing activities from continuing operations of $45.7 million during Fiscal 2022.

The net change is primarily due to higher debt repayments and the payment of deferred financing costs of $7.3 million in Fiscal 2023.

Our net debt repayments increased primarily due to a decrease in our eligible borrowing base due to lower inventory and receivables.

Cash flows provided by financing activities from continuing operations during Fiscal 2022 were $45.7 million compared to $11.8 million during Fiscal 2021.

The net change is primarily due to higher net borrowings, offset by proceeds from the sale of treasury shares of $10.9 million during Fiscal 2021.

Cash flows used in financing activities from continuing operations during Fiscal 2024 were $(5.7) million compared to $(49.7) million during Fiscal 2023.

Our cash flow used in financing from continuing operations decreased due to a decrease in net borrowings during the year, offset by an increase in deferred financing costs paid.

Financing Arrangements

Dollars in thousands April 29, 2023 April 30, 2022

Credit Facility $ 154,154 $ 185,700

FILO Facility — 40,000

Term Loan 30,000 —

Maturity Date (a)

April 27, 2024 April 29, 2023

Credit Facility December 28, 2024 $ 164,947 $ 154,154

Term Loan April 7, 2025 32,653 30,000

sub-total 197,600 184,154

Deferred financing costs (2,003) —

Deferred financing costs, Term Loan (b)

(1,263) (2,003)

Total debt $ 196,337 $ 182,151

Balance Sheet classification:

Short-term borrowings $ — $ 40,000

Long-term borrowings $ 196,337 $ 182,151

Total debt $ 182,151 $ 225,700

(a) On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including amending and extending the maturity date of the Credit Facility to June 9, 2028 and converting all outstanding principal and interest amounts owed under our Term Loan Credit Agreement into shares of our Common Stock.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 17.

Subsequent Events.

(b) For additional information on deferred financing costs, see Deferred Financing Costs below.

June 2024 Equity and Debt Transactions

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 17.

Subsequent Events.

Credit Facility

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

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restrictions.

Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs.

As of April 27, 2024, we are party to a credit agreement (the “Credit Agreement”), which was amended from time to time including on April 16, 2024, March 12, 2024, 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.

The agreement included an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100.0 million maintaining the maximum availability under the Credit Agreement at $500.0 million.

As of July 31, 2022, the FILO Facility was repaid according to its terms and future commitments under the FILO Facility were reduced to $0.

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 million to $380 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 ("SOFR"), 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 Specified Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms for the Credit Agreement).

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

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

We paid a fee of 0.25% of the outstanding principal amount of the commitments under the Credit Agreement on the amendment closing date, and we will pay an additional fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement on September 29, 2023.

On May 24, 2023, subsequent to quarter end, we further amended the Credit Agreement to (i) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.75% per annum, in the case of interest accruing based on SOFR, and 2.75%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (ii) defer the reduction of advance rates used to calculate our borrowing capacity by an amount equal to 500 basis points previously required on May 31, 2023 to September 1, 2023, (iii) require cash flow reporting and variance testing commencing June 3, 2023 and (iv) defer partial prepayment of the Term Loan from the DSS segment sale proceeds to September 1, 2023.

For additional information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated May 24, 2023 and filed with the SEC on May 31, 2023.

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

As of April 29, 2023, and through the date of this filing, we were in compliance with all debt covenants under the Credit Agreement.

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As of July 31, 2022, the FILO Facility was repaid and eliminated according to its terms and future commitments under the FILO Facility were reduced to $0.

Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs.

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).

For information regarding the Credit Agreement amendments, deferred financing costs and terms, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 7.

Index to Form 10-K Index to FS

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

During the 52 weeks ended April 27, 2024, we borrowed $563.0 million and repaid $552.2 million under the Credit Agreement, with $164.9 million of outstanding borrowings as of April 27, 2024 under the Credit Facility.

During the 52 weeks ended April 29, 2023, we borrowed $590.3 million and repaid $631.8 million under the Credit Agreement, with $154.2 million of outstanding borrowings as of April 29, 2023, comprised entirely of borrowings under the Credit Facility and $0 under the FILO Facility, which was repaid on August 1, 2022.

During the 52 weeks ended April 30, 2022, we borrowed $632.2 million and repaid $584.1 million under the Credit Agreement, with $225.7 million of outstanding borrowings as of April 30, 2022, comprised of outstanding borrowings of $185.7 million and $40.0 million under the Credit Facility and FILO Facility, respectively.

During the 52 weeks ended May 1, 2021, we borrowed $722.6 million and repaid $719.7 million under the Credit Agreement, with $177.6 million of outstanding borrowings as of May 1, 2021, comprised of outstanding borrowings of $127.6 million and $50.0 million under the Credit Facility and FILO Facility, respectively.

As of both April 27, 2024 and April 29, 2023, we have issued $3.6 million and $2.1 million, respectively, in letters of credit under the Credit Facility.

During the 52 weeks ended April 29, 2023, April 30, 2022, and May 1, 2021, we incurred debt issuance costs totaling $4.1 million, $0.3 million and $1.1 million, respectively, related to the Credit Facility.

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

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).

For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $30,000 (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”) and matures on June 7, 2024.

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.

As of April 27, 2024, we are party to a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC to incur the Term Loan Facility, which was amended on March 8, 2023 and July 28, 2023.

The Term Loan Credit Agreement matures on April 7, 2025.

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

For information regarding the Term Loan Credit Agreement amendments, deferred financing costs and terms, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 7.

During the 52 weeks ended April 27, 2024, we incurred $2.7 million for interest in kind on the Term Loan Credit Agreement and repaid $0 under the Term Loan Credit Agreement, with $32.7 million of outstanding borrowings as of April 27, 2024.

During the 52 weeks ended April 29, 2023, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of April 29, 2023.

On March 8, 2023, we amended the Term Loan Credit Agreement to (i) extend the maturity date of the Term Loan Credit Agreement by six months to December 7, 2024, (ii) permit the application of certain proceeds to the repayment of the loans under Credit Agreement and (iii) amend certain negative covenants and add certain additional covenants to conform to the Credit Agreement.

In addition, the amendment requires the achievement of a Specified Event (as described above) by no later than May 31, 2023 (as such date may be extended under the Credit Agreement, but no later than August 31, 2023 without consent from lenders under the Term Loan Credit Agreement).

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

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

We must pay a fee of $0.05 million to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $3.2 million related to the Term Loan.

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

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

We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind.

To date, all interest on the term loan has been paid in cash.

The Term Loans do not amortize prior to maturity.

Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we paid a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions.

The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit

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 (a)

April 27, 2024 April 29, 2023

Credit Facility - Prepaid and Other Current Assets

December 28, 2024 $ — $ 3,776

Credit Facility - Other noncurrent assets

Credit Facility - sub-total

Term Loan - Contra Debt

April 7, 2025 1,263 2,003

Total deferred financing costs

$ 14,160 $ 7,038

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 17.

Subsequent Events.

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Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

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.

Interest Expense

The following table presents interest expense on the consolidated statement of operations and cash interest paid:

52 weeks ended

April 27, 2024 April 29, 2023

Interest Incurred

Credit Facility $ 24,409 $ 16,994

Term Loan 3,984 3,078

Total Interest Incurred $ 28,393 $ 20,072

Amortization of Deferred Financing Costs

Credit Facility $ 11,910 $ 1,948

Term Loan 1,240 1,181

Total Amortization of Deferred Financing Costs $ 13,150 $ 3,129

Interest Income, net of expense $ (1,178) $ (518)

Total Interest Expense $ 40,365 $ 22,683

Cash Interest Paid

$ 24,943 $ 19,024

Income Tax Implications on Liquidity

For the fiscal year ended April 30, 2022, we filed an application to change our tax year from January to April under the automatic consent provisions.

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.

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

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

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

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

We received refunds of $15.8 million refund in Fiscal 2023, an $8.5 million refund (including $0.9 million in interest) in Fiscal 2024 and we expect to receive additional refunds of approximately $2.4 million in Fiscal 2025.

Share Repurchases

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

During Fiscal 2022, Fiscal 2021, and Fiscal 2020, we did not purchase shares under the stock repurchase program.

During Fiscal 2024 and Fiscal 2023, we did not purchase shares under the stock repurchase program.

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

During Fiscal 2023, Fiscal 2022, and Fiscal 2021, we also repurchased 347,808 shares, 239,751 shares, and 414,174 shares, respectively, of our common stock in connection with employee tax withholding obligations for vested stock awards.

During Fiscal 2024 and Fiscal 2023, we also repurchased 147,885 shares and 347,808 shares, respectively, of our common stock in connection with employee tax withholding obligations for vested stock awards.

Contractual Obligations

The following table sets forth our contractual obligations (in millions):

The following table sets forth our contractual obligations as of June 21, 2024 (in millions):

Payments Due by Period

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Years More Than

Credit Facility (a)

$ 154.2 $ — $ 154.2 $ — $ —

Term Loans (a)

New Credit Facility (a)

$ 325.0 $ — $ — $ 325.0 $ —

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Total $ 615.3 $ 123.7 $ 79.9 $ 373.7 $ 38.0

(a) As of April 29, 2023, we had a total of $184.2 million of outstanding borrowings under the Credit Facility and Term Loan.

See Financing Arrangements discussion above.

(a) On June 10, 2024, subsequent to the end of Fiscal 2024, we completed various transactions, including an equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, to substantially deleverage our consolidated balance sheet.

For additional information, see Part II - Item 8.

Financial Statements and Supplementary Data - Note 17.

Subsequent Events.

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(b) Our contracts for physical bookstores with colleges and universities are typically five years with renewal options, but can range from one to 15 years, and are typically cancelable by either party without penalty with 90 to 120 days' notice.

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In approximately 50% of our contracts with colleges and universities that include minimum guarantees, the minimum guaranteed amounts adjust annually to equal less than the prior year's commission earned.

Excludes obligations under store leases for property insurance and real estate taxes, which totaled approximately 2.6% of the minimum rent payments under those leases.

(d) Other long-term liabilities excludes expected payments related to employee benefit plans.

See Part II - Item 8.

Financial Statements and Supplementary Data — Note 8.

Employee Benefit Plans .

(d) Other long-term liabilities excludes expected payments related to employee benefit plans.

Certain Relationships and Related Party Transactions

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Related Party Transactions .

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Critical Accounting Policies and Estimates

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Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized at the point of sale as product revenue in our consolidated financial statements.

A software feature is embedded within the content of our digital textbooks, such that upon expiration of the term the customer is no longer able to access the content.

While the sale of the digital textbook allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer.

Rental periods are typically for a single semester and are always less than one year in duration.

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In these instances, we accelerate any remaining deferred rental revenue at the point of sale.

Revenue for our BNC First Day offerings are recognized consistent with our policies outlined above for product, digital and rental sales, net of an anticipated opt-out or return provision.

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Revenue recognized for our BNC First Day offerings is consistent with our policies outlined above for product, digital and rental sales, net of an anticipated opt-out or return provision.

Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized.

We estimate returns based on an analysis of historical experience.

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Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer.

There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain

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substantially all of the remaining benefits from the good or service.

For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

Effective in April 2021, as contemplated by the F/L Relationship related merchandising agreement and e-commerce agreement, we began to transition the fulfillment of our logo general merchandise sales to Lids and Fanatics.

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Service and other revenue

Service and other revenue is primarily derived from partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers, shipping and handling, and revenue from other programs.

Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers.

For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract.

The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

Service and other revenue is primarily derived from brand marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers, shipping and handling, non-return rental penalty fees, and revenue from other programs.

Merchandise Inventories

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Our textbook and trade book inventories, for Retail and Wholesale Segments, are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

There were no LIFO adjustments in Fiscal 2023, Fiscal 2022, and Fiscal 2021.

There were no LIFO adjustments in Fiscal 2024 and Fiscal 2023.

Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory.

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We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate rental cost of goods sold.

However, if our estimates regarding residual value are incorrect, we may be exposed to losses or gains that could be material.

A 10% change in rental cost of goods sold would have affected pre-tax earnings by approximately $3.3 million in Fiscal 2023.

Long-Term Incentive Compensation

The assumptions used in calculating the fair value of long-term incentive compensation payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment.

See Part II - Item 8.

Financial Statements and Supplementary Data — Note 12.

Long-Term Incentive Compensation Expense .

However, if our estimates

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We are required to estimate the expected forfeiture rate, and only recognize expense for those shares expected to vest.

If the actual forfeiture rate is materially different from their estimate, our long-term incentive compensation expense could be significantly different from what we recorded in the current period.

For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model.

The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options.

Phantom shares will be settled in cash based on the fair market value of a share of common stock at each vesting date in an amount not to exceed a specific price per share.

The fair value of the phantom shares was determined using the closing stock price on the date of the award less the fair value of the call option which was estimated using the Black-Scholes model.

The fair value of the liability for the cash-settled phantom share unit awards is remeasured at the end of each reporting period through settlement to reflect current risk-free rate and volatility assumptions.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to determine long-term incentive compensation expense.

If actual results are not consistent with the assumptions used, the long-term incentive compensation expense reported in our financial statements may not be representative of the actual economic cost of the long-term incentive compensation.

A 10% change in our long-term incentive compensation expense would have affected pre-tax earnings by approximately $0.5 million in Fiscal 2023.

regarding residual value are incorrect, we may be exposed to losses or gains that could be material.

A 10% change in rental cost of goods sold would have affected pre-tax earnings by approximately $3.7 million in Fiscal 2024.

Evaluation of Other Long-Lived Assets Impairment

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These combined events continue to impact the Company’s course materials and general merchandise business.

During the third quarter of Fiscal 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

During Fiscal 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 $7.2 million (both pre-tax and after-tax), comprised of $0.4 million, $3.6 million, and $3.2 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the consolidated statement of operations.

During the third quarter of Fiscal 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

During the third quarter of Fiscal 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

During Fiscal 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

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Fair Value Measurements .

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The impairment analysis process requires significant estimation to determine recoverability of each asset group and to determine the fair value of asset groups that were not recoverable, as well as the fair values of certain operating right-of-use assets included within the asset groups that were not recoverable.

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FASB guidance on accounting for income taxes requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion will not be realized.

We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience and expectations of future taxable income by taxing jurisdiction, the carryforward periods available to us for tax reporting purposes and other relevant factors.

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and other relevant factors.

The actual realization of deferred tax assets may differ significantly from the amounts we have recorded.

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Our actual results could differ materially from our current estimates.

Recent Accounting Pronouncements

See Part II - Item 8.

Financial Statements and Supplementary Data - Note 2.

Summary of Significant Accounting Policies - Recent Accounting Pronouncements for information related to new accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis