$BNED Did Not Adapt Fast Enough
With its stock down more than 32% YTD, neither Barnes & Noble Educational, Inc.’s (NYSE: BNED) stock nor its balance sheet seems to be in a good spot. Looking to improve its situation, BNED sold its Digital Student Solutions (DSS) segment to Learneo and is looking to scale its more profitable First Day Complete (FDC) segment. However, these efforts may not be enough since the company has $285 million in debt that it is going to pay through 2024 – which makes bankruptcy a serious risk to consider.
BNED Fundamentals
First Day Complete
BNED is currently looking to shift its business to the more profitable FDC. BNED expects a market of 13 million potential students, 4 million of whom are already within the existing BNED base, which would represent a $5.5 billion market opportunity. The question is if BNED can realize this market opportunity since, as of Q3 2023, only 580 thousand students have enrolled in the program, representing only 4% of BNED’s potential students and 14.5% of the existing students in BNED’s base.
FDC has grown 76% YoY reaching $67 million in sales, which accounts for just under 15% of BNED’s revenues and 23% of course material product sales, which have seen only 9% growth, most of it being driven by FDC. That could mean that if BNED can’t scale its FDC business fast enough and switch to profitability it could face severe consequences.
Long Term Debt
The main problem BNED is facing is the huge debt load of $285 million it accumulated over the recent years.
If BNED doesn’t successfully turn to positive cash flow soon, it may face a huge problem since it has only $11 million in cash and cash equivalents which will not be enough to pay its debt that is going to be paid through 2024.
Furthermore, BNED sold its Digital Student Solutions (DSS) to Learneo for $20 million, which may have confused many investors, since even though DSS growth was declining, BNED management has shown confidence in the segment and its high-profit margin. That indicates that the sale was purely to strengthen its balance sheet, which may still not be enough to pay off its debt.
BNED has already extended its $255 million ABL and its $30 million term loan 6 months through August and December of 2024 respectively, which may still not be enough time for BNED to sort its finances to pay its debts. It is also worth mentioning that the $30 million term loan has a high interest rate of 11.25%, so the extension will cost BNED more in interest payment. All of this may see BNED going bankrupt if it can not refinance its debts.
BNED Financials
In its Q3 2023 report, BNED’s assets increased 10% YoY from $1.26 billion to $1.28 billion and its cash and cash equivalents increased 11% YoY from $9.9 million to $11 million. BNED’s total liabilities increased by 7% YoY from $1.029 billion to $1.104 billion.
Revenue also increased 11% YoY from $402 million to $447 million. Operating costs increased more than 1.6% from $119 million to $121 million, which contributed to the operating loss decreasing 49% YoY from $33 million to $17 million. In this way, BNED reported a 32% YoY improvement in net loss to $25 million.
Technical Analysis
BNED stock’s trend is bullish with the stock trading in an upwards channel. Looking at the indicators, the stock is trading above the 50, and 21 MAs which are bullish indications, and is trading below the 200 which is a bearish indication. Meanwhile, the RSI is neutral at 60 and the MACD is bearish.
As for the fundamentals, BNED stock has witnessed a catalyst in the selling of its DSS segment for Learneo. BNED’s 2023 annual earnings and the possibility of BNED going bankrupt in 2024 due to its inability to pay its debts will be future catalysts for BNED stock.
BNED Forecast
While BNED’s First Day Complete problem seems to be promising in terms of profitability and is growing rapidly, it is still not growing fast enough, especially with the huge debt BNED has at the moment. The latest sale of DSS also has shown that BNED is looking to increase cash in any way possible, which doesn’t paint BNED’s future in a good light and may see BNED going bankrupt. There’s currently no saving grace for BNED stock, and it might be a profitable short play in anticipation of a potential bankruptcy in 2024.
BNED Fundamentals
First Day Complete
BNED is currently looking to shift its business to the more profitable FDC. BNED expects a market of 13 million potential students, 4 million of whom are already within the existing BNED base, which would represent a $5.5 billion market opportunity. The question is if BNED can realize this market opportunity since, as of Q3 2023, only 580 thousand students have enrolled in the program, representing only 4% of BNED’s potential students and 14.5% of the existing students in BNED’s base.
FDC has grown 76% YoY reaching $67 million in sales, which accounts for just under 15% of BNED’s revenues and 23% of course material product sales, which have seen only 9% growth, most of it being driven by FDC. That could mean that if BNED can’t scale its FDC business fast enough and switch to profitability it could face severe consequences.
Long Term Debt
The main problem BNED is facing is the huge debt load of $285 million it accumulated over the recent years.
If BNED doesn’t successfully turn to positive cash flow soon, it may face a huge problem since it has only $11 million in cash and cash equivalents which will not be enough to pay its debt that is going to be paid through 2024.
Furthermore, BNED sold its Digital Student Solutions (DSS) to Learneo for $20 million, which may have confused many investors, since even though DSS growth was declining, BNED management has shown confidence in the segment and its high-profit margin. That indicates that the sale was purely to strengthen its balance sheet, which may still not be enough to pay off its debt.
BNED has already extended its $255 million ABL and its $30 million term loan 6 months through August and December of 2024 respectively, which may still not be enough time for BNED to sort its finances to pay its debts. It is also worth mentioning that the $30 million term loan has a high interest rate of 11.25%, so the extension will cost BNED more in interest payment. All of this may see BNED going bankrupt if it can not refinance its debts.
BNED Financials
In its Q3 2023 report, BNED’s assets increased 10% YoY from $1.26 billion to $1.28 billion and its cash and cash equivalents increased 11% YoY from $9.9 million to $11 million. BNED’s total liabilities increased by 7% YoY from $1.029 billion to $1.104 billion.
Revenue also increased 11% YoY from $402 million to $447 million. Operating costs increased more than 1.6% from $119 million to $121 million, which contributed to the operating loss decreasing 49% YoY from $33 million to $17 million. In this way, BNED reported a 32% YoY improvement in net loss to $25 million.
Technical Analysis
BNED stock’s trend is bullish with the stock trading in an upwards channel. Looking at the indicators, the stock is trading above the 50, and 21 MAs which are bullish indications, and is trading below the 200 which is a bearish indication. Meanwhile, the RSI is neutral at 60 and the MACD is bearish.
As for the fundamentals, BNED stock has witnessed a catalyst in the selling of its DSS segment for Learneo. BNED’s 2023 annual earnings and the possibility of BNED going bankrupt in 2024 due to its inability to pay its debts will be future catalysts for BNED stock.
BNED Forecast
While BNED’s First Day Complete problem seems to be promising in terms of profitability and is growing rapidly, it is still not growing fast enough, especially with the huge debt BNED has at the moment. The latest sale of DSS also has shown that BNED is looking to increase cash in any way possible, which doesn’t paint BNED’s future in a good light and may see BNED going bankrupt. There’s currently no saving grace for BNED stock, and it might be a profitable short play in anticipation of a potential bankruptcy in 2024.
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