Barnes & Noble Education : 2023 Annual Report

BARNES & NOBLE EDUCATION, INC.

LETTER TO SHAREHOLDERS

Dear Fellow Shareholders,

The operating environment for higher education remained challenging during our 2023 fiscal year. While we continue to expect dynamic operating conditions, we are leveraging the lessons we've learned and are focusing on what we can control to create long-term value.

After our 2022 Fall semester came in below our expectations, we undertook a comprehensive review of the Company, including all products and offerings, customer needs, operations, investment requirements, and expected returns. This work clarified where we needed to create efficiency and strategically invest to deliver on our mission, deepen our strategic moat, and improve our execution to position BNED for sustained profitable growth.

Executing On Our Strategic Priorities

During our 2023 fiscal year, we focused on three important priorities to accelerate our strategy and improve our long-term financial results.

Our first priority was to align our costs with revenue in what we believe is the "new normal" of the post- pandemic operating environment. We flattened our organization, began closing unprofitable stores, and made the difficult decision to reduce our headcount. This reduction included many valued, long-tenured colleagues. We want to underscore how grateful we are for the hard work and contributions of all the employees impacted by these actions, which were necessary to right-size our organization and enable us to invest in our highest conviction growth opportunities.

Our second priority was to accelerate the transition of the schools we serve to our student-centric and more profitable, subscription-likeFirst Day Complete equitable access model. This innovative course material delivery model provides students with access to all of their course materials on or before the first day of class, ensuring there are no gaps in learning while providing the time-saving convenience of having all of their course materials bundled and delivered to them through a concierge-style service.

In May 2023, through our proprietary research platform, Barnes & Noble College Insights, we surveyed students who participated in the First Day Complete program during the 2023 Spring semester. Key insights from the survey include: 83% of survey participants said the First Day Complete program had a positive impact on their classroom success; 86% said they were better prepared for the academic term; 75% stated the program helped them achieve better grades; 91% stated that they found it convenient to have their course materials bundled by the program, and 78% stated that First Day Complete increases the likelihood they will continue their education at their current school.

Our third priority was to streamline our portfolio of assets to focus on our core competencies in our Retail business. In the first quarter of our 2024 fiscal year, we divested our Digital Student Solutions business to increase our focus and capital allocation on our continued transition to First Day Complete and growing our general merchandise business.

In addition to executing on these operational priorities, during the first quarter of our 2024 fiscal year, we strengthened our financial position by working with our financial stakeholders and strategic partners to amend and extend the maturity dates of the Company's credit and term loan agreements. This amendment provided additional near-term liquidity to fund our Fall 2023 and Spring 2024 semester inventory and operating needs and extended our operational "runway" to enable us to further execute our strategic model transition to First Day Complete.

Long-Term Growth and Profitability

In our 2023 fiscal year, First Day Complete revenue grew 88% and will continue to be the cornerstone of our long-term profitable growth plan. For the Fall 2023 term, 157 campus stores have committed to utilize First Day Complete, representing undergraduate and postgraduate enrollment of approximately 800,000 students, a 46% enrollment increase compared to the Fall 2022 term.

Beyond our equitable access offering, we also have an opportunity to continue to grow our general merchandise business. We made significant progress throughout our 2023 fiscal year on our emblematic product assortment, merchandising, execution, and seamless omnichannel retail experience through the Fanatics and Lids strategic partnership we forged in 2021. In our 2024 fiscal year, we expect to further leverage the benefits of this partnership to strengthen our schools' brands with their extended communities, and to continue to improve the emblematic product general merchandise experience and execution to benefit both the schools we serve and our retail customers.

From a capital allocation perspective, we are committed to ongoing efficiency and cost discipline. This includes deep rigor on managing store staffing levels and optimizing our labor mix, as well as driving greater efficiency in our information technology spend. Our Retail store teams' performance has been exceptional as they continue to provide an unmatched in-store experience while implementing demanding new productivity standards to reduce costs.

We want to recognize our outstanding employees who have helped drive significant change to transform our Company. The resolve we have seen across the Company is a testament to the people who make BNED such an incredible purpose-driven organization.

As we look toward our annual shareholder meeting on October 5, 2023, on behalf of the BNED Board, we would like to thank our departing Board members, Emily Chiu and Dan DeMatteo, for their service to the Company. We are pleased to welcome two new directors, Steven Panagos and Raphael Wallander, to the BNED Board. Both new Directors bring fresh perspectives and highly relevant experience to BNED's continued transformation. On behalf of management, we would also like to thank our Board for their guidance and contributions throughout the year.

In closing, we believe we have taken significant and necessary steps to position BNED for sustainable, profitable growth. We're focused on our most compelling growth opportunities, optimizing our cost structure, managing our balance sheet and building a stronger, more resilient company. Underpinning all of our actions is our commitment to helping the schools we serve meet and exceed their highest priority goals; and to help students succeed by providing greater access, affordability, convenience, and improved academic outcomes.

We are grateful for the support of our shareholders, lenders, campus and strategic partners, customers, and our BNED team members. We look forward to updating you on our progress.

Michael P. Huseby	Vice Admiral John R. Ryan
Chief Executive Officer &	Chairman of the Board
Acting Chief Financial Officer

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