Barnes & Noble Education, Inc.: Form 10-Q for the period ended Jan 25, 2025

Unless the context otherwise indicates, references to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc. or “BNED”, a Delaware corporation. References to “MBS” refer to our subsidiary MBS Textbook Exchange, LLC.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements involve risks and uncertainties. Please reference the disclosure regarding forward-looking statements for more information.

Overview

Description of Business

Barnes & Noble Education, Inc. (“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 a textbook wholesaler, and bookstore management hardware and software provider. We operate 1,164 physical and virtual bookstores, delivering essential educational content and general merchandise within a dynamic omnichannel retail environment.

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® affordable access course material programs, consisting of First Day Complete and First Day, which provide faculty-required course materials to students 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. 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. See BNC First Day® Affordable Access Course Material Programs below.

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 with 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 educational publishers who rely on us as one of their primary distribution channels.

For additional information related to our business, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 (as updated through our Current Report on Form 8-K filed with the SEC on December 11, 2024).

BNC First Day® Affordable Access Course Material Programs

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

• First Day Complete is adopted by an institution and includes all or the majority of undergraduate classes (and on occasion graduate classes), providing students with both physical and digital materials. In addition to providing numerous benefits to students, faculty and administrators, the First Day Complete model drives 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 BNC First Day® affordable access course material programs, First Day Complete and First Day, is an important strategic initiative of ours to meet the market demands of reduced pricing for 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 affordable access course material 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. 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 13 and 39 weeks ended January 25, 2025 and January 27, 2024:

Dollars in millions

Financing Arrangements

On June 10, 2024, we completed various transactions, including an equity rights offering, private equity investment, a 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. 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.
• Our existing Term Loan 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.
• 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.

On September 19, 2024, we entered into an at-the market ("ATM") sales agreement (the "September ATM Sales Agreement") with BTIG, LLC ("BTIG") under which we sold our Common Stock from time to time through BTIG as the sales agent. BTIG sold an aggregate offering of up to $40.0 million of our Common Stock from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We paid BTIG a commission of 2% of the gross sales proceeds of any Common Stock sold under the September ATM Sales Agreement. We were not obligated to make any sales of Common Stock under the September ATM Sales Agreement. During the 39 weeks ended January 25, 2025, we issued and sold the maximum aggregate offering of $40.0 million of our Common Stock under the September ATM Sales Agreement, at a weighted-average price of $10.06 per share and received $39.2 million in proceeds, net of commissions.

On December 20, 2024, we entered into an additional ATM sales agreement with BTIG (the "December ATM Sales Agreement"), under which we sold our Common Stock through BTIG as the sales agent. BTIG sold an aggregate offering of up to $40.0 million of our Common Stock from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We paid BTIG a commission of 2% of the gross sales proceeds of any Common Stock sold under the Sales Agreement. We were not obligated to make any sales of Common Stock under the December ATM Sales Agreement. During the 39 weeks ended January 25, 2025, we issued and sold the maximum aggregate offering of $40.0 million of our Common Stock under the December ATM Sales Agreement, at a weighted-average price of $10.42 per share and received $39.2 million in proceeds, net of commissions.

For additional information, see the Liquidity and Capital Resources in our Management's Discussion and Analysis of Financial Condition and Results of Operations, in Item 2. below.

Segments

We identify our segments in accordance with the way our business is managed. During the 26 weeks ended October 26, 2024, management determined that a realignment of the Company's operating and reporting segments was necessary to better reflect the operations of the organization. With the recent change in Chief Executive Officer ("CEO") and June milestone financing transactions, we have streamlined operations to focus on a centralized management structure to support company-wide procurement, marketing and selling, delivery and customer service. Given the change in how the overall business is managed and how the current CEO (the current Chief Operating Decision Maker ("CODM")) assesses performance and allocates resources, we combined the operating results of the prior two segments, Retail and Wholesale, into one operating and reporting segment. Prior period disclosures have been restated to reflect the change to one segment.

Seasonality

Our business is highly 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, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods.

Product sales 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 when the customer accesses the digital content as product sales in our condensed 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 condensed consolidated financial statements. Depending on the product mix offered under the BNC First Day® offerings, revenue recognized is consistent with our policies for product, digital and rental sales, net of an anticipated opt-out or return provision.

Given the growth of BNC First Day® affordable access course material 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 access course material 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 access course material offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools. 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, Competition and Other Business Conditions Affecting Our Business

The market for educational materials continues to undergo significant change. As tuition and other costs rise, colleges and universities face increasing pressure to attract and retain students and provide them with innovative, affordable educational content and tools that support their educational development. Current trends, competition and other factors affecting our business include:

• Overall Capital Markets, Economic Environment, College Enrollment and Consumer Spending Patterns. Our business is affected by capital markets, the overall economic environment, funding levels at colleges and universities, by changes in enrollments at colleges and universities, and spending on course materials and general merchandise.
• Capital Market Trends: We may require additional capital in the future to sustain or grow our business, including implementation of our strategic initiatives. The future availability of financing will depend on a variety of factors, such as economic and market conditions, and the availability of credit. These factors have and could continue to materially adversely affect our costs of borrowing, and our financial position and results of operations would be adversely impacted. Volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions.
• Economic Environment: General merchandise sales are subject to short-term fluctuations driven by the broader retail environment and other economic factors, such as interest rate fluctuations, changes in trade policies, including the imposition of new tariffs or increases in existing tariffs, and inflationary considerations. Broader macro-economic global supply chain issues could impact our ability to source physical textbooks, school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing. Union and labor market issues may also impact our ability to provide services and products to our customers. A significant reduction in U.S. economic activity could lead to decreased consumer spending.
• Enrollment Trends: The growth of our business depends on our ability to attract new customers and to increase the level of engagement by our current customers. In the Fall of 2023 and Spring of 2024, we observed increased year-over-year enrollment trends. Enrollment trends, specifically at community colleges, generally correlate with changes in the economy and unemployment factors, e.g., low unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment trends, as students generally enroll to obtain skills that are in demand in the workforce. Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional 18-24 year-old college age. Online degree program enrollments continue to grow, which impacts the level of in-store traffic for general merchandise sales, including for cafe and convenience products.
• Increased Use of Open Educational Resources (“OER”), Online and Digital Platforms as Companions or Alternatives to Traditional Course Materials, Including Artificial Intelligence (“AI”) Technologies. Students and faculty can now choose from a wider variety of educational content and tools than ever before, delivered across both print and digital platforms.
• Increasing Costs Associated with Defending Against Security Breaches and Other Data Loss, Including Cyber-Attacks. We are increasingly dependent upon information technology systems, infrastructure and data. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. We continue to invest in data protection, including insurance, and information technology to prevent or minimize these risks and, to date, we have not experienced any material service interruptions and are not aware of any material breaches.
• Distribution Network Evolving. The way course materials are distributed and consumed is changing significantly, a trend that is expected to continue. The market for course materials, including textbooks and supplemental materials, is intensely competitive and subject to rapid change.
• Disintermediation. We are experiencing growing competition from alternative media and alternative sources of textbooks and other course materials. In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, and publishers, including Cengage Learning, McGraw-Hill Education and Pearson Education, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, including student-to-student transactions over the Internet, and multi-title subscription access. We counteract disintermediation as we continue to scale the number of schools that adopt our BNC First Day® affordable access course material programs, given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.
• Suppliers, Supply Chain and Inventory. The products that we sell originate from a wide variety of domestic and international vendors. Since the demand for used textbooks has historically been greater than the available supply, our financial results are highly dependent upon our ability to build our textbook inventory from suppliers in advance of the selling season. Some textbook publishers supply textbooks pursuant to consignment or rental programs which could impact used textbook supplies in the future. We are a national distributor for rental textbooks offered through

McGraw-Hill Education's and Pearson Education’s consignment rental program. We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, content or services, particular payment terms or the extension of credit limits. If our current suppliers were to stop selling merchandise, content or services to us on acceptable terms, including as a result of one or more supplier bankruptcies due to poor economic conditions or refusal by such suppliers to ship products to us due to delayed or extended payment windows as a result of our own liquidity constraints, we may be unable to procure the same merchandise, content or services from other suppliers in a timely and efficient manner and on acceptable terms, or at all. Additionally, delayed or incomplete publisher shipments of physical textbook orders, or delays in receiving digital courseware access codes, could have an adverse impact on sales, including our BNC First Day Complete equitable access program, which relies upon timely receipt of inventory in advance of class start dates each academic term. The broader macro-economic global supply chain issues may also impact our ability to source school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing.

• Price Competition. In addition to the competition in the services we provide to our customers, our textbook and other course materials business faces significant price competition. Students purchase textbooks and other course materials from multiple providers, are highly price sensitive, and can easily shift spending from one provider or format to another.
• First Day Complete and First Day Models. Offering course materials sales through our BNC First Day® affordable access course material programs, First Day Complete and First Day, is a key, and increasingly important, strategic initiative of ours to meet the market demands of reduced pricing for students. Our First Day Complete and First Day programs contribute to improved student outcomes, while increasing our market share, revenue and relative gross profits of course materials sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. These affordable access course material programs have allowed us to reverse historical long-term trends in course materials revenue declines as the growth of our BNC First Day programs offsets declines in a la carte courseware sales and closed store sales. We 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 cannot guarantee that we will be able to achieve these plans within these timeframes or at all.
• A Large Number of Traditional Campus Bookstores Have Yet to be Outsourced.
• Outsourcing Trends. We continue to see the trend towards outsourcing in the campus bookstore market and also continue to see a variety of business models being pursued for the provision of course materials (such as affordable access course material programs and publisher subscription models) and general merchandise.
• New and Existing Bookstore Contracts. We expect awards of new accounts resulting in new physical and virtual store openings will continue to be an important driver of future growth in our business. We also expect that certain less profitable or non-essential bookstores we operate may close, as we focus on the profitability of our stores.

For additional discussion of our trends and other factors affecting our business, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 (as updated through our Current Report on Form 8-K filed with the SEC on December 11, 2024).

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. Additionally, at college and university bookstores which we operate, we sell 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 bookstore 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.

Results of Operations

Results of Operations - Summary - Continuing Operations (a)

Dollars in thousands

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

Results of Operations - Discontinued Operations

On May 31, 2023, we completed the sale of assets related to our former Digital Student Solutions (“DSS”) segment, which met the criteria for classification as Assets Held for Sale and Discontinued Operations. The results of operations related to our former DSS segment are included in the condensed consolidated statements of operations as “Income (loss) from discontinued operations, net of tax.” The cash flows of our former DSS segment are also presented separately in our condensed consolidated statements of cash flows. For additional information, see Part II - Item 7. Management's Discussion and Analysis in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 (as updated through our Current Report on Form 8-K filed with the SEC on December 11, 2024).

Dollars in thousands

33

Results of Operations - Continuing Operations - 13 and 39 weeks ended January 25, 2025 compared with the 13 and 39 weeks ended January 27, 2024

Dollars in thousands

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

Third quarter fiscal year 2025 total revenue increased by 2.1%, or $9.7 million, from last year to $466.3 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 $30.1 million, or 6.6%, during the quarter, driven by revenues from BNC First Day programs which increased by $38.2 million, or 20.8%, helping to offset much of the decline from closed stores in total revenue. Income from Continuing Operations increased by $27.5 million, or 283.3% to $17.8 million, compared to $(9.7) million in the prior year. Adjusted EBITDA from Continuing Operations improved by $6.3 million, or 29.8%, to $27.4 million from $21.1 million last year, primarily due to lower selling and administrative expenses of $8.2 million as the result of cost-saving and productivity initiatives, closed stores, and growth in our BNC First Day® programs.

Fiscal year 2025 year to date revenue increased by $0.7 million, or 0.1% to $1,331.9 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 $64.4 million, or 4.8%, during the year, driven by revenues from BNC First Day programs which increased by $93.9 million, or 21.1%, helping to offset much of the decline from closed stores in total revenue. Loss from Continuing Operations was $(30.7) million, inclusive of a loss on extinguishment of debt of $(55.2) million, compared to $(34.5) million in the prior year period. Adjusted EBITDA from Continuing Operations improved by $26.4 million to $72.7 million from $46.3 million last year primarily due to lower selling and administrative expenses of $31.7 million primarily related to 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 39 weeks ended January 25, 2025 and January 27, 2024:

Dollars in thousands

The sales increase during the 13 and 39 weeks ended January 25, 2025 is primarily related to higher comparable store sales and new store sales primarily due to our BNC First Day® programs, 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.

Dollars in millions

(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 25, 2025, we opened 49 stores and closed 130 stores, with estimated net annual sales of $159 million. 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 $9.7 million, or 2.1%, to $466.3 million during the 13 weeks ended January 25, 2025 from $456.7 million during the 13 weeks ended January 27, 2024.

• Product sales and other increased by $7.8 million, or 1.9%, to $423.2 million during the 13 weeks ended January 25, 2025 from $415.4 million during the 13 weeks ended January 27, 2024.
• Course material product sales increased by $10.5 million, or 3.3%, to $328.1 million during the 13 weeks ended January 25, 2025, compared to $317.6 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 $38.2 million, or 20.8%, to $222.2 million, offset by lower sales resulting from closed stores.

Dollars in millions

• Gross Comparable Store Sales for course materials increased by $23.3 million, or 6.8%, compared to the prior year period as discussed below.
• General merchandise product net sales decreased by $0.9 million, or 1.2%, to $71.6 million, compared to $72.5 million in the prior year period, primarily due to lower emblematic product sales. Gross Comparable Store Sales for general merchandise increased by $6.8 million, or 6.1%, compared to the prior year period as discussed below.
• Service and other revenue decreased by $1.9 million, or 7.3%, to $23.5 million, compared to $25.3 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 $1.9 million, or 4.5%, to $43.2 million during the 13 weeks ended January 25, 2025 from $41.3 million during the 13 weeks ended January 27, 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 $0.7 million, or 0.1%, to $1,331.9 million during the 39 weeks ended January 25, 2025 from $1,331.2 million during the 39 weeks ended January 27, 2024.

• Product sales and other decreased by $4.0 million, or 0.3%, to $1,233.8 million during the 39 weeks ended January 25, 2025 from $1,237.7 million during the39 weeks ended January 27, 2024.
• Course material product sales increased by $13.2 million, or 1.4%, to $975.5 million during the 39 weeks ended January 25, 2025, compared to $962.3 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 $93.9 million, or 21.1%, to $539.0 million, offset by lower sales resulting from closed stores.

Dollars in millions

• Gross Comparable Store Sales for course materials increased by $67.6 million, or 7.3%, compared to the prior year period as discussed below.
• General merchandise product net sales decreased by $9.6 million, or 5.0%, to $184.0 million, compared to $193.6 million in the prior year period, primarily due to closed stores, lower graduation product sales due to timing of spring graduation events shifting to the fourth quarter of fiscal year 2024 from the first quarter of fiscal year 2025, and lower emblematic product sales. Gross Comparable Store Sales for general merchandise decreased by $3.2 million, or (0.8)%, compared to the prior year period as discussed below.
• Service and other revenue decreased by $7.5 million, or 9.2%, to $74.3 million, compared to $81.8 million in the prior year period, primarily due to lower liquidation sales, 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 $4.6 million, or 4.9%, to $98.1 million during the 13 weeks ended January 25, 2025 from $93.5 million during the 13 weeks ended January 27, 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 product sales, graduation product sales due to timing of spring graduation events shifting to the fourth quarter of fiscal year 2024 from the first quarter of fiscal year 2025, lower sales related to cafe and convenience products, and trade books sales.

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

Dollars in millions

Cost of Sales and Gross Margin

Our cost of sales increased as a percentage of sales to 79.3% during the 13 weeks ended January 25, 2025 compared to 78.1% during the 13 weeks ended January 27, 2024. Our gross margin decreased by $3.7 million, or 3.7%, to $96.4 million, or 20.7% of sales, during the 13 weeks ended January 25, 2025 from $100.0 million, or 21.9% of sales during the 13 weeks ended January 27, 2024.

Our cost of sales increased as a percentage of sales to 78.9% during the 39 weeks ended January 25, 2025 compared to 78.4% during the 39 weeks ended January 27, 2024. Our gross margin decreased by $5.7 million, or 2.0%, to $281.2 million, or 21.1% of sales, during the 39 weeks ended January 25, 2025 from $286.9 million, or 21.6% of sales during the 39 weeks ended January 27, 2024.

The following table summarizes the cost of sales for the 13 and 39 weeks ended January 25, 2025 and January 27, 2024:

Dollars in thousands

The following table summarizes the gross margin for the 13 and 39 weeks ended January 25, 2025 and January 27, 2024:

Dollars in thousands

For the 13 weeks ended January 25, 2025, the gross margin as a percentage of sales decreased as discussed below:

• For the 13 weeks ended January 25, 2025, Product and other gross margin decreased (130 basis points), primarily due to lower margin rates (160 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 (30 basis points) related to our college and university contracts as a result of the shift to digital and First Day models and lower performing school contracts not renewed.
• For the 13 weeks ended January 25, 2025, the 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 39 weeks ended January 25, 2025, the gross margin as a percentage of sales decreased as discussed below:

• For the 39 weeks ended January 25, 2025, Product and other gross margin decreased (60 basis points), primarily due to lower margin rates (100 basis points) for course materials due to lower markdowns, offset by lower contract costs as a percentage of sales (40 basis points) related to our college and university contracts as a result of the shift to digital and First Day models and lower performing school contracts not renewed.
• For the 39 weeks ended January 25, 2025, the Rental gross margin as a percentage of sales increased driven primarily by higher rental margin rates, and lower contract costs as a percentage of sales related to our college and university contracts.

Selling and Administrative Expenses

Dollars in thousands

During the 13 weeks ended January 25, 2025, selling and administrative expenses decreased by $8.2 million, or 10.3%, to $71.6 million from $79.8 million during the 13 weeks ended January 27, 2024. This decrease was primarily due to a $9.9 million decrease in payroll and related operating costs, and cost savings initiatives, partially offset by a $1.7 million increase in incentive plan expense.

During the 39 weeks ended January 25, 2025, selling and administrative expenses decreased by $31.7 million, or 13.0%, to $211.5 million from $243.2 million during the 39 weeks ended January 27, 2024. This decrease was primarily due to a $32.2 million decrease in payroll and related operating costs, and cost savings initiatives, partially offset by a $0.5 million increase in incentive plan expense.

Depreciation and Amortization Expense

Dollars in thousands

Depreciation and amortization expense decreased by $2.3 million, to $7.8 million during the 13 weeks ended January 25, 2025 from $10.1 million during the 13 weeks ended January 27, 2024. The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized in Fiscal 2024, offset by capital additions and accelerated intangible amortization related to closed stores.

Depreciation and amortization expense decreased by $1.2 million, to $29.4 million during the 39 weeks ended January 25, 2025 from $30.6 million during the 39 weeks ended January 27, 2024. The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized in Fiscal 2024, offset by capital additions and accelerated intangible amortization related to closed stores.

Impairment Loss (non-cash)

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

During the 13 and 39 weeks ended January 25, 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 (non-cash) 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.

During the 13 and 39 weeks ended January 27, 2024, 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 (non-cash) of $5.8 million (both pre-tax and after-tax), comprised of $0.4 million, $2.7 million, and $2.7 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the condensed consolidated statement of operations.

For additional information, see Item 1. Financial Statements - Note 2. Summary of Significant Accounting Policies and Note 6. Fair Value Measurements.

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 5. Equity and Earnings Per Share and Note 7. Debt.

Restructuring and other charges

During the 13 and 39 weeks ended January 25, 2025, we recognized restructuring and other charges totaling $(7.6) million and $(4.1) 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 (non-cash), $0.1 million and $0.4 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 our former Chief Executive Officer on June 11, 2024, and $0.1 million and $1.1 million, respectively, for legal and advisory professional service costs for restructuring and process improvements and other charges.

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

Operating Income (Loss)

Dollars in thousands

Our operating income was $22.9 million during the 13 weeks ended January 25, 2025, compared to operating income of $0.9 million during the 13 weeks ended January 27, 2024. The increase in operating income is due to the matters discussed above. For the 13 weeks ended January 25, 2025, operating income, excluding the $1.7 million of impairment loss (non-cash) and the $(7.6) million of restructuring and other charges, discussed above, was $17.0 million (or 3.6% of sales). For the 13 weeks ended January 27, 2024, operating income, excluding the $5.8 million of impairment loss (non-cash) and the $3.4 million of restructuring and other charges, discussed above, was $10.1 million (or 2.2% of sales).

Our operating loss was $(12.5) million during the 39 weeks ended January 25, 2025, compared to operating loss of $(5.0) million during the 39 weeks ended January 27, 2024. The increase in operating loss is due to the matters discussed above. For the 39 weeks ended January 25, 2025, excluding the $1.7 million of impairment loss (non-cash) and the $55.2 million of loss on extinguishment of debt and the $(4.1) million of restructuring and other charges, discussed above, operating income was $40.3 million (or 3.0% of sales). For the 39 weeks ended January 27, 2024, excluding the $5.8 million of impairment loss (non-cash) and the $12.3 million of restructuring and other charges, discussed above, operating income was $13.1 million (or 1.0% of sales).

Interest Expense, Net

Dollars in thousands

Net interest expense decreased by $5.5 million to $5.1 million during the 13 weeks ended January 25, 2025 from $10.6 million during the 13 weeks ended January 27, 2024. Net interest expense decreased by $11.4 million to $18.2 million during the 39 weeks ended January 25, 2025 from $29.5 million during the 39 weeks ended January 27, 2024. Interest expense decreased primarily due to the June 10, 2024 debt financing transaction, lower borrowing and lower interest rates.

Income Tax Expense

Dollars in thousands

We recorded an income tax expense of $10.7 million on pre-tax income of $17.8 million during the 13 weeks ended January 25, 2025, which represented an effective income tax rate of 60.0% and we recorded an income tax expense of $0.2 million on a pre-tax loss of $(9.7) million during the 13 weeks ended January 27, 2024, which represented an effective income tax rate of (2.4)%. The effective tax rate for the 13 weeks ended January 25, 2025 is higher than the prior year comparable period due to the IRC 382 limitation on attribute utilization, offset by the impact of accounting method changes filed for our full year 2024 tax return in the current period

We recorded an income tax expense of $11.9 million on pre-tax loss of $(30.7) million during the 39 weeks ended January 25, 2025, which represented an effective income tax rate of (38.8)% and we recorded an income tax expense of $0.5 million on a pre-tax loss of $(34.5) million during the 39 weeks ended January 27, 2024, which represented an effective income tax rate of (1.5)%. The effective tax rate for the 13 weeks is higher and for the 39 weeks ended January 25, 2025 is lower than the prior year comparable period due to the IRC 382 limitation on attribute utilization offset by the impact of accounting method changes filed on our full year 2024 tax return and permanent differences related to the loss on the debt-to-equity conversion in the current period.

Net Income (Loss) from Continuing Operations

Dollars in thousands

As a result of the factors discussed above, net income from continuing operations was $7.1 million during the 13 weeks ended January 25, 2025, compared with net loss of $(9.9) million during the 13 weeks ended January 27, 2024. As a result of the factors discussed above, net loss from continuing operations was $(42.6) million during the 39 weeks ended January 25, 2025, compared with $(35.0) million during the 39 weeks ended January 27, 2024.

Adjusted Earnings (non-GAAP) is $3.8 million during the 13 weeks ended January 25, 2025, compared with $0.1 million during the 13 weeks ended January 27, 2024. Adjusted Earnings (non-GAAP) is $13.2 million during the 39 weeks ended January 25, 2025, compared with $(14.4) million during the 39 weeks ended January 27, 2024.See Adjusted Earnings (non-GAAP) discussion below.

Use of Non-GAAP Measures - Adjusted Earnings, Adjusted EBITDA, 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, 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 (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; (2) interest expense, net and (3) income taxes, (4) as adjusted for additional items that are subtracted from or added to net income (loss) from continuing operations. We define Free Cash Flow as cash flows from operating activities less (1) capital expenditures; (2) cash interest and (3) cash taxes.

These non-GAAP measures have been reconciled to the most comparable financial measures presented in accordance with GAAP as follows: the reconciliation of Adjusted Earnings to net income (loss); the reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss); and the reconciliation of Free Cash Flow to Cash Flows from Operating Activities. All of the items included in the reconciliations are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance.

These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures of financial performance prepared in accordance with GAAP. In addition, the Company's use of these non-GAAP financial measures may be different from similarly named measures used by other companies, limiting their usefulness for comparison purposes.

We review these non-GAAP financial measures as internal measures to evaluate our performance at a consolidated level to manage our operations. We believe that these measures are useful performance measures which are used by us to facilitate a comparison of our on-going operating performance on a consistent basis from period-to-period. We believe that these non-GAAP financial measures provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone, as they exclude certain items that management believes do not reflect the ordinary performance of our operations in a particular period. Our Board of Directors and management also use Adjusted EBITDA at a consolidated level as one of the primary methods for planning and forecasting expected performance, for evaluating on a quarterly and annual basis actual results against such expectations, and as a measure for performance incentive plans. We believe that the inclusion of Adjusted Earnings and Adjusted EBITDA 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 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

Dollars in thousands

Consolidated Adjusted EBITDA (non-GAAP) - Continuing Operations

Dollars in thousands

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

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

Free Cash Flow (non-GAAP)

Dollars in thousands

(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. When a school adopts our BNC First Day® affordable access course material 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 access course material offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools.

(b) Purchases of property and equipment are also referred to as capital expenditures. Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, and enhancements to internal systems and our website. The following table provides the components of total purchases of property and equipment:

Dollars in thousands

Liquidity and Capital Resources

Our primary sources of cash are net cash flows from operating activities, funds available under our A&R 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 January 25, 2025, we had $16.7 million of cash on hand, including $5.2 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, a term loan debt conversion, and a credit facility refinancing, to substantially deleverage our consolidated balance sheet. Additionally, as of January 25, 2025, we have completed two ATM programs pursuant to the September ATM Sales Agreement and December ATM Sales Agreement, respectively, under which we issued and sold shares of the Company's Common Stock with an aggregate price of $40.0 million under each respective ATM program. These transactions also 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. 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.

Liquidity

Sources and Uses of Cash Flow - Continuing Operations

Dollars in thousands

As of January 25, 2025 and January 27, 2024, we had restricted cash of $7.5 million and $6.9 million, respectively, comprised of $5.2 million and $6.0 million, respectively, in prepaid and other current assets in the condensed consolidated balance sheets related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $2.3 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 access course material 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 access course material 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 39 weeks ended January 25, 2025 were $(138.5) million compared to $(83.2) million during the 39 weeks ended January 27, 2024. The increase in cash flows used in operating activities from continuing operations of $55.3 million was primarily due to higher receivables due to the growth of our BNC First Day programs, and the timing of payables to vendors for inventory purchases and expenses.

Cash Flow from Investing Activities from Continuing Operations

Cash flows used in investing activities from continuing operations during the 39 weeks ended January 25, 2025 were $(8.5) million compared to $(11.4) million during the 39 weeks ended January 27, 2024. 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 $9.3 million and $11.5 million during the 39 weeks ended January 25, 2025 and January 27, 2024, respectively.

Cash Flow from Financing Activities from Continuing Operations

Cash flows provided by financing activities from continuing operations during the 39 weeks ended January 25, 2025 were $135.2 million compared to $59.9 million during the 39 weeks ended January 27, 2024. The net change of $75.3 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, and proceeds of $78.5 million from the sale of Common Stock, offset by payments for equity issuance costs of $9.7 million and lower net borrowings of $93.7 million.

Capital Resources

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 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 Share and 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. Debt for terms.

On September 19, 2024, we entered into an at-the market ("ATM") sales agreement (the "September ATM Sales Agreement") with BTIG, LLC ("BTIG") under which we sold our Common Stock from time to time through BTIG as the sales agent. BTIG sold an aggregate offering of up to $40.0 million of our Common Stock from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We paid BTIG a commission of 2% of the gross sales proceeds of any Common Stock sold under the September ATM Sales Agreement. We were not obligated to make any sales of Common Stock under the September ATM Sales Agreement. During the 39 weeks ended January 25, 2025, we issued and sold the maximum aggregate offering of $40.0 million of our Common Stock under the September ATM Sales Agreement, at a weighted-average price of $10.06 per share and received $39.2 million in proceeds, net of commissions.

On December 20, 2024, we entered into an additional ATM sales agreement with BTIG (the "December ATM Sales Agreement"), under which we sold our Common Stock through BTIG as the sales agent. BTIG sold an aggregate offering of up to $40.0 million of our Common Stock from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We paid BTIG a commission of 2% of the gross sales proceeds of any Common Stock sold under the Sales Agreement. We were not obligated to make any sales of Common Stock under the December ATM Sales Agreement. During the 39 weeks ended January 25, 2025, we issued and sold the maximum aggregate offering of $40.0 million of our Common Stock under the December ATM Sales Agreement, at a weighted-average price of $10.42 per share and received $39.2 million in proceeds, net of commissions.

On January 10, 2025, we filed a mixed-use shelf offering (the "Shelf Offering") for an aggregate initial offering price of up to $100.0 million. This Shelf Offering will provide flexibility as we seek to optimize its capital structure optionally over time.

Share Repurchases

During the 39 weeks ended January 25, 2025, we did not repurchase any of our Common Stock under the stock repurchase program. As of January 25, 2025, approximately $26.7 million remains available under the stock repurchase program.

During the 13 and 39 weeks ended January 25, 2025, we repurchased 0 and 429 of our Common Stock, respectively, outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Income Tax Implications on Liquidity

As of January 25, 2025, 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.

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 Estimates in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 (as updated through our Current Report on Form 8-K filed with the SEC on December 11, 2024).

Evaluation of Disclosure Controls and Procedures

An evaluation (as required under Rules 13a-15(b) and 15d-15(b) under the Exchange Act) was performed under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of January 25, 2025.

Management has not identified any changes in the Company’s internal control over financial reporting that occurred during the third quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except as set forth below, there have been no material changes, during the 39 weeks ended January 25, 2025 to the risk factors discussed in Part I - Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 (as updated through our Current Report on Form 8-K filed with the SEC on December 11, 2024).

Recently announced changes to U.S. trade policy, including recently announced tariffs, could adversely affect our business.

Recently, the United States announced tariffs on products manufactured in several jurisdictions, including Canada, China, and Mexico, and has made announcements regarding the potential imposition of tariffs on products from other jurisdictions, such as the European Union. The President of the United States has also directed various federal officials to evaluate other aspects of United States trade policy. While the United States has temporarily paused the imposition of tariffs on Canadian and Mexican products, the pause may be lifted in whole or in part. The United States may take other action to impose, reimpose or increase tariffs, and countries subject to such tariffs may impose reciprocal tariffs or other restrictive trade measures in response to the imposition of tariffs by the United States.

Certain of our merchandise is sourced indirectly from outside the United States. Political or financial instability, merchandise quality issues, product safety concerns, trade restrictions, work stoppages, tariffs, foreign currency exchange rates, transportation capacity and costs, inflation, civil unrest, natural disasters, public health crises, epidemics, and pandemics, and other factors relating to foreign trade are beyond our control and could disrupt our supply of foreign-sourced merchandise.

We are monitoring and evaluating any potential impacts that increased tariffs and other trade restrictions may have on our business, and considering ways in which we may offset these impacts. There is no assurance, however, that we will be successful in mitigating the effects on us of increased trade regulation in the current environment.