Barnes & Noble Education(BNED) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total sales for Q1 2021 were $204 million, a decrease of 36% from$ 319.7 million in the prior year, primarily due to COVID-19 related campus closures [44][42] - The consolidated gross margin rate for the quarter was 15.1%, down from 22.4% in the prior year, attributed to a shift to lower margin digital courseware and reduced sales of higher margin general merchandise [49][42] - Cash balance at the end of the quarter was $7.5 million compared to$ 8.2 million in the prior year, with outstanding borrowings increasing to $234.6 million from$ 174.1 million [51][42] Business Line Data and Key Metrics Changes - Retail segment experienced a 42.8% decline in comparable sales, while comparable course material sales declined by 10.1% [45][42] - BNC's First Day offering grew 156% to $9.1 million during the quarter, indicating strong demand for digital course materials [46][42] - DSS sales increased by$ 0.5 million or 9.3% to $5.9 million, driven by growth in bartleby subscriptions, which doubled to$ 1.4 million [46][42] Market Data and Key Metrics Changes - The company signed an estimated $70 million in new business during the quarter, indicating a strong pipeline despite the challenges posed by COVID-19 [23][42] - eCommerce sales represented 73% of total Q1 sales, up from 31% a year ago, reflecting a significant shift towards online shopping [36][42] Company Strategy and Development Direction - The company concluded its strategic review, determining that the continued execution of its current business plan is the best path forward [7][6] - Investments in digital offerings, eCommerce solutions, and warehouse operations have become crucial in adapting to the ongoing challenges posed by the pandemic [15][8] - The company is focused on preserving liquidity while balancing capital allocation and executing its strategic plan for long-term sustainable value creation [11][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented challenges faced by schools due to COVID-19, including lower enrollments and the impact of remote learning [13][14] - The company remains confident in its strategy and believes it has sufficient liquidity to manage through the ongoing impact of COVID-19 [10][11] - Management expects continued strong demand for digital learning resources and support tools as students adapt to virtual or hybrid learning environments [28][27] Other Important Information - The company has entered into a cooperation agreement with its largest shareholder, Outerbridge Capital, which includes board nominations and standstill provisions [12] - The majority of on-campus stores have reopened with safety measures in place, including contactless payment options [34][42] Q&A Session Summary Question: Can you talk about your confidence moving into the fall and expectations for foot traffic? - Management highlighted a focus on liquidity, with borrowings reduced to approximately$ 55 million, and emphasized disciplined inventory management [57][59] Question: What are you seeing in terms of usage of bartleby compared to earlier this spring? - Management noted a significant increase in traffic and usage of bartleby, with a 50% increase in traffic between March and April [65][66] Question: Can you discuss the sales cycle for First Day Complete and potential for scaling? - Management indicated that while some schools deferred decisions, there is renewed interest, and they expect significant growth in the number of schools adopting First Day Complete [78][81] Question: How are you staying relevant with students who are not on campus? - Management emphasized increased collaboration with schools to communicate offerings and the importance of the new eCommerce system to enhance the student shopping experience [86][90] Question: Can you provide insights on the competitive landscape and market share? - Management expressed confidence in taking market share, particularly due to the unique capabilities of MBS in fulfilling orders during the pandemic [101][104]