Barnes & Noble Education, Inc

Good morning and welcome to the Barnes & Noble Education Earnings Call. At this time, for opening remarks and introductions, I would like to turn the call over to Andy Millivoy, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Good morning and welcome to our fiscal 2021 third quarter earnings call. Joining us today are Mike Huseby, CEO and Chairman, Tom Donoghue, CFO, Jonathan Shar, Executive Vice President, BNED Retail and Client Solutions, Lisa Mallett, President of Barnes & Noble College, and David Henderson, President of MBS. Before we begin today's call, I'd like to remind you that the statements we make 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 the company. 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 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 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. Nearly one year ago today, colleges and universities nationwide began closing their campuses due to the COVID-19 pandemic. Shortly after, we would close down our campus doors protecting the safety and well-being of our employees and our customers. Last March, none of us could have anticipated the year to come nor the challenges we would face as this pandemic continued on. Many students assumed that though they would be finishing their spring term remotely, they would be back on campus by the summer of 2020. Now, in the spring of 2021, many still have yet to return. The challenges of this past year required tremendous fortitude and adaptability from both us and our partners. It also provided a significant opportunity for BNED to showcase the value we provide to institutions. This past year, it became more apparent than ever that the solutions we offer can help institutions address challenges that have grown exponentially in the midst of a global pandemic, driving affordability, access, and ROI for students. Further, our ability to customize these solutions to the unique needs of each college and university has not only demonstrated our value, but also what differentiates us in the marketplace. Highlighting the importance of equitable access, affordability, and an improved student experience Our first day and first day complete programs have grown significantly this fiscal year, and we see this growth continuing to rise rapidly as the value proposition and impact on student outcomes becomes even more relevant. To date, we have agreements with 31 campus stores to support the BNC first day complete program in fall term 2021, representing over 160,000 in total undergraduate enrollment, which is up from 12 campus stores and 43,000 in total undergraduate enrollment in the fall term 2020. And our teams continue to work with a significant number of additional campuses to secure agreements to launch First Day Complete for fall term 2021. First Day Complete provides substantial benefits for students, not only driving down costs, but also providing access to materials on or before the first day of class and a convenience of a concierge-style forced material delivery model. Importantly, it does not limit academic freedom for faculty. As the campus bookstore, we can ensure that no matter what the format or publisher, faculty can adopt whatever materials work best for their class at the most affordable cost. Coupled with AIP, our adoption and insights portal for faculty and administrators we can help faculty discover and choose cost-effective course materials for their students. This model of course material delivery provides benefits across the board, and we look forward to watching it grow as more and more institutions recognize the value it brings to students. The retail experience, particularly in stores, remains challenged this quarter as many campuses continue to operate in hybrid or completely remote formats, and continue to curtail on-campus activities to promote COVID-related safety protocols. We continue to serve customers through stores that have been adapted to promote health and safety guidelines, as well as through our mobile and web channels that have remained available to students even as campuses were closed. Our store and field teams have once again worked through a very challenging rush period and I remain incredibly grateful to each and every one of them for the tireless efforts in the midst of a pandemic. As anticipated, spring rush results were lower than the previous year due to the impacts of COVID, with continued pressure on our higher margin general merchandise business in particular. While we are managing expenses prudently in light of these anticipated declines, we have also sought out additional ways to ensure that when campus activity and athletic events do ultimately return to normal, Our retail experience is providing the best possible value for students, faculty, alumni, and fans. In December 2020, we announced that we had entered into a long-term strategic omnichannel merchandising partnership with Fanatics Lids College, or FLC, forging an alliance with the two online and offline leaders in the license, sports, and emblematic merchandise category. Fanatic's cutting-edge e-commerce and technology expertise will offer BNED campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with LIDS, the leading standalone brick-and-mortar retailer focused exclusively on licensed fan and alumni products, BNC and its campus stores will have improved access to trended sales performance data on licensees, product styles, and design treatments for more than 1,200 LIDS stores and stores that they manage for sports organizations such as the New York Yankees, Los Angeles Dodgers, and others. Under the terms of the agreement, Bananix and LIDS also made a joint $15 million strategic equity investment in BNED, which we plan to use to further bolster our strategic growth initiatives. We believe our FLC partnership has tremendous potential to improve the customer experience, increase selection, and accelerate the recovery and growth of our high-margin general merchandise business, particularly in e-commerce, beginning in our upcoming fiscal 2022. This will in turn benefit our campus partners, providing a significant opportunity to increase our financial contribution to them. We are very excited for the partnership to begin this spring and look forward to providing further updates in a month to come. In addition to the benefits for our existing clients, as a very positive aspect of this alliance, we plan to go to market together with FLC to attract new business through our enhanced offering. Now I'll turn to our DSS business. Our Bartleby suite of solutions continues to grow rapidly, providing students with the academic support they need during this period when traditional learning routines have been upended. We experienced strong results once again this quarter, with Bartleby revenue growing 53% over last year. Bartleby growth subscribers grew to over 210,000 on a year-to-date basis, with DSS revenue increasing 11.8% over that same period driven by Bartleby revenue growth. Though the in-person learning experience remains invaluable, and students and institutions alike are eager to return to campus, we believe the dramatically increased use of online learning during this pandemic will lead to far more flexible models of learning in a post-pandemic world. With this flexibility will come the need for support outside the classroom, and as a result, tools such as Bartleby will remain relevant even as students return to campus. In the meantime, we're continuing to expand Bartleby's capabilities, most recently through a new agreement with Wolfram Alpha, a trusted name in education that provides highly sophisticated technical computing solutions to thousands of colleges and universities globally. As part of our agreement, we will work with Wolfram Alpha to develop a math solver as a new feature in our Bartleby suite of solutions. The math solver will allow students to access an interactive digital calculator that provides real-time, step-by-step explanations for even the most advanced math problems. We know from the questions we're currently seeing asked through Bartleby that math is a subject where students require a significant amount of learning support. Introducing this new math solver will ensure that Bartleby continues to grow with the students it serves. adding functionality that can meet the urgent demand to even better support students in this subject area. Bartleby remains a significant growth driver for BNED, and we have been very pleased with the progress our teams have made in increasing Bartleby's reach and brand awareness. Our highly skilled BFF team is also innovating new features and functionalities that will enhance both Bartleby's UX and its competitive position. We're confident that this positive momentum will continue as our product becomes more robust and students continue to recognize the support Bartleby can offer them throughout their academic journeys. I want to welcome our new DSS president, David Menke, who officially started yesterday. We're very fortunate and grateful to have attracted a leader of David's caliber with a proven and substantive track record of leading digital retail subscription-based businesses to large scale and success. All of us at BNED, including the DSS team he will be leading, are very excited to have David in this new key senior management role. As we look ahead, we continue to expect the pandemic to impact our results for the balance of this fiscal year. As such, we continue to tightly manage our expenses and our current liquidity position remains strong. Despite the many challenges that COVID-19 presented, I am very proud of all the work that our team has accomplished over the past year to position BNED for continued success. The progress we have made on our key strategic initiatives, further bolstered by the strategic partnerships that have been forged with the leading companies in their respective categories, enable us to provide unmatched solutions to our campus partners. Ultimately, this will be reflected in our ability to retain our current campus partnerships and to attract new ones to expand our foundational retail platform. Importantly, and very positively, on a year-to-date basis, we have signed over $100 million in new retail contracts this fiscal year, or $84 million on a net basis. These annual contract amounts are based on historical sales trends for each school. This past year was a catalyst for a great deal of change in higher education. It has accelerated long needed change and forced all of us who serve this industry to be nimble and flexible. It's pushed us to innovate faster than we ever thought possible. We firmly believe that the changes of this past year will lead to a better and more equitable future for higher education. For BNED, we have demonstrated the resilience and dedication of our people and the value of our contributions to our customers. which makes us very optimistic about our ability to create sustainable and enhanced shareholder value going forward. With that, Tom will provide the financial review. Thanks, Mike. Please note that our fiscal 2021 third quarter ended on January 30th, 2021, and consisted of 13 weeks. All comparisons will be to the prior year period unless otherwise noted. Total sales for the quarter were $411.6 million, compared with $502.3 million in the prior year. This decrease of $90.7 million, or 18.1%, was comprised of a $70.3 million decrease from the retail segment, a $27.5 million decrease from the wholesale segment, and a $0.8 million increase from the DSS segment. BNED's fiscal 2021 third quarter results were significantly impacted by the ongoing COVID-19 pandemic, as many schools continue to adjust their learning model and significantly reduce their on-campus activities in response to the pandemic. While our textbook business continues to be fairly resilient in the current environment, reduced on-campus activities and social distancing protocols continue to significantly affect our general merchandise business. Retail comparable store sales declined 19.9% during the quarter, comprised of an 8.1% decline in textbook sales and a 46% decline in our general merchandise business. These declines were partially mitigated by BNC's rapidly growing first day offerings, where a student is charged for course materials by the institution through a fee or included in tuition. These sales grew 107% to 46.4 million during the quarter. Consistent with prior years, the spring rush period typically extends beyond the quarter due to later school openings and students buying course materials later in the semester. Factoring in the fiscal month of February, comparable store sales for the retail segment decreased 26.7% on a year-to-date basis. Net sales for the wholesale segment decreased $27.5 million, or 41.1% to $39.5 million. primarily due to lower sales, especially at non-BNC bookstores, partially offset by lower returns and allowances. Additionally, results have been impacted by the significant reduction of on-campus textbook buyback opportunities due to COVID-19 safety protocols. We expect a lack of on-campus buyback programs during fiscal 21 to impact wholesale availability of used book inventory supply in fiscal 22. DSS sales grew 0.8 million or 12% to 7.2 million, benefiting from the growth in Bartleby subscriptions. Bartleby subscriptions revenue increased 53% to 2.6 million, while student brands revenue decreased 3% to 4.6 million. The consolidated gross margin rate for the quarter was 17.2% compared to 23.6% in the prior year period. This decrease was primarily due to sales mix including a higher concentration of 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 lower contract costs, along with higher margins in the wholesale segment, led by lower markdowns and lower returns and allowances. As we continue to operate in the challenging sales environment, we remain steadfast on prudently managing 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 $13.5 million, or 12.7% compared with the prior year period. During the third quarter, we evaluated some of our store-level long-lived assets for impairment, which were significantly affected by the COVID-19 pandemic. As a result of the impairment testing, we recognized a pre-tax $27.6 million non-cash charge. At the end of the quarter, our cash balance was $9.9 million with outstanding borrowings of $150.8 million as compared to borrowings of $65.9 million in the prior year period. This difference is directly the result of the lower sales environment we are experiencing. Our current liquidity position remains strong despite the challenging climate. As a component of the strategic partnership that we entered into with Fanatics and LIDS during the third quarter, in addition to the $15 million strategic equity investment they made in BNED, they have also agreed to purchase our logo and emblematic general merchandise product, which we expect to be finalized during our fiscal fourth quarter. CapEx for the third quarter was $9.7 million compared with $7.6 million in the prior year. Our retail segment operates 1,441 college, university, and K-12 school bookstores, comprised of 765 physical bookstores and their e-commerce sites, as well as 676 virtual bookstores. As of today, we have contracts to open an additional 13 stores in fiscal year 2021, with 15 additional known closings, primarily of smaller, unprofitable stores. This will bring our total physical and virtual store count to 1,439 locations, net of closed stores. With that, we will open the call for questions. Operator, please provide instructions for those interested in asking a question.

If you'd like to ask a question at this time, please press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. First question comes from Ryan McDonald. Please go ahead.

Yes, good morning, everyone. Thanks for taking my question. Great to see some of the progress on the digital initiatives. And I guess that's where I'll start. When we look at the opportunity for first day, first day complete, great to see we're now up to 31 stores representing 160,000 potential students. Can you sort of explain and tell us how that rolls out to students? Do you expect as we get to fall 21 that all students or a vast majority of students will be able to take advantage of that, or will this be a rolling approach with new incoming classes? Hey, Ryan, it's Jonathan Char. Thanks for the question. With the 31 campus stores where we have agreements reached, all of those campus stores are participating starting in the fall in first day complete. So it is not a rolling launch. That is how course materials will be delivered to those students at those campuses starting in fall, or some of those are continuing from the 12 that we had in fall term 20. So all of those campuses are participating. And as mentioned, we are continuing to work with a significant number of additional campuses to secure agreements to launch first day complete for fall term 21 over the next 30 to 60 days.

Excellent. And then my follow-up question is really just getting a sense of what you're hearing from your university partners as you progress through the spring.

Obviously, a greater mix of maybe some on-campus students being on campus, maybe not necessarily taking classes in person as much as What are you hearing in terms of, you know, potential for graduation ceremonies on campus towards the later this spring and then expectations, I guess, as we start planning for fall 21? Are you hearing more of a greater mix of universities willing to do more in-person learning? Thanks.

Yeah, Ryan, it's Mike. I think that what we're hearing from campuses is for Fall 21, substantially more on-campus in-person learning, but no doubt they're going to continue to blend in based on what they've learned to the extent that it's efficient or maybe it's more effective for certain classes or certain students that have a requirement for more flexibility to blend in virtual. In terms of graduation, I'll let Lisa. Lisa can handle that one.

Thanks, Mike. Overall, I agree with Mike's assessment on the fall. Every day, Ryan, we are getting good news and good feedback from our universities about their plans for not just optimism, but their plans for reopening in a much more normalized way for fall semester, residence life, and having the majority of classes in person. So that's good news. Universities right now are making their decisions on graduation and orientation. More and more schools are scheduling in-person orientations and bringing back student tours, which we're really excited to see. And for graduation, we're still seeing a mix, but even schools that are opting not to do in-person, vast majority are moving forward with virtual graduations, which we're working to take full advantage of.

Excellent. Thanks for taking my questions. Once again, to ask a question, please press star 1 on your telephone keypad. We have a question from Alex Furman with Craig Hallam Capital. Please go ahead.

Great. Thanks very much for taking my question. I wanted to ask a little bit more about the general merchandise business and the partnership with Fanatic. You guys have always done a really good job with the emblematic apparel business, but Fanatic is possibly the best in the world at this. So what are your stores going to look like when students are back on campus in the fall semester that might be different than what they've seen in the past? And, you know, as you think about the next couple of years, how big could that business really get for you? I'll answer in general, and then Lisa can talk about what the stores are going to look like. You know, we announced this partnership in December, so we're now in the process of implementing it with Fanatics and LIDS. LIDS is an affiliate of Fanatics. As you know, it has some real expertise in providing data analytics around trend in sales performance and licensees and product styles and that type of thing. They have 1,200 of their own stores and manage other stores, as we said in the script. But I think that, you know, what's important to understand and what Fanatics and Lidsville understand is that, you know, we're really representing the brand of the schools here. So the schools have a lot of input into what those stores look like, and they'll have a lot of input as well, you know, our people into what the stores will sell and how they represent the brand that the school wants to represent. What we're really leveraging here is we're taking, you know, taking advantage of our focus on understanding the schools and local personalized marketing and relationships with the students. And we're taking advantage of Fanatic's expertise and in e-commerce and technology as well as in marketing and in LIDS in terms of their in-store expertise and their access to some of the licensees that we have, but incremental access to additional licensees that both Fanatics and LIDS had to expand the assortment. And eventually we have a go-to-market strategy also I'll let Lisa talk about that's an offensive part of the strategy with this new partnership.

Great. Thank you, Mike. In terms of the scores, everything that Mike says is accurate in terms of we're really bringing together the best of both companies, certainly our deep understanding and knowledge of each of our individual campuses. and what sells and the intel we have from our students and campus partners together with the really deep technology and data capabilities that the Fanatics Woods partnership is going to bring to the table. So in terms of how our stores are going to look, we're not expecting major wholesale changes, but certainly we are going to grow to have an even sharper and more expanded product assortment that hopefully is going to continue to speak um to our customers whether they're an incoming freshman or an alumni coming back to campus for the big game so that's you know that's really the you know how we look at the stores especially for the fall in terms of the go-to-market strategy you know we're getting a very very good response from the market in terms of the power of this partnership bringing together all the capabilities and the brand of barnes noble college with fanatics our sales organizations have been huddling and identifying targets and really how we can start to paint a new North Star for the industry and help universities continue to promote their brand and really grow their revenue.

Great. That's really helpful. Thank you. And then if you wouldn't mind, can you kind of tell us a little bit more about, you know, how –

fiscal 22 could unfold? Obviously, the first couple months or quarter or two are going to be under significant COVID pressure. But it sounds like you have the confidence to say that you think fiscal 22 is going to be EBITDA positive at this point. How profitable could it be? What are some of the things that could kind of determine how the year goes? I know you mentioned that textbook availability just from buybacks in the spring is going to have some impact in the fall. Can you kind of walk us through the different scenarios that could play out in the year ahead? Well, this is Mike. I'll just talk in terms of general. First off, the reason we wanted to put some comments in the outlook regarding, you know, obviously 21 is continuing to be impacted. It's been a really, really tough year, but it's also been a year that, accelerated changes that allowed us to enforce this in some ways, but allowed us to get our cost structure in a much more variable basis. And that will continue to benefit us in fiscal year 22. But the things we're really counting on for fiscal year 22 to get us to even got positive, we're at this point very confident about it, is the vaccines and their impact on getting students back on campus, opening up sporting events, getting fans in the seats, during game days and that type of thing. Because you can see from our results that we kind of held our own on the courseware side, but we've been hit very, very hard this past year on general merchandise. So general merchandise turning around, not just from the change in the on-campus population, but also everything that that brings with it. you know, people coming in on the campus, alums, et cetera, you know, and, you know, increases in online sales as well for emblematic clothing. And that's where fanatics and lids come in, too, is making this change now, you know, should really help us in concert with moving to our own e-commerce system, you know, help improve our e-commerce sales quite a bit. Because those patterns of buying are permanently changed, as we all know, and they're headed towards ever-increasing reliance on e-commerce or digital sales. So the timing of the partnership really, I think, could have been better. We have the time now to implement it and get it up and running for many schools in the summer and then the rest of the schools in the fall. So we're doing that. It's important to understand we're doing that rollout in concert with our uh the roll out of our new e-commerce system as well so that we have a user experience that's that's fairly seamless um in addition to general merchandise we're counting on and very confident about the growth of bartleby of its contribution financially it's starting to become much much more significant on a relative basis uh we have a new leader in place that's going to help us you know get some place the right bets etc but we have substantial momentum even in the spring over the fall in terms of the traffic and subscribers. So we don't expect learning to go back to completely in-person. The virtual models and the hybrid models are going to continue, and students are going to continue to want to take advantage of Bartleby's anytime, anywhere capabilities to help them with their homework and writing needs and the other needs that we're going to address through the evolution of the product that's rapidly going on. And obviously, as John talked about, first day and first day complete, and the momentum we have behind those is another important contributor to margin. Our focus is really on margin and cash flow. The Fanatics deal will result in you know, more of an agency relationship in terms of us being commissioned on the sales. So we'll have to explain that as we get better visibility into, you know, the quarters when that starts to happen. But we expect growth in margin and cash flow as a result of that partnership, Bartleby, and the new courseware delivery models we're putting in place. Um, a lot of it is dependent upon, and there's still some uncertainty about, you know, COVID protocols and what's going to happen in the fall. But right now we're, you know, from what we're hearing, what we're seeing with the vaccines, even on the variants, we're, uh, you know, we're very optimistic that, uh, the fall, fall 21 is going to be, you know, um, let me say back to normal, which is what we said, but, you know, very, very strong compared to what we saw this past fall. Um, and they'll ask, you know, either John or Lisa can, or Tom can hop in on that answer. And to answer your question, Alex, about how high you could get, we're not going to get specific guidance on that. I mean, you can see where the losses are running for the nine months, and as we said, COVID could continue to add to that loss in the fourth quarter because it's abating, but it's not, you know, the pattern's already been set for this fiscal year and this semester. But we did want to put it in context. That's a fairly significant, very significant recovery from where we were, and a lot of that's due to the fact that We do have a cost structure that will sustain on a much more variable basis, you know, coupled with much higher expectations in terms of general merchandise and revenue and margin from Bartleby. Great. That's really helpful. Thank you very much.

Next question comes from Rory Wallace with Outer Bridge Capital.

Hi, everyone. A lot of big announcements over the last three months, I guess, since the last call. So congrats on everything that you achieved for the shareholders and for the business. Mike, I was wondering if you'd talk a little bit about David Nenke specifically, just what he brings to the table. I know it's only his second day today, but just to the extent you can speak about why he's the guy and also kind of what the long-term vision and opportunity is there for him to kind of take DSS to the next level. Yeah, Roy, thanks. We're excited about having David join us, generally. So, you know, we were fortunate. We had a We had a process that exposed us to a number of what I would call very strong candidates, and David emerged as a very clear choice, our number one choice. And we had a lot of people, including some of our board members, involved in the process of interacting with David during that process. In terms of answering some of the questions on vision and strategy and that type of thing, I mean, that's exactly why we have David is so he can help you know, take some time and see what we're doing and capitalize on the momentum that's already been achieved. And we'll have a lot more to report on, I guess I would say, you know, vision and strategic decisions as he gets in and understands the business and we all interact on what we want the strategy for Bartleby to be in the future, what bets we want to place, do we want to, you know, do what we're doing now or are there some things we want to do differently. But, you know, David has got an outstanding track record, and it's very proven in terms of leading, and not just leading, but developing from scratch digital retail subscription-based businesses at Amazon. I think we put this out in the press release where we talked about David's background in developing their grocery business. And, you know, he did some other things there in terms of convincing the Amazon senior management to take on some of the competitors in terms of storage and photos and then the Explorer business, which he was running when he left Amazon. Talking to senior management at Amazon in the process, I can tell you that his and also peers of his and also subordinates across the board has outstanding references. And he has a finance background, but then he got into marketing and operations. He's proven himself across the board. And our key DSS leaders were also involved in talking to him during the process. So I'm very confident that they fit with our current team, which we have a great team that he's inheriting. He can also, you know, choose to supplement that team. But right now our team's been doing a great job. It's built a lot of momentum and They got a chance to meet each other during the process, which is important, I think. And I think the chemistry was excellent. And so I think he'll hit the ground running. And I know he's already been working hard over the last couple of weeks to get up to speed. So he's going to be a great fit for us, and we're very excited to have him meet that business. Yeah, well, congrats on the hire, and that all sounds great. I guess moving to first day in Bartleby in terms of the financial contribution, if I think about – the growth trajectory of those over the coming quarters, it seems like Bartleby traffic continues to be very strong just from tracking that. And with the growth in first day complete, is it fair to say that we shouldn't at least expect that growth to slow down? I would imagine Bartleby could actually start to feel some acceleration on a year-over-year basis and potentially first day too. But I just want to make sure that I'm thinking about that properly. Yeah, is your question, can you rephrase your question about growth and slowing down? I'm not sure. I mean, it sounds like you agree that the growth in Bartleby will continue. Was your question more about first day or kind of? Yeah, well, the way that I'm modeling it, it seems like the Bartleby, you know, trajectory is on a traffic basis has been very, very strong. And as we start to cycle some of the comps from last year where you had reduced selling in store, which was leading to, you know, just kind of a lower conversion rate on the gross additions. Is it fair to think that we might see Bartleby revenue accelerate? Well, as I just said, you know, in talking about this year 22, without getting into specifics or guidance on Bartleby, you know, we're counting on Bartleby, you know, continuing to grow in its relative contribution to margin growth. will be higher than its relative contribution to revenue growth because it's such a high-margin business. So, yes, I think one of David's first jobs in terms of working with the team and setting strategy and confirming is to make sure that we have a product that will create a sustainable relationship with subscribers. It's a fairly high-churn business because of the nature of the cohorts going through school, but there are ways to increase the, you know, the relationship life, the LTV of the product, which our team is working on in terms of the features and functionalities it's building into it, making it much more attractive to, you know, to use over the course of a four year and beyond education and for continuous learning. But we want to make sure that, you know, the way we're marketing it, selling it and increasing usage of it. Importantly, we want usage of the product to go up, which will help with the, uh, know with churn and would also help with the ltd so and anyway yes we expect part will be to go up uh in terms of increased uh revenues we've said that i think we've been on record for that for you know since it started and and bartleby's is evolving into being a much more competitive product versus some of the larger companies which is an important point to understand and as the as the competitive nature of its product increases through the features and functions that are being added, you know, we would expect that to attract, you know, more customers from the competition, right, to take market share. So, and as Jonathan said, on first day, first day complete, you can see first day grew substantially 107% year over year. And that's important because that's digital only. First day by course is digital only. And as there's more and more movement to it, You know, the digital, we don't want to forget about, you know, first day, the product, have it overshadowed by first day complete. Although first day complete is, you know, is digital and physical all in one solution. You know, from our perspective, kind of the panacea for students in terms of cost savings and accessibility and also to make life easier for the schools. But we expect both of those to continue to grow. And as Jonathan said, we're continuing to work with a substantial number of schools in our pipeline. to implement first aid complete. Yeah, and following on that, I guess, for you and John, with the enrollment being up 4x, it's great to see for complete for the fall. And I guess when I think about the number of balls you're still juggling as far as potential wins in the next couple of months, is that a material number of schools and students that you could potentially still enroll into those programs? The answer is yes, but we're not going to project it because it's a difficult sales process during COVID in some respects, even though it's such an obvious, to the outside, it's such an obvious win-win-win because of the benefits it brings students and schools. But what you find in your learnings in terms of how you go through the sales process is that it's a big model change, and many schools will know expand the uh the vote on on the model change to a number of constituencies and so that we're learning from that in terms of how we approach it and that type of thing but the point is it's a long it's a fairly long sales cycle having said that we've been through that sales cycle now for you know uh with a large number of schools over the past year and so we were confident that we're going to continue to grow that multiple substantially, and probably even for the fall, but we can't say that with certainty yet. The 31 is signed agreements. We have other verbal commitments, but we're not counting those. You can't count those chickens until we really have the signature on the mix of metaphor on the dotted line. So I'll let John embellish on that. But his team has been doing a great job on it and very, very focused on on making it easy for schools to switch by having tools in place like AIP and the SIS daily download and all the other things we've talked about in prior calls.

Yeah. Yeah. Thanks, Mike. And Rory, as you pointed out, you know, in terms of the impact from a student perspective, the floor is really 4X growth year over year as we get into the fall. And we're working with many institutions that, as Mike referenced, we don't have signed agreements, but we are moving forward and starting implementation. Many institutions, have April Board of Trustees meetings where tuition and fees for the next academic year get approved and signed off on. So that's part of the cycle with some of the schools, as long as just continuing to work with them on a fairly long sales cycle. But very optimistic that we will build on that 4X multiple of growth for the fall and And then beyond, the impact that this model can have on student outcomes and student academic success is really powerful and something that our clients are asking us to support more and more. And the more sort of the more case studies we have and proof points of the impact of the model, the faster that will drive growth into this new course material delivery model.

Yeah, thanks a lot, John. And then one for Lisa on new business, just in terms of the wins so far, I think it's $84 million net, up from $71 million, I believe, last quarter. and i'm just curious you know how how exciting is it to have the the families partnership um in the mix as you compete on some of these other deals that are in play and how are you thinking about the opportunity for new business once coven normalizes here hopefully in f-22

Yeah, well, I think that what Mike and Tom have been referencing about the accelerated need for change due to COVID is really helping us propel new businesses. The schools just continue to recognize this is not something they can run on their own. As Jonathan inferred about just the increasing importance of student outcomes and ROI, schools are just continuing to look for us. In particular, because of our ability to truly customize everything we do for our schools, nothing we do is cookie cutter. So that aligned with the new fanatics relationship, we're hearing very, very good comments in the marketplace. You know, and one of the reasons is just the ability to bring together different campus constituencies. So where there are relationships today with athletics, the ability to bring together, you know, all these different departments to really maximize, you know, not just the revenue from sales, but also the licensing revenue and our ability to really catapult this business because of the technology Fanatics is going to bring to the table, as well as their data capabilities. So we think it's going to continue, Rory, and it's going to be an exciting selling season.

The other part of that is relationships, which is key, is that Fanatics is already in the NCAA space in a fairly big way, especially with the larger part, high schools. And so they have some relationships, mainly through the athletic department, with some schools that we don't have. And we have relationships, clearly, that they don't have. So putting those together and leveraging each other's relationships and then also putting the power, as Lisa says, of the two relationships together where we can help form a bridge, so to speak, between athletics and the academic side for benefits that they can't get otherwise. You know, it's a very, very powerful go-to-market strategy, and we're seeing it starting to pay some dividends already, and you did see that in the third quarter, actually, in one specific proposal in January that we won. So... You know, it's very exciting and, you know, it's offensively from a strategic perspective as well as with some defensive elements, which you discussed in the last, you know, I think in the last call around, you know, fanatics getting into this space in a big way. Definitely. And then just a last question for Tom on just a couple of modeling questions. Sure. The expenses are normally down more or this quarter they weren't down sequentially versus FQ2. And I guess how much of that is just kind of bringing people back in preparation for a more normalized environment versus growth investments versus anything else that I might not be thinking about? What are modeling expenses?

Yeah, I think you're right, Roy. It's more of a seasonality. As we sit back here in early March and look back at the spring rush, I think, and we tried to say this in the prepared remarks, that January was probably more, you know, a better month for the spring rush than necessarily February.

So a lot of the payroll and store-level expenses were geared towards the activity we saw on our campuses in terms of students purchasing. So it's it's probably a little heavier in January than perhaps it should be, but that's just really us reacting to the needs of the retail footprint. Okay. And then just the final one on the first day, specifically first day complete and a rev rec around that. So, you know, you've been breaking out the first day of revenue every quarter, which has been extremely helpful, I think, to investors. But When I think about the next quarter and the number you'll end up reporting in the growth, is there anything to think about as far as when those deals are getting rep wrecked? Because it seems like that very high growth trajectory should definitely continue in your FQ4. I just want to make sure that I'm thinking about it right. Are you referring to first day or first day complete or both? well i'm really referring to both you know but i'm but also on complete i know that that's um that's billed differently because it's obviously the the system-wide sale as opposed to um the more transactional first deck yeah so typically the way we recognize the reservoir is over the course of the semester for both products okay so there's nothing to think about as far as why growth wouldn't continue to be very strong in the next quarter uh well i i don't know i don't necessarily think the revenue recognition is tied to growth in that sense is what i think you're implying yeah well i was just wondering if you build it all in one quarter for for example because the semester can can stretch over a couple quarters right so i'm just wondering yes Yeah. But you're saying, so it gets billed gradably, or it gets billed all in one quarter? It gets billed over the semester. So if the semester goes over two quarters and is recognized throughout, for instance, the semester starts in January and ends in April, it would be billed through January to April. Got it. Okay. Yeah, thanks. Sorry if it's a confusing question. But, yeah, thanks a lot and good luck, guys. I really appreciate it. All right. Thanks, Mark.

And at this time, I will turn the call over to Mr. Millivoy.

Great. Thank you. And thank you all for joining us for today's call and your continued interest in BNED. Please note that our next call is scheduled to be held on or about July 1st, to report our fourth quarter and year-end earnings. With that, we'll wish everybody a great day. Thank you.

This concludes today's conference call. You may now disconnect.