Investor Presentation July 2015 Filed pursuant to Rule 433 of the Securities Act of 1933, as amended Registration Statement No. 333-202298 Free Writing Prospectus dated July 14, 2015 |
Forward Looking Statements Disclaimer This presentation contains certain forward-looking statements and information relating to our business that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “forecasts,” “projections,” and similar expressions, as they relate to us or our management, identify forward- looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others, those described in the prospectus contained in our Registration Statement on Form S-1 filed with the Securities and Exchange Commission (the “SEC”) under the captions “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements.” Should one or more of such risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward- looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this presentation except to the extent required by law. We have filed a registration statement on Form S-1 (including a prospectus) with the SEC for the spin-off to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents we have filed with the SEC for more complete information about us and the spin-off. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. You may request a copy of the prospectus relating to the spin-off at no cost by writing to us at the following address: Investor Relations, Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, NJ 07920. |
Agenda 1. Introduction & Strategic Overview Mike Huseby Executive Chairman 2. Company Overview Max J. Roberts Chief Executive Officer 3. Financial Overview Barry Brover Chief Financial Officer |
Introduction & Strategic Overview |
Transaction Summary Barnes & Noble Inc. (BKS) Barnes & Noble Booksellers Inc. (Retail Business) NOOK Digital LLC (Digital Business) Barnes & Noble Education Inc. (BNED) Barnes & Noble College Booksellers LLC. (College Business) B&N Stockholders Pro Forma Structure Description • Tax-free spin-off of Barnes & Noble Education Inc. (“BNED”) from Barnes & Noble Inc. • Pro-rata distribution of all capital stock of BNED to existing Barnes & Noble shareholders Rationale • Enhanced management and board focus • Business appropriate capital structures and return of capital policies • Pure-play investment opportunity • Attractive standalone currency for BNED with increased access to capital markets Other • Exchange: NYSE • Ticker: BNED • Distribution Ratio: 0.632 1 Overview |
Management Team Barry Brover CFO KPMG Max J. Roberts CEO Petrie Retail, Macy’s, Deloitte Michael P. Huseby Executive Chairman Barnes & Noble, Cablevision, Charter, AT&T William Maloney EVP, Sales Barnes & Noble Education Lisa Malat VP, Operations & CMO Macy’s Scott Ryder CTO, Yuzu Apple, Sun Microsystems Kanuj Malhotra Chief Strategy & Development Officer Barnes & Noble, Kaplan, Cendant, Lehman Phil O’Reilly VP, Tax Barnes & Noble, MF Global, McDermott Will & Emery Thomas D. Donohue VP, IR & Treasurer Barnes & Noble, Interpublic Patrick Maloney COO Barnes & Noble Education Tenured Management Team with Deep Digital and Acquisition Experience 2 |
Investment Highlights Strong Platform for Growth Significant Market Opportunity •Significant opportunity in core business and adjacent areas •Well positioned to expand market share and store footprint Leverageable Investments in Innovation Proven Business Model Leader in Digital Education •Aggregator, distributor and enabler of digital education content Complete Solution Provider Large National Footprint •National distribution network •Scaled operations •Direct access to 5 million students •Flexible and resilient operations •Lower sensitivity to economic cycles •Profitable new contract growth •Significant opportunities in college bookstore market and digital education •52% of stores operated by schools •Robust technology platform positions company for future growth •Deeply embedded within campus ecosystem •Strategic partner to schools, faculty and students •Solutions focused on driving both university and student outcomes 3 |
Organic • Distribution – Physical – Virtual / eCommerce – Unaffiliated / Out-of- Footprint Markets • Leverage Digital Investment Inorganic • Distribution – Physical – Digital • Content – Physical – Digital Growth Strategy Drive Student Outcomes • Course Development • Instructional Design • Assessment • Adaptive Learning • Tutoring • Career Services & Credentialing Drive University Outcomes • Marketing and Recruitment • Enrollment and Development • Retention • Digital Enablers • K-12 • Vocational • International Core Adjacent Products / Markets (Higher Ed) New Markets (Opportunistic) 4 Multiple Avenues for Organic and Inorganic Growth |
Company Overview |
Significant Market Opportunity $ 13B PRINT & DIGITAL HIGHER ED BOOK MARKET 52% SCHOOL-OPERATED BOOKSTORES 21M STUDENTS IN POST- SECONDARY DEGREE-GRANTING INSTITUTIONS $ 170B MILLENIALS’ ANNUAL PURCHASING POWER $ 10B COLLEGE BOOKSTORE MARKET Leading Operator and Innovator in Highly Fragmented Industry 5 |
The Most Comprehensive Suite of Campus Solutions Complete Solution Provider School System Integration Comprehensive Rental & Student Affordability Programs Enhanced Revenue Opportunity Comprehensive Course Materials Catalog Social & Academic Hub Access to 5M Student Audience Barnes & Noble College Marketing Education Services Faculty Support Services Student / Alumni Engagement Customized Retail Experience & Academic Superstores General Merchandise Student Support Services Operational Expertise Physical / Digital Content Distribution Education Technology 6 |
Proven Business Model 7 Stable and Profitable Business Operations (1) Over last 3 fiscal years. LOW CUSTOMER ACQUISITION COSTS HIGH REVENUE VISIBILITY 93% CAMPUS PARTNER RETENTION $ 90M REVENUE FROM NEW STORES OPENED IN FY2015 CONTRACTS TYPICALLY PROFITABLE WITHIN CONTRACTS TYPICALLY PROFITABLE WITHIN 15 Yrs AVERAGE SCHOOL RELATIONSHIP TENURE 1 ST YEAR (1) |
Large National Footprint 8 Direct Access to 5M Students through 724 Stores in 42 States |
Leverageable Investments in Innovation 9 Best in Class Technology Platform Drives Everything We Do Campus Connect Platform Research / Analytics Platform eCommerce Platform CAMPUS SYSTEM INTEGRATION ACTIONABLE RESEARCH INSIGHTS DYNAMIC RETAIL EXPERIENCE Digital Educational Platform Course Material Adoption Platform Digital Marketing Platform DIGITAL CONTENT LEADERSHIP COLLABORATIVE RELATIONSHIPS STUDENT ENGAGEMENT & MARKETING |
Leader in Digital Education Digital Content Aggregator Digital Content Publishers Digital Content End Users Well Positioned to Lead Transition to Digital 10 Content Aggregation Leading Digital Platform Campus Relationships Well Positioned to Lead Industry Transition |
Strong Platform For Growth 4 Lead in Digital Education Expand Market Share with New Bookstores Increase Sales at Existing Bookstores 3 2 1 Strategic Partnerships & Acquisition A Clear Path Forward 11 |
Financial Overview |
Financial Summary $1,631 $1,536 $1,545 $132 $212 $228 $1,763 $1,748 $1,773 2013 2014 2015 Product Sales / Other Rental Income ________________________ (1) Adjusted to exclude LIFO adjustment of $(2.2) mm, $7.7 mm and $0.0 mm in FY2013, FY2014 and FY2015, respectively. (2) Includes new hires, compensation, technology and marketing spend. (3) Reflects primarily store payroll and operating expenses. (4) 2015 reflects pro forma adjustments related to the distribution. Total Sales ($ in millions) Gross Profit & Margin (1) ($ in millions) Change in S&A Expense ($ in millions) Pro Forma EBITDA & Margin (1)(4) ($ in millions) 12 (3) (2) $363 $348 $347 $44 $81 $97 $407 $429 $444 2013 2014 2015 Product Sales / Other Gross Profit Rental Gross Profit $20 $28 $29 2013 2014 2015 Yuzu Investments Infrastructure Costs Stores Separation Costs $104 $99 $87 5.9% 5.6% 4.9% 2013 2014 2015 EBITDA % margin |
Financial Summary (cont.) Store Openings vs. Closings Gross Profit Margin (1) Comparable Store Sales Growth Rental Income ($ in millions) 13 ________________________ (1) Adjusted to exclude LIFO adjustment of $(2.2) mm, $7.7 mm and $0.0 mm in FY2013, FY2014 and FY2015, respectively. $96 $132 $212 $36 $80 $16 $132 $212 $228 2013 2014 2015 Growth Over Prior Year (1.2%) (2.7%) 0.1% 2013 2014 2015 49 30 48 10 16 24 2013 2014 2015 Stores Opened Stores Closed 22.3% 22.6% 22.4% 33.0% 38.4% 42.5% 2013 2014 2015 Product Sales / Other Gross Margin Rental Gross Margin |
Pro Forma Capitalization ________________________ (1) Reflects settlement of related party receivables. (2) Based on average excess availability. Cash $95 Credit Facility – (1) (2) Type: Asset-Backed Revolving Facility Commitment: $400 Base Accordian: $100 Cost: L + 175 – 200 bps Term: 5 years Pro Forma Balance Sheet ($ in millions) Credit Facility ($ in millions) 14 FY2015 |
Attractive Investment Opportunity Leading operator and innovator in highly fragmented industry National footprint with significant ability to scale new products and services Innovative technology platform deeply embedded within campus ecosystem Flexible and resilient business model providing foundation for profitable growth Tenured management team with operational, digital and M&A expertise Strong growth platform with significant near-to-medium term opportunities 15 Unique Investment Opportunity in Higher Education and Ed Tech |
Thank You |