Barnes & Noble Education, Inc

Hello, 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 2023 first quarter earnings call. Joining us today are Mike Huseby, CEO, Tom Donoghue, CFO, Jonathan Shar, Executive Vice President, BNED Retail and President, Barnes & Noble College, David Henderson, President of MBS, and David Nenke, 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 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. Good morning, everyone. Our first quarter began with a solid start, benefiting from a strong graduation season as many schools returned to in-person graduation ceremonies and, in some cases, held multiple ceremonies to provide opportunities for those who were not allowed to attend and celebrate in person over the past two years. We experienced stronger general merchandise sales, especially within our logo and emblematic products, as on-campus traffic grew from increased student recruitment events and other activities as compared to each of the two prior years. Our first quarter is a seasonally slow academic period, which primarily consists of graduation activities, summer classes, and preparing for the fall back to school rush. In addition to the strength of our general merchandise business, our first quarter results also benefited from the continued growth of our inclusive access programs, which drove a 1.5% increase in comparable course material sales. Total first day sales grew 67% to $45 million. Currently, we are in the thick of our peak fall rush annual sales period. As reported last quarter, we entered fall rush with strong year-over-year growth in our contracted first day complete, or FDC, inclusive access offerings. With FDC having achieved scale in fiscal year 22, we now have meaningful and objective proof points that FDC improves student outcomes through easier access, convenience, and substantially enhanced affordability. Our surveys have shown that students believe our FDC model better prepares them academically, helps them achieve better grades, and is easier to use than an a la carte model. Many students cited real benefits from FDC, such as reduced financial stress and the ease of getting all required books and materials ahead of classes, benefits that students said increased their likelihood to continue their education at that school. We have also received strong feedback from school faculty and administrators who have noted that the FTC model has made it easier to engage earlier in the term with their students who are getting their assignments completed earlier as almost all of their students have their course materials on or before the first day of classes. Further validating our internal research on FTC's benefits, a research scientist at the University of New Hampshire examined the impact of equitable access course material models on student outcomes at two-year public institutions. The research explored the relationship between success rates as defined by course completion rates and a student's participation in an equitable access course materials program. Results of that study revealed a 16% increase in the course completion rate for participants compared to non-participants. It also showed a 21% increase for black students, a 17% increase for Pell Grant students, and a 16% increase for Hispanic students when comparing participants and non-participants. This independent research reveals powerful data that supports our proprietary research and positioning that first day complete improves student outcomes and enhances a student's academic journey. We believe this study should serve as a catalyst to accelerate demand for our FTC solution in the marketplace. 111 of our campus stores are utilizing First Day Complete for this fall term, representing undergraduate enrollment of approximately 545,000 students, representing an 85% growth rate over fall 2021 based on undergraduate student enrollment. Additionally, We expect our general merchandise business to benefit from increased on-campus traffic and an increase in the number of activities and events as schools approach a more traditional learning experience. We are seeing tremendous demand for both FDC and our all-digital offering for first day by course across all types and sizes of institutions. With a strong pipeline of institutions that are currently evaluating the FDC program, We expect this growth to continue to accelerate. For example, in the spring term of this academic year, we are excited to begin offering first day complete at the University of Connecticut. These results reinforce BNED's differentiated and collaborative approach to working with our partner institutions to provide innovative solutions to help drive improved learning outcomes for students nationwide. As Tom will discuss further, our retail non-GAAP adjusted EBITDA loss for this seasonally slower quarter was 25 million as compared to a loss of 19.6 million in the prior year period. The adjusted EBITDA loss increased on higher selling and administrative expenses, primarily related to the expanded staffing at stores in response to greater on-campus activity and to prepare for the peak fall term including support for the growth of our first-day programs, which offset the sales and gross margin improvements during the quarter. Our wholesale business continued to be impacted by supply constraints from the lack of used book inventory available for sales, resulting from the disruption to the traditional on-campus buyback activity over the last few years, as well as lower overall demand due to declining enrollments and the transition to digital course materials. Wholesale revenue declined 16.6% during the quarter, while EBITDA declined by $3.6 million. CSS continued its growth trajectory in the quarter. Total revenue grew 10.6% on a year-over-year basis. We are also continuing to see positive momentum in scaling our Bartleby institutional business. In addition to Delgado Community College, which we piloted in spring 2017, 2022, we are excited to announce Eastern Kentucky University, EKU, as our most recent institutional partner. We are integrating the full suite of Bartleby products into the EKU's learning management systems, providing 24-7 access to a full suite of on-demand study and writing resources for undergraduate and graduate students starting this fall. With that, I'll turn it over to Tom.