Q4 2023 Barnes & Noble Education Inc Earnings Call
Thank you for standing by my name is Maria and I will be a conference operator today at this time I would like to welcome everyone to the.
Speaker 1: Thank you for standing by. My name is Maria, and I will be your conference operator today. At this time, I would like to welcome everyone to the.
Barnes <unk> noble.
Speaker 1: Education Fiscal 2023 Fourth Quarter Earnings Conference.
Education fiscal 2023 fourth quarter earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer question session. If you'd 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.
Speaker 1: All lines have been placed on mute 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.
Speaker 1: If you would like to withdraw your questions, press star 1 again. Thank you. I would now like to turn the call over to Mr. Hunter Blakenbaker, Vice President of Investor Relations. Mr. Blakenbaker, please go ahead.
Thank you I would now like to turn the call over to Mr. Hunter Blankenbaker, Vice President of Investor Relations. Mr. Blankenbaker. Please go ahead.
Okay, great. Thanks, Maria and good morning, everyone.
Speaker 2: Okay, great. Thanks, Maria. And good morning, everyone. And welcome to our fiscal 2023 fourth quarter earnings conference call.
Welcome to our fiscal 2023 fourth quarter earnings Conference call.
Speaker 2: Joining us today are Jonathan Scharr, Executive Vice President, BNED Retail, and President Barnes and Noble College,
Joining us today are Jonathan Shaw Executive Vice President.
Retail and President Barnes <unk> Noble College.
Speaker 2: Mike Miller, our EVP of corporate development and affairs and our chief legal officer, and Jason Snuggeski, our SPP, and director.
Mike Miller, our EVP of corporate development and affairs, and our Chief legal officer.
And Jason snack recipe or.
<unk> SVP and treasurer.
Speaker 2: Mike Huseby, our Chief Executive Officer, will not be on the call today due to a family emergent.
Mike <unk> our.
Our Chief Executive Officer will not be on the call today due to a family emergency.
Before we begin the call 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.
Speaker 2: Before we begin the call, 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 document.
The contents of this call are 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.
Speaker 2: The contents 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.
Speaker 2: During this call, we will make forward-looking statements with predictions, projections, and other statements about future events.
During this call we will make forward looking statements with predictions projections and other statements about future events.
Speaker 2: These statements are based on current expectations and assumptions that are not, that are subject to risks and uncertainty. The following statement is based on current expectations and assumptions that are not,
These statements are based upon current expectations and assumptions that are not that are subject to risks and uncertainties.
Including those contained in our press release and public filings with the Securities and Exchange Commission.
Speaker 2: including those contained in our press release and public filings with the securities and exchange.
Speaker 2: Company disclaims any obligation to update any forward-looking statements that may be made or discussed during this call.
The company disclaims any obligation to update any forward looking statements that may be made or discussed during this call.
So with that I'll now turn the call over to Mike Miller.
Thanks, Hunter and good morning, everyone.
Speaker 3: Thanks Hunter and good morning everyone. We appreciate you joining us today. While the operating environment remained challenging in fiscal 2023 and our results did not meet our expectations.
We appreciate you joining us today, while the operating environment remains challenging in fiscal 2023, and our results did not meet our expectations, we made significant progress to transform and strengthen the business for sustained profitable growth.
Speaker 3: We made significant progress to transform and strengthen the business for sustained profitable growth.
Speaker 3: In the second half of Fiscal 23, we took decisive action to reduce our cost structure and increase operating efficiency across all aspects of our business.
In the second half of fiscal 'twenty, three we took decisive action to reduce our cost structure and increase operating efficiency across all aspects of our business.
Speaker 3: We appropriately aligned our costs with revenue in what we believe is the new normal of the post-pandemic operating environment.
We appropriately aligned our costs with revenue and what we believe is the new normal of the post pandemic operating environment.
Speaker 3: We also accelerated the transition of the schools we serve to our more profitable, subscription-like, first-day complete for FDC equitable access model.
We also accelerated the transition of the schools we serve.
More profitable subscription like first day complete or FTC equitable access model the.
Speaker 3: The equitable access model is rapidly becoming the industry standard for institutions, faculty, publishers, and most importantly, students.
The equitable access model is rapidly becoming the industry standard for institution faculty publishers and most importantly students.
Speaker 3: In fiscal 23, FDC grew 88%.
In fiscal 'twenty, three FTC grew 88%.
Speaker 3: Then we added a record number of schools for the fall 23 term.
Then we added a record number of schools for the fall 20% return.
Speaker 3: Through this innovative, equitable access program, we've changed the momentum of the course material business and have grown course material revenue for two consecutive years.
Through this innovative equitable access program, we've changed the momentum of the course material business and have grown course material revenue for two consecutive years.
Speaker 3: Additionally, we divested our Digital Student Solutions business to deepen our focus and capital allocation on our continued transition to First Aid Complete and growing our general American unst subsequent conversation.
Additionally, we.
We divested our digital student solutions business to deepen our focus on capital allocation on a continued transition to first day complete.
And growing our general merchandise business.
Speaker 3: And lastly, as the flu was last week, we strengthened our liquidity and financial position to accelerate the execution of our strategy for the benefit of VNED's students, educators, faculties, alumni, fans, and staff.
And lastly, as disclosed last week, we strengthened during liquidity and financial position to accelerate the execution of our strategy for the benefit of <unk> students educators faculty alumni.
Alumni fans employees and shareholders.
Speaker 3: Under the terms of the agreement, we've extended the maturity of our debt facilities, amended certain covenants, and modified certain other agreements that restricted our ability to operate efficiently.
Under the terms of the agreement we have extended the maturity of our debt facilities.
<unk> certain covenants and modified certain other agreements that restricted our ability to operate efficiently.
We are pleased to have worked constructively to reach a resolution with our financial stakeholders in strategic partners that preserves value for our investors today and enables us to evaluate the best long term opportunities for the company.
Speaker 3: We are pleased to have worked constructively to reach a resolution with our financial stakeholders and strategic partners that preserves value for investors today and enables us to evaluate the best long term opportunities for the company.
Okay.
Speaker 3: Given the significant changes we made to our business in Fiscal 23, we are entering Fiscal 24 a more efficient company with a clear focus on our greatest strengths and opportunities and well positioned for profitable growth over the next several years.
Given the significant changes we made to our business in fiscal 'twenty. Three we are entering fiscal 'twenty for a more efficient company with a clear focus on our greatest strengths and opportunities and well positioned for profitable growth over the next several years.
Speaker 3: With that as a backdrop, I'll provide a review of our fourth quarter and fiscal 23 financial results before turning it over to Jonathan Schar to review our fiscal 24 strategic initiative.
With that as a backdrop I'll provide a review of our fourth quarter and fiscal 2000, <unk> financial results before turning it over to Jonathan Shar to review our fiscal 'twenty four strategic initiatives.
Speaker 3: Following that, I'll discuss our fiscal 24 guidance and closing remarks.
Owing that I'll discuss our fiscal 'twenty for guidance and closing remarks.
Now, let's turn to our results consolidated fiscal 2018 revenue from continuing operations of $1 5 billion grew by three 2% <unk>.
Speaker 3: Consolidated fiscal 23 revenue from continuing operations of 1.5 billion grew by 3.2%. Consolidated adjusted EBITDA grew by 2.2 million to negative 8.1 million.
Consolidated adjusted EBITDA grew by $2 2 million to a negative $8 1 million.
Speaker 3: Moving on to our retail segment, Fiscal 23 total retail revenue increased by $52.1 million, or 3.6%, to $1.5 billion, driven by strong first day complete, first day bay course, and general merchandise sales.
Moving on to our retail segment.
23, total retail revenue increased by $52 1 million or three 6% to $1 5 billion driven by strong first day complete first day by of course and general merchandise sales.
Speaker 3: Total course materials revenue increased 1.8%, driven by a 48% increase in first day and first day complete revenue.
Total course materials revenue increased one 8% driven by a 48% increase in first day and first day complete revenues.
Speaker 3: offset by a 9.4 percent decline in the traditional a la carte model.
Offset by a nine 4% decline in the traditional Ala Carte model.
Speaker 3: The higher growth first day and first day complete revenues comprised approximately 33% of course, material revenue and fiscal 23.
The higher growth first day, and first day complete revenues comprised approximately 33% of course material revenue in fiscal 'twenty three and.
Speaker 3: In fiscal 24 1st day and 1st day complete will approach the majority of course, material revenue.
In fiscal 'twenty for first day, and first day complete we will approach the majority of course material revenue.
Which provides enhanced predictability and the course material business.
Speaker 3: which provides enhanced predictability in the course material business.
Total retail gross comp store sales.
Speaker 3: Total retail gross comm store sales in fiscal 23 increased 3.2%.
Fiscal 'twenty three increased three 2%.
Speaker 3: Retail gross comparable course material sales grew 0.4% and general merchandise gross comparable store sales increased 8.6% dated by a strong performance and emblematic general merchandise cafe and convenience.
Retail gross comparable course material sales grew <unk>.
4% and general merchandize gross comparable store sales increased eight 6%.
Aided by a strong performance in the emblematic general merchandise and cafe and convenience.
Speaker 3: fiscal 23 retail non-gap adjusted EBITDA of 10.6 million increased 2 million primarily due to a 52 million revenue increase offset by higher cost of sales and selling at administrative cost.
Fiscal 'twenty three retail non-GAAP adjusted EBITDA of $10 6 million increased $2 million, primarily due to a $52 million revenue increase offset by higher cost of sales and selling and administrative costs.
Speaker 3: For the fourth quarter, retail sales of $235.4 million decreased 4.1%.
For the fourth quarter retail sales of $235 4 million decreased four 1%.
Speaker 3: due primarily to a 3.1% decline in coarse material and a 6.5% decrease in general merchandise.
Due primarily to a three 1% decline in course material and a six 5% decrease in general merchandise.
Speaker 3: Within course materials, a 60% increase in FCC revenue was offset by a 9.9% decrease in a la carte sales.
Within of course materials, a 60% increase in FTC revenue was offset by a nine 9% decrease in olive cartels.
Speaker 3: 116 campus stores utilize BNC's first day complete.
116 campus stores utilized and fees first day complete.
Speaker 3: coursework delivery program during the spring 23 term.
Courseware delivery program during the spring twenty-three term.
Speaker 3: at institutions representing 580,000 in total enrollment.
At institutions, representing 580000 in total enrollment.
Speaker 3: Within general merchandise, growth in cafe and convenience was offset by declines in supply products and
Within general merchandise growth in cafe, and convenience was offset by declines in supply product.
Emblematic sales.
Speaker 3: The year-over-year decline in emblematic sales was driven by a decrease in the commission rate.
The year over year decline in <unk> sales was driven by a decrease in the commission rate.
As part of the fanatics and Lids agreement, which call for an adjustment in commission rates as that relationship matures.
Speaker 3: as part of the Fanatics and Liz Agreement, which called for an adjustment in commission rate as the relationship matured.
Speaker 3: Fourth quarter retail selling at administrative expenses decreased 3.8 million or 5.2 percent compared to the prior year period due to the company's initiatives to drive efficiencies, simplify organizational structure, and reduce nonessential costs and lower incentive compensation economics.
Fourth quarter retail selling and administrative expenses decreased $3 8 million or five 2% compared to the prior year period due to the company's initiatives to drive efficiencies simplify organizational structure and reduce non essential costs and lower incentive compensation expense.
Speaker 3: Fourth quarter retail non-GAAP adjusted EDTA was negative 10 million as compared to 4.2 million in the prior year period.
Fourth quarter retail non-GAAP , adjusted EBITDA was negative $10 million as compared to $4 2 million in the prior year period.
Speaker 3: Retail non-GAAP adjusted EBITDA declined due to lower fourth quarter revenue and lower fourth quarter gross profit, which included a shift in the mix of buying patterns from physical textbooks to lower margin digital course materials within the company's A La Coq course material model. Additionally, higher gross profit, which included a shift in the mix of buying patterns from physical
Retail non-GAAP adjusted EBITDA declined due to lower fourth quarter revenue at lower fourth quarter gross profit, which included a shift in the mix of buying patterns from physical textbooks to lower margin digital course materials within the company as our course material model.
Additionally, higher inventory reserves and increase in shrink and shrink and higher markdowns impacted gross margin by approximately $6 5 million versus the fourth quarter of last year.
Speaker 3: an increase in shrink and higher markdowns impacted gross margin by approximately 6.5 million versus the fourth quarter of last year.
Speaker 3: Moving on to wholesale, fiscal 23 revenue decreased 5.2% to $106.4 million. In the first half of the year, supply constraints from the lack of used book inventory and the shift to digital course materials caused revenue to decline on a year-over-year basis.
Moving onto wholesale fiscal 'twenty three revenue decreased five 2% to $106 4 million.
First half of the year supply constraints from the lack of used book inventory and the shift to digital course materials caused revenue to decline on a year over year basis.
Speaker 3: In the back half of the year, we saw an easing of supply constraints and more textbook purchasing opportunities, enabling us to fill increasing demand at BNC and other bookstores. This enabled wholesale revenue growth in the third and fourth quarters.
In the back half of the year, we saw an easing of supply constraints and more textbook purchasing opportunities, enabling us to fill increasing demand at BNP and other bookstores.
This enables wholesale revenue growth in the third and fourth quarters.
Speaker 3: Fiscal 23 wholesale non-GAAP adjusted CBA DAO declined slightly to $3.2 million from $8 million in the prior year.
Fiscal 'twenty three wholesale non-GAAP adjusted EBITDA declined slightly to $3 2 million from $3 eight.
<unk> 8 million in the prior year.
Turning to fiscal 'twenty four.
Speaker 3: Turning to Fiscal 24, we are confident in our ability to grow the top line through our Primary Growth Initiative, General Merchandise, and our
We're confident in our ability to grow the top line through our primary growth initiatives general merchandise and first day complete.
Speaker 3: We are also fully committed to disciplined fence management, and we will continue to optimize our cost structure to drive increased revenue and adjusted EBITDA.
We are also fully committed to disciplined expense management.
And we will continue to optimize our course cost structure to drive increased revenue and adjusted EBITDA.
Speaker 3: I'd now like to turn the call over to Jonathan to take a deeper look at our 2024 growth.
I'd now like to turn the call over to Jonathan to take a deeper look at our 2024 growth initiatives.
Speaker 2: Thanks Mike and good morning everyone. I'll begin today with one of our key growth initiatives, First State Complete.
Thanks, Mike and good morning, everyone I'll begin today with one of our key growth initiatives first day complete feedback.
Speaker 2: Feedback from students, faculty, administration, and academic leadership on First Day Complete continues to be excellent.
Feedback from students Faculty administration and academic leadership on first day complete continues to be excellent.
Speaker 2: In May, through a proprietary research platform, Barnes & Noble College Insights, we conducted a survey with students who participated in the First Day Complete Program during the Spring 2023 semester.
In may through our proprietary research platform Barnes <unk> Noble College insights, we conducted a survey with students who participated in the first day complete program during the spring 2023 semester.
Speaker 2: These students reported overwhelmingly that through the subscription-like course material model, they had a better customer experience, were better prepared, and ultimately achieved improved academic success.
These students reported overwhelmingly that through the subscription like course material model. They had a better customer experience, we're better prepared and ultimately achieved improved academic success.
Speaker 2: Confirming BNC's Equitable Access Program is making a positive impact on student outcomes.
Affirming <unk> access program is.
Is making a positive impact on student outcomes.
Speaker 2: Some key insights from the survey include 83% of survey participants said the program had a positive impact on their classroom success.
Some key insights from the survey include 83% of survey participants said the program had a positive impact on their classroom success.
Speaker 2: 86% that they were better prepared for the academic term. 75% stated it helped them achieve better grades.
86% said they were better prepared for the academic term, 75% stated it help them achieve better grades 91% stated that they found it convenient to have their course materials bundled.
Speaker 2: 91% stated that they found it convenient to have their course materials bundled.
Speaker 2: And 78% stated that first day complete increases the likelihood they will continue their education at their current state level.
And 78% stated that first day complete increases the likelihood they will continue their education at their current school.
Speaker 2: With this perspective in mind, it's not surprising that we added a record number of schools for the 2023 fall semester.
With this perspective in mind, it's not surprising that we added a record number of schools for the 2023 fall semester.
Speaker 2: Currently, 157 campus stores are committed to utilize First Day Complete for the upcoming fall 2023 term. This represents undergraduate and now postgraduate enrollment based upon the positive response of the program of approximately 800,000 students.
Currently 157 campus stores are committed to utilize first day complete for the upcoming fall 2023 term.
This represents undergraduate and now post graduate enrollment based upon the positive response to the program of approximately 800000 students.
Speaker 2: A 46% enrollment increase versus the fall of 2022.
A 46% enrollment increase versus a fall of 2022.
Speaker 2: Additionally, several schools have already committed to launching FDC in January in the spring 2024 semester and have already signed commitments for fall 24, plus a robust pipeline of hundreds of schools that are discussing making the transition to FDC next to academic year.
Additionally, several schools are already committed to launching FCC in January in the spring 'twenty 2024 semester and have already signed and we already have signed commitments for fall 'twenty four.
Plus a robust pipeline of hundreds of schools that are discussing making the transition to FTC next academic year.
Beyond our equitable access offering we also see a great opportunity to continue to grow our general merchandise business we.
Speaker 2: Beyond our equitable access offering, we also see a great opportunity to continue to grow our general merchant.
Speaker 2: We made significant progress throughout fiscal 2023 on our emblematic product assortment, merchandising execution, and seamless omnichannel retail experience through our strategic partnership with Fanatics and LIT.
We made significant progress throughout fiscal 2023 on our emblematic product assortment merchandising execution and seamless omni channel retail experience through our strategic partnership with fanatics, and lids, which led to an impressive eight 6% growth in gross comparable store sales and.
Speaker 2: which led to an impressive 8.6% growth in gross comparable store sales and general market.
General merchandise.
Speaker 2: We're entering fiscal 2024 and our fall rush period from a position of strength that will allow us to continue to differentiate V&V schools, ensure their brands continue to resonate with the extended campus communities, and continue to implement initiatives that allow us to further innovate and optimize assortment for the unique needs of our customers.
We are entering fiscal 2024, and our fall rush period from a position of strength that will allow us to continue to differentiate the <unk> schools.
Sure their brands continue to resonate with the hair extended campus communities and continue to implement initiatives that allow us to further innovate and optimize the assortment for the unique needs of our customers.
In addition to strengthening our emblematic offering we continue to evolve and amplify our non emblematic general merchandise business.
Speaker 2: we continue to evolve and amplify our non emblematic general merchandise.
Speaker 2: One initiative we are particularly excited about is the launch of B-Well-B-U.
One initiative, we are particularly excited about is the launch of <unk>.
Speaker 2: Stress and anxiety on college campuses is a large and growing issue. According to the latest Student Voice survey from Inside Higher Ed and College Pulse, three in four students say that stress negatively impacts their ability to focus, learn, and succeed academically, and that reducing stress is their number one health goal.
Stress and anxiety on college campuses in large and growing issue.
According to the latest student voice survey from inside higher Ed and college pulse.
Reinforce students say that stress negatively impacts their ability to focus learn and succeed academically and that reducing stress is their number one health goals.
Be well Bu.
Speaker 2: Our Be Well BU collection offers a wide range of health and wellness products, as well as on-campus and online educational events to help the campus community live with less stress and more joy.
Our <unk> collection offers a wide range of health and wellness products as well as on campus and online educational events to help the campus community live with less stress and more joy.
Speaker 2: Within wholesale, MBS became the primary supplier for more than 100 additional accounts due to one of its largest competitors exiting the market.
Within wholesale.
MBS became the primary supplier for more than 100 additional accounts due to one of its largest competitors exiting the market.
As a result, we expect fiscal 2024 wholesale revenue to modestly grow for the first time in two years.
Speaker 2: As a result, we expect fiscal 2024 wholesale revenue to modestly grow for the first time in two years.
Speaker 2: MBS has established itself as the provider in the industry, and the team is excited to play a bigger role in supporting higher education and meeting the long tail demand of physical course material.
MBS has established itself as the provider in the industry and the team is excited to play a bigger role in supporting higher education and meeting the long tail demand of physical course materials.
Speaker 2: From an expense standpoint, we are committed to ongoing efficiency and cost...
From an expense standpoint, we are committed to ongoing efficiency and cost discipline.
Speaker 2: The team has built a deep rigor on managing staffing levels and other components of store payroll, which is our largest expense lineup.
The team has built a deep rigor on managing staffing levels and other components of store payroll, which is our largest expense line item.
Speaker 2: We've established payroll guidelines aimed at maximizing sales while staying within our allocated payroll budget.
We have established payroll guidelines aimed at maximizing sales, while staying within our allocated payroll budget.
Speaker 2: By implementing these guidelines, we believe our stores will be better positioned to achieve their sales targets.
By implementing these guidelines, we believe our stores will be better positioned to achieve their sales targets.
Speaker 2: while maintaining financial discipline, and we are already seeing the positive results.
Maintaining financial discipline.
And we are already seeing the positive results.
Speaker 2: And now I'll turn the call back over to Mike to discuss our guidance and closing remarks. Thanks, Jonathan.
And now I'll turn the call back over to Mike to discuss our guidance and closing remarks.
Thanks, Jonathan.
Moving on to guidance from continuing operations.
Speaker 3: As we execute on our growth and cost reduction initiatives, we expect total consolidated revenue to be slightly higher year over year, driven by the growth of first day complete and general merchandise offset by declines in an a la carte course material.
As we execute on our growth and cost reduction initiatives. We expect total consolidated revenue to be slightly higher year over year, driven by the growth of first day complete and general merchandize offset by declines in an Ala Carte course materials.
Speaker 3: Gross profit dollars will be higher, however, we expect gross profit margin to be flat to down relative to fiscal 2023, driven by the continued shift to digital from physical. We expect S&A dollars to be down year over year as we realize the full year benefit of our cost reduction initiatives and maintain cost of discipline, including payroll and clothing on the floor.
Gross profit dollars will be higher however, we expect gross profit margin to be flat to down relative to fiscal 2023, driven by the continued shift to digital and physical <unk>.
We expect SG&A dollars to be down year over year as we realize the full year benefit of our cost reduction initiatives and maintained cost discipline, including payroll and closing unprofitable stores.
Speaker 3: Given these factors, we expect fiscal 2024 non-GAAP adjusted EBITDA to be approximately $40 million.
Given these factors, we expect fiscal 2024, non-GAAP adjusted EBITDA to be approximately $40 million.
Speaker 3: Before closing, I want to recognize our outstanding employees across the country who have helped drive significant change to transform our country.
Before closing I want to recognize our outstanding employees across the country, who have helped drive significant change to transform our company.
Speaker 3: They have done this while keeping the Barnes and Noble Education mission front and center as we continue to support our students and institutions.
They have done this while keeping the Barnes <unk> Noble Education mission front and center as we continue to support our students and institutions.
Speaker 3: This year, this past year, revealed the true character of BNED and its value.
This year this past year revealed the true character of <unk> and its value is.
Speaker 3: Finally, in connection with our recent credit facility agreement, we announced that we are continuing the ongoing review of strategic alternatives.
Finally in connection with our recent credit facility agreement, we announced that we are continuing the ongoing review of strategic alternatives.
Speaker 3: available to the company to ensure we are maximizing value and best positioning our business for the future.
Available to the company to ensure we are maximizing value and best positioning our business for the future.
Speaker 3: B&D plays an extremely valuable and valued role within the higher education ecosystem. And we are committed to executing on the best path forward for the company and our stakeholders.
<unk> plays an extremely valuable and valued role within the higher education ecosystem and we are committed to executing on the best path forward for the company and our stakeholders.
Speaker 3: We will not be commenting further on this until the Board of Directors has concluded that disclosure is appropriate or required.
We will not be commenting further on this until the board of directors has concluded that disclosure is appropriate or required.
Speaker 3: We believe we have taken the right steps to position B&ED on the path towards sustainable, profitable growth and delivering value for our shareholders over the long term.
We believe we have taken the right steps to position <unk> on the path towards sustainable profitable growth and delivering value for our shareholders over the long term.
Speaker 3: Underpinning all of our actions is our commitment to helping colleges and universities meet and exceed their highest priority goals and remove barriers for students by providing greater access, affordability, convenience, and ultimately greater academic success.
Underpinning all of our actions is our commitment to helping colleges and universities meet and exceed their highest priority goals.
And remove barriers for students by providing greater access affordability convenience and ultimately greater academic success.
Speaker 3: We are very excited about the next phase of B&ED's journey, and we're looking forward to sharing this vision with you. That concludes today's prepared remarks.
We are very excited about the next phase of <unk> journey, and we're looking forward to sharing this vision with you.
That concludes today's prepared remarks, and now we'll take any questions you may have.
Our first question comes from the line of Alex Fuhrman, Craig Hallum Capital Group. Please go ahead.
Speaker 1: Our first question comes from the line of Alex Furman, Craig Halem, Capital Group. Please go ahead.
Hey, guys. Thanks for taking my question.
Speaker 4: Hey guys, thanks for taking my question. Great progress it sounds like on the first day complete side of things, getting more Young of school school this year haven't movements.
Yes, great progress it sounds like on the first day complete guide of things getting more schools signed up for <unk>.
Speaker 4: signed up for the upcoming fall semester and it sounds like you're expecting first day complete to be the majority of
Coming fall semester, and it sounds like Youre expecting first day and first day complete to be the majority of required course, where material sales. This year can you walk me through.
Speaker 4: required course wear material sales this year. Can you walk me kind of through, you know.
Not immediately as Youre, giving guidance for this year start thinking about next year, but.
Speaker 4: Not to immediately as you're giving guidance for this year, start thinking about next year, but can you walk me through kind of what the next few years look like in terms of the transition to getting, substantially all of your schools onto first day complete in the future? Should we expect? Yeah.
Can you walk me through kind of what the next few years look like in terms of the transition to getting substantially all of your school onto first day complete in the future.
Should we expect there.
Speaker 4: You know, there to be meaningful turn in the school to kind of update us on on kind of how that.
There to be meaningful churn in the schools that you kind of update us on kind of how that transition to being substantially all on first day complete is going and how long that will take.
Speaker 4: transition to being substantially all on first day complete is going and how long that will
Speaker 2: Yeah, Alex, it's Jonathan. Thanks for the thanks for the question. We're really excited about the growth of first day complete. As we said.
Yes, Alex.
Jonathan Thanks for the thanks for the question.
We're really excited.
Excited about the growth first day complete as we said.
Speaker 2: During the call, we have 157 campus stores committed to first day complete for this fall and several more already committed to launching in the spring term within this academic and fiscal year and even discussing it with many more. And already, as we noted, have...
During the call. We have 157 campus stores committed to first day complete for this fall and several more already committed to launching in the spring term within this academic and fiscal year and even discussing it with many more and already as we noted have.
Speaker 2: schools can contractually committed to the following year and having discussion with hundreds of other schools. And so, we expect that to continue to grow significantly, not only for the balance of our fiscal 24, but starting.
Schools contractually committed to the following year and having discussion with hundreds of other schools and so.
We expect that to continue to grow significantly.
Not only for the balance of our fiscal 'twenty four but starting in fall semester, 24, which is our fiscal 'twenty, five and and really driven by the fact that we're scaling we saw a record number of new campus stores being added.
Speaker 2: in fall semester 24, which is our fiscal 25.
Speaker 2: and really driven by the fact that
Speaker 2: you know, we're scaling, we saw a record number of new campus stores being added, and really it's about the impact it's making in higher education for all the key stakeholders and the fact that it's having a significant positive impact on student outcomes.
And really it's about the impact it's making in higher education for all the key stakeholders and the fact that it's having a significant positive impact on student outcomes and so our teams are having conversations every day with clients that are very student centric and focused.
Speaker 2: So our teams are having conversations every day with clients that are very student-centric and focused on impacting growth and working through those transitions. And we expect to continue to transition schools, have the majority of our campuses on first day complete. And...
On impacting growth and working through those transitions and we expect.
<unk> transitions schools have the majority of our campuses on first day complete and.
Speaker 2: and continue to grow just based on the positive impact for really everyone in the ecosystem, institutions, ourselves, publishers, and most importantly, the students. Okay, that's really...
And continue to grow just based on the positive impact for everyone in the ecosystem.
<unk> ourselves publishers and most importantly, the students.
Okay, that's really.
Hunter I just wanted to kind of comment one thing.
Speaker 5: You think about, I think you heard this a lot through the prepared remarks, but our overall strategy is really based on just driving profitability. And that is a core focus of ours. So we're really engaging with the schools to make that transition. And there may be instances where we close stores, right? We closed 127.
If you think about I think you've heard this a lot through the the prepared remarks, but our overall strategy is really based on just driving profitability.
That is a core focus of ours.
We're really engaging with the schools to make that transition.
And there may be instances, where we've closed stores, we closed 127.
Speaker 5: stores in FY 23. We obviously opened some, so net was 63, but really profitability is our main driver here. So.
Stores in FY2023.
We obviously opened some so net net was 63.
Yeah.
Really profitability is our main driver here so just.
Go ahead.
Speaker 4: Yeah, no thanks guys, that's, that's, that's, that's really helpful. I guess when I'm part of what I'm trying to understand here is, you know, it's been, it's been a little while since...
Yeah, no. Thanks, guys.
That's really helpful. I guess, what im part of what I'm trying to understand here is it's been it's been a little while since we've.
We've had.
And updated given the timing of your fiscal year end negotiations you guys have been doing on the on the credit side of things I guess I'm trying to understand is it bill.
Speaker 4: I guess I'm trying to understand is it still, you know, the intention to be substantially out of the OlaCard required material business, you know, one, two, three years from now, as you guys have kind of gone, you know, through your P&L with applying to the comb over the last four or five months, you know, is there maybe more of a willingness to keep some of those stores open and certain or keep some of the, you know, required material businesses open OlaCard in some more of those instances or should we expect that this is basically the OlaCard you're going to have OlaCard required materials in a significant way. No, now we'll continue to have, we'll continue to support institutions, remote.
The intention to be substantially out of the Ala carte required materials business.
Three years from now as you guys have kind of gone through your P&L with a fine tooth comb over the last four or five months.
Is there may be more of a willingness to keep some of those stores open in certain or keep some of the required material businesses open olive garden into more of those instances or should we expect that this is basically the last year youre going to have al carte required materials in a significant way.
Speaker 2: No, no, we'll continue to have, we'll continue to support institutions from an all-cart basis. As Hunter said, we're really looking at the profitability of stores on an individual basis, and that there are stores that are profitable and we're driving growth based on initiatives like we referenced during the call and general merchandise that are helping us.
No no we will continue to have.
Ed will and continuous support institutions from Ala Carte basis as Hunter said, we're really looking at the profitability of stores on an individual basis and there are stores that are profitable and we're driving growth based on initiatives like Lee referenced during the call and general merchandise.
That that are helping us.
Speaker 2: road profitability of those stores. So we will continue to support.
Grow the profitability of those stores. So we will continue to support.
Speaker 2: stores and the a la carte course material model, but the industry is moving really quickly to the model. We're leading the way and the industry leader in that, but across the entire higher education landscape, that's where the model is moving based on the impact. So.
Stores and the Ala Carte course material model.
But the industry is moving really quickly to the model, we are leading the way and the industry leader in that but across the entire higher education landscape, that's where that's where the.
The model is moving based on the impacts so.
Speaker 2: We're focused on having discussions every day, even with stores and clients that have profitable stores and really strong general merchandising businesses that are growing, there's interest in moving to that model. So we're committed to that and we're committed to helping achieve the highest priority goals of our customers and to very consistently, one of those goals is enhancing the student experience that's due now.
We're focused on having discussions every day, even with stores and clients that have profitable stores and really strong general merchandising businesses that are growing there is interested in interest in moving to that model. So we're committed to that.
We are committed to helping achieve the highest priority goals of our of our customers and to us.
Very consistently one of those goals is enhancing the student experience and student outcomes and so that's why we're really focused on that making incredible progress and we'll continue to see that accelerate.
Speaker 2: So that's why we're really focused on that, making incredible progress, and we'll continue to see that excel. what's gonna happen to the future...
Speaker 4: Okay, that's really helpful. And you guys find this commenting on what you're seeing just in terms of enrollment that your partner school is gonna get people to know for sure. You know, until you get past some of these drop-add dates, but I imagine at this point, you know, most of your residential schools must, you know, know how many kids are moving into the dorms later this month. So, you know, anything to call out, you know, positive or negative in terms of enrollment trends for this year and curious if you're starting to see, you know, a return of more international college.
Okay, that's really helpful.
His mind, commenting on what Youre seeing.
Just in terms of enrollment at your partner schools, and I guess, you won't know for sure.
Until you get past some of these drop add date, but I imagine at this point.
Most of your residential pools.
How many kids are moving in the dorm later this month.
Anything to call out positive or negative in terms of enrollment trends for this year and I'm curious if you're starting to see.
A return of more international College students.
Yes, Alex it's really too early for us to <unk>.
Speaker 2: Yeah, Alex, it's really too early for us to tell at this point. And we'll have a lot more visibility into that in the next 30 to 60 days. But at this point, it's still too early. And most institutions need to get through their ad drop periods to really have that number lock down. But you get more and more visibility as classes start and you're in that first and second week as well. So, yeah, unfortunately little too early.
Ted.
<unk> at this point.
And yes, we will have a lot more visibility into that in the next 30 to 60 days.
But at this point, it's still too early and most institutions need to get through their AD drop periods to really have that number locked down, but but you get more and more visibility as classes start and you are in that first and second week as well so yes, Unfortunately little too too early for that at this point.
Speaker 4: Sure, no, that makes...
Sure no that makes.
Speaker 4: That makes sense. And then I guess at this point where we're pretty much one quarter into the year, I know the summer term is, generally, obviously a low volume period. So you guys have not a lot of people on campus. But what have you seen on the general merchandise?
That makes sense and then I guess at this point, we're pretty much one quarter into the year I know the summer term is generally I, obviously, a low volume period for you guys with not a lot of people on on campus, but.
What have you seen on the general merchandise side of the business to the extent that there has been traffic in your stores.
Speaker 4: Side of the business, you know, to the extent that there has been traffic in your stores. Um, you know, have people been gravitating you mentioned, you know, carrying more of an assortment of. Of non emblematic as well as emblematic apparel is that is that something that you've seen a lot of. Demand and interest for that is that something that's been selling this summer.
Have people been gravitating, you mentioned carrying more of an assortment of.
Non emblematic as well as emblematic apparel is that is that something that you've seen a lot of demand and interest for us that is that's something that's been selling this summer.
Speaker 2: Yeah, we're seeing, you know, we're seeing really good demand for general merchandise various categories. And we're really excited about the assortment and what we have ready for consumers and really well-marchinized their stores for consumers for this back to school period, but general merchandise.
Yes, we are seeing.
We're seeing.
Yeah really good demand for.
For our for general merchandise various categories.
Yes, we're really excited about the assortment and what we have.
Ready for consumers and really well merchandise their stores for consumers for this back to school period, but general merchandise.
Speaker 2: and the opportunity to continue to seek growth in general merchandise uh... is uh... is something that uh... we're focused on excited about and and uh... i think that we're really well positioned to continue to seek growth and then there is some sort of exciting components of that that we've seen uh... over the last couple months and but really it's about you know back to school and rush and uh...
And the opportunity to continue to see growth in general merchandise is is something that we're focused on excited about.
And think that we're really well positioned to continue to see growth and then there is some sort of exciting components of that that we've seen over the last couple of months, but really it's about back to school and rush and.
And being prepared for that which which we are and we think our growth initiatives and focus.
Speaker 2: and being prepared for that, which we are. And we think our growth initiatives and focus really have us right now operating from a position of strength in that business. And Alex, the only thing I might.
Really have us.
Right now operating from a position of strength in that business.
Alex the only thing I might add to that is yes, you're right, we're well into the first quarter is not done.
Speaker 5: You know, you're right. We're well into the first quarter. It's not done. When we laid out our guidance that we just provided, we incorporated those first quarter trends into the guidance. So some of that commentary around general merchandise growth.
When we laid out our guidance that we just provided we incorporated those first quarter trends into the guidance. So some of that commentary around general merchandise growth.
Speaker 5: you know, having good progress thus far on store profitability, all incorporate into the guidance and to work, removing on track here.
Having good progress thus far on store profitability, all incorporated into the guidance and so we're we're moving on track here.
That's great. Thank you both very much.
Speaker 1: Our next call comes from Mr. Ryan McDonald with Needham. Please go ahead.
Our next call comes from Mr. Ryan Macdonald with Needham. Please go ahead.
Speaker 3: Thanks for taking my questions. Maybe on the first day complete transition, just to clarify, is the guidance for fiscal 24 today inclusive of the expectation of incremental schools churning? And I'd just be curious what you're seeing thus far through the transition in terms of mix of schools that have chosen to adopt versus that are choosing to churn.
Hi, Thanks for taking my questions maybe on the first day complete transition just to clarify.
Are you is the guidance.
For fiscal 'twenty four today inclusive of the expectation of <unk>.
Incremental schools churning and I'd just be curious what you're seeing thus far through the transition in terms of mix of schools that have chosen to adopt versus that are choosing to term.
Speaker 2: Yeah, Ryan, thanks for the question. It's Jonathan. Yeah, the fiscal 24, you know, our plan and guidance include all of our first day complete assumptions, all of our total store assumptions, both new store opens and closes for the year. And so it all factors that in, inclusive of the, you know, the
Yes, Brian Thanks for the question it's Jonathan.
Yes.
Fiscal 'twenty four.
Our plan and guidance include our all of our first day complete assumptions all of our total store assumptions, both new store opens and closes for the year and and so so it all factors that and inclusive of the.
The <unk>.
Speaker 2: new stores, or stores transitioning to first day completion in the spring as well, beyond the 157 that we referenced that are, that are,
New stores transition or stores transitioning to first day complete in the spring as well beyond the 157%.
Referenced that are that are.
Speaker 2: supporting the program this fall. So that is built into the model.
Supporting the program. This fall so that is built into the model and in terms of sort of what we're seeing in terms of transitions.
Speaker 2: And in terms of sort of what we're seeing in terms of transitions, I would say that we're really excited about what we saw and as you mentioned, we had a record number of stores that store we in terms of growth and in terms of stores to get to the 157 and we're continuing to add to that, already have others.
I'd say that.
We're really excited about what we saw and as I mentioned, we had a record number of.
Number of stores that.
Where are we in terms of growth.
In terms of stores to get to the 157, and we're continuing to add to that already have others transition. We did close certain stores that were unprofitable and couldnt get to that model this fiscal year and.
Speaker 2: transition, we did close certain stores that were unprofitable and couldn't get to that model this fiscal year and but You know as Hunter said as we reference really focusing on profitability and that is what is built into our fiscal 24 plan and guide
But as Hunter said as we've referenced we're really focusing on profitability and that is what is built into our fiscal 'twenty four plan and guidance.
I appreciate the increased focus on profitability as we think about the.
Speaker 3: I appreciate the increased focus on profitability. As we think about the amended and extended credit facility, can you talk about sort of the updated terms there and then what sort of flexibility does this give you over the next 12 months in our, are there any milestones that you need to hit, I guess as you're progressing towards the updated sort of extension deadline?
Amended and extended credit facility can you talk about sort of the updated terms there and then what sort of flexibility does this give you over the next 12 months and are are there any milestones that you need to hit I guess as you are.
Progressing towards the updated sort of extension deadline.
Speaker 6: Brian , this is Jason. Excuse me, this is Jason, I'll answer that. You met in an extended, we undertook stressed out the maturities about the ABL in the term.
Brian . This is excuse me this is Jason I'll answer that.
The amended extend that we undertook stretched out the maturities of both the ABL on the term loan.
Speaker 6: The ABL is now out till the end of December of 2024. The term loan is stretched out through March of 2025.
The ABL is now out till the end of December of 2020 for the term loan is stretched out through <unk>.
March of 2025.
Speaker 6: I would say that the additional covenants that we now have.
I would say.
So additional covenants, we now have.
Speaker 6: are nothing that we haven't been undertaken before previously. We've been managing through this for the past few years and everything that we are doing now is just managing and monitoring through this carnage.
Nothing that we haven't been undertaken before previously we've been managing through this for the past few years.
Everything that we're doing now is just managing and monitoring through this current agreement.
Speaker 6: This agreement has also provided us ample liquidity and additional liquidity to allow us to fund our operations from day one of that.
This agreement has also provided us ample liquidity and additional liquidity to allow us to fund our operations from day one of that signing.
Speaker 6: So a lot of the, what we did with our current bank group was, was obviously a support that they showed us, but this is a bank group who understands our business and has worked with us since 2000.
So a lot of the what we did with our current bank group was obvious support that they showed us but this is a bank group, who understands our business and has worked with us since 2015.
And I would just say, Brian Mike Miller, I would just I would just add that Dana.
Speaker 7: And I would just say Ryan, Mike Miller, I would just add that, you know, it's.
Okay.
Speaker 7: The new amendment and extend gives us the flexibility and the support and the growth platform.
The new amendment extend gives us.
The flexibility and the support and the growth platform.
Speaker 7: not just for fall rush but spring rush as well which as you know are our most critical.
Not just for fall rush, but spring spring rush as well, which as you know our most critical.
Speaker 7: season. So it gives us the runway to really
Seasons, so it gives us the runway to really.
Speaker 7: Pivot and continue to turn around and really see the success of our initiatives with Thursday complete and in general merchandise really take hold.
Pivot and continue this turnaround.
And really see the success of our initiatives with first day complete.
And in general merchandize really take hold.
As far as as far as.
Speaker 7: As far as as far as milestones, you know, as you know, we there are two new board members that will be added to the board and who will be in the constituting a strategic alternative committee. And that is in short order, you know, within the next week or so they need to be appointed to the board. So that's the most, you know, eminence.
Milestones as you know.
There are two new board members that will be added to the board and we will be in that.
Constituting a strategic alternatives committee.
And that is in short order within the next week or so.
They need to be appointed to the board.
So that's the most.
Eminent milestones.
Yes.
Okay. That's helpful color I appreciate that.
Speaker 3: Okay, that's a helpful color. I appreciate that. On the Fanatics LIDS partnership, I noticed a comment during the call about sort of a changing of the commission structure there. You just provide a little bit more color about what the changes are there, and then I guess how you're feeling about the growth and the potential profitability of that partnership moving forward.
On the fanatics lids partnership.
I noticed the commentary during the call about sort of changing of the.
The commission structure. There can you just provide a little bit more color about what the changes are there and then I guess, how you are feeling about the growth and the potential profitability of that partnership moving forward.
Speaker 5: My plan is to take the first part of that question and maybe Jonathan can tag on the second part of that.
Mike Why don't you take the first part of that question and maybe Jonathan can tag on the second part of that.
Speaker 7: Yeah, sure. So there were adjustments in the, from both the e-commerce and in-store revenue share arrangements for the next year as the business continues to mature and the...
Yes, sure so there were adjustments.
In the from both e-commerce and in store.
Kermit revenue share arrangements.
For the next year.
As the business continues to mature.
Speaker 7: rather the strategic partnership continues to mature. So there were adjustments to the RIT.
Rather the strategic partnership continues to mature.
So there were adjustments to the timing of it.
Revenue percentages.
Speaker 7: that were made and they will revert after 12.
That will need and.
They will recur.
After after 12 months.
And then from a from a business trajectory standpoint.
Speaker 2: And then from a business trajectory standpoint, as we said in fiscal 23, our general merchandise gross comparable store sales increased almost 9%. And really that was
As we said in for fiscal 'twenty, three our general merchandize gross comparable store sales increased almost 9%.
And really that was aided.
Speaker 2: in that strong performance performance aided by emblematic general merchandise and some of the other non emblematic businesses, but we're really excited about the growth that we saw the impact of the
And that strong performance aided by emblematic general merchandise and some of the other non emblematic businesses, but we're really excited about the growth that we saw the impact of the.
Speaker 2: of the product assortment, differentiated product assortment, really unmatched customer experience, both in-store and online, and think there'll be really significant growth in that business as we go forward for fiscal 24 and beyond. So we're very excited from a business trajectory standpoint, from how the assortment is reflecting the local, you know, the local...
Is it the product assortment of differentiated product assortment really unmatched customer experience both in store and online and think that will be really significant growth in that business. As we go forward for fiscal 'twenty four and beyond so we're very excited from a business trajectory standpoint.
From a how the assortment is reflecting.
The local.
The local.
Speaker 2: I sort of demands of each store and also national trends and that combination is really powerful and proving to be really powerful, exciting new brands we're introducing into the mix. So we expect that to continue to be a growth driver and really continue to be a strategic advantage for us.
Sort of demands of each store and also national trends and that combination is really powerful and proving to be to be really powerful exciting new brands, we're introducing into the mix and so so we expect that to continue to be a growth driver and really continue to be a.
A strategic advantage for us with.
Speaker 2: with our stores as they help build their brands and create an exciting destination on campus for visitors to come and really have a must visit place on campus and you're on campus and online. So we're really excited and we think that it's gonna continue to, or Tennessee Grove, and it's a very strategic initiative for us to leverage the power of the park.
With our stores as they help sort of build there to help build their brands and creating an exciting destination on campus.
Or visitors to <unk> com and really have a must must visit place on campus or on campus and online. So we're really excited and we think that it's going to continue or continue to see growth and it's a very strategic initiative for us to leverage the power of the partnership.
And before we leave that point I, just wanted to say that both fanatics in lids and our partners at vital stores really.
Speaker 7: And before we leave that point, I just wanted to say that both Fanatics and Liz and our partners at VitalSource really
Speaker 7: We're true partners with B&ED through the amend and extend process and really help get that done through various amendments to our current agreements with them.
We are true partners with <unk> through the amend and extend product process and.
Really help get that done through various.
And then to our current agreements with them so.
Speaker 7: on behalf of the management on the board.
On behalf of management and the board.
We are where we are very thankful for their continued support and partnership.
Speaker 7: We are very thankful for their continued support and partnership.
Excellent thanks for taking my questions.
Speaker 1: I will now turn the call back over to Mr. Hunter Blake and Baker, Vice President of Investor Relations for Closing Remark.
I will now turn the call back over to Mr. Hunter Blankenbaker, Vice President of Investor Relations for closing remarks.
Great. Thanks, Maria we that completes our call today, we're going to.
Speaker 5: Great, thanks Maria. We, that completes our call today. We're going to go focus on our fall rush and we look forward to having our first quarter earnings call in early September . Thanks everybody.
We will focus on our fall rush and we look forward to.
Having our first quarter earnings call in early September thanks, everybody.
Speaker 1: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Okay.
Okay.
Yeah.
Yeah.