Barnes & Noble Education(BNED) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total sales for Q2 2020 were $772.2 million, a decrease of$ 42.5 million or 5.2% compared to $814.8 million in the prior year [27] - Consolidated gross margin for the quarter was 24.3%, down from 25.9% in the prior year [32] - Selling and administrative expenses decreased by$ 1.9 million or 1.7% compared to the prior year [33] - Cash balance at the end of the quarter was $24.6 million, an increase of$ 4.6 million compared to $20 million in the prior year [34] Business Line Data and Key Metrics Changes - Comparable store sales in the retail segment decreased by 5.9% for the quarter, compared to a decrease of 5.8% in the prior year [28] - Course material sales decreased by 7.7%, an improvement over the prior year's decline of 8.0% [28] - DSS sales were$ 5.2 million, an increase of $0.3 million or 5.7% compared to the prior year, primarily due to increased sales of bartleby subscriptions [31] Market Data and Key Metrics Changes - Course material sales continue to be impacted by lower average selling prices, with approximately 40% of the decrease in the quarter due to lower pricing [28] - Community colleges represent around 20% to 21% of total revenue, down from the usual 25% [56] Company Strategy and Development Direction - The company is focusing on strategic initiatives to address affordability, access, and achievement, including growing the high-margin DSS business and expanding the FirstDay program [7][24] - A new strategic partnership with VitalSource was announced to enhance the FirstDay platform [12] - The company aims to stabilize and grow EBITDA by scaling high-margin DSS offerings and increasing omnichannel general merchandise sales [24] Management's Comments on Operating Environment and Future Outlook - Management noted a significant transformation in the higher education industry, including a shift to digital and declining enrollments [7] - The company is optimistic about the potential for strategic partnerships to enhance shareholder value and accelerate strategy execution [6][41] - Management expressed confidence in the initiatives set forth to serve the market effectively and enhance shareholder value [25] Other Important Information - The company has contracts to open approximately$ 97 million of new business gross sales for 36 million net after store closings [18] - The company expects consolidated adjusted EBITDA to be between $80 million to$ 85 million for fiscal year 2020 [36] Q&A Session Summary Question: What has changed in the business that prompted the strategic review? - Management noted an increase in unsolicited inquiries from potential strategic partners, indicating a recognition of the value in the company's assets [39] Question: How is the bartleby business performing in terms of student acquisition? - The primary acquisition channel remains college stores, with in-store sales being the main source of new subscribers [42][43] Question: What impact do recent price increases from publishers have on the retail business? - Management indicated that pricing from publishers has been volatile, and the company aims to collaborate with them to provide affordable solutions for students [47][49] Question: How are community colleges performing within the portfolio? - Community colleges continue to represent a lower portion of total revenue, but improvements have been seen due to the implementation of FirstDay programs [54][56] Question: How are recent partnerships with brands like Urban Outfitters performing? - The partnerships have generated excitement and increased foot traffic in stores, with plans to expand these initiatives [61][63]