Barnes & Noble Education, Inc

Ladies and gentlemen, thank you for standing by. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes & Noble Education Fiscal 2024 Second Quarter Earnings Conference Call. All lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Hunter Blakenbaker, Vice President of Investor Relations. Please go ahead.

Thanks, Operator. Good afternoon, everyone, and welcome to our fiscal 2024 second quarter earnings call.

Joining us today are Mike Fusey, Chief Executive Officer, Kevin Watson, Chief Financial Officer, and Jonathan Schaar, Executive Vice President, B&ED Retail, and President, Barnes & Noble College. As referenced in our second quarter slide presentation, which can be found on our investor relations website, I'd like to remind you that statements we make on today's call are covered by the safe harbor disclaimer contained in our press release and public documents. The content of this call are 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 Husey. Mike? Thanks, Hunter. Good afternoon, everyone, and thank you for joining us today. It's my pleasure to provide our earnings commentary today together with Jonathan and to introduce Kevin Watson, our new CFO who joined BNED in September and is already contributing significantly to BNED's success. One year ago, we announced decisive actions to accelerate our transition to the First Day Complete model and also implemented significant cost reduction and operational efficiency initiatives to improve our profitability. We've made substantial progress on these initiatives, and our second quarter financial results are further proof points that our strategy is working. Before we get into the details, I'll touch on the key highlights from the quarter. First, I'd like to really thank our team for their commitment to our company's success and their continued efforts to deliver a great experience to our students, faculty, institutions, administration, parents, alumni, and strategic partners. Our team's agility and resilience enabled us to not only deliver a successful fall rush in a very dynamic operating environment, but also to execute on our strategic initiatives over the last year. I'm truly grateful for their hard work and commitment. Second, our innovative, equitable access program, Per Se Complete, continues to positively impact students, higher education, and our business. In the second quarter, FCC revenue increased 52% year-over-year to $136 million, and the combined first aid program's revenue reached $199 million. Our strategic transition to first aid courseware business model has reached an inflection point. First aid and first aid complete revenues are approaching 50% of course material revenue And revenue increases from first-day offerings exceeded the decrease in revenue from the traditional a la carte model by $30 million on a year-to-date basis. This evolution to a subscription-like B2B model significantly improves revenue and revenue visibility, which enables us to better align costs with revenue. improved inventory management and operating efficiency, and to ultimately achieve much higher four-wall EBITDA per store. Next, we've improved operational efficiency and maintained top-line growth despite operating in 128 fewer stores. we've achieved our planned 30 to 35 million of annualized cost savings and, as a result, consolidated adjusted EBITDA increased 28% to 50.3 million in the second quarter. Looking ahead, we've identified additional opportunities to improve efficiencies further and reduce operating expenses to continue improving our profitability and cash flow. Importantly, The actions we have taken and continue to take position us to deliver more consistent, sustainable, and profitable growth in the years ahead. Shifting to our second quarter performance. Total revenue of 610.4 million increased by 1.7 million or 0.3% compared to the prior year period. The second quarter sales increase is primarily due to the growth of our per se programs which increased 39% to $199 million, partially offset by declines in the a la carte courseware sales, including lower sales from a smaller store footprint as we focus on profitability of our stores. Second quarter adjusted EBITDA from continuing operations of $50.3 million increased by $11.1 million or 28.3%, primarily driven by a $13 million decrease in S&A expenses compared to the prior year. Before turning the call over to Jonathan to discuss our retail segment results, I'll provide a brief comment on the strategic alternatives process. Our board of directors continues its ongoing review of a broad range of strategic alternatives available to the company, including, but not limited to, potential capital raises, asset divestitures, sales of business, and pursuit of standalone growth plans. We're committed to executing on the best path forward for the company and our stakeholders to maximize value and best position our business for the future. We won't be commenting further on this until the Board of Directors has concluded that disclosure is appropriate or required.