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.

Thanks, Mike. that our fiscal 2021 second quarter ended on October 31, 2020, and consisted of 13 weeks. All comparisons will be through the prior year period unless otherwise noted. Total sales for the quarter were $595.5 million compared with $772.2 million in the prior year. This decrease of $176.7 million, or 22.9 percent, was comprised of $165.2 million decrease from the retail segment, a $3.8 million decrease from the wholesale segment, and a $0.7 million increase from the DSS segment. BNED's fiscal 2021 second quarter results were significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning model and significantly reduced their on-campus activities in response to the pandemic. While many big conferences resumed their sporting activities, fan attendance was either eliminated or severely restricted, which had a substantial impact on the company's high margin general merchandise business. Sales were also affected by overall enrollment declines, which were further exacerbated by the decline of international students who either studied online or deferred their studies as a result of the pandemic. Retail comparable store sales declined 28.1% during the quarter, comprised of a 19% decline in textbook sales and a 52% decline in our general merchandise business. Our general merchandise business, which includes clothing and food and relies on store traffic throughout the semester, was far more impacted by the reduction of students on campus and the elimination of the campus social events and sporting events. These declines were partially mitigated by BNC's rapidly growing first-day offerings, which incorporate course material fees into students' tuition fees and grew 77% to $53.4 million during the quarter. Net sales for the wholesale segment decreased $3.8 million, or 9.5% to $36.4 million, primarily due to decreased gross sales partially offset by lower returns and allowances. DSS sales grew 0.7 million, or 14%, to 5.9 million, benefiting from the growth in Bartleby Subscriptions and our student brands business. Bartleby Subscriptions revenue increased 53% to 1.7 million, while student brands revenue increased 3.8% to 4.3 million. The consolidated gross margin rate for the quarter was 19.4%, compared to 24.2% in the prior year period. This decrease was primarily due to the shift to lower margin digital courseware and lower sales of our higher margin general merchandise products, coupled with higher markdowns. This was partially offset by our efforts to renegotiate and lower contract costs. In anticipation of the challenging sales environment, we continue to prudently manage payroll and store operating expenses. These actions, coupled with the cost reduction actions taken in fiscal 20, enabled us to reduce selling and administrative expenses by 21.4 million or 18.9% compared with the prior year period. As we look ahead to the spring rush period, we anticipate that schools will continue to prioritize the health and safety of their faculty and students and continue to adjust their learning models in response to the pandemic. we expect that they will continue to restrict on-campus social events, including sporting events, to reduce crowds and follow COVID-19 safety protocols. We remain committed to serving our partners however they choose to resume learning and will continue to prudently manage expenses and liquidity in light of the lower sales environment. Due to all the uncertainty that COVID presents in the near and intermediate term, we are not providing fiscal 21 guidance. We do expect that COVID will continue to have a significant impact on our business during fiscal 21. At the end of the quarter, our cash balance was $7.4 million with outstanding borrowings of $99.5 million, as compared to $24.6 million of cash and no borrowings in the prior year period. This difference is directly the result of the lower sales environment we are experiencing, but better than our own expectations. Our current liquidity position remains strong despite the challenging climate. CapEx for the second quarter was $9.1 million compared with $10.9 million in the prior year. Currently, our retail segment operates 1,439 college, university, and K-12 school bookstores comprised of 768 physical bookstores and their e-commerce sites as well as 671 virtual bookstores. As of today, we have contracts to open an additional nine stores in fiscal 2021, with one additional known closing primarily of a smaller, unprofitable store. This will bring our total physical and virtual store count to 1,447 locations, net of closed stores. With that, we open the call for questions. Operator, please provide instructions for those interested in asking questions.

Great, thank you. Ladies and gentlemen, as a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press a pound or hash key. Please stand by while we compile the Q&A roster. And your first question here comes from the line of Ryan McDonald from Needham. Please go ahead. Your line is now open.

Yeah, good morning, everyone. Thanks for taking my questions. Congrats on a nice quarter here during challenging times. As you're starting to look towards the spring semester, I think there's a recent New York Times article that discussed that a number of universities are expecting more students on campus this coming spring. Just would be curious to hear sort of how that compares to the conversations you're having with your university partners and and how you're approaching sort of inventory building as we get to the spring semester here?

Ryan, it's Mike. I'll give a general answer, then I'll let Lisa Mallett, who's president of our college operations, jump in. You know, obviously, it's very hard to predict what's going to happen because, as we saw in the fall, depending on how COVID moves and how well it gets controlled. You know, we saw today the first vaccines are starting, but how fast will they get rolled out, et cetera? You know, we still have a number of schools that it's different by geography, as you saw in California, that many of the schools, the state schools decided to go full remote. That was fairly unusual. Many other schools went hybrid in the fall. And those that didn't go hybrid and went full on campus, some ended up having to change their plans. I think the same thing as a risk of happening in the spring, although now that the schools have been through a full semester of this adaptation and there's going to be a relatively long break for most schools between Thanksgiving when many schools dismiss students other than to have finals taken virtually for the winter break. We had a fairly long break there. So I'll let Lisa talk about what we're actually hearing from our campus partners so we can address the rest of your question.

Sure. Good morning, Ryan. I saw that article as well and immediately reached out to our field vice presidents just to make sure that we had the latest insights on what's happening on campus. I mean, Mike's right. It is very geography driven. The trend we are seeing is that schools are pushing their openings. They're not opening. till mid-January or late January. We heard that yesterday as an example for Yale and Kentucky. Pretty universally, they're canceling spring breaks. Obviously, they don't want students leaving campus, come back to campus, et cetera. So there are many universities that are not making a definitive decision in terms of what's going to happen later on in the spring. But the trend is definitely the later openings. and the cancellation of the spring breaks. Our expectation is that learning will continue to be driven mostly remotely at this time.

Tom, can you ask a question on the SPAMs, the inventory SPAMs?

Yeah, thanks. This is Tom Ryan. Brian, our intention and plan has always been to not be ahead of what we see in the sales. So to the extent that the sales aren't coming, we're not going to be ahead of ourselves on the inventory, and we'll continue to manage that prudently and really manage to the campus activities that we see in terms of the activities and the events that, to this point in time, have really been non-existent.

You can see from the comments in the script that you know, we have an increasing percentage of sales going to e-commerce, which is, you know, fairly obvious as to why. And not only e-commerce, you know, from our own fulfillment, but we institute a dropship capability in our general merchandise, many of our general merchandise partners, and that's increasing. So that helps us in the context of, you know, being able to fulfill and also the breadth of the selection that our customers can get it. These are orders that are being filled directly by manufacturers through the Commerce Hub dropship system.

Excellent. That actually leads right into my next question nicely around e-commerce. It's great to see sort of the materially increasing percentage of merchandise sales coming from e-commerce. Can you talk about what your expectations for this phased rollout of the new platform are as we get into calendar 21, and perhaps what's really potentially constraining or preventing universities from really rolling that out and implementing it more quickly? John Scharr could address that question.

Yeah. Hey, Ryan. It's Jonathan Scharr. Yeah, our plan is to continue our development and have a phased rollout of our new e-commerce platform starting after the spring rush and then have that phased throughout and have that implemented prior to fall rush for our next fiscal year.

Excellent. In terms of answering your question about what's preventing, you know, anytime you put in a new e-commerce system, particularly under these circumstances, we want to make sure that, you know, we do things on a very customized basis for each school. So this isn't flipping the switch. We have, you know, 770 or so microsites available. so that we have begun to roll it out. It's not a flipping the switch type of an exercise. It's very customized. So I think it's a very cooperative process between us and the school. So to answer your question directly, some of it will depend on the resources that the schools devote, and some of it depends on us making sure that as we're scaling this, we're doing it in a way that optimizes the transition from the old system to the new system.

Excellent. Just one last one from me. I'll jump back in the queue. On first day and first day complete, you know, great to see 12 implementations during the semester. As you look at sort of expectations for additional routes into spring, what are your expectations in terms of number of universities or maybe a comparison, you know, order of magnitude compared to the fall and how's the pipeline looking for fall 2021? Thanks. John?

Yeah, hey, it's Jonathan again. Yeah, for spring, we are and we've announced publicly that Sam Houston State University is launching for spring term, which from an enrollment standpoint will be our largest campus implementing first day complete. And we haven't publicly communicated what the other schools would be for spring. But looking ahead, the pipeline, as noted in the script, is really robust. We are in deep discussions with a significant number of campus partners about transitioning to the model and the benefits of the whole inclusive model and the access affordability model And achievement and overall convenience is even more relevant today. So we're really excited about the number of conversations and the opportunity to really show significant growth in first day complete for next fiscal year and really starting with fall term 21.

The other thing I would add to that is that as we said, we added $93 million of new business thus far this year in fiscal 21. And as we're doing that, we're having these conversations with the new schools on first aid complete. We're trying to target our efforts towards those schools to have an open mind towards inclusive access, and first aid complete. That doesn't mean all the schools will do that, that we're picking up these new schools, but that's an important point because it validates the new business that we're selling validates the overall model, which is things are more complicated for schools. They have more of an emphasis on managing the fiscal aspects of their business. And because they share in every dollar that we produce, under our contracts with them, they're very incentivized to outsource to us. So the model, the overall business model within Barnes & Noble College is being validated by the new business as well as the move to first day and first day complete. And by the way, we have very recent conversations with the top management of large publishers. And in general, they're very committed to inclusive access as a way to grow their digital businesses, which is important to us.

Excellent. Thanks for taking my questions. Thanks, Roland.

Your next question comes from the line of Alex Fearman with Craig Hallam Capital. Please go ahead. Your line is now open.

Great. Thanks very much for taking my questions. You know, I'd love to just if we could take a step back for a second as you think about, you know, planning for next year and years to come, you know, as you engage with your partner schools and look at potential new contracts, you know, do you feel that universities are still envisioning the campus bookstore as a central community space? Can you talk about maybe how that might look different after the pandemic or the same as it has for you before 2020? Yeah, I'll let Lisa handle that.

I think my overall comment would be that As I just said, many of the reasons that we're growing our new business have to do with the complexities of not just content procurement, but also retailing. And I think one of the things we really bring to the table through Lisa and her team is the strength in the retail experience within the stores. And we expect that to continue. And as I've said in the past, I personally believe, and this is necessarily a corporate view, this is not necessarily supportable by facts, but you know, there's going to be quite a pendulum swing back to students and others who are interested in learning getting back to social, you know, lack of social distance. While they'll still be careful in certain respects, I think that there's going to be a real urge to get back together and spend time physically, which, you know, we're not necessarily planning our business, Alex, it's going to return to physical store traffic levels of fiscal year 19 in the fall of next year. I don't think that would be smart, but we are expecting, you know, the overall community hub feel of our schools to continue and be maybe even more important than ever given what's transpired over the course of the last year. But Lisa, you can.

Yeah, no, Mike, you know, yeah, what you said is exactly right. I mean, Alex, as we go to market, you know, it's really two key factors. you know, really value props for us is obviously affordability and what we're able to do to drive that through digital and first state complete, et cetera. But the other is really our expertise and prowess as a retailer and our ability to build community, to drive traffic, to celebrate the school brand, and to drive revenue, right? And we recently did a debrief, Alex, of around 12 of of our schools recently signed schools to understand what drove their decision and how did we differentiate in the marketplace. And what came through so loud and clear in all of those responses was our ability to drive community and to create that dynamic community space, you know, not just for the students, but obviously for parents and alumni, but also in know in more of the you know retail community locations to bring in the outside community into the store so universities are very very focused on making sure that the student experience um continues to evolve and and um and that we remain really a central hub on campus

Great. That's really helpful. And then just thinking about the numbers for a little bit, what are some of the things that you're going to be looking towards over the next few months and quarters as you make the decisions to start bringing some expenses back and personnel back? Are there kind of signposts that you're going to be looking for over the next semester or two as you start to make those decisions?

Well, all that's tied into our planning for spring and beyond, obviously, as you're incurring And, you know, we've done a very painful, but I would say great job of managing costs and costs related to payroll and other costs and other capital spend. And that started as soon as the pandemic hit. We furloughed almost 11,000 people. And then we've been bringing people back into stores. Primarily we're talking about Barnes & Noble College in terms of this question because MBS has been running, you know, three shifts 24-7 since COVID hit, given their assets and their ability to satisfy virtual and remote learning requirements. And Bartleby, the same thing. I mean, they're exploding in terms of their growth right now. So the Barnes & Noble College is really the focal point and in terms of expense management, because that's where most of the costs are and that's where most of the challenge is. And so what we're planning on is doing the same thing that we've done, which is being very flexible in changing our cost structure so that much more of it is variable as opposed to fixed. You know, we have changed the mix of our full-time employees with the mix of our seasonal and temporary employees. And we've changed, you know, Tom can get into this maybe in a little more detail, but, you know, our objective is to maintain that change in our cost structure, which allows us to be much more nimble and reactive, quite frankly, on a short-term basis, you know, which is once we get news from various schools, how are we able to staff and accommodate employees And at the same time, you know, use technology to try to reduce, you know, payroll costs. You may want to comment further on that.

Yeah, no, thanks, Mike. Alex, I think some of the guideposts that we're thinking of generally revolve around the activities or what we've been experiencing with the lack of activities on campus with the severely restricted or non-existent fans at football games and the likes, you know, we're heading into obviously basketball season. What does an NCAA tournament look like? So as these events and social events start returning more to normal, I think that's some of the guideposts we're thinking of as we consider, you know, some of the expense items that you're referring to, but Mike hit it pretty well in terms of how we've adjusted the model. And this is really attributable to the to the college team and the field staff on how we've switched from longer-standing full-time employees to more temporary, seasonal, and that's helped reduce costs significantly.

I think the other unknown, and I wouldn't call it a guidepost necessarily, but it's the vaccine progress, which I don't think we have enough information on yet. You can form your own speculation based on all the information that's out there. But we are starting to see the actual rollout of the vaccine. And that's not just how does it impact students, but how does it impact faculty who are concerned? Will they get the vaccines earlier? We don't know the answers to those questions. But what it does look like from the early reports, and even listening to them this morning from the health care experts, is that the vaccines do look like they're effective. And, you know, thus far, I mean, the clinical trials, I mean, et cetera. So that's a big thing that we'll keep our eye on and every school is keeping their eye on and I'm sure is going to be, you know, pushing to get their faculty and their administration, you know, involved in being vaccinated as soon as they can.

Terrific. Well, you guys have done a great job managing through this year, and I appreciate all the answers. Thanks. Thank you, Alex.

Once again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your next question comes from Rory Wallace from Adelbridge Capital. Please go ahead. Your line is now open.

Thanks for taking my questions and congrats on the strong results. I just wanted to follow up on Bartleby where I think you mentioned like 378% increase in your monthly uniques and up 80% in spring. And I was just trying to square that with the growth in revenues, which I assume that maybe you were getting higher conversion rates on the in-store traffic last year. And that's why the revenue is not growing quite as fast, but I just love a higher level sense of how you think the product's performing in the marketplace and also any ways that you, you see to enhance the product and distribute it more broadly. Thanks, Rory. That's a question I could spend a lot of time on because I've been spending a lot of time personally with the DSS team. As you know, Kanush and Holtra did a wonderful job getting us to this point and has built a really strong team within DSS for other opportunities at the end of November. So I've been spending a lot of time with that team. To give you a short answer, I guess, first off, in terms of How does it square with revenue and how does it relate to the in-store? Really what you're asking is what does a sub look like that is sold through our PLS system in-store versus the great growth we've had, much of which has come from our long-tail SEO strategy. And, you know, in Q&A in particular, we have textbook solutions in Q&A in terms of homework help. And Q&A is just literally exploding. I mean, we're spending a lot of time right now just working on the quality of our responses, the turnaround time in our responses, and all those things that we need to do from a competitive perspective and also a client service perspective to make sure we have a sustainable business and great customer experience. So... what you'll start to see is you'll start to see, you know, because of the technology that the team has put in place, you'll start to see, you know, a sortation, so to speak, of the volume of activity we get in. We're prioritizing those questions that we're getting in daily to make sure we're answering our paid subscribers first. Okay, so this product has been built largely, as you know, on a model where it's largely promotional and our focus hadn't been on really the financials. It's really getting the product built, the content put in place. and getting everything put in place that we need to offer. That's changing. We're now focusing more so on, as you're asking, building the quality of the product to differentiate it. So when we bought Student Brands in 2017, one of the main reasons we brought that company into our family is because they have a tremendous team of people that are ahead of where we think the competition is on artificial intelligence and machine learning. That's enabling us to sort through volumes of questions that are about three times what we're expecting on a daily basis as of right now in our plans and to prioritize them using what we call Bartleby Connect. It's basically a router that takes using artificial intelligence and really being able to analyze the source of the question It allows us to sort large amounts of questions so that we're focusing on paying subscribers and our strongest prospects for converting questions and answers to more sustainable subscribers. Historically, the LTV associated with an in-store sale has been substantially higher than know one that we get from an seo or you know out of footprint we call it uh sale and we have ways that we're working on to close that gap by enhancing the product i don't really want to get into our specific product roadmap on this kind of a call for competitive reasons but we have a tremendous team that's working on a lot of things that um you know are not distant objectives. They're being worked on and rolled out as we speak, whether it's expanding subjects, you know, doing a lot more with video and various contexts and that type of thing. So you'll see a much more, I think, robust product in the very near term from Bartleby, even though it's performing very well right now in terms of improving its performance on Q&A and textbook solutions. So we're very excited about it, and I'm personally very excited about it because I'm getting to be much more involved personally with the team and seeing what a strong team we have in DSS and what a great job they're doing. Yeah, thanks, Mike, and I appreciate that. And I guess dovetailing on that, just since you did bring it up, I mean, I know that you obviously have a great handle on how that's performing and what you're working on, but do you think that there's – Is there an organizational strategy, I guess, as far as eventually consolidating that under someone else who's currently with the company?

Or would you look to potentially make an external hire at some point around managing DSS and Bartleby?

Our objectives with Bartleby are to take it to the next level of the business. And how we do that and who we do it with, we'll announce when we're ready to do it. So I think, you know, we have a plan. I just don't think it makes sense to talk about that until we have specifics. Understood. And then as far as first day, I thought the revenue number was pretty high compared to what I was expecting, 53 million. And I assume a lot of that is the bulk of it is still a la carte versus complete. But is there any sense that you can give us as far as how much of it might be first day complete at this stage? We're not going to break those numbers out today. I mean, at the end of this fiscal year, we may, so we can provide some context on the growth potential. I think what's really exciting about it is the margin expansion. And, you know, we have to be a little careful about disclosing those numbers, given how new the product is. We want to make, you know, from a competitive perspective and also Just, you know, I think that inclusive access as an offering and a concept incorporates both first aid and first aid complete. And until we scale first aid complete, which we expect to do based on the pipeline discussion you just heard, you know, in a much more substantial way in the fall of next year, I think we can look towards breaking those numbers out. I don't think it It benefits us right now to do that, other than in the context of John's metrics around enrollments, for example. We talked about Sam Houston State and the size of that relative to other First Aid Complete clients. We're pushing for First Aid Complete metrics that really revolve around enrollment increase and margin contribution. I think that, yes, you'll start to see those numbers highlighted, but it probably won't be done this year. I just don't think it makes sense to do that yet. Sure. Yeah, that makes sense. And I guess with the sales motion there being tied strongly to new business, which I know Lisa's running, but then as far as what, John, you've been specifically doing there, have you been able to, I guess, sort of staff that sales team up and are you experimenting with anything new around go-to-market or is what you have in place working pretty well?

Yeah, we actually have a significant dedicated focus to first day complete and communicating the value proposition to both current clients and prospects alike. And we have implemented a number of new marketing and sales and marketing programs recently. that are doing a really effective job of getting the attention of our campuses to have detailed and substantive conversations on first day complete and if the value proposition is that it delivers as a priority on many campuses. And the good news is the answer is yes. And so we're driving Those conversations were on the pipeline. It's really, really robust and sort of a line for significant growth from a number of institutions. And as Mike said, also the overall enrollment of students within our campuses that will be participating in first aid complete, as well as margin contributions.

Yeah, I think, you know, John and his team, as well as Lisa in the field, have done a tremendous job focusing on first aid complete. And the marketing and creativity, I don't want to get into that over the phone in terms of what we're doing specifically, given some of the competitive issues. But... been very creative we even have you know certain board members that are getting directly involved because of their backgrounds and their expertise and endorsements of this product which has been effective as well so we're we're pulling out all stops i guess i would say in a very thoughtful but an aggressive way to market that that pipeline that we have and you know the good news about it is that a lot of the things have been put in place such as the integration with the student information system, which is basically a very simple thing to do, AIP, the Adoption Insights Portal. A lot of these tools that we've produced under John's leadership have been put in place in many of these schools already, so that going to first aid complete is the next step in the sequence, and it's not difficult to do. It's a heavy lift any time you go from from a conventional a la carte model to a first aid complete for a campus the first time you do it. But having these tools in place makes it much, much simpler and much more productive for the school as well as for us. So there's been a strategy behind this, as you know, Rory, for the last couple of years in terms of what we've been developing and putting into schools in terms of tools to make this possible. the first day complete implementation sequentially, you know, fairly easy to do. It's a logical next step for many of the schools.

Great. Thanks a lot, both of you. And then I guess for Lisa, just on the new business side, the 72 million of net new business year to date is a great number.

I guess, how are you feeling about the pipeline heading into 2021 and even

or I guess calendar 21 and the back half of fiscal 21.

Yeah, we're feeling very, very bullish about it. I mean, the numbers prove that out. Our pipe is up, I don't know, around 100 million than where it was last year, Rory. So, you know, as everyone has talked about, I mean, the complexity of the industry and the pressure that the schools are under, having to make those really tough decisions about cutting academic programs or tenure track faculty. is really driving schools to wake up and recognize that they need to operate more like a business. And we are in such a position of strength because of our ability to really customize and break apart our models and rebuild them in any way that the schools need. So I am very, very bullish about the strength of the opportunities and the pipe going into next year.

Great. Well, thanks a lot, everyone, and good luck going forward. Thank you, Roy.

And there are no further questions in the queue at this time. I'll turn the call back over to Andy Melvoy for any closing comments.

Great. Thank you. And thank you all for joining us on today's call and your continued support and interest in BNED. Please note that our next scheduled financial release will be our fiscal 2020 third quarter earnings on or about March 4th, 2021. Have a great day, everybody. Bye-bye.

And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.