Q3 2021 Barnes & Noble Education Inc Earnings Call
[music] strength.
Thanks.
Good morning, and welcome to the Barnes and Noble Education earnings call at the time for opening remarks, and introductions I would like to turn the call over to Andy, notably 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 my kids be CEO and chairman.
Tom Donohue CFO Jonathan.
Jonathan Shar executive Vice President and the retail and client solutions, Lisa Mallet President of Barnes <unk> Noble of 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 and 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 <unk>.
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 closed down our campus stores and protecting the safety and wellbeing of our employees and our customers.
Last March and none of us sort of anticipated the year to come and nor the challenges we would face as this pandemic continued on.
Many of students assumed debt, though they would be finishing their spring term remotely they would be back on campus by the summer of 2020.
Now and the spring of 2021.
Many of you still have yet the return.
The challenges of this past year required tremendous fortitude and adaptability and both of us and our partners.
It also provided a significant opportunity for B any day to showcase the value we provide the institutions.
This past year, it became more apparent than ever at 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 the solution to the unique needs of each college and University is not only demonstrated our value, but also what differentiates us and the marketplace.
Highlighting the importance of equitable access affordability and at 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 DNC first day of <unk>.
The program and fall term 2021, representing over 160000, and total undergraduate enrollment, which is up from 12 campus stores and 43000 and total undergraduate enrollment and the fall term 2020.
And our teams continue to work with a significant number of additional campuses to secure agreements. The 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 over four of the first day of class and the convenience of a concierge style force material delivery model.
Importantly, it does not limit of academic freedom for faculty.
As the campus bookstore, we can ensure that no matter what the format of our publisher.
It will peak and adopt whatever materials work best for their class at the most of affordable cost.
Coupled with AIP, our adoption and inside the quarter for faculty and administrators.
We can help faculty discover and choose cost effect of course materials for their students.
This model of course material delivery provides the benefits across the board and we look forward to watching at grow as more and more institutions recognize the value it brings to the students.
The retail experience, particularly in stores remain challenged this quarter as many Santos has continued to operate and hybrid or completely remote format and continued to curtail on campus activities to promote COVID-19 related safety protocols.
We continue to serve customers to the stores that have been adapted and promote health and safety guidelines as well as to our mobile and web channels that have remained available the students even at campuses were closed.
Our store and field teams have once again work through a very challenging rush period.
And I remain incredibly grateful to each and every one of them from the tireless efforts and the midst of the 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 decline.
We have also sought out additional ways to ensure that when campus the activity and the political 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 merchandize and partnership with fanatics Lids College or SLC and <unk>.
<unk> and alliance with the two online and offline leader and the license or some emblematic merchandize category.
But at its cutting edge e-commerce and technology expertise will offer the <unk> campus stores expanded product selection.
The World class online and mobile experience and the progressive direct to consumer platform.
And with Lids the law.
Leading standalone brick and mortar retailer focused exclusively on license and and alumni products.
P&C and its campus stores will have improved access to trend and sales performance data on licensees product style and design treatments for more than 200 lids stores and.
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 banana to Lids also made at $15 million strategic equity investment in B and D.
Which we plan to use to further bolster our strategic growth initiatives.
We believe our <unk> partnership has tremendous potential to improve the customer experience increased selection and accelerate the recovery and growth of our high margin general merchandise business, particularly and ecommerce 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 and a bunch of pickup.
In addition to the benefits for our existing clients at.
The very positive aspects of this alliance we plan to go to market together with SLC 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.
The additional learning routines have been up ended.
We experienced strong results once again this quarter with Bartleby revenue growing 53% over last year.
Robert and gross subscribers grew to over 210000 and on a year to date basis with DSS revenue, increasing 11, 8% over that same period driven by bottle the revenue growth.
Though the end 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 and a post pandemic world.
With this flexibility will come and the need for support outside the classroom and as a result tools such as Bartleby will remain relevant even as students return to campus.
And the meantime, we're continuing to expand bottle of these capabilities.
Most recently through a new agreement with Wolf from Alpha of trusted name and education that provides highly sophisticated technical computing solutions.
<unk> of colleges and universities globally.
As part of our agreement, we will work with Wolf from Alpha to develop of math solver as a new feature and our Bartleby suite of solutions.
The math solver will allow students to access and interactive digital calculator that provides real time.
Step by step explanations with even the most advanced math problems. We know from the questions. We're currently seeing at II Bartleby that math is the subject where students require a significant amount of line and support.
Introducing this new math solver will ensure that bartleby continues to grow with the students at <unk>.
Adding functionality that can meet the urgent demand even better support students and this subject area.
Borrowed the remains a significant growth driver for <unk> at.
And we've been very pleased with the progress our teams have made and increasing <unk> reach and brand awareness our highly still at DSS team is also innovating new features and functionalities that will enhance both part of these 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 journey.
I want the welcome our new DSS, President, David <unk>, who officially started yesterday.
We're very fortunate and grateful to have attracted the 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 <unk>, including the DSS team, who will be leading.
Very excited to have David and this new key senior management role.
As we look ahead, we continue to expect the pandemic to impact our results from 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 of the work that our team has accomplished over the past year and position <unk> 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 and their respective categories enabled us to provide unmatched solutions to our campus partners.
Ultimately this will be reflected and 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 and 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 the catalyst for a great deal of change and higher education.
It has accelerated long needed change and force all of us and service industry to be nimble and flexible.
It's pushed us to innovate faster than we ever thought possible with.
We firmly believe that the changes of this past year will lead to a better and more applicable future for higher education.
For <unk>.
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 32021, 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 and the prior year.
This decrease of $90 7 million or 18, 1% was comprised of $73 million decrease from the retail segment of $27 5 million decrease from the wholesale segment and the 0.8 million increase from the DSS segment B.
<unk> 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 and response to the pandemic.
While our textbook business continues to be fairly resilient and 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 eight 1% decline and textbook sales and a 46% decline and our general merchandise business.
These declines were partially mitigated by the NCS rapidly growing first day offerings, where students charged for of course materials by the institution through of fee or included intuition. These.
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 of course materials later and 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 D&C book stores, partially offset by lower returns on allowances.
Additionally results had been impacted by the significant reduction of on campus textbook buyback opportunities due to COVID-19 safety protocols. We expect the lack of on campus buyback programs during fiscal 'twenty, one to impact wholesales availability of used book inventory supply and fiscal 'twenty two.
DSS sales grew zero point $8 million or 12% to $7 2 million benefiting from the growth and Bartleby subscriptions bar.
The Bartleby subscriptions revenue increased 53% to $2 6 million of student brands revenue decreased 3% of $4 6 million.
The consolidated gross margin rates of the quarter was 17, 2% compared to 23, 6% and 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 and lower contract costs, along with higher margin and the wholesale segment.
Led by lower markdowns and lower returns on allowances.
As we continue to operate and 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 'twenty 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 of long lived assets for impairment, which was significantly affected by the COVID-19 pandemic.
As a result of the impairment testing, we recognized a pre tax $27 6 million noncash 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 on 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 and in addition to the $15 million strategic equity investment they made and DNA.
<unk> also agreed to purchase of our logo and emblematic general merchandise products, 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 and the prior year.
Currently our retail segment operates 1441 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 opened 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 1439 locations net of closed stores.
With that we will open the call for questions. Operator, please provide instructions for those interested and asking a question.
Maybe if I can ask the question at this time. Please press Star then the number one on your telephone keypad and you would like to withdraw your question press the pound key.
Question comes from line Mcdonald. Please go ahead.
Yes. Good morning, everyone. Thanks for taking my question on great to see some of the progress on the digital initiatives and I guess, that's where I'll start and when we look at the.
The opportunity for first day, and first day complete and great to see more analysis 30, 31 stores, representing a 160 60000 potential students can you sort of explain and tell us how that rolls out. The students do you expect and when you get the fall 'twenty, one and that all students and.
And the vast majority of students will be able to take advantage of that or will this be a rolling approach, which was new incoming classes.
Hey, Ryan.
Yes, Jonathan Shar. Thanks for the thanks for the question.
With the 31 campus stores, where we and agreements reached all of those campus stores are participating starting in the fall and first day complete so it is not a rolling on.
Our rolling launch that is how course materials will be delivered to the students at those campuses starting in fall or some of those are continuing from fault from the 12 net add in fall term 'twenty. So all of those campuses are participating.
And and as mentioned we are continuing to work with a significant number of additional campuses. The secured agreements to launch first day complete for fall term 'twenty one over the next 30 to 60 day.
Excellent and then my follow up question is really just getting a sense of what youre hearing from you.
And your University partners as you progressed through the spring, obviously, a greater mix of maybe some on campus student being on campus of maybe not necessarily taking classes and person as much at what are you hearing in terms of potential for graduation ceremonies on campus towards the.
And the later this spring and then expectations I guess as we start planning for fall of 'twenty. One are you hearing more of a greater mix of universities willing to do more in person and learning.
Yes, Brian its Mike I think that what we're hearing from from campuses for fall of 'twenty, one substantially more on campus and person learning, but no doubt, they're going to continue to blend and based on what they've learned the extent of sufficient or maybe its effect more effective for certain classes of certain.
Certain students that have.
The requirements more flexibility Brendan blend and virtual and terms of graduation, and I'll, let Lisa Lisa can handle that one.
Okay. Thanks, Thanks Max.
Overall I agree with the best.
And on the floor every day, Ryan we are getting.
Good news and good feedback from our universities about their plans for not just the optimism about their plans for reopening.
And of much more normalized rate for fall semester.
And the implied and having the majority of.
The assets in person. So that's good news and universities right now on making the decisions on gratulation and orientation and more and more schools are scheduling in person orientations and bringing back seat and tours.
Which were really.
And for graduation, we're still seeing on mix.
But even schools that are opting not to do in person and vast majority of moving forward with the virtual or virtual graduations, which we're working to take full advantage.
Excellent thanks for taking my questions.
Yes.
Once again and ask a question. Please press star one on your telephone keypad.
Question from Alex Fuhrman with Craig Hallum Capital. Please go ahead.
Great. Thanks, very much for taking my question.
At the act a little bit of more about the general merchandise business and the partnership with.
The data you guys have always done a really good job with the emblematic apparel business, but vanadic.
Possibly the best and the World assets. So what are your stores and a look like.
And when students are back on campus and the bulk of the master that might be different than what they've seen and the path and as you think about the next couple of years, how big could that business really get.
All the answer in general and and Lisa can talk about what the stores are going to look like.
We announced this partnership and December So, we're now and the process of implementing at with fanatics and Lids Lids is an affiliate of the fanatics as you know and has some real expertise and providing data analytics around trend and sales performance on license fees and product styles and that type of thing.
200 of their own stores and manage manage other stores as we've said and the script.
But I think I think that the.
What's important to understand and.
And what with fanatics and with both understand.
Is that we're at really representing the brand of the schools.
The schools have a lot of input into what those stores look like and they were kind of a lot of input as well our people and to what the stores will sell and how they represent of the brand at the school once represent.
We are really leveraging here is we're taking.
And then taking advantage of our our focus on on understanding the schools and local personalized marketing and and relationships with the students.
And we're taking advantage of fanatics expertise and and ecommerce and and.
Technology, as well as the marketing and and lids in terms of their in store expertise and their access to some of the licensees that we have but the incremental access to additional.
And of licensees at both fanatics lids had to expand the assortment.
And.
Eventually we have.
We have of go to market strategy also I'll, let I'll, let Lisa talk about that sort of offensive part of the strategy with the.
With this new partnership.
Great. Thank you Mike in terms of the stores everything that Mike said is accurate in terms of really bringing together the best of both company and certainly our deep understanding and knowledge.
Each of our individual campuses and.
Sales and the income we have our students and campus partners together with the really deep technology and data capabilities that the fanatics with partnership it's been at brings to the table. So in terms of how our stores are going to look we're not expecting.
The major wholesale changes, but certainly we are we are going to grow to have an even sharper and more expanded product assortment that hopefully is going to continue to speak to.
And to our customers, whether theyre and incoming freshmen or and alumni coming back to campus for the Big day. So that that's really the how we look at the stores, especially for the fall in terms of the go to market strategy and we're getting a very very good response from the market in terms of the power of this partnership.
Together all the capabilities.
And the brand of Barnes and Noble College with fanatics on sales organizations have been huddling on and identifying targets.
Really how we can start to point the north star for the industry and help universities continues to promote their brand and.
The really grow the 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 how the fiscal 'twenty two could unfold obviously the.
First couple of months or quarter or two are going to be under significant COVID-19 pressure on.
But it sounds like you have the confidence that the day that you think fiscal 'twenty two is going to be EBITDA positive at this point.
And how profitable can it be what are some of the things that can kind of determine how the year goes I know you mentioned that the textbook availability just from from buybacks and the spring.
And we're going to have the 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 and in terms of the general first off the reason we wanted to put some comments on the outlook regarding.
Slide 21 is continuing to be impacted it's been a really really tough year, but it has also been at a year that.
The accelerated changes that allowed us to end.
And forced us in some ways, but allowed us to get our cost structure and a much more variable basis and that will continue to benefit us and fiscal year 'twenty two but the things we're really counting on for fiscal year 'twenty to get us the EBITDA positive.
At this point very confident about it.
The vaccines and their impact on getting students back on campus opening up sporting events and getting.
Fans and the seats.
During game days and that type of thing because you can see from our results that we've kind of held our own and the courseware side, but we've been at very very hard this past year on general merchandise. So general merchandise turning around not just from the change and the.
And the on campus population, but also everything at that brings with it.
And people coming into the campus of loans et cetera.
And <unk>.
The increases in on online sales as well, so emblematic clothing and.
That's where fanatics and lids and then two is making this change now.
And to really help us in concert with moving to on our own E Commerce system.
And helped.
The improve our ecommerce sales quite a bit because of those patterns of buying.
Imminently changed as we all know and Theyre headed.
Towards the ever increasing reliance on on e-commerce or the digital sales. So the timing of the partnership really I think kind of environment at the time, the big implemented and.
And get it up and running.
For many schools and the summer and then the rest of the schools and the fall. So we're doing that and it's important to understand we're doing that rollout in concert with.
And the rollout of our new ecommerce system as well so that would help.
And user experience.
It's fairly seamless.
In addition to the general merchandize, we're counting on and very confident about the growth of the bar will be at its contribution financially at starting to become much much more significant on a relative basis.
The new leader in place that's going to help us.
Get some place the right bets et cetera, but we have substantial momentum.
Even in the spring over the fall in terms of the traffic and the and subscribers. So we don't expect learnings go back to completely in person at the virtual models and the hybrid models are and continue and students are going to continue to want to take advantage of rovs and the anytime anywhere capabilities to help them.
But with the homework and writing needs and the needs that we are working to address of the evolution of the product that's rapidly rapidly going on.
And at.
Obviously as John talked about the.
The first day and first day complete and.
And the momentum we have behind those as another important contributor to margin.
Our focus is really on margin and cash flow.
The fanatics deal will result in.
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 the quarters when that starts to happen, but we expect growth and margin and cash flow was the result of that partnership Bartleby.
And the new of course, where delivery models, we're putting in place.
But a lot of it is dependent upon and there is still some uncertainty about coal.
Covid protocols and what's going to happen in the fall, but right now we're from what we're hearing and what we're seeing with the vaccines even on the variance were.
We're very optimistic that the pulse of 'twenty, one is going to be.
And I'd say back to normal which is what we've said, but very very strong compared to what we saw the basketball.
And the list these are John or Lisa Thompson hop in on that answer.
And to answer your question, Alex about how high EBITDA to debt, we're not going to give specific guidance on that and you can see where the losses are running from the nine months and as we said Covid could continue to.
At debt loss in the fourth quarter.
And because it's it's abating, but it's not the patterns of already been set for this fiscal year and the semester, but we did want to put it in context, that's a fairly significant.
And very significant recovery from where we were and a lot of thats due to the fact that we do on a cost structure that will sustain on a much more variable basis.
And with the much higher expectations in terms of general merchandise and and.
And revenue and the margin from Bartleby.
Great. That's really helpful. Thank you very much.
The next question comes from Rory Wallace with Outerbridge 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 could talk a little bit about David and Enki specifically just.
And what he brings to the table I know, it's the only his second day to day, but just to the extent you can speak about why he is the guy and also.
And kind of what the long term vision and opportunity is there for him too.
To kind of take DSS to the next level.
Alright. Thanks.
We're excited about.
Having David join Us and generally so.
We were fortunate we had of.
We had the.
The process that exposed us to the number of.
What I would call very strong candidates and David emergence of very clear choice and our number one choice.
And we had a lot of people, including some of our board members involved and the and.
And the process of interacting with David during that during the process.
In terms of answering some of the questions on vision and strategy and that type of thing and Thats exactly why we have David is so deep and help.
And I will take some time and and see what we're doing and capitalize on the momentum and it's already been achieved.
And we'll have a lot more of a report on I guess, I would say vision and strategic decisions as he.
Gets in and and understands the business and we all interact on on what we want the strategy for Bartleby bartleby too to be in the future.
And what that's we wanted to place to the one of them.
And do what we're doing now because of some things we wanted to do differently, but.
David has got a outstanding track record and its very proven in terms of.
Leading and not just leading the developing from scratch and.
The digital retail subscription based businesses.
And Amazon I think we put this out at in the press release, where we talked about Davis background, and and developing the grocery business and he.
He did some other things the in terms of convincing the Amazon senior management to take on some of the competitors in terms of storage and and photos and and.
And then the explore business, which he was he was running.
And when he left the Amazon.
Talking to senior management of the Amazon and the process I can tell you that is.
And also appears as and also subordinates.
And across the board has and is outstanding and outstanding references and.
He is at his finance back.
But then he got into marketing and operations and prove themselves across the board and.
And the.
Our.
And our key DSS leaders were also involved in and talking at Tim during the process and I'm very confident that with our current team which was of a great team debt.
He's inheriting even also.
Choose to supplement the team, but right now our teams have 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 the chemistry was excellent and.
So I think youll hit the ground running and I know <unk> already been working hard over the last couple of weeks to get up to speed. So.
He is going to be of great fit for us and we're very excited to have the feedback.
Business.
Congrats on the hiring and that all sounds great I guess moving to the first day and Bartleby in terms of the financial contribution if I think about the growth trajectory.
<unk> of those over the coming quarters it seems like.
And so the traffic continues to be very strong just from from tracking that and with the growth and first day complete is it fair to say that.
And we shouldn't at least expect that growth the slowdown I would imagine bartleby could actually start to show from acceleration on a year over year basis, and potentially the first day too, but I just want to make sure that I'm thinking about that properly.
Yes.
And if your question could you rephrase your question about the growth and slowing down and I'm not sure I mean, it sounds like you agree that the growth and Bartleby will continue most of your question more about first day or kind of yes.
The way that our modeling it seems like the bartleby.
Trajectory is on the 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 and store, which was leading to.
Just kind of the lower conversion rate on the.
And beyond.
On the gross additions at fair to think that we might see bartleby revenue accelerated.
Well as I, just said and talking about fiscal year 'twenty, two without any of the specifics or guidance on bartleby.
Counting on Bartleby, continuing to grow and its relative contribution to margin will be higher than its relative contribution the revenue growth because of such a high margin business alright. So yes, I think one of the data is one of the David.
First.
Jobs in terms of working with the team and setting the strategy and confirming is to make sure that we have.
We have of product that will create a sustainable relationship with subscribers.
It's a fairly it's a fairly.
It's fairly high churn business because of the nature of the cohorts going through school, but they are at.
Ways to increase the.
And the relationship life and the LTV of the product, which our team is working on in terms of the features and functionalities, it's building into it and making it much more attractive.
The us over the course of the four year and beyond education and for continuous learning, but we want to make sure that the way, we're marketing and selling it and increasing usage of it and importantly want usage of the product the globe, which will help with the.
With the churn and it will also help with the LTV. So.
Anyway, Yes, we expect final day to go up and in terms of increased.
Revenue as we've said that I think we've been on record for that for since it started and Brian and Bartleby is evolving and to be a much more competitive product versus some of the larger companies, which is important to understand and as the and as the competitive nature of its product increases through the features and functions and are being added we would expect that to attract more.
Customers from the competition right.
Alright to take market share.
So.
And as Jonathan said on the first day first day complete you can see at first acres substantially of 107% year over year and that's important because that's the digital only first day by of course of digital only and as there's more and more movement to the <unk>.
Digital we don't want to forget about first day of the product and have it.
And overshadowed by first day complete all the first day complete is.
This is digital and physical on one solutions from our perspective kind of the the <unk>.
Panacea for school for students in terms of cost savings and accessibility and also to make life easier from the schools, but we expect both of those to continue to grow and.
Jonathan said, we're continuing to work with the substantial number of schools and our pipeline.
To implement the first day complete.
And following on that I guess for you and John with the <unk>.
The enrollment being up Forex.
Great to see for complete for the fall and I guess, when I think about the.
The number of bonds are still juggling as far as potential wins and the next couple of months is that a material number of schools and.
And students that you could potentially still enrolling and those programs.
And the answer is yes, but we're not going to we're not kind of projected.
As of difficult sales process during COVID-19 and in some respects, even though at such a and obvious and.
To the outside and such an obvious win win win.
And because of the benefits of bring students and schools, but what you are fine and the learnings in terms of of how you go through the sales process as debt.
It's a big model change and many schools will.
And I'll expand the the bolt.
Both on the model change to a number of constituencies.
And so we're learning from that in terms of 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'd been true that sales cycle now for <unk>.
With the.
Large number of schools over the past year and so we're confident that we're going to continue to grow at multiple substantially and probably even for the fall, but we can't say that with certainty at the 31 is signed agreements we have other.
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 matter of floor on the dotted line sales John embellish on that but it seems and doing a great job on it and the very very focused on and.
And then making it easy for schools to switch by having tools in place like AIP and <unk> daily download and although the things we've talked about the prior calls.
Yes, yes, thanks, Mike and.
And Laurie as you pointed out.
In terms of and the impact from a from a student perspective.
The floor is really forex and growth year over year as we get into the fall and we're working with many institutions that as Mike referenced.
Don't have signed agreements, but but we are moving forward and and starting implementation.
Any institutions.
April board of trustees meetings, where tuition and fees for the next academic year get approved and signed off on so thats 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 Forex multiple of growth for the fall and then beyond the.
The impact at 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 more.
Sort of the more case studies, we have and proof points of the impact of the model.
The the faster.
At <unk> that will drive growth into the new course material delivery model.
Yes, Thanks, a lot John and then.
One for lease and on new business.
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 how exciting is it to have the the sandwich partnership.
And 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 warrants.
Covid normalizes here hopefully in F 'twenty two.
Yeah, well I think that what Mike.
And <unk> and referenced staying about the accelerated need for change during the Covid is really helping.
Helping us per calendar day businesses. The schools just continue to recognize this is not something they can they can run on their own as Jonathan inferred about just the increasing importance of student outcomes and ROI scores of just continuing to look for us.
In particular, the cost of our ability to truly customized everything we do for us of oil has nothing we do at Cookie cutter so on.
<unk>.
Your line the new fanatics relationship we're hearing.
Very very good comments and the marketplace.
And one of the reason at this at the ability to bring together different campus constituency.
And there are relationships today with the athletic the ability to bring together.
All of these different departments to really maximize not just the revenue and sales, but also the licensing revenue and our ability to really catapult this business because of the technology.
I'm going to bring to the table at relative data capabilities, and we think it's going to continue worry and it's going to be and exciting selling statement.
And the other part of it is at relationships, which is key is that fanatics, who is already in the NCWA space and a fairly big way, especially with the larger power five schools and so they have some relationships.
And 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 of leases as of the two relationships together, where we can we can help form of bridge so to speak between the athletics and the academic site for.
And for benefits at the can't get otherwise.
At the very very powerful go to market strategy, and we're seeing it start and starting to pay some dividends already and you did see that and the third quarter actually on one specific.
The proposal in the in January, but we wanted and so.
It's very exciting and.
It's off the offensive Lee from the strategic perspective, as well as with some defense of elements, which you discussed and the last.
And the last call.
And that is getting into the space and the big way.
And definitely and then just the last question for Tom on just a couple of modeling question. So the expenses are normally down more on.
And this quarter they were down sequentially.
Sources at <unk>.
Q2, and I guess, how much of that is just kind of bringing people back and preparation for a more normalized environment versus growth investments versus anything else that I might not be thinking about one of the modeling expenses.
Yes, I think youre right.
More of a seasonality.
As we sit back here in early March and look back at the spring Rush and I think and when we tried to say this.
On the prepared remarks, the January was probably more.
On.
And better months of the spring rush and the necessarily February so a lot of the payroll.
And the store level of expenses were geared towards the the activity we saw on our Kansas at in terms of.
And the purchasing so it's.
And it's probably a little heavier in January and perhaps it should be but thats, just really us reacting to the needs of.
And of the retail footprint.
Okay and then just the final one on on the first day, specifically first day complete and Rev. Rec around that so <unk>.
<unk> been breaking out the <unk>.
First day of revenue every quarter, which has been extremely helpful. I think to your investors, but when I think about the next quarter.
And the the number of you'll end up reporting and the growth is there anything to think about as far as and when.
And those deals are getting Rev rec.
It seems like that very high growth trajectory shutdown should definitely continue in and your FQ4 I just want to make sure that I'm thinking about at right.
Are you referring to first day of our first day complete and bolt on.
Well I'm really referring to both put on.
Also on complete I know that debt.
And that's built differently because it's obviously the the system wide sales as opposed to the more transactional jurisdiction.
Yes, so is the.
Typically the way we recognize the revenue already at 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 and the next quarter.
Okay.
I think the comes on I don't necessarily think the revenue recognition.
It's not tied to growth on that sense of I think youre implying.
Okay.
Yes, I was just wondering if you build at all in one quarter for example, because the semester can stretch over a couple of quarters. So I was just wondering yes.
Yes, so, but you got and Youre, saying.
And.
So at <unk>.
So it gets build ratably or it gets filled all in one quarter.
It will get spilled over the semester.
The <unk>.
It was over two quarters and is recognized throughout the.
For instance, the semester starts in January and ends in April the built through January through April and Rocky.
Got it okay. Thanks.
If it's at.
To the question, but yes, thanks, a lot and.
Good luck guys I really appreciate it.
Thanks, Ron.
And at this time and I'll turn the call over to Mr. Northway.
Great. Thank you and thank you all for joining us for today's call and your continued interest and <unk>.
Please note that our next call.
And we want to be held on or about July one to report our fourth quarter and year end earnings with that and wish everybody a great day. Thank you.
This concludes today's conference call you may now disconnect.
Okay.
And then.
And then.