Barnes Noble Education Inc

Our primary sources of cash are net cash flows from operating activities, funds available under our Credit 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 July 27, 2024, we had $21.3 million of cash on hand, including $10.7 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.

On June 10, 2024, we completed various transactions, including a private equity investment, an equity rights offering, Term Loan debt conversion, and a Credit Facility refinancing, to substantially deleverage our consolidated balance sheet. These transactions also raised additional capital for repayment of indebtedness and provide additional flexibility for future working capital needs. For additional information, see Financing Arrangements below.

We believe that our future cash from operations, access to borrowings under the Credit Facility, and short-term vendor financing will provide adequate resources to fund our operating and financing needs for the next twelve months and beyond. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity. Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy. There can be no assurances that we will have access to capital markets on acceptable terms.

Sources and Uses of Cash Flow - Continuing Operations

As of July 27, 2024 and July 29, 2023, we had restricted cash of $13.1 million and $11.6 million, respectively, comprised of $10.7 million as of both periods in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $2.4 million and $0.9 million, respectively, in other noncurrent assets in the condensed 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

Our business is highly seasonal. Cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials for the upcoming semesters based on the typical academic semester. Given the growth of our BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day® affordable textbook access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to BNC First Day® affordable textbook 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. 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 schools’ semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods.

Cash flows used in operating activities from continuing operations during the 13 weeks ended July 27, 2024 were $(144.0) million compared to $(119.9) million during the 13 weeks ended July 29, 2023. The increase in cash flows used in operating activities from continuing operations of $24.1 million was primarily due to the timing of payables to vendors for inventory purchases and expenses, all of which were delayed resulting from lower borrowing base availability under our credit facility.

Cash Flow from Investing Activities from Continuing Operations

Cash flows used in investing activities from continuing operations during the 13 weeks ended July 27, 2024 were $(3.2) million compared to $(4.1) million during the 13 weeks ended July 29, 2023. The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments, enhancements to internal systems and websites, and new store construction. Capital expenditures totaled $3.5 million and $4.2 million during the 13 weeks ended July 27, 2024 and July 29, 2023, respectively.

Cash Flow from Financing Activities from Continuing Operations

Cash flows provided by financing activities from continuing operations during the 13 weeks ended July 27, 2024 were $139.9 million compared to $93.2 million during the 13 weeks ended July 29, 2023. The net change of $46.7 million is primarily due the gross proceeds of $95.0 million of new equity capital through a $50.0 million new equity investment led by Immersion Corporation and a $45.0 million fully backstopped equity rights offering, offset by payments for equity issuance costs of $9.5 million and lower net borrowings of $38.6 million.

Financing Arrangements

On June 10, 2024, we completed various transactions, including a private equity investment, an equity rights offering, Term Loan debt conversion, and a Credit Facility refinancing, to substantially deleverage our consolidated balance sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for future working capital needs, which will also allow us to strategically invest in innovation and growth initiatives, including but not limited to the growth of our First Day Complete program.

Upon closing of the transactions on June 10, 2024:

•We received gross proceeds of $95.0 million of new equity capital through a $50.0 million new equity investment (the “Private Investment”) led by Immersion and the $45.0 million Rights Offering. The transactions infused approximately $85.5 million of net cash proceeds after transaction costs. The transaction resulted in Immersion obtaining a controlling interest in the Company. See Note 5. Equity and Earnings Per Share.

•Our existing Term Loan credit agreement lenders, TopLids and VitalSource, 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 in the condensed consolidated statement of operations in connection with the Term Loan debt conversion which represents the difference between the debt fair value and net carrying value, 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. See Note 5. Equity and Earnings Per Shareand Note 7. Debt.

•We refinanced our Credit Facility providing access to a $325.0 million facility maturing in 2028. The refinanced Credit Facility will meaningfully enhance our financial flexibility and reduce our annual interest expense. See Note 7. Debtfor terms.

Income Tax Implications on Liquidity

As of July 27, 2024, we recognized a current income tax receivable for net operating loss carrybacks in prepaid and other current assets on the condensed consolidated balance sheet. We received refunds of $15.8 million and $8.5 million in Fiscal 2023, and Fiscal 2024, respectively. We received a final $2.7 million refund (including $0.3 million in interest) on August 12, 2024.

Share Repurchases

During the 13 weeks ended July 27, 2024, we did not repurchase any of our Common Stock under the stock repurchase program. As of July 27, 2024, approximately $26.7 million remains available under the stock repurchase program.

During the 13 weeks ended July 27, 2024 and July 29, 2023, we repurchased 429 and 779 of our Common Stock, respectively, outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Critical Accounting Estimates

Our policies regarding the use of estimates and other critical accounting policies are consistent with the disclosures in Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimatesin our Annual Report on Form 10-K for the fiscal year ended April 27, 2024.