Direct-to-Student Offering Expands BNED's Digital Portfolio
Financially Accretive Transaction Benefits Support Growth Strategy
Enhances Both BNED's and Student Brands' Market Reach
BASKING RIDGE, N.J.--(BUSINESS WIRE)--
Barnes
& Noble Education, Inc. (NYSE: BNED) ("the Company"
or "BNED"), a leading provider of educational products and services
solutions for higher education and K-12 institutions, announced today
that it has completed the acquisition of Student Brands, a leading
direct-to-student subscription-based writing skills services business,
for $58.5 million in cash.
Student Brands is an education technology company that operates multiple
direct-to-student businesses focused on Study Tools, Writing Help, and
Literary Research, all centered around assisting students with the
writing process. Student Brands has a substantial and growing community
of online learners, with over 20 million unique monthly users across its
digital properties, which include 123HelpMe.com, Bartleby.com and
StudyMode.com in the United States and TrabalhosFeitos.com, Etudier.com
and Monografias.com in Brazil, France and Mexico, respectively. Student
Brands utilizes deep data analytics and artificial intelligence to drive
its proprietary content management system, the Content Brain. The
Content Brain sifts through millions of pieces of content and provides
the best answer for virtually any assignment a student is tackling.
Student Brands generates revenue predominantly through its
subscription-based services and digital advertisements.
Kanuj Malhotra, Chief Operating Officer, Digital Education, Barnes &
Noble Education, said: "The acquisition of Student Brands enables BNED
to maintain and expand our leadership position in the distribution and
provision of educational services and content. The lack of writing
proficiency is one of the most significant challenges in our education
system, and Student Brands provides a significant opportunity to serve
this market with solutions that improve student performance. BNED serves
one in four higher education students every year, and through our recent
acquisition of MBS, we have expanded our market reach to even more
students in both higher education and K-12. The addition of Student
Brands and its nearly 100,000 subscribers will enable us to offer
products and services directly to our current student base and beyond."
Transaction Benefits
The transaction builds on the Company's strong growth momentum in
digital learning, and will further enhance its ability to support
partner schools' retention efforts by helping students and teachers
embrace technology tools that improve writing proficiency. The
experienced management team at Student Brands provides deep online and
customer monetization experience. BNED serves more than six million
students, as well as parents and alumni. With this acquisition, BNED
extends its industry-leading reach and deepens its relationships with
students and faculty by adding a direct-to-student digital channel. By
leveraging the BNED footprint among students and faculty, K-12 schools
and higher education institutions, Student Brands will have
substantially more opportunities to market the services students need to
improve performance in the classroom and secure jobs after graduation.
"We help millions of students every month with the critical skills that
they need to succeed - whether it's writing a paper for class or
drafting a college application essay. As student demand for extra help
with writing and study tools continues to grow, we are delighted to be
joining forces with a company whose scale, resources and expertise will
help drive further innovation in our products and expand our addressable
market," said Thomas Swalla, Chief Executive Officer, Student Brands.
"Barnes & Noble Education shares our mission to provide students with
innovative solutions to solve a growing range of academic challenges. We
are confident that this is an ideal combination and we are thrilled to
begin working with our new colleagues."
Market Opportunity
Writing proficiency is one of the most critical skills needed by
graduates across all industries, and students in the U.S. spend more
than $3 billion dollars annually on remedial education, including
remedial writing instruction1. The writing proficiency
deficit is widespread, negatively impacting students, new graduates and
employers:
-
82% of high school students and 96% of college students require extra
help and more than 20 million students consider writing help an
ongoing need2;
-
New graduates are struggling to find work3 or accept jobs
that do not require degrees4; and employers are struggling
to find qualified graduates to hire5.
Transaction Details
The Company utilized cash on hand and availability under its current
credit facility to finance the acquisition. Student Brands is expected
to contribute over $10 million of EBITDA to BNED's consolidated
operation results over the next twelve months. Student Brands has
negligible recurring capital expenditures, resulting in strong free cash
flow generation. The acquisition will be accretive to BNED's EBITDA, Net
Income and Cash Flow in FY2018. Additionally, the acquisition is
structured to "step up" the tax basis of Student Brands' assets and is
expected to result in significant future tax savings.
Student Brands will operate as a part of BNED's digital operations and
will serve as its initial anchor asset for BNED's direct-to-student
growth strategy. Mr. Swalla will remain CEO of Student Brands and the
current Student Brands leadership team will join BNED as full-time
employees. Student Brands will retain its offices in Los Angeles, CA and
India.
Advisors
Cyndx Advisors LLC acted as exclusive financial advisor and Gibson, Dunn
& Crutcher, LLP served as legal counsel to Barnes & Noble Education in
connection with the transaction. Vaquero Capital LLC acted as exclusive
financial advisor and LKP Global Law, LLP served as legal counsel to
Student Brands in connection with the transaction.
Conference Call Information
BNED will host an investor call to discuss this transaction on Monday,
August 7, 2017, at 10:00 a.m. ET. The conference call can be accessed
via a live webcast at www.bned.com/investor
or by dialing 888-510-1767 and entering passcode 236805. A replay of the
call will be available through Monday, August 14 via webcast at www.bned.com/investor
or by dialing 866-375-1919 and entering passcode 9916801. An investor
presentation will be posted to the Barnes & Noble Education, Inc.
website (www.bned.com/investor)
prior to the conference call.
About Barnes & Noble Education, Inc.
Barnes & Noble Education, Inc. (NYSE: BNED), one of the largest contract
operators of physical and virtual bookstores for higher education and
K-12 institutions across the United States, one of the largest textbook
wholesalers, and a leading provider of digital education services,
enhances the academic and social purpose of educational institutions.
Through its Barnes & Noble College and MBS subsidiaries, Barnes & Noble
Education operates 1,481 physical and virtual bookstores and serves more
than 6 million students, delivering essential educational content and
tools within a dynamic retail environment. Through LoudCloud, its
digital education platform, Barnes & Noble Education offers a suite of
digital software, content and services that include predictive
analytics, OER courseware, competency-based solutions and a learning
management system. Barnes & Noble Education acts as a strategic partner
to drive student success; provide value and support to students and
faculty; and create loyalty and improve retention, all while supporting
the financial goals of college and university partners.
General information on Barnes & Noble Education, Inc. can be obtained by
visiting the Company's corporate website: www.bned.com.
About Student Brands
Student Brands is an education technology company that operates multiple
direct-to-student businesses focused on Study Tools, Writing Help, and
Literary Research. The Student Brand network of sites provides real
tools and answers for students around the globe. With more than 20
direct-to-student sites in more than 10 countries, Student Brands
provides writing and study tools that help millions of students succeed
in high school, college, and post-graduate studies.
Forward-Looking Statements
This press release contains certain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 and
information relating to us and 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," "will," "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 press release 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: general competitive
conditions, including actions our competitors may take to grow their
businesses; a decline in college enrollment or decreased funding
available for students; decisions by colleges and universities to
outsource their bookstore operations or change the operation of their
bookstores; the general economic environment and consumer spending
patterns; decreased consumer demand for our products, low growth or
declining sales; the anticipated benefits of the Student Brands
acquisition may not be fully realized or may take longer than expected;
restructuring of our digital strategy may not result in the expected
growth in our digital sales and/or profitability; risk that digital
sales growth does not exceed the rate of investment spend; the
performance of our online, digital and other initiatives, integration of
and deployment of, additional products and services including new
digital channels, and further enhancements to Yuzu® and any
future higher education digital products, and the inability to achieve
the expected cost savings; our ability to successfully implement our
strategic initiatives including our ability to identify and execute upon
additional acquisitions and strategic investments; technological
changes; our international expansion could result in additional risks;
our ability to attract and retain employees; changes to payment terms,
return policies, the discount or margin on products or other terms with
our suppliers; risks associated with data privacy, information security
and intellectual property; trends and challenges to our business and in
the locations in which we have stores; non-renewal of contracts and
higher-than-anticipated store closings; disruptions to our computer
systems, data lines, telephone systems or supply chain, including the
loss of suppliers; work stoppages or increases in labor costs; possible
increases in shipping rates or interruptions in shipping service,
effects of competition; obsolete or excessive inventory; product
shortages; changes in law or regulation; the amount of our indebtedness
and ability to comply with covenants applicable to any future debt
financing; our ability to satisfy future capital and liquidity
requirements; our ability to access the credit and capital markets at
the times and in the amounts needed and on acceptable terms; adverse
results from litigation, governmental investigations or tax-related
proceedings or audits; changes in accounting standards; challenges to
running our company independently from Barnes & Noble, Inc. following
the Spin-Off; the potential adverse impact on our business resulting
from the Spin-Off; and the other risks and uncertainties detailed in the
section titled "Risk Factors" in Part I - Item 1A in our Annual
Report on Form 10-K for the year ended April 29, 2017. Should one or
more of these risks or uncertainties materialize, or should 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 press
release.
1 Complete College America, 2014
2Factworks Survey, May 2016
3 Baccalaureate and Beyond Longitudinal Study, 2006-2014, NCES
4Economic Policy Institute, 2015
5National Chronicle of Higher Ed, Employment Perception
Survey
View source version on businesswire.com: http://www.businesswire.com/news/home/20170804005402/en/
Media:
Barnes & Noble Education, Inc.
Carolyn J.
Brown, 908-991-2967
Vice President
Corporate Communications
cbrown@bned.com
or
Investors:
Barnes
& Noble Education, Inc.
Thomas Donohue, 908-991-2966
Vice
President
Treasurer and Investor Relations
tdonohue@bned.com
Source: Barnes & Noble Education, Inc.
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