Barnes & Noble Education, Inc.

Results of Operations

Elements of Results of Operations

Our condensed consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). The results of operations reflected in our condensed consolidated financial statements are presented on a consolidated basis. All material intercompany accounts and transactions have been eliminated in consolidation.

Our sales are primarily derived from the sale of course materials, which include new, used, rental and digital textbooks and general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Our rental income is primarily derived from the rental of physical textbooks. We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, and other services.

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

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, and professional services.

Results of Operations - Summary(a)

(a)Adjusted net income (loss) and Adjusted EBITDA are non-GAAP financial measures. See Use of Non-GAAP Measures discussion below.

Results of Operations - 13 and 26 weeks ended November 1, 2025 compared with the 13 and 26 weeks ended October 26, 2024

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

Overview

For the 13 weeks ended November 1, 2025 revenue increased by 7.0%, or $42.3 million, from last year to $644.4 million, primarily driven by growth in our BNC First Day® programs and a net decrease in physical and virtual locations, some of which were closures of underperforming stores, which has helped to improve profitability. Gross Comparable Store Sales increased by $20.3 million or 3.1%, during the quarter, driven by revenues from BNC First Day programs which increased by $58.7 million, or 24.9%, helping to offset much of the decline from closed stores in total revenue. Income decreased by $18.2 million, or 42.1% to $25.0 million, compared to $43.2 million in the prior year. Adjusted EBITDA decreased by $7.0 million, or 12.4%, to $49.8 million from $56.8 million last year, primarily due to lower interest expenses of $1.6 million as the result of cost-saving and productivity initiatives, closed stores, and growth in our BNC First Day® programs.

For the 26 weeks ended November 1, 2025 revenue increased by 7.7%, or $67.0 million, from last year to $932.6 million, primarily driven by growth in our BNC First Day® programs and a net decrease in physical and virtual locations, some of which were closures of underperforming stores, which has helped to improve profitability. Gross Comparable Store Sales increased by $54.4 million, or 6.0%, driven by revenues from BNC First Day programs which increased by $91.7 million, or 29.0%, helping to offset much of the decline from closed stores in total revenue. Income increased by $67.5 million, or 111.1% to $6.7 million, compared to $(60.8) million in the prior year. Adjusted EBITDA improved by $4.4 million, or 12.9%, to $38.3 million from $33.9 million last year, primarily due to lower interest expenses of $5.5 million as the result of cost-saving and productivity initiatives, closed stores, and growth in our BNC First Day® programs.

Sales

The following table summarizes our sales for the 13 and 26 weeks ended November 1, 2025 and October 26, 2024:

Sales increased during the 13 and 26 weeks ended November 1, 2025, primarily related to higher comparable store sales and new store sales primarily due to our BNC First Day® programs as well as the calendar shifts discussed above, offset by lower sales resulting from closed stores. The components of the sales variances for the 13 and 26 week periods are reflected in the table below.

The sales decrease during the 13 and 26 weeks ended October 26, 2024 is primarily related to lower sales resulting from closed stores, offset by higher comparable store sales and new store sales primarily due to our BNC First Day® programs as well as the calendar shifts discussed above. The components of the sales variances for the 13 and 26 week periods are reflected in the table below.

(a) Logo general merchandise sales are recognized on a net basis as commission revenue in the condensed consolidated financial statements. For Gross Comparable Store Sales details, see below.

(b) Other revenue includes brand partnership marketing, fulfillment operations, liquidation sales, shipping and handling, marketplace sales, certain accounting adjusting items related to return reserves, and other deferred items.

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

During the 26 weeks ended November 1, 2025, we opened 48 stores and closed 66 stores. The Company’s strategic initiative is to close under-performing and less profitable stores.

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

Our total sales increased by $42.3 million, or 7.0%, to $644.4 million during the 13 weeks ended November 1, 2025 from $602.1 million during the 13 weeks ended October 26, 2024.

•Product sales and other increased by $38.5 million, or 6.9%, to $598.2 million during the 13 weeks ended November 1, 2025 from $559.7 million during the 13 weeks ended October 26, 2024.

◦Course material product sales increased by $37.3 million, or 8.8%, to $459.3 million during the 13 weeks ended November 1, 2025, compared to $422.0 million in the prior year period. The increase was primarily related to higher comparable store sales and new store sales primarily due to organic growth in our BNC First Day® programs and the shift between the fiscal and academic calendars, which increased by $58.7 million, or 24.9%, to $294.0 million, offset by lower sales resulting from closed stores.

◦Gross Comparable Store Sales for course materials increased by $16.0 million, or 3.4%, compared to the prior year period as discussed below.

◦General merchandise product net sales increased by $3.0 million, or 2.7%, to $112.9 million, compared to $109.9 million in the prior year period, primarily due to lower emblematic product sales. Gross Comparable Store Sales for general merchandise increased by $4.3 million, or 2.5%, compared to the prior year period as discussed below.

◦Service and other revenue decreased by $1.7 million, or 6.1%, to $26.1 million, compared to $27.8 million in the prior year period, primarily due to lower liquidation sales, lower web deferrals revenue, lower shipping and handling and lower partnership marketing income, offset by higher rental penalty fees and higher marketplace sales.

•Rental income for course materials increased by $3.8 million, or 8.8%, to $46.2 million during the 13 weeks ended November 1, 2025 from $42.4 million during the 13 weeks ended October 26, 2024 primarily due to the growth of our BNC First Day® programs, offset by lower rentals due to closed stores and the shift to digital products.

Our total sales increased by $67.0 million, or 7.7%, to $932.6 million during the 26 weeks ended November 1, 2025 from $865.6 million during the 26 weeks ended October 26, 2024.

•Product sales and other increased by $61.8 million, or 7.6%, to $872.4 million during the 26 weeks ended November 1, 2025 from $810.6 million during the 26 weeks ended October 26, 2024.

◦Course material product sales increased by $63.4 million, or 11.5%, to $616.9 million during the 26 weeks ended November 1, 2025, compared to $553.4 million in the prior year period. The increase was primarily related to higher comparable store sales and new store sales primarily due to our BNC First Day® programs, which increased by $91.7 million, or 29.0%, to $408.4 million, offset by lower sales resulting from closed stores.

◦Gross Comparable Store Sales for course materials increased by $52.1 million, or 8.3%, compared to the prior year period as discussed below.

◦General merchandise product net sales increased by $2.6 million, or 1.3%, to $210.6 million, compared to $207.9 million in the prior year period, primarily due to lower emblematic product sales. Gross Comparable Store Sales for general merchandise increased by $2.3 million, or 0.8%, compared to the prior year period as discussed below.

◦Service and other revenue decreased by $4.3 million, or 8.7%, to $44.9 million, compared to $49.2 million in the prior year period, primarily due to lower liquidation sales, lower web deferrals revenue, lower shipping and handling and lower partnership marketing income, offset by higher rental penalty fees and higher marketplace sales.

•Rental income for course materials increased by $5.2 million, or 9.5%, to $60.2 million during the 26 weeks ended November 1, 2025 from $55.0 million during the 26 weeks ended October 26, 2024 primarily due to the growth of our BNC First Day® programs, offset by lower rentals due to closed stores and the shift to digital products.

Gross Comparable Store Sales

To supplement the Total Sales table presented above, the Company uses Gross Comparable Store Sales as a key performance indicator. Gross Comparable Store Sales includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from permanently closed stores for all periods presented. For Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis in Gross Comparable Store Sales compared to a net basis as commission revenue in our condensed consolidated financial statements.

We believe the current Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time. We present this metric as additional useful information about the Company’s operational and financial performance and to allow greater transparency with respect to important metrics used by management for operating and financial decision-making. Gross Comparable Store Sales are also referred to as “same-store” sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry. As a result, our calculation of comparable store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

The increase in course material sales was primarily due to the growth of BNC First Day® affordable access course material programs (as discussed above), offset by declines in a la carte courseware sales. The decrease in general merchandise sales are primarily related to lower logo sales, graduation product sales due to timing of graduation events shifting to fourth quarter of fiscal 2025 from first quarter of fiscal 2026.

Gross Comparable Store Sales variances by category for the 13 and 26 week periods are as follows:

Cost of Sales and Gross Margin

Our cost of sales increased as a percentage of sales to 79.9% during the 13 weeks ended November 1, 2025 compared to 78.7% during the 13 weeks ended October 26, 2024. Our gross margin increased by $1.3 million, or 1.0%, to $129.8 million, or 20.1% of sales, during the 13 weeks ended November 1, 2025 from $128.5 million, or 21.3% of sales during the 13 weeks ended October 26, 2024.

Our cost of sales increased as a percentage of sales to 80.1% during the 26 weeks ended November 1, 2025 compared to 80.0% during the 26 weeks ended October 26, 2024. Our gross margin increased by $11.7 million, or 6.8%, to $185.2 million, or 19.9% of sales, during the 26 weeks ended November 1, 2025 from $173.5 million, or 20.0% of sales during the 26 weeks ended October 26, 2024.

The following table summarizes the cost of sales:

The following table summarizes the gross margin:

For the 13 weeks ended November 1, 2025, the gross margin as a percentage of sales decreased as discussed below:

•Product and other gross margin decreased (110 basis points), primarily due to lower margin rates (190 basis points) for course materials due to higher markdowns related to closed stores and higher inventory reserves, offset by lower contract costs as a percentage of sales (80 basis points) related to our college and university contracts as a result of the shift to digital and First Daymodels and lower performing school contracts not renewed.

•Rental gross margin as a percentage of sales decreased driven primarily by lower rental margin rates, offset by lower contract costs as a percentage of sales related to our college and university contracts.

For the 26 weeks ended November 1, 2025, the gross margin as a percentage of sales decreased as discussed below:

•Product and other gross margin decreased (20 basis points), primarily due to lower margin rates (120 basis points) for course materials due to higher markdowns, offset by lower contract costs as a percentage of sales (100 basis points) related to our college and university contracts as a result of the shift to digital and First Daymodels and lower performing school contracts not renewed.

•Rental gross margin as a percentage of sales decreased driven primarily by lower rental margin rates, offset by lower contract costs as a percentage of sales related to our college and university contracts.

Selling and Administrative Expenses

During the 13 weeks ended November 1, 2025, selling and administrative expenses increased by $4.4 million, or 6.0%, to $77.3 million from $72.9 million during the 13 weeks ended October 26, 2024. This increase was primarily due to a $8.3 million increase in payroll and related operating costs, and a $0.6 million increase in incentive plan expense.

During the 26 weeks ended November 1, 2025, selling and administrative expenses increased by $5.2 million, or 3.7%, to $145.2 million from $140.0 million during the 26 weeks ended October 26, 2024. This increase was primarily due to a $7.1 million increase in payroll and related operating costs, and a $4.2 million increase in incentive plan expense.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased by $0.9 million, to $7.6 million during the 13 weeks ended November 1, 2025 from $8.5 million during the 13 weeks ended October 26, 2024. The decrease was primarily attributable to lower depreciable assets and intangibles, offset by capital additions and accelerated intangible amortization related to closed stores.

Depreciation and amortization expense decreased by $4.8 million, to $16.8 million during the 26 weeks ended November 1, 2025 from $21.6 million during the 26 weeks ended October 26, 2024. The decrease was primarily attributable to lower depreciable assets and intangibles, offset by capital additions and accelerated intangible amortization related to closed stores.

Other (income) expense

During the 13 and 26 weeks ended November 1, 2025, the Company recognized other (income) expense totaling $4.1 million and $5.6 million, respectively, comprised of Investigation related costs.

During the 13 and 26 weeks ended October 26, 2024, the Company recognized other expense totaling $0.2 million and $3.5 million, respectively, comprised primarily of $1.0 million and $2.1 million, respectively, related to severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction initiatives, $0 and $2.0 million, respectively, of severance primarily related to the resignation of the former Chief Executive Officer on June 11, 2024, ($1.8 million is included in accrued liabilities in the condensed Consolidated Balance Sheet as of October 26, 2024), $0.3 million and $0.8 million, respectively, for legal and advisory professional service costs for restructuring and process improvements and other charges, and ($1.4 million) for both periods related to the termination of liabilities related to a frozen retirement benefit plan (non-cash). We recognized an increase to additional paid in capital on the condensed Consolidated Balance Sheet for the reimbursement of the former Chief Executive Officer severance from VitalSource (a principal stockholder) as part of the June 10, 2024 financing transactions.

Operating Income

Our operating income was $40.8 million during the 13 weeks ended November 1, 2025, compared to operating income of $47.1 million during the 13 weeks ended October 26, 2024. The decrease in operating income is due to the matters discussed above.

Our operating income was $17.6 million during the 26 weeks ended November 1, 2025, compared to operating income of $8.4 million during the 26 weeks ended October 26, 2024. The increase in operating income is due to the matters discussed above.

Loss on extinguishment of debt

On June 10, 2024, our existing Term Loan lenders converted approximately $34.0 million of outstanding principal and accrued and unpaid interest into our Common Stock. We recognized a loss on extinguishment of debt of $55.2 million during the 26 weeks ended October 26, 2024 in the condensed consolidated Statement of Operations in connection with the Term Loan Debt Conversion which represents the difference between the Common Stock fair value issued upon conversion and the net carrying value of the Term Loan, plus unamortized deferred financing costs related to the Term Loan. As a result of the Term Loan Debt Conversion, the Term Loan and its related documentation was terminated. There were no debt conversions in the comparable prior period. See Item 1. Financial Statements - Note 6. Equity and Note 10. Debt.

Interest Expense, Net

Net interest expense decreased by $1.6 million to $3.9 million during the 13 weeks ended November 1, 2025 from $5.5 million during the 13 weeks ended October 26, 2024. Interest expense decreased primarily due lower borrowing and lower interest rates.

Net interest expense decreased by $5.5 million to $7.6 million during the 26 weeks ended November 1, 2025 from $13.1 million during the 26 weeks ended October 26, 2024. Interest expense decreased primarily due to lower borrowing and lower interest rates.

Income Tax (Benefit) Expense

We recorded an income tax expense of $11.9 million on pre-tax income of $36.9 million during the 13 weeks ended November 1, 2025, which represented an effective income tax rate of 32.3% and we recorded an income tax expense of $(1.5) million on a pre-tax income of $41.7 million during the 13 weeks ended October 26, 2024, which represented an effective income tax rate of (3.6)%. The effective tax rate for the 13 weeks ended November 1, 2025 is higher than the prior year comparable period due to the Internal Revenue Code (IRC) 382 limitation on attribute utilization, increased projections of taxable income, and decrease in the valuation allowance.

We recorded an income tax expense of $3.3 million on pre-tax loss of $10.0 million during the 26 weeks ended November 1, 2025, which represented an effective income tax rate of 32.7% and we recorded an income tax expense of $0.9 million on a pre-tax loss of $59.9 million during the 26 weeks ended October 26, 2024, which represented an effective income tax rate of (1.5)%. The effective tax rate for the 26 weeks ended November 1, 2025 is higher than the prior year comparable period due to the Internal Revenue Code (IRC) 382 limitation on attribute utilization, increased projections of taxable income, and decrease in the valuation allowance.

Net Income (Loss)

Net income was $25.0 million during the 13 weeks ended November 1, 2025, compared with net income of $43.2 million during the 13 weeks ended October 26, 2024. As a result of the factors discussed above, net income was $6.7 million during the 26 weeks ended October 26, 2024, compared with a net loss $60.8 million during the 26 weeks ended October 28, 2023.