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1. We've taken a position in $BNED which was spun out from Barnes and Noble a couple years back. Their business has pivoted from college bookstore operator to an e-com centric platform with a host of digital solutions to solve painpoints endemic of an inefficient education system
2. Known mostly as a college campus bookstore operator, $BNED has a 768 physical bookstores and 671
"virtual" bookstores across 1,439 campuses nationwide. In many cases, their physical store and associated e-commerce capability is the only game in town for
students to get the
"virtual" bookstores across 1,439 campuses nationwide. In many cases, their physical store and associated e-commerce capability is the only game in town for
students to get the
3. textbook and course materials needed for class. The stock trades at a sleepy 0.38x NTM sales as the business on the whole is valued by the market as an unexciting, secularly challenged, book retailer. Our research indicates that the market's valuation misses the mark.
4. First, e-commerce comprised ~2/3s of their total sales in the October ending quarter. Schools are getting their own customizable, branded, sites through BNED. As of the latest call in December, they had 770 "or so" microsites affiliated with different schools. More interesting
5. than their successful (albeit ongoing) e-commerce pivot is their "First Day Complete" solution which is a part of their First Day initiative that seeks to increase the uptake of proper course materials for students upon the start of each semester; on average only 30% of
6. required course materials are bought by
college students; this especially hurts less economically advantaged students. Under First Day
Complete, $BNED delivers 100% of required course materials to all students at a university at highly discounted prices (40-50% cheaper).
college students; this especially hurts less economically advantaged students. Under First Day
Complete, $BNED delivers 100% of required course materials to all students at a university at highly discounted prices (40-50% cheaper).
7. This solution is live in 12 schools today and scaling to 50+ in2021. Further, we already are starting to see this product show up in financials with $9.1M revenue
contribution from First Day in FQ121 and $53.4M in FQ221; growth was +156% yy and +77% yy
respectively.
contribution from First Day in FQ121 and $53.4M in FQ221; growth was +156% yy and +77% yy
respectively.
8. This spring they will be adding Sam Houston State (25k student enrollment) to the growing list of
colleges adopting their First Day program. If
we use a simple 5x sales multiple on First Day's revenue stream then the implied value of the business
colleges adopting their First Day program. If
we use a simple 5x sales multiple on First Day's revenue stream then the implied value of the business
9. would be over $1.1B or ~$23/share. That's 376% higher than the current stock price. Bartleby ($CHGG comp) is another hidden gem among BNED's assets In the October quarter, Bartleby grew subscribers to over 120,000 with revenue increasing 53%.
10. Note too that Bartleby's sub product is priced at
$9.99/month, below Chegg's equivalent product at $14.99/month. CHGG trades at 16x NTM sales. With
~$10M in run-rate revenue today, using CHGG's multiple of 16x, we can see Bartleby valued at $160M,
or $3.23/share which is 2/3s
$9.99/month, below Chegg's equivalent product at $14.99/month. CHGG trades at 16x NTM sales. With
~$10M in run-rate revenue today, using CHGG's multiple of 16x, we can see Bartleby valued at $160M,
or $3.23/share which is 2/3s
11. of BNED's stock price. Put it all together and this can easily be a $20-$40 stock in the next 24 months. End.
