Ladies and gentlemen, thank you for standing by and welcome to Barnes & Noble Education’s Third Quarter Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to turn the call over to your first speaker today, Tom Donohue, Chief Financial Officer. Please go ahead, sir.

Thank you. Good morning and welcome to our fiscal 2020 third quarter earnings call. Joining us today are Mike Huseby, CEO and Chairman; Lisa Malat, President of Barnes & Noble College; Jonathan Shar, Executive Vice President, BNED Retail and Client Solutions; Kanuj Malhotra, President of Digital Student Solutions as well as other members of our senior management team. Also joining us today is Andy Milevoj, our newly appointed Vice President of Corporate Finance and Investor Relations. Andy will be taking over this portion of the call moving forward. Andy?

Thanks, Tom and good morning, everybody. Before we begin today’s call, I’d like to remind you that the 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 the property of Barnes & Noble Education and are not for rebroadcast or use by any other party without the prior written consent of Barnes & Noble Education. During this call, we will be making forward-looking statements with predictions, projections and other statements about future events. These statements are based upon current expectations and assumptions 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 or discussed during the call. And now, I’ll turn the call over to Mike Huseby.

Thanks, Andy. Thanks, Tom. Good morning, everyone and thanks for joining us today. As evidenced by our third quarter results, the higher-ed industry continues to evolve at a rapid pace and we continue to adapt our offerings to ensure that both BNED and our customers are on a path for mutual success. We have a sound strategy in place to meet the demands of this changing industry and we are adding significant proof points weekly that confirm we are on the right path. In our third quarter we continue to execute on our strategic priorities which include: growing our high margin DSS business by leveraging our resource-based to scale Bartleby subscriptions; growing our share of course material adoptions through BNC First Day, BNC First Day Complete and other new digital models; stabilizing and now increasing revenue from new business wins to grow our footprint and manage stores; and strengthening and improving our important general merchandise business. As part of our ongoing focus on accelerating the execution of our strategic imperatives, we’ve also made some important changes to our leadership team that will allow us to best leverage the specific skills each of our senior leaders have and better align our cost structure with current business trends. Lisa Malat has been promoted from her COO position to President of Barnes & Noble College, in this role, she will have overall responsibility for the profitability and growth of Barnes & Noble College. Jonathan Shar, who previously served as Senior Vice President, Revenue and Product Development will now serve as Executive Vice President, BNED Retail and Client Services. Jonathan will have overall responsibility for the profitability growth of our retail segment. Jonathan and Lisa, working closely with our outstanding field leadership have demonstrated that they understand how to deliver what our campus partners need to be successful. They will lead our BNC and retail teams to success as we are now well positioned to scale the delivery of our digital suite of solutions. In addition, Jonathan and Lisa will work with our MBS and other leaders to realize further synergies across our different business units, ensuring that BNED is leveraging all of its unique assets to best serve each of our customers. This effort also includes working closely with Kanuj Malhotra on our DSS team to continue to improve the market awareness and execution of Bartleby in-store sales, which is an important element of our strategy for growth and enhancing shareholder value. We continue to improve our Bartleby suite of services providing students with 24/7 on-demand access to academic assistance. This quarter, we’re excited to launch an updated Bartleby website, which brings together our Bartleby Learn and Bartleby Write products more cohesively under one domain. You can see the new design and check it out at www.bartleby.com. In addition, this quarter we began to see increased Bartleby customer acquisition through SEO, a sales channel we are actively building. We’re encouraged by the results we’ve seen with SEO thus far and we will continue to improve upon it to drive further customer acquisition, both within and also outside of our store footprint. Within our stores, we’re implementing actions for process improvement and better execution. While we are proud of the work our field teams are doing to get Bartleby into students’ hands, we are confident that we can do even better. For the Spring Rush period, including the month of February, Bartleby gained more than 50,000 gross new subscribers, the majority of that, again, came from our stores. On a year-to-date basis, we acquired more than 150,000 gross new subscribers including the month of February. Our stores remain a vital driver of success for BNED. In addition to the sales channel, they provide for growth-driving solutions, such as Bartleby, our stores also serve as the foundation for our relationships with colleges and universities nationwide. We continue to add value for current and prospective partner institutions, which, coupled with our updated go-to-market strategy, has driven significant new business wins this year. Year-to-date, we have contracts to open new stores with over $110 million of new business gross sales or approximately $50 million net after store closings. Most of this new contract net revenue will flow through fiscal year 2021, which begins in less than two months. We’re also focusing on ways to realize greater profitability from our new stores more quickly, without sacrificing the quality of service that is so important to our campus relationships. The schools we serve are responding positively to the services and solutions we offer to help them in their ongoing efforts to drive affordability, access, and achievement. For example, our Adoptions and Insights Portal or AIP has seen continued success this quarter as we scale the solution to additional partner institutions. AIP is also helping to substantially increase submitted adoptions, further campus affordability initiatives and add revenue for both BNED and our partner institutions. We are pleased with the ongoing success of this key solution and its rollout at campuses nationwide. AIP is also a key component in the successful scaling of our First Day Complete program, a new course material model that addresses affordability and access across all courses at an institution by bundling the cost of materials into tuition and/or fees. AIP enables the school to submit all adoptions in advance so that we can order the appropriate materials in aggregate and then deliver those materials on an individual student basis. BNC First Day Complete, which we piloted at a handful of institutions in fiscal year 2020 has proven to be highly innovative and delivering affordability, access, and convenience for students. Based upon the success of this program, we now have significant and increasing client interest in implementing BNC First Day Complete. We expect to see 4 times to 5 times growth in the number of institutions participating in fiscal 2021 and we have a growing pipeline of First Day Complete schools that we project to result in multiple growth rates of this model in fiscal 2022. This strong customer demand has not been limited to any one segment of our client footprint. It has ranged from four-year public and top-tier private institutions to community colleges of all sizes. Importantly, this program enables us to significantly reduce course material costs for students while ensuring they are properly equipped for their classes on the very first day. BNC First Day Complete is quickly emerging as a true game-changer for us, given the significant benefits it is providing our campus partners and their students while also providing BNED with a much improved and sustainable long-term economic model for its courseware sales. Further, our major publishing partners are now collaborating with us more closely on digital delivery because our schools are demanding the benefits from these models, which also creates publisher sell-through penetrations. Another important growth pillar in our plans springboards off of our upcoming launch of BNC’s new e-commerce platform. We believe our new e-commerce experience will drive substantial value for the students and campus communities we serve, which we expect to meaningfully increase revenue for our general merchandise business beginning in fiscal year 2021. While our general merchandise business currently generates substantial revenue for BNED, a relatively low percentage of those sales are attributable to our e-commerce channels. We expect this change in a positive way as we introduce our new e-commerce sites. These sites will be hyper-personalized, hyper-local, and truly customize the shopping experience for students, alumni, and fans. We look forward to introducing and supporting new capability to our campus partners later this summer. BNED is relentlessly focusing on a number of growth initiatives that will help us drive further value for our institutional partners as well as for the students and faculty we serve. Our strategy has been validated by the proof point successes we’ve seen thus far. We are taking actions daily to accelerate execution and achieve scale of our new courseware, general merchandise, and Bartleby offerings. As previously disclosed, our Board has engaged an Independent Financial Advisor to assist in reviewing strategic opportunities to accelerate our execution and to enhance shareholder value. We are now in a position to provide additional information regarding the review at this time; we look forward to providing you with updates as they become relevant. Finally, we have taken steps to implement a meaningful cost reduction program to mitigate current downward revenue pressure as we pivot to delivery models aimed at higher penetration of the courseware market. This cost reduction program is expected to streamline operations and decision-making timeframes, maximize productivity, and enhance profitability. Tom will discuss this program further in just a moment. Pivoting our company from a physical, retail-centric service provider to an industry leader that provides innovative custom, physical and digital solutions to both institutions and directly to students has required profound change over the past two years in our people, processes, and technological capabilities. The investments we have largely already made, but also continue to make to accomplish this pivot are clearly being validated by our marketplace, both by institutions and by students. We’re accomplishing this while continuing to prudently allocate capital to maintain a solid financial position, including healthy levels of free cash flow generation. While our cost reduction program is required during this period of transformation, our primary focus is on innovating, delivering, and growing useful and scalable courseware, general merchandise, and digital learning solutions that will benefit our customers, provide personal growth opportunities for our employees, and stabilize then reverse recent current sales and EBITDA trends. With our growth initiatives gaining positive significant momentum, coupled with significant cost reduction actions both taken and planned, we expect stabilization over the next 12 months and meaningful cash flow growth beginning at fiscal year 2022. We are confident in our ability to achieve the objectives we’re working towards and BNED’s ability to remain an innovative leader in this dynamic marketplace. With that, I’ll turn it over to Tom for the financial review.

Thank you, Mike. Please note that the third quarter ended on January 25th, 2020, consists of 13 weeks. All comparisons will be for the third quarter of fiscal 2019, unless otherwise noted. Total sales for the quarter were $502.3 million, compared with $548 million in the prior year. This decrease of $45.7 million or 8.3% was comprised of a $40.1 million decrease from the retail segment and an $11.5 million decrease from the wholesale segment, partially offset by a $1.2 million increase from the DSS segment. Comparable store sales in the retail segment decreased 7.3% for the quarter, as compared to a decrease of 8.3% in the prior year period. Consistent with prior years, the Spring Rush period expanded beyond the quarter due to later school openings and the continued pattern of students buying course materials later in the semester. Factoring in the fiscal month of February, comparable store sales of BNC decreased 5.7% on a year-to-date basis. Comparable course material sales for the quarter decreased 9.3% as compared to a prior year decrease of 11.7%. Course material sales continue to be impacted by lower average selling prices, with approximately 16% of the decrease in the quarter due to lower pricing. General merchandise comparable store sales for the quarter decreased 0.7% compared with a 1.6% increase in the prior year. Net sales for the wholesale segment were $67 million, a decrease of $11.5 million or 14.7% as compared to the prior year period. The decrease is primarily due to the shift from physical textbooks to digital products, resulting in a decrease in customer demand. DSS sales were $6.4 million in the quarter, an increase of $1.2 million or 22.9% as compared to the prior year periods, the increase is primarily due to the increased sales in the Bartleby subscriptions. The consolidated gross margin for the quarter was 23.6%, down from 24.3%, the prior year period. This is primarily attributable to the decreases in the wholesale segment resulting from an unfavorable sales mix in inventory markdowns. Selling and administrative expenses in the third quarter decreased by $4.8 million or 4.3% compared with the prior year period. The decrease was primarily a result of lower payroll and operating expenses in retail, wholesale and corporate services, partially offset by an increase in infrastructure costs and product development costs in the retail segment, and ongoing costs associated with the development of Bartleby in the DSS segment. Our cash balance at the end of the quarter was $9.8 million, a decrease of $12.2 million as compared to $22 million in the prior year period. There was $65.9 million in outstanding borrowings compared with $70.1 million in outstanding borrowings in the prior year period. Our current and projected liquidity remained strong, despite declining sales trends in physical course materials and the significant investments we are making in strategic change initiatives. In fiscal 2020, we expect the average debt to be approximately $120 million, compared with $145 million in the prior year. Our peak borrowings of approximately $200 million were hit during the summer and fully repaid during the Fall Rush. We expect additional borrowings until the end of the fiscal year, a similar pattern to fiscal 2019. CapEx for the third quarter was $7.6 million compared with $8.6 million in the prior year. Currently, our retail segment operates 1,436 college, university, and K-12 school bookstores, comprised of 772 physical bookstores and their e-commerce sites as well as 664 virtual bookstores. As of today, we have contracts to open an additional 12 stores in fiscal year 2020 with 3 additional loan closings. This will bring our total physical and virtual store counts to 1,445 locations net of closed doors. As announced in this morning’s press release, we are implementing a significant cost reduction program designed to streamline operations, maximize productivity and drive profitability. Certain elements of this plan have recently been implemented, while other more meaningful actions are planned for fiscal 2021, which begins in May 2020. As a result of the recently enacted personnel and related elements of this plan, we expect to recognize a restructuring charge of $10 million to $15 million during the fourth quarter of fiscal 2020. We expect this component of the program to produce an annualized run rate savings of approximately $8 million to $12 million, the majority of which is expected to be realized beginning in fiscal 2021. For fiscal 2020, we continue to expect adjusted EBITDA to be between $80 million and $85 million, capital expenditures are now expected to be in a range of $35 million to $45 million. We expect free cash flow to be between $30 million to $40 million as compared to $39.7 million in fiscal 2019. With that, we’ll open the call for questions.

Thank you. Your first question comes from Ryan MacDonald from Needham. Your line is open.

Yes. Good morning, everyone. Thanks for taking my questions. I guess to start out when we follow up on the cost reduction program, you mentioned that you’ve already implemented a few changes. Can you talk about what some of those changes were? And then as we’re going forward into the end of the fiscal year here, maybe in specific areas of the business where you think that you can sort of optimize some of the spend? Thanks.

Hey, Ryan it’s Mike I’ll start off then Tom can elaborate. But we’ve been involved in reducing costs over the course of the last 12 months to 18 months. This is a more focused program that involves different elements. It involves our people and involves looking at the way we’re doing business in terms of various vendor relationships we have; it’s very comprehensive. So, I would say first off, we have brought our costs down already, but this is a much more significant kind of programmatic action that we’ve already started taking and we’ll continue to ramp up.

You know, Ryan, this is Tom. I would just add that the initial focus obviously is what we announced this morning is really on the streamlining of operations and maximizing our productivity. And, you know, right now it’s really focused in the retail segment and the core business as we look to rationalize how the business is done and really adjusted for the digital changes that have been happening as it relates to the course materials and how that will impact going forward. What the business looks like, what stores look like and how we really operate the business –

That we’ll be giving more details in the next quarter.

Sounds good. Okay and then switching over to the digital segment of the business. Great to see that the gross subscribers continue to increase into the spring semester. Can you talk about though, given that the quarter fell within sort of a busy time with mid-terms and finals from last semester, what you saw in terms of usage trends during that time for Bartleby? And then perhaps what sort of retention rates you’re seeing from students after sort of the first month of signup with the promotional month there? Thanks.

So Ryan, this is Kanuj. The usage rates as measured by Q&A activity, content views, time on sites of all sorts have been peaking their highs they’ve ever been. That’s also a reflection of having more people sort of retained and stay on the site, but even on an individual basis, we see much more productivity in terms of question usage, textbook solution views, and others. So the metrics are all very healthy and it’s pointed to by the surveys and other work we do that students are finding value in it. You know they still resonate. We think we’re very disruptively priced in the market relative to the competitive set. So we think the value proposition is holding strong and we continue – we’ll continue to iterate in terms of product development and content and service development. We’re very, very focused on the Q&A experience, getting down response times and that sort of thing. I’m sorry, your second question was on the retention. In terms of retention, I mean, we haven’t – what we’ve said sort of publicly disclosed is that, the overall retention is around 20%, that’s consistent with what we see in our Student Brands business – I’m sorry, churn is 20% I beg your pardon. And that’s the free to paid month, we haven’t really talked about that. But that’s not dramatically different than the monthly churn average.

Okay, got it. So declined by so it’s about 20% churn and then retentions remained relatively consistent just from sort of the free month to the months after that.

Yeah, it’s slightly higher, but it’s not dramatically so.

Okay, excellent. Okay and then just one more for me. You know, within the retail business and as you’re speaking to bookstore managers in the current semester, have you started to see any changes related to foot traffic at all obviously, given sort of the fear and concern around coronavirus at all and does that have a potential impact to sort of same-store sales, particularly in the general merchandise area moving forward? Thanks.

I’ll take this is Mike. Lisa could answer this more specific. But I think it’s just too early to, you know, we – our Spring Rush was basically completed by the time that the coronavirus really became public in a big way and started to infiltrate the United States. So I don’t think, you know, if you’re looking at – it’s all real-time, we’re all learning every day. There’s nothing that, you know, we see right now, Ryan that’s having, you know, significant impact on the business, but obviously that could change over time if this thing takes off. We’re in kind of the same boat and a lot of other businesses are in that. So we are domestic, so we don’t cross borders other than, you know, some of our Student Brands’ activity is cross border over the internet, but over the web, but we don’t, as a malware, we’re thinking through doing contingency planning, et cetera, you know, hope for the best, prepare for the worst and on supply chain for general merchandise and things like that. But as of now, Lisa can update this, but I don’t think there’s anything that has affected this fiscal quarter. We would expect to really materially affect the rest of the fiscal year.

I would – this is Lisa, I would agree with that. We’ve been working closely with the supply chain to monitor any impact. And the good news is, we’re not seeing any material impact for the balance of the fiscal year.

Excellent. Thanks for taking my questions.

Your next question comes from Alex Fuhrman from Craig-Hallum Capital. Your line is open.

Great, thanks for taking my question. And Andy nice to speak with you again.

Likewise, thanks so much, Alex.

So, you know, wanted to ask about this First Day Complete offering. Can you give us a sense of, you know, the uptick you’ve seen in the schools where it’s been rolled out? You know, what percentage of students do you have a sense have been taking advantage of it and specifically, you know, do you have a sense of who has been using it, whether that’s been by year of school or domestic versus international? Just curious how we should think about that as that gets rolled out to more schools?

Yeah. Hey, it’s Jonathan Shar. So First Day Complete is a new course material model that as we said in the remarks that addresses affordability and access and really convenience by bundling course material across all courses for all students at an institution as part of tuition and/or fees. So it really touches everyone at the schools that we serve. Then we – as we said, we launched that in a handful of schools and with really incredible results in terms of savings for students and convenience and access and based on that the demand for the product on those proof points has been really significant and you know, the scaling for fiscal 2021, we expect to see about 4 times to 5 times the number of institutions and that continue to grow in a really significant way in fiscal 2022.

Okay, that’s helpful. Thanks.

The thing that, Alex – this is Mike. The thing about First Day Complete also is that it makes sense not just for us and schools, it also makes sense for the publishers. And, you know, the publishers, as you can see from their results that they put out, are challenged on adoptions and even digital sales. This provides a model that allows penetration rates to go from, you know, in our case, you know, 30%, 35% up to close to 100%. And, you know, our approach to that is, because of the benefits that this is giving to the schools, you know, we – our economics improve substantially. We’re an open book with the schools; we talk to them about protecting our downside risk, their downside risk and also sharing some of the upside, so they can have flexibility. That’s why it’s so appealing to the schools that we serve is, it gives them more flexibility, while passing through substantial 30% to 40% cost savings to students. And so what we’re really – this is really coming from our customers, which makes the conversation with the publishers, you know, easier in a way, because this is not something that we’re necessarily pushing, although we’ve got tools developed to make it easy to use and easy to implement. But this is what customers want. This is satisfying all their objectives and it’s helpful that it also works for the publishers, because they’re obviously providing a lot of the content. So content comes from other sources, but a lot of it comes from the publisher still.

And just to clarify, it’s across both digital and physical content. So this is not just a, you know, a digital content solution. This is across all course materials and requires no change in faculty behavior, which is one of the reasons why it’s being embraced by so many institutions.

Yeah, that’s an important point. That’s an important point. It does, you know, our First Day program is more of a course-by-course digital-only program. First Day Complete is ALL courseware, physical and digital together. It’s just an example of how we can use all of our assets together. We have a unique set of assets including MBS which can do fulfillment of the physical side. And this will help MBS’s business as it scales as well.

Great, that’s really helpful. Thank you.

We have no further questions. I would now like to turn the call over to Andy Milevoj for closing remarks.

Great, thank you. And thank you everyone for joining us on today’s call. Please note that our next scheduled financial release will be our fiscal 2020 fourth quarter and fiscal yearend earnings call on or about June 25th, 2020. Have a great day, everyone.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.