Barnes & Noble Education, Inc

Ladies and gentlemen, thank you for standing by and welcome to the Barnes & Noble Educational Fiscal 2021 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 1. TO YOUR SPEAKER TODAY, ANDY MELDOY. THANK YOU. PLEASE GO AHEAD, SIR.

GOOD MORNING, AND WELCOME TO OUR FISCAL 2021 SECOND QUARTER EARNINGS CALL. JOINING US TODAY ARE MIKE HUSBY, CEO AND CHAIRMAN, TOM DONAHUE, CFO, JONATHAN SHAR, EXECUTIVE VICE PRESIDENT, BNED RETAIL AND CLIENT SOLUTIONS, LISA MALLETT, PRESIDENT OF BARNES NOVA COLLEGE, AND DAVID HENDERSON, PRESIDENT OF MBS. Before we begin the call, I'd like to remind you that the statements we make on today's call are covered by the Safe Harbor disclaimer contained in our press release and public documents. The contents of this call are the property of Barnes & Noble Education and are not for rebroadcast or use by any other party without prior written consent of Barnes & Noble Education. During this call, we will make forward-looking statements with predictions, projections, and other statements about future events. These statements are based upon current expectations and assumptions that are subject to risks and uncertainties, including those contained in our press release and public filings with the Securities and Exchange Commission. The company disclaims any obligation to update any forward-looking statements that may be made or discussed during this call. And now, I'll turn the call over to Mike Huseby.

Thanks, Andy, and thank you all for joining us this morning. During the past few months, we've seen a vastly different college experience take place nationwide. Our campus partners have adapted to a fall semester that looked very different than in years past. Between navigating delayed start dates, introducing blended learning formats, implementing widespread student testing and more, colleges and universities adjusted as best they could to the ongoing challenges that COVID-19 pandemic continues to present. Through all of this, BNED has been able to pivot accordingly, ensuring that our customers receive uninterrupted service no matter where, when, or how their learning took place this fall. As we have highlighted since the onset of this pandemic, the strategic investments we have made in our digital offerings, e-commerce solutions, warehouse operations, and campus stores have uniquely positioned us to offer the flexible and adaptable solutions that institutions, students, and faculty Over the past few years, we have introduced solutions such as our BNC First Aid Model and the BNC Adoption and Insights Portal to drive convenience for students and administrators and respond to institutions' increased emphasis on affordability, access, and achievement. We have also developed new digital offerings such as our Bartleby Suite of Services to ensure students have access to 24-7 academic support. Coupled with our virtual bookstores, dropship offerings, and fulfillment capabilities powered by our MDS subsidiary, BNED has created an unmatched value proposition, which we believe has become only more relevant in light of the challenges this pandemic has presented for institutions. It is because of this that we have continued to attract new clients and generate new business growth, signing $93 million in new business to date this fiscal year, or $71 million on a net basis. With that being said, we are continuing to experience the impacts of the pandemic in other areas of our business and are adjusting and adapting accordingly. As anticipated, we experienced substantially lower general merchandise sales this quarter, which significantly impacted our profitability given the relatively high margins of our GM business. Our second quarter traditionally sees higher general merchandise sales due to athletic events, many of which were either completely canceled or took place in a reduced capacity this fall. Our field team has done a tremendous job managing expenses to help mitigate these declines, which Tom will discuss in further detail. Compared to our expectations, Textbooks performed relatively well, particularly considering many students did not have the traditional on-campus experience or did not attend on-campus classes at all. Textbook sales declined 19% for the quarter as compared to 7.7% decline in the prior year period. Because of substantially reduced foot traffic on campus and in our campus stores due to pandemic restrictions, e-commerce remains an important and accelerating sales channel for us. We continue to see a large percentage of shoppers purchasing their textbooks and general merchandise on our bookstore website. E-commerce sales represented 66% of our total Q2 sales as compared to just 36% in the prior year. We have made continued progress in the development of our new e-commerce platform this quarter. This exciting platform will provide a hyper-personal, hyper-local shopping experience for customers. We continue to see growth and momentum of our First Day and First Day Complete inclusive access programs, which have become even more relevant to institutions in light of the current learning environment. At a time when many things remain uncertain, our First Day offerings enable schools to provide a more affordable and highly convenient model that ensures students receive their course materials, and are ready to learn by the first day of class. This is more critical now than ever. At the start of the fall semester, we successfully launched First Day Complete at 12 campuses, and we expect to implement the program at additional campuses for the start of the spring semester. As we look ahead to next fall, we are in deep discussions with a significant number of our campus partners about transitioning to First Day Complete as they look to take advantage of the benefits of our all-inclusive model to enhance access, affordability, and student academic achievement. As we continue to support our campus partners through our bookstore operations and course material offerings, we also continue to serve students directly through our DSS segment. The demand for Bartleby's Homework Health Solutions has recently exploded. October 2020 was our highest traffic month ever, with approximately 4 million unique visitors in the month, up 378% versus last year, and up almost 80% versus spring peak traffic. We are focused on scaling this business in a quality manner that will lead to sustainable subscriber growth. Bartleby's potential to add significant shareholder value to BNED is truly exciting. The rapid emergence and persistence of online and blended learning formats only strengthens the need for this digital solution. This past quarter, we saw continued demand for our Bartleby products from the students we serve. Bartleby growth subscribers grew to over 120,000 with revenue increasing 53%. On a year-to-date basis, subscriber growth is up over 40%. Because fewer students are on campus right now, we have seen a smaller percentage of Bartleby sales taking place through our in-store channel. And while our store teams are still putting great effort into selling to their customers, we've also increased our focus on other sales and marketing channels to ensure that Bartleby is available to as many students as possible. This includes SEO, which has continued to exceed our expectations in driving users to Bartleby and remains a core aspect of our growth strategy. Additionally, during the second quarter, we entered into a partnership with Blackboard, a leading ed tech company, to offer our Bartleby suite of solutions in their newly launched Blackboard Assist feature. Blackboard Assist is a feature within Blackboard's learning management system that enables higher ed students to search and access academic support services from their institutions as well as from curated third-party tutoring and homework tools such as Bartleby right within their LMS. Bartleby will offer two products through Blackboard Assist in the United States. Bartleby Health and Bartleby Rights. Bartleby Health is the institutionally branded version of our Bartleby Learn product, which provides asynchronous online tutoring from experts who are available 24-7. We are very excited about this new partnership and the expanded distribution it provides for our Bartleby suite of services in the United States. Blackboard Learn is a leading global learning management system in the U.S., and serves millions of students, many of whom are outside of the BNED footprint. We believe that partnerships such as this one and VitalSource will allow us to grow brand awareness for Bartleby, in turn driving increased subscriptions and revenue. As we look to further scale our Bartleby suite of solutions, we will continue to explore additional partnerships such as this one, which will allow us to scale at faster rates. This was obviously a very unique fall rush for our stores, for students, for faculty, and for our campus partners. With a focus on the health and safety of our people and communities, our stores resumed operations on campuses where it was deemed safe to do so this fall, supporting customers with safety measures such as mobile curbside pickup, contactless payments, and socially distanced store layouts. We are immensely proud of our teams for the ways in which they have adapted to change these past few months. One of our biggest strengths as a company lies in the relationships we have on campuses nationwide. Our partners, students, and faculty rely upon us for best in class service. And even in the midst of a global pandemic, we have been able to continue delivering just that. As we've noted previously, we continue to expect COVID-19 to impact our business throughout fiscal 2021. In response, we have substantially adapted our cost structure and continue to take actions to reduce costs and operate more efficiently in this environment. We'll remain vigilant and highly focused on managing expenses and liquidity prudently. I would like to take this opportunity to once again thank all of our campus partners, and our people at BNED for their tireless efforts throughout these challenging times. Even as we have had to adapt to difficult circumstances, our teams have continued to make significant progress on our goals, and I'm very proud of the ways in which they have all continued to innovate and move forward. With that, I will turn it over to Tom for the financial review.