Barnes & Noble Education, Inc

Good morning and welcome to the Barnes & Noble Education Earnings Call. At this time, our 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'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to Andy Milliboy, Vice President, Corporate Finance and Investor Relations. Please go ahead. Good morning.

Good morning. And welcome to our fiscal 2022 first quarter earnings call. Joining us today are Mike Huseby, CEO and Chairman, Tom Donoghue, CFO, Jonathan Scharr, Executive Vice President, BNED Retail, David Henderson, President of MBS, and David Menke, President of DSS. 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 used 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. As many of you know, the first quarter, consisting primarily of summer courses, is typically a low revenue quarter for the company relative to other more seasonably active quarters. As Tom will discuss in further detail during the financial review, we were encouraged by the sales rebound during the first quarter, especially within our general merchandise business. And while the COVID pandemic continues to evolve, we believe this performance is a positive harbinger for the upcoming fall semester as in-person classes are expected to prevail and other on-campus social activities and sporting events begin to resume at greater volumes. While the COVID-19 pandemic has had a profound and unprecedented impact on higher education and our business, as we navigated through the pandemic, we've been successful in accelerating the execution of our strategic initiatives improving our offerings for our campus partners, and managing our liquidity position so that we entered fiscal 22 in a position of strength. Our inclusive access courseware offerings, first day and first day complete, are becoming widely recognized with an increasing velocity of adoption as programs that provide improved student outcomes through equitable access, enhanced convenience, and improved course material affordability. Our partnership with Fanatics and Liz combines our innovative academic offerings with an unparalleled merchandise assortment and vesting class omni-channel customer experience. We expect this greatly enhanced experience and expanded offering to increase sales of our higher margin logo and emblematic products as we continue to roll it out over our store footprint in the coming months. Our direct-to-student digital Bartleby offering continues to gain market share as we add new features and functionality and better understand our customers' need to continue to build this extremely valuable resource for students as they navigate new hybrid learning models. On their own, each of these offerings provides significant benefits to the schools and students we serve. Collectively, we believe we provide an unmatched offering and compelling value proposition that simply can't be replicated in the marketplace. As we prepare to welcome students back on campus for the 2021-22 academic year, we're very excited to provide advanced course material delivery solutions across student choice and inclusive access models, all designed to support improved student outcomes through access, convenience, and affordability. BNC First Day and First Day Complete are innovative models of course material delivery that address equitable access across an entire institution by ensuring that all students are prepared for learning by the first day of class while also substantially improving affordability through lower costs. Through BNC First Day, digital course materials like e-text or publisher courseware are adopted by a faculty member for a single course. and students receive their materials through the school's learning management system. BNC First Day Complete is an innovative model of course material delivery that addresses equitable access across an entire institution by ensuring that all students are prepared for learning by the first day of class. For campuses utilizing the First Day Complete model, the cost of course materials are bundled into tuition and or fees and the campus bookstore oversees the distribution of physical and digital course materials to all students on or before the first day of class. Through a concierge-style service, students can choose to pick up all their physical materials either at the bookstore or have them shipped, while digital materials are accessible through an institution's learning management system. When students have access to their learning materials at the start of class, they can engage with the course content from day one, ensuring that there are no gaps in learning. In a survey we conducted with more than 400 students utilizing First Day Complete, we found that 74% of students said the program helped them to be better prepared academically. 70% of students said it had a positive impact on their classroom success. while 62% of students responded that First Day Complete helped them to achieve better grades. Amongst the additional top benefits of First Day Complete cited by students were convenience and time savings. Of those surveyed, 84% said they liked the convenience of having their course materials bundled and delivered to them through this program. In addition, 85% stated that the program saved them time A representative response from students who surveyed was, I like that I don't have to think about doing everything to get my course materials. Everything was already ready for me. In addition to student benefits, First Day Complete is very attractive to our campus partners and it enables them to address student outcomes through equitable access, enhanced convenience, and improved affordability. That's why this model has been adopted across a broad spectrum of the schools we serve. from small private colleges to large public universities and multi-campus community college systems. This value proposition resonates with all schools, including our virtual school partners with whom we are actively discussing First Day Complete and beginning to test its application in the virtual market. As we learn more, we'll keep you posted on this incremental opportunity. Additionally, as schools compete with one another for enrollment, It also becomes an attractive competitive advantage, which we believe will lead to additional demand for this offering. For the current fall term, first day complete will be offered at institutions with undergraduate enrollment of over 300,000 students, up from 43,000 students last fall, representing a year-over-year growth multiple of approximately seven times. Looking forward, based on the accelerating demand for this solution, we expect continued strong growth for both first day and first day complete. As students and visitors return to campus and begin to attend campus events like sporting events, prospective student tours, and alumni weekends, we're excited to debut our new general merchandise offerings resulting from our strategic partnership with Fanatics and LIDS. We expect this partnership, which will provide an enhanced product assortment and significantly improved omnichannel experience, to not only grow sales in campus stores, but to also increase our customer relationships with the total addressable market by growing sales to alumni and other fans. When we entered into this strategic partnership, our goal was to not only grow sales within our existing store base through an enhanced offering, but to also boost our value proposition and, in turn, grow the footprint of our schools. We're already realizing this benefit, and we're thrilled to announce in June our newly formed partnership to serve the University of Notre Dame. Beginning next year, Barnes & Noble College will manage all course materials, retail, and online operation for the university's campus retail stores, while drawing heavily on our partnership with Fanatics and LIDS, given the large emblematic merchandise sales of Notre Dame. This partnership combines the power of Barnes & Noble College's academic solutions and our established retail expertise with Fanatic and Lid's new and innovative in-store and e-commerce retail solutions that we are already actively collaborating on with Notre Dame leadership. Importantly, we are now partnering with two best-in-class industry leaders that have significantly greater scale in this segment, allowing us to mitigate some of the COVID-related supply chain challenges that are affecting many other businesses in the manufacturing and retail industries. Providing best in class retail experiences for our existing campus partners and new client top tier universities is precisely why we entered into our partnership with Fanatics and LIDS. Our selection by Notre Dame sends a strong message to both our current campus partners and also prospective new partners that together we are truly best in class retail partners, both in store and for e-commerce. Turning to our DSS business, our Bartleby suite of solutions continues to exhibit its rapid growth. DSS revenue for the quarter was $8.3 million, growing 41% over last year, representing the highest dollar revenue growth recorded for the DSS segment since its formation. Bartleby generated over 66,000 new growth subscribers this quarter, representing more than 100% growth over the same period last year, with revenue increasing 86%. As students and institutions are excited to return to an on-campus learning experience this fall, we believe that the significantly increased use of online learning and supplemental tutoring tools over the past year has forever changed the landscape of higher education and the need for flexibility in the post-pandemic world. We expect Barnaby to continue to grow and become even more relevant with this heightened need for support outside of the classroom. We expect significantly better performance of in-store sales of Bartleby this year, given the substantial return to on-campus learning. In response to these trends, we continue to invest in and strengthen our powerful DSS offerings. During the first quarter, we launched Math Solver, a new Bartleby product feature that is powered by our partnership with Wolfram Alpha and allows students to do on-demand, real-time access to learn how to solve all types of math problems in algebra, pre-calc, calculus, and more. Introducing this new feature ensures that Bartleby continues to grow with the students it serves, adding functionality that can meet the urgent and growing demand to even better support students in this subject area. We are seeing positive growth and momentum in the student brands writing help business, which is also contributing to the overall BSS revenue growth. The student brand's business, which attracts a global audience of over 25 million students per month across four languages and focuses on assisting students with the writing process, has reversed what were declining trends by focusing on long-tail SEO and machine learning assisted optimization efforts to increase reach and potential subscribers. These efforts have been successful in driving an increase in both unique visitors and also active paid users. While our success lies in driving growth and margin contributions from our growth initiatives, we also continually to carefully manage our costs and liquidity by leveraging both our partnership relationships and the more flexible cost structure we engineered over the last approximately 18 months. During those 18 months, we were presented with significant challenges that we had to adapt to and overcome. While challenges remain, certain of them such as supply chain and fulfillment logistics, are improving weekly, and we believe they will continue to improve to allow us to meet the increased pent-up demand that we are seeing as fall rush starts. I'm extremely proud of our organization and the significant progress they have made on our strategic initiatives and their complete dedication to serving our customers and each other. As we begin the critical current fall rush period and look to the rest of this fiscal year 22 and beyond, we're excited to welcome students back to campus and to once again serve our campus partners in person. COVID will continue to evolve and require our attention. And while its trajectory is difficult to predict, I am confident in our company's ability to adapt, adjust, and serve our campus partners, providing unparalleled service in the safest possible manner. With that, I'll turn it over to Tom for the financial review.