Q2 2021 Barnes & Noble Education Inc Earnings Call
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Good day.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Barnes and noble educational fiscal 2000 at 21 second quarter earnings Conference call.
At this time all participants are in a listen only mode. After the speakers presentation. There will be at question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today.
Indeed lovely. Thank you. Please go ahead sir.
Good morning, and welcome to our fiscal 2021 second quarter earnings call joining.
Joining us today are Mike.
At the CEO and chairman.
Donnie you CFO.
Jonathan Chou, our executive Vice President of being EDI retailing client solutions.
Some of it president of Barnes <unk> Noble at College, and Dave at Henderson President of MBS.
Before we begin the call I would like to remind you that the statements. We make on todays call are covered by the safe Harbor disclaimer contained in our press release and public documents the cash.
Contents of this call out of the property of Barnes <unk> Noble education and are not for rebroadcast or use by any other party without prior written consent of Barnes <unk> 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 on 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 Huckabee.
Thanks, Andy and thank you all for joining us this morning.
During the past few months, we've seen a vastly different college experienced take place nationwide.
Our campus partners of adapted to a fall semester that look very different than in years past.
Between navigating the late start dates introducing blended learning format.
Supplementing widespread student testing at more.
Colleges and universities adjusted as best they could to the ongoing challenges that COVID-19 pandemic continues to present.
Through all of this be anybody has been able to pivot accordingly.
During that our customers receive uninterrupted service no matter, where when or how they're learning took place this fall.
As we have highlighted since the onset of this pandemic that's.
On the strategic investments, we have made in our digital offerings ecommerce solutions warehouse operations and half of stores have uniquely positioned us off of the flexible end adaptable solutions that institution students and faculty need.
Over the past few years.
We have introduced solutions, such as our BMC first day model and the DNC 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 a new digital offerings, such as our bar will be suite of services to ensure students have access to 24 seven academic support.
Coupled with our virtual book stores.
Dropship offerings and fulfillment capabilities offered by our MDF subsidiary.
Any de has created an unmatched value proposition, which we believe has become one of the more relevant in light of the challenges. This pandemic has presented for institutions.
It is because of this that we of continues to attract new clients and generate new business gross.
Mining $93 million in new business today at this fiscal year for $71 million on a net basis.
With that being said, we are continuing to experience the impacts of the pandemic and 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 RG on business.
Our second quarter of traditionally sees higher general merchandise sales due to athletic events, many of which were either completely canceled or took place and at 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 textbook.
Textbook performed relatively well, particularly considering many students did not have the traditional on EPS experience or did not attend on campus classes at all.
Textbook sales declined 19% of 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 do the pandemic restrictions.
Congress 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 or bookstore website.
Ecommerce sales represented.
At the 6% of our total Q2 sales as compared to just 36% in the prior year.
We have made continued progress on the development of our new E Commerce platform this quarter the space.
Exciting platform will provide a hyper personal hyperlocal of shopping experience for customers.
We continue to see gross and momentum of our first day at first day complete inclusive access programs, which have become even more relevant 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 ensure students receive the of 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 they complete at 12 campuses and we expect to implement the program at additional campuses from the start of the spring semester.
As we look ahead to next fall we are 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 end all inclusive model to enhance access affordability and student academic achievement.
As we continue to support our campus partners to our book store operations and of course material offerings.
Also continue to serve students directly through our DSS segment.
The demand for bottle of these homework help solutions has recently exploded.
October 2020 was our highest traffic month ever with approximately 4 million unique visitors in the month of.
378% versus last year end.
End of almost 80% vs spring.
Peak traffic.
We are focused on scaling this business in a quality manner that will lead to sustainable subscriber growth.
Part of these potential to add significant share holder value to be any d. is truly exciting.
The rapid emergence of persistence of online and blended learning format only strengthens the need for this digital solution.
This past quarter, we saw continued demand for our bar will be products from the students we serve.
Barbie gross subscribers grew to over 120000 with revenue increasing 53%.
On a year to date basis subscriber growth is up over 40%.
Because fewer students on campus right now we have seen a smaller percentage of Barbie sales taking place through our in store channel.
And while our store teams are still putting great effort into selling their customers. We've also increased our focus on other sales and marketing channel ensure that part will be as available to as many students as possible.
This includes as CEO, which has continued to exceed our expectations and driving users to Bobby and remains a core aspect of our growth strategy.
Additionally, during the second quarter, we entered into a partnership with Blackboard, a leading AD Tech company to offer our bar will be suite of solutions in their newly launched black work at CES feature.
That would assist because of feature within blackboards learning management system that enables higher end students to search and access academic support services from their institutions as well as from curated third party tutoring and homework tools, such as Bartoli right within their LMS.
Part of the will offer two products through black will assist in the United States.
Part of the health and brought will be right.
Part of the health is the institutionally branded version of our bar will be learn product, which provides asynchronous online tutoring from experts who are available 24 seven.
We are very excited about this new partnership and expanded distribution. It provides.
For our Barnes will be suite of services in the United States.
Blackboard learn as a leading global learning management system in the U.S. and service millions of students many of whom are outside of the b any debt footprint.
We believe that partnerships such as this one and vital source will allow us to grow brand awareness from Bartel book in turn driving increased subscriptions and revenue.
As we look to further scale, our part will be 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 per students faculty and for our campus partners.
With a focus on the health and safety of our people on communities.
Our stores resumed operations on campuses, where it was deemed safe to do so this fall.
Sporting customers with safety measures such as.
Mobile curbside pickup not.
Contact with payments and socially distant store layouts.
We're immensely proud of our teams of the ways in which they have adapted to change these past few months.
One of our biggest strengths of the company lies in the relationships we have on campuses nationwide.
Our partners students and faculty rely on 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 cold at 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 will 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 the end he for their tireless efforts throughout these challenging times.
Even as we have had to adapt to difficult circumstances.
Our teams of continued to make significant progress on our goals.
And I'm very proud of the ways.
Which they have all continues to innovate and move forward.
With that I will turn it over to Tom for the financial review.
Thanks, Mike.
Please note that our fiscal 2021 second quarter ended on October 30, Onest 2020 and consisted of 13 weeks.
All comparisons will be sort of 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. We're at 22.9% was comprised of 165.2 million decrease from the retail segment.
3.8 million decrease from the wholesale segment.
And he 0.7 million increase from the TSS segment.
Be any these fiscal 2021 second quarter results were significantly impacted by the ongoing cold at 19 pandemic as many schools continue to adjust their learning model and significantly reduce their on campus activities in response to the pandemic.
While many big conferences resume their sporting activities Dan.
Fan attendance was either eliminated or severely restricted which had a substantial impact on the company is high margin general merchandise business sales.
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 being sees rapidly growing first day offerings, which incorporate course material fees into students' tuition fees and grew 70, 70% of 53.4 million during the quarter.
Net sales for the wholesale segment decreased 3.8 million were at 9.5% 36.4 million, primarily due to decreased gross sales, partially offset by lower returns at allowances.
PSS sales grew zero point $7 million or 14% to 5.9 million debt.
Benefiting from the growth in part of the subscriptions and our student brands business.
Part of be subscriptions revenue increased 53% to 1.7 million.
On a student brands of revenue increased 3.8% of $4.3 million.
The consolidated gross margin rate for the quarter was 19.4 per cent 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 jumped on merchandise products, coupled with higher markdowns.
This was partially offset by our efforts to renegotiate and lower contract cost.
In anticipation of the challenging sales environment, we continue to prudently manage payroll and store operating cash 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 per cent compared with the prior year period.
As we look ahead of spring Rush period, we anticipate at schools will continue to prioritize to health and safety of their faculty and students and continue to adjust their learning models in response for the 10 dynamic.
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 of learning and we'll continue to prudently manage expenses and liquidity in light of the lower sales environment.
Due to all the uncertainty that cobot presents in the near and intermediate term, we're not providing fiscal 21 guidance. We do expect debt cobot, we'll continue to have a significant impact on our business stores in fiscal 21.
At the end of the quarter, our cash balance was 7.4 million with outstanding borrowings of 99.5 million at.
As compared to 24.6 million of cash at no borrowings on the prior year period. This.
At this difference is directly the result of the lower sales environment, we are experiencing but better than our own expectations per.
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 1439 College University in K 12 School book stores comprised of 768, physical book stores and their E commerce sites as well as 671 virtual book stores.
As of today, we have contracts to open an additional nine stores in fiscal 2021 with one additional known close on primarily of a smaller on profitable stores.
This will bring our total physical and virtual store count to 1447 locations net of course of stores.
With that well open the call for questions on.
Operator, please provide instructions for those interested in asking a question.
Great. Thank you, ladies and gentlemen, as a reminder to ask a question on the need to press star one on your telephone to withdraw your question press the pound or hash key.
Yes, standby Lilly compiled the acuity Roberts King.
And your first question comes from the line of Ryan Macdonald from Needham. Please go ahead. Your line is now open.
Yeah. Good morning, everyone. Thanks for taking my questions on congrats on nice quarter here during challenging times.
As you are starting to look towards the spring semester I think there was a recent New York Times article that discuss at a number of universities are expecting more students on campus at.
This coming spring just just would be curious to hear sort of how that compares to the conversations you're having with your University partners end and how you're approaching sort of inventory building, yeah, as we get to the spring semester here.
Hey, Brian It's Mike I'll give a general answer then on OLED. So we'll be smell at this president of our.
In college.
[noise] on operations jump in.
You know, obviously, it's sort of hard to predict what's going to half of them because as we saw on the fall depending on how cold it moves and how well guess controlled.
We saw today the first vaccines are starting but how fast will they get rolled out et cetera.
Yeah, we still have you had a number of schools that it's different by geography as you saw on California.
At the many of the schools of state schools decided to go full bore remote that was fairly unusual many other schools one hybrid in the fall of.
End of those that didn't go hybrid in one pull on campus. Some ended up having to change their plans I think the same thing as.
There's a risk of staffing in the spring, although now local schools have been true.
The whole semester of this AD education.
And there's going to be a relatively long break from most schools between.
On scaling on many schools on dismiss students a other than to have final stake in virtually all of it.
At the winter break so we are fairly long break there so.
So I'll at least talk about what we're what we're actually actually hearing.
From our our campus partners, who can address the rest of your question.
Sure Good morning, Ryan at I.
I started at article as well on immediately you know when staff. So I feel at Vice Presidents day to you know.
Make sure that we have the latest insight on what's happening on campus I mean, Mike's right. It is very cheap on.
Geography, driven you know the trend we are seeing book that you know schools of pushing their openings right. They're not opening so so mid January or they can be wary, we heard that yesterday at an example for yet another hockey pretty universally there Mark Delaney spring breaks obviously been on one student even camp.
Let's come back to campus et cetera on.
So you know.
There are many universities that are a bit or not.
On making a definitive decision in terms of what's going on in later on in the spring, but at the trend is definitely the leader opening on any cancellation of debt spring breaks our expectation of that learning will continue to be driven mostly on remotely at this time.
Maybe something in schools are listed on the on the spend the military space.
Yeah. Thanks. This is Tom Ryan Brian <unk>, our intention and plan has always been to not be ahead on of what we see in the sales so to the extent at the sales on coming we're not going to be ahead of ourselves on the inventory and we will continue to manage that prudently and at.
And really manage to the to the campus activities that we see in terms of the activities in the event that to this point in time at really the non existent.
You can see that.
Comments on your scripts.
Sounds good at.
Oh are we have an increasing percentage of sales on a go in ecommerce, which is you know.
Early on deal system wide at not only E. Commerce, you know from our own fulfillment, but we instituted dropship capabilities or general merchandise flow from some many of our general merchandise partners and that's increasing so that that helps us in the contracts, though we'll be able to fulfill and also on the breadth of the selection.
At our customers can go at it.
Or sort of being sold directly by manufacturers through the promise of job dropship system.
Okay. So net net actually leads right into my next question nicely at around E. Commerce, it's great to see sort of the the materially increasing on a percentage of of merchandise sales coming from from E. Commerce or can you talk about what your expectations for the space rollout of of the new platform on of on average.
As you get into calendar at 21 end and perhaps you know whats really essentially constraining are preventing at universities from from really rolling that out and implementing at the more quickly.
Well, John John Sharp and adjust the question yeah.
Yeah, Hey, Brian its Jonathan show, our Oh, Yeah. We're on 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 sales throughout <unk> and have that implemented prior to fall rush for our next fiscal year.
Excellent and I guess on one of the answering your question about what's preventing you.
Well anytime you put in a new ecommerce system, particularly under these circumstances, we want to make sure that we do things on a very customized basis for each school.
So businesses and flipping a switch we have from 707 years, so micro sites.
So that we have we have begun to roll it out that's it's not a flipping a switch type of a number of an exercise is very customized. So I think it's you know it's it's a it's very cooperative process between us and the school. So to answer your question directly some of it will depend on the resources at the schools to vote on some of it depends on.
On us, making sure that you know as we're scaling this we're doing it in a way that optimizes kind of the transition from the old system from the new system.
Hi, Thanks on just one last one from me I'll jump back in the queue on first day in first day complete grades.
Great to see 12 12 implementations during this semester as you look at sort of expectations for additional Roberts into spring.
One of your expectations in terms of number of universities or maybe a comparison of the order of magnitude compared to the fall and how's the pipeline looking for fall 2021. Thanks.
John <unk> yeah.
Yeah, Hey, it's Jonathan again on debt for spring, we are at least stop and we've announced publicly that Sam East end State University is a is launching for spring term, which which from an enrollment standpoint of little bit be our largest on campus implementing first stake.
Please.
And and then and we haven't a couple of communicated what the other schools would be for spring, but looking ahead the pipeline as low as noted in the script is really robust we're in deep discussions with a significant number of campus partners about transitioning to the model.
Ill.
And end the benefits of the whole inclusive model and the access affordability.
And debt and achieving it on an overall convenience stores, 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 end really starting with fall term 21.
The other things as Mike the other thing I would add to that is that as we as we said we added $93 million of new business. Thus far this year in fiscal 2001.
And as we're doing that we're having these conversations with the new schools on on first day of simply we're trying to.
On target our efforts towards those schools to have an open mind towards inclusive of access and first day completed that doesn't mean all of the schools will do that that we're we're picking up as of the schools, but thats an important point because it is validates the new business that we're selling validates overall model.
All which is things are more complicated for schools they.
They have more of an emphasis on emphasis on managing the fiscal aspects of their business and because they share on every dollar that we produce under our contracts with them.
We are very incentivized to.
Outsource to us so the model of the overall business model of from Barnes <unk> Noble College is being validated by the new business as well as the book to walk.
First on first of all complete by the way with a very recent conversations with the of the top management of large publishers and no in.
In general, they're very committed to inclusive of access as a way to grow their digital the digital businesses, which is reported to us.
Excellent thanks for taking my questions.
Thanks Ryan.
Your next question comes from the line of Alex Chairman of Craig Hallum Capital. Please go ahead. Your line is now open.
Great. Thanks, very much for taking my question on you know I I would love to just if we could take a debt back for a second at as you think about you.
Planning for next year end and years to calm as you as you engage with with your partner schools and look at potential new contracting at do you feel at universities are still envisioning. The campus book store at the Central community space can you talk about maybe how how that might look different after the pandemic on.
Or the same at that as it has to be before 2020.
Yelled at least to handle that I think the my overall comment would be that as I. Just said you know many of the reasons that we are growing our new business have to deal with.
The complexities of not just content procurement, but also retailing and.
And I think one of the things we really brings at the table not releasing her team as a strengthened in the retail experience within the stores. We expect adjusted we expect that to continue as of.
As I've said in the past I personally believe in this business on corporate view smart necessarily portable.
My facts, but you.
You know, there's going to be a quite of pendulum swing back to.
Students.
And others, who are interested in learning getting back to social social no lack of social distance, while still low so be careful in certain respects I think that there's going to be of real urge to get back together on spend claim physically which we're not necessarily planning our business Alex.
She's been returned 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 the overall community hub feel of our schools continue moving maybe even more important than ever get on what's transpired over the course of last year.
At this and make them.
Yes on the house.
Yeah, what we said is exactly right I mean, Alex as we go to market you know its really two key.
You know really value props for US is obviously affordability and what we're able to do to on dry gas of digital and first day complete et cetera, but the other is really our expertise from prowess at a retailer on our ability to build community to drive traffic to celebrate the school Graham.
And to drive revenue right and we recently did of Green Salix that go around 12.
Of our schools recently signed at schools to understand what drove their decision and how to differentiate in the marketplace on.
Moving through so loud and clear in all of those of responsive why our ability to drive tdm to create that dynamic community space.
Not just for the students, but obviously at their parents alumni, but also at end.
On more of that you know retail community locations to bring end be at sites moving into the stores. So universities are very very focused on making sure that the student experience on.
He needs to evolve and and and that we remain really at central hub on campus.
Great Thats really helpful. And then just thinking about the numbers were a little bit what is what are some of the things that you're going to be looking towards over the next few months on quarter is at you make the decision at the start bringing some expenses back in personnel back or are there kind of signpost that youre going to be looking for over the next semester or two as you start to me.
Make those decisions.
Okay, well, that's all that's tied into our our planning for per spring and beyond obviously these are occurring.
And you know we.
We've done on.
Very painful, but I would say great job flow of managing costs and costs related to the payroll and other cost into the capital spend net started soon is dependent on the kit low.
For low almost.
Almost 11000 people and then we will on bringing people back into stores, primarily we're talking about Arsenal of Barnes <unk> Noble College in terms of this question because on the EPS has been running.
Three shifts at 24, seven cents of such cold It hit given there are assets on their ability to satisfy virtual on remote nobody requirements and embarked on the same thing on either exploded in terms of gross so the Barnes <unk> Noble College is really on the focal point in terms of.
Expense management, because that's where most of the costs on that's where most of the challenges.
So if you know what we're planning season so.
What we're planning on it.
Is is doing the same thing that we've done which end team.
Very flexible and changing our cost structure, so that much more of it is.
Variable as opposed to fixed.
Oh, no we have changed the mix of our full time employees with the mix of our seasonal at tougher employed.
And we've changed pumping it into this maybe at a little more detail, but our objective is to is to maintain that.
At that change in our cost structure, which allows us to be much more nimble and then reacted quite frankly on no short term basis on which is.
Once we get news from from various schools, how are we able to staff from the accommodate at at the same time, you don't use technology to try to to to reduce.
On payroll costs from a you may want to comment further on that.
Yeah, no. Thanks, Mike Alex I think some of the guide posts that we're thinking of generally revolve around the activity at or what we've been experienced with a lack of activities on campus with the severely restricted.
Or non existant fans at football games and the likes you know we're heading into obviously basketball season. One of the then see a tournament book like so as these events and social then start returning more to normal I think thats some of the guidepost for thinking on.
As we consider you know some of the expense items that you're referring to but unlike kind of pretty well in terms of how we've adjusted the model on this is really attributable to the.
To the college team to end the field staff on how we switch you know from longer standing full time employees to more temporary seasonal.
And thats helped reduce costs and significantly.
I think the other on known and I wouldn't call it of guidepost necessarily but as for vaccine progress, which I don't think we have enough information on yet you didn't even for me on speculation based on all the information that at.
Out there but.
But you know we are starting to see.
The actual rollout of the vaccine and.
No thats not just how does it impact students, but how does it impact faculty member of concern.
Well they get the vaccines earlier, you know that but we don't know the answers to those questions.
But what it does look like from the early reports, we even list until on this morning from a from the health care experts is at the vaccines do look like they are effective at.
And of.
Thus far I mean, its clinical trials I mean et cetera. So that's that's a big thing that we'll keep our eye on an urban schools keep your eye on and I'm sure as one could be pushing to get their faculty and administration. You know involved in index and then back to it as soon as they can.
Terrific well will you guys have done a great job managing through that this year and I appreciate all the answers. Thanks.
Thank you out.
Once again, we'd like to ask a question. Please press star followed by the number one on your telephone keypad.
Your next question comes from Marine life from adult gross capital. Please go ahead. Your line is now welcome.
Thanks for taking my questions and congrats on the strong results.
Just wanted to follow up on part will be where I think you mentioned like 378% increase in your monthly uniques end up 80% should spring.
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 Thats why the revenues net growing quite as fast, but I just love a higher level of sense of how you think the price of performing in the marketplace and also any ways that you you see to enhance the product and distribute it at more broadly.
Yes, Thanks, very that's what that's a question I could spend a lot of time on because of.
I'm spending a lot of time personally with the sales team as you know punish the whole channel today at a wonderful job getting us to this point and has built a really strong team.
Within DSS low.
Further opportunities at the end of November so I've been spending a lot of time looked at team and from give you a short answer I guess first of all in terms of how does that square with revenue and how does it relate to the to the in store really what you're asking is one of the sub look like you know that is.
Is it sold through our Pos system in store versus another great growth, we've had much of which has come from our long tell us the on strategy at.
And yet on.
On Q on a in particular, we at textbook solutions acuity of terms of homework help NTM NHS literally exploding and they are worth what kind of spending a lot of time right now just working on some of the quality of our responses the.
Turnaround time on our responses on all those things that we need to do from.
On a competitive perspective, and also of client service perspective to make sure we had at sustainable.
Business on a great customer experience, so what yield what you'll start to see is we'll start to see.
You know of because of the technology that at the team put in place.
We'll start to see you know of sortation, so to speak of on the volume of activity. We get end, we're prioritizing those questions and that we're getting in daily.
Cash to make sure we're answering our paid subscribers first okay.
Okay. So this this product is being built largely as you know on a on a model where it's largely promotional and of our focus has been on on really the financials, it's really getting the product Gulf of 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 asked in building the quality of the product of differentiated so when we bought student brands in 2017, one of the main reasons we brought the.
Company at our families because of of a tremendous team of people that are ahead of what we think the comp where we put the competition is on on artificial intelligence and machine learning.
That's enabling us to sort through volumes of questions at or about three times of we're expecting on a daily basis as of right now and our plans and of prioritize them use of what we call bottled and Max which basically a router that takes using artificial intelligence and and really being able to analyze.
The source of of question.
It allows us to sort of a huge amounts of large amounts of questions. So that we're focusing on.
On on paying subscribers and our strong you know our strongest of prospects for converting.
On the questions and answers to low more sustainable.
Subscribers the LTV associated historically, the LTV associated with an in store sale has been substantially higher than low.
One that we got from us on those.
C O or.
Out of footprint, we call it a sale and we have ways that we're working on to close that gap on enhanced of 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 debt you know are not disappear.
[music].
Objectives. They are being worked on at rolled out as we speak whether it's expanding subjects you know doing lot more with the with video and various non tax and that type of thing. So you'll see a much more I think robust product in the very near term lumbar it'll be even though it's performing very well right now in terms of improving.
So its performance on on on Q on a in technical solutions.
So we're very excited about at that I'm personally very excited about it because of the work the bulk of personally.
With the team and seeing what of strong team, we have in India, So absolutely great job they're doing.
Yes, Thanks, Mike and I appreciate that and I guess dovetailing on that just since you did bring it up I mean I.
I know that you you obviously have a great handle on how that's performing at and what you're working on but do you think that there is is there an organizational strategy I guess as far as eventually consolidating that under on someone else's currently with the company or would you look to potentially make.
And external hire at some point around.
Managing DSS and part of it.
Our objectives, we borrowed from here to take at the next level of the business.
And how we do that movie deal with we'll announce when we're ready to do it.
So I think you know of re ever plan I, just don't I don't think of it makes sense to talk about that until we see on specifics.
Understood.
And then as far as first day I thought the on the revenue number which was pretty high compared to what I was expecting at 53 million and I assume a lot of that is the bulk of it is still at cart vs. Complete but is there any sense that you can give us as far as.
As how much of it might be first day complete at this stage.
Hey, we're at January we're going to break those number we're not going to break those numbers out today and made at the end of this fiscal year, we make so he 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.
About disclosing those those numbers given how on new though the product is we want to make you know from a competitive perspective and also just a.
I think that I think that inclusive of access.
As a as an operating at a concept incorporates book first day end first day complete.
And until we scale first day complete which we expect to do on based on the pipeline discussion you just heard Elon.
On a much more substantial way in the fall of next year.
Well I don't think we can look towards breaking those numbers out I don't think at it benefits US right now to do that other than in a.
On the call.
Context of like Johnson John's metrics around enrollments for example of the enrollments that we talked about Sam Houston State and you know the size of that relative to other other.
On a per se complete client, we're pushing for per se complete metrics at really revolve around the remodel of the low.
From an increase and end margin contribution.
So I think that yes, you'll start to see those numbers you know highlighted but it would probably be probably won't be.
Don on loans.
But 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 from new business, which I know.
Leases running but then as far as what John you've been specifically doing there on.
Have you been able to I guess sort of staff that that sales team up in our use of experimented with anything new around go to market or what you have in place working pretty well.
Yeah, we've actually Havent.
Significant dedicated focus to first day complete and communicating the value proposition to both current clients and prospects alike, and we have implemented on number of.
New marketing and sales and marketing programs that that are doing a really effective job of.
Of getting the attention of our campuses to have detailed inception of conversations on first day complete at the value proposition is.
Is that at the levers as a priority on many campuses and the good news is the answer is yes. So we're driving those conversations where we're on the pipeline.
Really really robust and and.
At of a line for significant.
Gross from a number of institutions and as Mike said also the overall enrollment of of students on within our campuses that will be participating in first day complete as well as margin contribution.
Yes, I think you know John and his team as well as lease of the feel that put a tremendous job focusing on on per se from clean and the of the marketing from creativity I don't want to get into that over the phone in terms of what we're doing specifically.
Given the given some of the competitive issues, but has been very creative we even though you know certain board members that are getting directly involved because of their backgrounds index expertise at endorsements of of that aquatic peaked at which has been effective as well. So we're we're pulling out all stops I guess I would say.
Based on a very thoughtful of an aggressive way to market that that pipeline that we have and you know at the good news about of is bad is at a lot of the things that have been put in place such as the integration of the student information system, which is basically at a very simple thing to do at IP.
Good afternoon site portal a lot of these these these tools that weve produced under John's leadership has been put in place at many of these schools already so they're going to first day of complete is the next step on the sequencing, it's not difficult to do it's a heavy lift any kind of you go from from.
Conventional wildcard model to first day complete per campus. The first time, you do it but having these tools in place makes it much much simpler and.
You know much more much more productive for of the school as well as for us.
So they're going on there's gonna strategy behind this as you know we're ready for the last couple of years in terms of what we've been developing and putting into schools in terms of tools.
Moving to make this a to make this.
So the first day complete implementation sequentially you know.
Fairly fairly easy to do.
On the logical next step from any of the schools.
Right. Thanks, Thanks, a lot of both of you and then I guess for.
For lease of just on the new business side, the 72 million of net new business year to date of the great number I guess, how are you feeling about the pipeline heading into 2021 and even.
I guess calendar 21, and the back half of fiscal 21.
Yeah, we're feeling very very bullish about end in the numbers from prove that out of hi, It's out I don't know around 100 million than where at what last year worry. So you know at everyone has talked about I mean, the complexity of the industry and the pressure, but at the schools are on there are having to make those really tough this end it's about.
Cutting academic programs at tenure track back of me on.
It's really driving schools to wait GAAP and recognize that they need to operate more like a business and we are in stocks at position of strength because of our ability to really hot than my end break apart on models and we build them in any way at the school need so I am.
Very very bullish about on the strength of the opportunities on the pipe selling into next year.
Great well. Thanks, Thanks, a lot everyone of them and good luck on forward.
Thank you were at.
Good day or no further questions in the queue. At this time I will turn the call back over to end your modeling for any closing comments.
Great. Thank you and thank you all for joining us on todays call and your continued support and interest in be any de please.
Please note that our next scheduled financial release will be our fiscal 2000 <unk> third.
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.
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Okay.
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