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 39 weeks ended January 31, 2026 compared with the 13 and 39 weeks ended January 25, 2025

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

Overview

For the 13 weeks ended January 31, 2026 revenue increased by 11.3%, or $52.3 million, from last year to $515.1 million, primarily driven by growth in our BNC First Day® programs and a net increase in physical and virtual locations. Gross Comparable Store Sales increased by $33.8 million or 7.2%, during the quarter, driven by revenues from BNC First Day® programs which increased by $71.3 million, or 32.1%. Net income decreased by $11.3 million, or 62.9% to $6.7 million, compared to $17.9 million in the prior year. Adjusted EBITDA decreased by $1.2 million, or 4.7%, to $23.6 million from $24.8 million last year, in part due to a decrease in gross margins that is a result of certain timing differences in revenue recognition during the spring rush selling season, as well as investigation costs and other expense incurred in the current period.

For the 39 weeks ended January 31, 2026 revenue increased by 9.0%, or $119.3 million, from last year to $1,447.7 million, primarily driven by growth in our BNC First Day® programs and a net increase in physical and virtual locations which has helped to improve profitability. Gross Comparable Store Sales increased by $86.3 million, or 6.3%, driven by revenues from BNC First Day® programs which increased by $163.0 million, or 30.2%, helping to offset much of the decline from closed stores in total revenue. Net income increased by $56.2 million, or 131.3% to $13.4 million, compared to $(42.8) million in the prior year. Adjusted EBITDA improved by $3.2 million, or 5.5%, to $61.9 million from $58.7 million last year, primarily driven by revenue growth from the expansion of our BNC First Day® programs, which drove higher comparable store sales, as well as the closure of unprofitable stores, partially offset by investigation-related costs incurred during the current period.

Sales

The following table summarizes our sales for the 13 and 39 weeks ended January 31, 2026 and January 25, 2025:

Sales increased during the 13 and 39 weeks ended January 31, 2026, primarily due to higher comparable store sales, new store sales, and new adoptions of our BNC First Day® programs. Also contributing to the increase in sales is the shift in the fiscal year and the academic calendar year discussed above. These increases were offset by lower sales resulting from closed stores. The components of the sales variances for the 13 and 39 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 39 weeks ended January 31, 2026, we opened 56 stores and closed 82 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 $52.3 million, or 11.3%, to $515.1 million during the 13 weeks ended January 31, 2026 from $462.8 million during the 13 weeks ended January 25, 2025.

•Product sales and other increased by $52.2 million, or 12.4%, to $471.8 million during the 13 weeks ended January 31, 2026 from $419.7 million during the 13 weeks ended January 25, 2025.

◦Course material product sales increased by $53.5 million, or 17.6%, to $357.8 million during the 13 weeks ended January 31, 2026, compared to $304.2 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, which increased by $71.3 million, or 32.1%, to $293.6 million, offset by lower sales resulting from closed stores.

◦Gross Comparable Store Sales for course materials increased by $43.7 million, or 12.2%, compared to the prior year period as discussed below.

◦General merchandise product net sales decreased by $(2.2) million, or (2.2)%, to $95.1 million, compared to $97.3 million in the prior year period, primarily due to lower emblematic product sales. Gross Comparable Store Sales for general merchandise decreased by $(9.9) million, or (8.6)%, compared to the prior year period as discussed below.

◦Service and other revenue increased by $0.8 million, or 4.6%, to $18.9 million, compared to $18.1 million in the prior year period, primarily due to higher rental penalty fees and higher marketplace sales, offset by lower liquidation sales, lower web deferrals revenue, lower shipping and handling and lower partnership marketing income.

•Rental income for course materials increased by $0.1 million, or 0.2%, to $43.3 million during the 13 weeks ended January 31, 2026 from $43.2 million during the 13 weeks ended January 25, 2025 primarily due to the growth of our BNC First Day® programs, offset by lower recognition of deferred rental income due to the shift in the calendar year versus the academic school year, closed stores and the shift to digital products.

Our total sales increased by $119.3 million, or 9.0%, to $1,447.7 million during the 39 weeks ended January 31, 2026 from $1,328.4 million during the 39 weeks ended January 25, 2025.

•Product sales and other, increased by $114.0 million, or 9.3%, to $1,344.2 million during the 39 weeks ended January 31, 2026 from $1,230.3 million during the 39 weeks ended January 25, 2025.

◦Course material product sales increased by $116.9 million, or 13.6%, to $974.6 million during the 39 weeks ended January 31, 2026, compared to $857.7 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 $163.0 million, or 30.2%, to $702.0 million, offset by lower sales resulting from closed stores.

◦Gross Comparable Store Sales for course materials increased by $93.7 million, or 9.6%, compared to the prior year period as discussed below.

◦General merchandise product net sales increased by $0.4 million, or 0.2%, to $302.5 million, compared to $302.1 million in the prior year period. Gross Comparable Store Sales for general merchandise decreased by $(7.4) million, or (1.9)%, compared to the prior year period as discussed below.

◦Service and other revenue decreased by $3.5 million, or 4.9%, to $67.0 million, compared to $70.5 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 $5.4 million, or 5.4%, to $103.5 million during the 39 weeks ended January 31, 2026 from $98.1 million during the 39 weeks ended January 25, 2025 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 for the 39 weeks ended January 31, 2026 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 39 week periods are as follows:

Cost of Sales and Gross Margin

Our cost of sales increased as a percentage of sales to 81.3% during the 13 weeks ended January 31, 2026 compared to 79.7% during the 13 weeks ended January 25, 2025. Our gross margin increased by $2.3 million, or 2.5%, to $96.1 million, or 18.7% of sales, during the 13 weeks ended January 31, 2026 from $93.8 million, or 20.3% of sales during the 13 weeks ended January 25, 2025.

Our cost of sales increased as a percentage of sales to 80.6% during the 39 weeks ended January 31, 2026 compared to 79.9% during the 39 weeks ended January 25, 2025. Our gross margin increased by $14.1 million, or 5.3%, to $281.3 million, or 19.4% of sales, during the 39 weeks ended January 31, 2026 from $267.2 million, or 20.1% of sales during the 39 weeks ended January 25, 2025.

The following table summarizes the cost of sales:

The following table summarizes the gross margin:

For the 13 weeks ended January 31, 2026, the gross margin as a percentage of sales decreased as discussed below:

•Product and other gross margin decreased (180 basis points), primarily due to lower margin rates (320 basis points) due to reduced logo and non-logo general merchandise sales and higher markdowns related to closed stores, partially, offset by lower contract costs as a percentage of sales (140 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 increased driven primarily by higher rental margin rates, offset by higher contract costs as a percentage of sales related to our college and university contracts.

For the 39 weeks ended January 31, 2026, the gross margin as a percentage of sales decreased as discussed below:

•Product and other gross margin decreased (70 basis points), primarily due to lower margin rates (190 basis points) due to logo and non-logo general merchandise sales, offset by lower contract costs as a percentage of sales (120 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 increased driven primarily by lower contract costs as a percentage of sales related to our college and university contracts, offset by lower rental margin rates.

Selling and Administrative Expenses

During the 13 weeks ended January 31, 2026, selling and administrative expenses increased by $1.0 million, or 1.4%, to $72.6 million from $71.6 million during the 13 weeks ended January 25, 2025. This increase was primarily due to a $0.4 million increase in payroll and related operating costs, and a $0.6 million increase in incentive plan expense.

During the 39 weeks ended January 31, 2026, selling and administrative expenses increased by $6.2 million, or 2.9%, to $217.7 million from $211.5 million during the 39 weeks ended January 25, 2025. This increase was primarily due to a $3.1 million increase in payroll and related operating costs, and a $3.1 million increase in incentive plan expense.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased by $0.4 million, to $7.4 million during the 13 weeks ended January 31, 2026 from $7.8 million during the 13 weeks ended January 25, 2025. 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 $5.2 million, to $24.2 million during the 39 weeks ended January 31, 2026 from $29.4 million during the 39 weeks ended January 25, 2025. The decrease was primarily attributable to lower depreciable assets and intangibles, offset by capital additions and accelerated intangible amortization related to closed stores.

Impairment Loss

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

During the 13 and 39 weeks ended January 31, 2026, we evaluated certain of our store-level long-lived assets for impairment. Based on the results of the impairment tests, we recognized an impairment loss of $0.5 million (both pre-tax and after-tax), comprised of 0.2 million, $0.1 million, and $0.2 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the condensed consolidated statement of operations.

During the 13 and 39 weeks ended January 27, 2025, we evaluated certain of our store-level long-lived assets for impairment. Based on the results of the impairment tests, we recognized an impairment loss of $1.7 million (both pre-tax and after-tax), comprised of 0.3 million, $0.3 million, and $1.1 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the condensed consolidated statement of operations.

Other (income) expense

During the 13 and 39 weeks ended January 31, 2026, the Company recognized other (income) expense totaling $1.0 million and $6.7 million, respectively, comprised of Investigation related costs.

During the 13 and 39 weeks ended January 25, 2025, the Company recognized other expense totaling $(6.3) million and $(2.8) million, respectively, comprised primarily of $(7.6) million and $(9.0) million, respectively, related to the termination of liabilities related to a frozen retirement benefit plan; $0 and $2.1million, 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, of which $(1.8) million is included in accrued liabilities in the condensed Consolidated Balance Sheet as of October 26, 2024), nil and $0.9 million, respectively, for legal and advisory professional service costs for restructuring and process improvements and other charges; and $1,300 related to the settlement of a class action lawsuit and related legal fees.

Operating Income

Our operating income was $14.6 million during the 13 weeks ended January 31, 2026, compared to operating income of $18.9 million during the 13 weeks ended January 25, 2025. The decrease in operating income is due to the matters discussed above.

Our operating income was $32.3 million during the 39 weeks ended January 31, 2026, compared to operating income of $27.3 million during the 39 weeks ended January 25, 2025. 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 39 weeks ended January 25, 2025 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 $0.2 million to $4.9 million during the 13 weeks ended January 31, 2026 from $5.1 million during the 13 weeks ended January 25, 2025. Interest expense decreased primarily due to lower borrowings and lower interest rates. Interest expense for the 13 weeks and 39 weeks ended January 31, 2026 includes $0.3 and $1.0, respectively, of waiver fees incurred in connection with the Investigation.

Net interest expense decreased by $5.7 million to $12.5 million during the 39 weeks ended January 31, 2026 from $18.2 million during the 39 weeks ended January 25, 2025. Interest expense decreased primarily due to lower borrowings and lower interest rates.

Income Tax (Benefit) Expense

We recorded an income tax expense of $3.1 million on pre-tax income of $9.7 million during the 13 weeks ended January 31, 2026, which represented an effective income tax rate of 31.7% and we recorded an income tax benefit of $(4.1) million on a pre-tax income of $13.8 million during the 13 weeks ended January 25, 2025, which represented an effective income tax rate of (29.7)%. The effective tax rate for the 13 weeks ended January 31, 2026 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 $6.3 million on pre-tax income of $19.7 million during the 39 weeks ended January 31, 2026, which represented an effective income tax rate of 32.2% and we recorded an income tax benefit of $(3.2) million on a pre-tax loss of $46.1 million during the 39 weeks ended January 25, 2025, which represented an effective income tax rate of 7.0%. The effective tax rate for the 39 weeks ended January 31, 2026 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 $6.7 million during the 13 weeks ended January 31, 2026, compared with Net income of $17.9 million during the 13 weeks ended January 25, 2025. As a result of the factors discussed above, Net income was $13.4 million during the 39 weeks ended October 26, 2024, compared with a net loss $42.8 million during the 39 weeks ended October 28, 2023.