Barnes & Noble Education(BNED) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The first quarter consolidated total revenue increased by almost 4% to $264.2 million, with adjusted EBITDA improving by approximately 22% [10][20] - Retail segment revenue increased by$ 9 million or 3.8% to $245.5 million, driven by an 8.4% increase in course material revenue [11][48] - Consolidated adjusted EBITDA grew by 21.8% or$ 7.5 million to a negative $26.8 million [20][22] - Merchandise inventories decreased by 17% or$ 79.4 million to $384.2 million compared to the prior year [24] Business Line Data and Key Metrics Changes - Course materials gross margin declined due to higher markdowns and a higher percentage of lower-margin digital course material sales [21] - First Day Complete revenue increased by 55% year-over-year, with total course material sales up by 8.4% [13][48] - Retail gross profit decreased by$ 3.7 million or 6.9%, while retail gross margin decreased by 230 basis points to 20.5% [48] Market Data and Key Metrics Changes - The First Day Complete model is now implemented in 157 campus stores, representing enrollment of nearly 800,000 students, a 46% increase over the fall of 2022 [41] - First Day Complete course material sales increased by 82% year-over-year in stores that transitioned to the model [46] Company Strategy and Development Direction - The company is focusing on operational efficiencies and cost reductions to drive profitable growth [4] - The First Day Complete model is a cornerstone of the long-term profitability growth plan, with expectations for increased student participation rates over time [14][19] - The company is winding down underperforming stores, operating 117 fewer stores compared to the previous year [11][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive impact of the First Day Complete model on student experience and institutional partnerships [14][44] - The company expects to maintain its fiscal 2024 adjusted EBITDA expectation of approximately $40 million despite inventory delays [52] - Management highlighted the importance of adapting to the current operating environment and the potential for future growth through strategic initiatives [40][55] Other Important Information - The company welcomed two new directors to the board, bringing fresh perspectives to its transformation efforts [25] - The company is actively pursuing a more permanent capital structure to support its business model transformation [40] Q&A Session Summary Question: Can you provide more color on the inventory delays? - Management clarified that the delays were primarily felt in course materials and that they prioritized clearing course materials vendors to mitigate impacts on fall rush sales [28][57] Question: What is the runway for additional store wind-downs? - Management indicated that the future of store wind-downs depends on the success of converting stores to the First Day Complete model and improving profitability [32][60] Question: What has been the impact on general merchandise sales at schools that transitioned to First Day Complete? - Management noted that there has not been a decrease in student traffic; in fact, more students are coming into stores to pick up their First Day Complete packages [63][64]