Financial Data and Key Metrics Changes - Total sales for Q2 2021 were $595.5 million, a decrease of $176.7 million or 22.9% compared to $772.2 million in the prior year [24] - Retail comparable store sales declined 28.1%, with textbook sales down 19% and general merchandise sales down 52% [25][26] - Consolidated gross margin rate decreased to 19.4% from 24.2% in the prior year, primarily due to a shift to lower margin digital courseware and reduced sales of higher margin general merchandise [27] Business Line Data and Key Metrics Changes - The retail segment saw a decrease of $165.2 million in sales, while the wholesale segment decreased by $3.8 million [24] - The DSS segment experienced a growth of $0.7 million or 14% to $5.9 million, driven by Bartleby subscriptions which increased by 53% to $1.7 million [27] - First Day offerings grew 77% to $53.4 million during the quarter, indicating strong demand for inclusive access models [26] Market Data and Key Metrics Changes - eCommerce sales represented 66% of total Q2 sales, up from 36% in the prior year, highlighting a significant shift towards online purchasing [12] - The demand for Bartleby’s homework help solutions surged, with unique visitors increasing by 378% year-over-year [15] Company Strategy and Development Direction - The company has made strategic investments in digital offerings, e-commerce solutions, and warehouse operations to adapt to the changing educational landscape due to COVID-19 [7][8] - The focus on First Day and First Day Complete programs aims to enhance affordability and access for students, which is increasingly relevant in the current environment [13][14] - Partnerships with companies like Blackboard are being pursued to expand the reach of Bartleby solutions [18][20] Management's Comments on Operating Environment and Future Outlook - Management expects COVID-19 to continue impacting the business throughout fiscal 2021, leading to ongoing adjustments in cost structure and operations [22][29] - The company remains committed to managing expenses prudently and maintaining liquidity in light of the challenging sales environment [30] - There is optimism regarding the potential for increased on-campus activity in the spring semester, although uncertainty remains [36][38] Other Important Information - The cash balance at the end of the quarter was $7.4 million, with outstanding borrowings of $99.5 million, reflecting a shift from the prior year when there were no borrowings [30] - Capital expenditures for the quarter were $9.1 million, down from $10.9 million in the prior year [31] Q&A Session Summary Question: How are universities approaching inventory building for the spring semester? - Management indicated that it is difficult to predict due to varying responses to COVID-19, with some schools opting for remote learning [34][36] Question: What are the expectations for the rollout of the new e-commerce platform? - The phased rollout is planned to start after the spring rush, with customization for each school being a key factor [42][44] Question: How is the pipeline looking for new business heading into 2021? - There is a robust pipeline with significant discussions ongoing regarding transitioning to First Day Complete models [47][82]

Financial Performance - Total sales for the 13 weeks ended August 1, 2020, were $204,014,000, a decrease of 36.2% compared to $319,657,000 for the same period in 2019 [111]. - The net loss for the 13 weeks ended August 1, 2020, was $46,652,000, compared to a net loss of $32,155,000 for the same period in 2019 [111]. - Adjusted EBITDA for the 13 weeks ended August 1, 2020, was $(38,017,000), compared to $(25,123,000) for the same period in 2019 [111]. - Total sales decreased by $115.6 million, or 36.2%, to $204.0 million during the 13 weeks ended August 1, 2020, from $319.7 million during the same period in 2019 [118]. - Retail sales decreased by $115.9 million, or 42.2%, to $158.8 million during the 13 weeks ended August 1, 2020, compared to $274.7 million in the prior year [122]. - Wholesale sales increased by $8.0 million, or 11.0%, to $80.3 million during the 13 weeks ended August 1, 2020, from $72.3 million in the same period in 2019 [126]. - Rental income decreased by $6.6 million, or 38.0%, to $10.8 million during the 13 weeks ended August 1, 2020, from $17.4 million in the prior year [124]. - The operating loss increased to $(58.9) million, or (28.9)% of sales, during the 13 weeks ended August 1, 2020, compared to $(43.8) million (13.8%) in the same period of 2019 [142]. - The company recorded a net loss of $(46.7) million during the 13 weeks ended August 1, 2020, compared to a net loss of $(32.2) million in the same period of 2019 [146]. - Adjusted Earnings (non-GAAP) was $(41.7) million during the 13 weeks ended August 1, 2020, compared to $(30.1) million in the prior year [148]. Operational Changes - The company recognized restructuring and other charges totaling $5.67 million during the 13 weeks ended August 1, 2020, including $3.4 million for severance costs [79]. - The company has temporarily suspended employer matching contributions into its 401(k) plans through the end of December 2020 due to COVID-19 impacts [82]. - The company implemented a significant cost reduction program aimed at maximizing productivity and driving profitability, with expected annualized savings beginning in Fiscal 2021 [155]. - Total selling and administrative expenses decreased by $27.7 million, or 28.3%, to $70.0 million during the 13 weeks ended August 1, 2020, from $97.7 million in the same period of 2019 [134]. - Retail selling and administrative expenses decreased by $26.8 million, or 32.0%, to $57.0 million, mainly due to a $22.8 million reduction in payroll and operating expenses [135]. - Total depreciation and amortization expense decreased by $1.8 million, or 11.4%, to $14.1 million during the 13 weeks ended August 1, 2020, from $15.9 million in the prior year [139]. Market and Competitive Environment - The COVID-19 pandemic significantly impacted the company's first quarter results, with many schools shifting to remote learning [92]. - The company continues to face downward enrollment trends and shrinking resources from state and federal government for colleges and universities [103]. - The market for educational materials is undergoing significant changes due to rising tuition costs and increased competition from alternative sources [102]. - The company is experiencing growing competition from alternative media and sources of textbooks, impacting its traditional distribution channels [103]. - The company operates in a competitive environment with risks including COVID-19 impacts, changes in college enrollment, and digital sales growth not meeting investment rates [168]. Financial Position and Cash Flow - Cash flows used in operating activities were $(54.8) million, an increase of $14.6 million compared to $(40.2) million in the prior year, primarily due to higher net loss and changes in working capital [157]. - Cash flows provided by financing activities were $59.5 million for the 13 weeks ended August 1, 2020, compared to $40.6 million in the prior year, reflecting higher net borrowings [160]. - Capital expenditures totaled $7.1 million for the 13 weeks ended August 1, 2020, down from $8.3 million in the same period in 2019 [159]. - The company had $234.6 million in outstanding borrowings under the Credit Agreement as of August 1, 2020, compared to $174.1 million as of July 27, 2019 [161]. - As of August 1, 2020, cash, cash equivalents, and restricted cash at the end of the period were $8.2 million, down from $9.0 million at the beginning of the period [156]. Strategic Initiatives - The company expanded its strategic partnership with VitalSource® in August 2020 to provide students with access to additional learning opportunities [91]. - The company plans to continue expanding its general merchandise e-commerce capabilities and increase market share through new accounts and strategic partnerships [91]. - The Board of Directors authorized a stock repurchase program of up to $50 million, with approximately $26.7 million remaining available as of August 1, 2020 [163]. - During the 13 weeks ended August 1, 2020, the company repurchased 178,669 shares of Common Stock outside of the stock repurchase program for employee tax withholding obligations [163]. Risk Management - The company faces risks related to data privacy, information security, and potential disruptions from third-party service providers [168]. - The company anticipates that strategic objectives and synergies from acquisitions may not be fully realized or may take longer than expected [168]. - The company has not identified any changes in internal control over financial reporting that materially affected its controls during the first quarter [175]. - The effectiveness of the company's disclosure controls and procedures was evaluated and deemed effective at a reasonable assurance level [174]. - The company has no material changes in market risk disclosures compared to the previous fiscal year [172].

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]

Barnes & Noble Education, Inc. (NYSE:BNED) Q4 2020 Earnings Conference Call July 14, 2020 10:00 AM ET Company Participants Andy Milevoj - Investor Relations Mike Huseby - Chairman and Chief Executive Officer Tom Donohue - Chief Financial Officer Jonathan Shar - Executive Vice President, BNED Retail and Client Solutions Lisa Malat - President, Barnes & Noble College Kanuj Malhotra - President, Digital Student Solutions David Henderson - President, MBS Conference Call Participants Ryan MacDonald - Needham Ale ...

COVID-19 Impact - The COVID-19 pandemic has had a material adverse effect on the company's business and revenues, particularly starting in mid-March 2020, with ongoing impacts expected[79]. - The company has faced challenges in customer engagement due to potential school closures and reduced in-person attendance[80]. - The company continues to adapt to COVID-19 impacts by providing free shipping and expanded digital content offerings to students during campus closures[317]. - The company experienced significant impacts from COVID-19, including campus store closures, which affected operations and comparability of results across periods[323]. - The company has implemented cost reduction efforts, including workforce reductions, in response to the financial impact of the pandemic[80]. Competition and Market Dynamics - The company faces significant competition from various educational content providers and online platforms, impacting pricing and market share[83]. - The retail price for textbooks is influenced by contracts with colleges, which have been reduced due to a focus on affordability, negatively impacting revenue and margins[85]. - The business is highly dependent on college enrollment and consumer spending patterns, with potential adverse effects from economic downturns[90]. - Seasonal fluctuations impact textbook sales, with peak sales in the second and third fiscal quarters[94]. Financial Performance - Total sales for the 53 weeks ended May 2, 2020, were $1,851,063, a decrease of 9.0% compared to $2,034,643 for the 52 weeks ended April 27, 2019[300]. - Gross profit for the same period was $442,549, representing a gross margin of 23.9%, down from $527,726 and a margin of 25.9% in the previous year[300]. - The net loss for the 53 weeks ended May 2, 2020, was $38,250, compared to a net loss of $24,374 for the prior year, reflecting an increase in losses of 56.8%[300]. - The company’s accumulated deficit increased to $(282,827) as of May 2, 2020, from $(244,577) the previous year, indicating a worsening financial position[305]. - The company reported a basic loss per share of $0.80 for the 53 weeks ended May 2, 2020, compared to a loss of $0.52 per share in the previous year[300]. Strategic Initiatives - The company aims to grow its digital products and services, which is critical for future operating results[89]. - The company has entered into partnerships and acquisitions to expand its Digital Student Solutions offerings, including a partnership with The Princeton Review[83]. - The company plans to expand its general merchandise e-commerce capabilities and increase market share through new accounts and strategic acquisitions[315]. - The company is exploring various strategic alternatives to enhance shareholder value, including potential partnerships and joint ventures[119]. Supplier and Inventory Risks - Approximately 31% of merchandise purchased during Fiscal 2020 came from the company's four largest retail suppliers, with the largest supplier accounting for about 12%[86]. - The company’s wholesale business sources over 90% of its inventory from two primary channels, making it vulnerable to supplier disruptions[86]. - The four largest suppliers accounted for approximately 32.2% of merchandise purchased during the 53 weeks ended May 2, 2020, indicating a concentration in supplier relationships[331]. Debt and Cash Management - As of May 2, 2020, the company's cash and cash equivalents totaled approximately $8.2 million, with $174.7 million of borrowings outstanding under Credit Facility and FILO Facility[283]. - Proceeds from borrowings under the Credit Agreement amounted to $600,900,000, an increase from $521,200,000 in the prior year, highlighting the company's reliance on debt financing[308]. - Outstanding borrowings under the Credit Facility and FILO Facility as of May 2, 2020, were $99,700 thousand and $75,000 thousand, respectively, with total outstanding borrowings of $174,700 thousand[404]. Regulatory and Compliance Risks - The company is subject to various laws and regulations that may impact its marketing and sales efforts, including the CAN-SPAM Act and GDPR, which could require substantial expenditures for compliance[100]. - Changes in federal and state minimum wage laws could increase selling costs and necessitate a reevaluation of the wage structure for employees[101]. - The company faces risks related to international operations, including compliance with various regulations and currency fluctuations[95]. Technology and Data Security - Data security risks are significant, with potential breaches leading to legal and financial exposure[97]. - Cyber-attacks are increasing in frequency and sophistication, posing threats to the company's information technology systems[98]. - The company has invested significantly in proprietary technology for managing textbook inventory and distribution, and any failure in these systems could disrupt operations and adversely impact results[106]. Asset Management and Impairment - The company recorded a pre-tax goodwill impairment loss of $49.3 million in Fiscal 2019 and $313.1 million in Fiscal 2018, indicating significant challenges in maintaining asset value[111]. - The company recognized a non-cash impairment loss of $433 thousand in the Retail segment during the 53 weeks ended May 2, 2020, and a total of $57,748 thousand in the previous year[408]. - The company completed its annual goodwill impairment test in the third quarter of Fiscal 2020, concluding that the fair value of the DSS reporting unit exceeded its carrying value, resulting in no impairment recognized[343]. Employee and Benefit Expenses - Total employee benefit expense for defined contribution plans was $5,015 for the 53 weeks ended May 2, 2020, down from $6,702 in the previous fiscal year, reflecting a decrease of approximately 25.2%[424]. - The company temporarily suspended employer matching contributions into its 401(k) plans due to COVID-19 impacts, effective April 2020 through December 2020[425]. Acquisitions - The acquisition of PaperRater was completed for cash consideration of $10,000, enhancing the digital content library with additional writing services[375]. - The acquisition of Student Brands was completed for $61,997, focusing on study tools and writing assistance for students[376].

Financial Performance - Total sales for the 39 weeks ended January 25, 2020, were $1,594.2 million, a decrease from $1,700.3 million for the same period in 2019, representing a decline of approximately 6.2%[162] - Total sales for the 13 weeks ended January 25, 2020, were $502.3 million, a decrease of 8.3% from $548.0 million for the same period in 2019[113] - Net loss for the 13 weeks ended January 25, 2020, was $1.7 million compared to a net income of $769,000 for the same period in 2019[113] - Adjusted EBITDA for the 39 weeks ended January 25, 2020, was $62.8 million, down from $85.3 million for the same period in 2019, reflecting a decrease of approximately 26.3%[162] - Adjusted EBITDA for the 13 weeks ended January 25, 2020, was $13.4 million, compared to $22.2 million for the same period in 2019, a decrease of 39.5%[158] - The company reported a gross profit of $380.1 million for the 39 weeks ended January 25, 2020, down from $410.7 million in the same period of 2019, a decrease of approximately 7.4%[162] - Gross profit for the 13 weeks ended January 25, 2020, was $118.5 million, compared to $132.9 million for the same period in 2019[120] Cost and Expenses - Total employee benefit expense for defined contribution plans was $3,683 during the 39 weeks ended January 25, 2020, compared to $4,978 for the same period in 2019, reflecting a decrease of 26%[82] - Stock-based compensation expense for the 39 weeks ended January 25, 2020, was $6,000, down from $6,851 in the prior year, indicating a reduction of approximately 12.4%[90] - Selling and administrative expenses for the 39 weeks ended January 25, 2020, were $317.3 million, compared to $325.4 million for the same period in 2019, a decrease of approximately 2.1%[162] - Selling and administrative expenses for the 13 weeks ended January 25, 2020, were $106.2 million, compared to $110.9 million for the same period in 2019[120] - Depreciation and amortization expense decreased by $1.3 million, or 7.7%, to $15.1 million during the 13 weeks ended January 25, 2020[144] Revenue Segmentation - The Retail Segment's product sales accounted for 90.3% of total sales in the 13 weeks ended January 25, 2020, compared to 89.8% in the same period of 2019[114] - Retail sales decreased by $40.1 million, or 8.1%, to $458.0 million during the 13 weeks ended January 25, 2020, compared to $498.1 million during the same period in 2019[124] - Retail sales decreased by $94.7 million, or 6.0%, to $1,474.4 million during the 39 weeks ended January 25, 2020, compared to $1,569.1 million during the same period in 2019[124] - Wholesale sales decreased by $11.5 million, or 14.7%, to $67.0 million during the 13 weeks ended January 25, 2020, compared to $78.5 million during the same period in 2019[129] - DSS total sales increased by $1.2 million, or 22.9%, to $6.4 million during the 13 weeks ended January 25, 2020, compared to $5.2 million during the same period in 2019[130] Impairment and Restructuring - An impairment loss of $433 was recognized in the Retail segment during the 39 weeks ended January 25, 2020, related to non-recoverable capitalized development costs[79] - The company experienced a non-cash impairment loss of $433,000 during the 39 weeks ended January 25, 2020[119] - Restructuring and other charges totaled $3,240 during the 39 weeks ended January 25, 2020, primarily for professional service costs and employee termination benefits[80] - The company reported a restructuring charge of $205,000 for the 13 weeks ended January 25, 2020[120] - Restructuring and other charges totaled $0.2 million and $3.2 million for the 13 and 39 weeks ended January 25, 2020, respectively[145] Borrowings and Cash Flow - The company borrowed $383,400 and repaid $451,000 under the Credit Agreement during the 39 weeks ended January 25, 2020, with outstanding borrowings of $65,900 as of that date[78] - Cash flows provided by operating activities during the 39 weeks ended January 25, 2020, were $86.4 million, down from $175.9 million in the prior year, a decrease of $89.5 million[168] - The company experienced a net cash flow used in investing activities of $(21.7) million for the 39 weeks ended January 25, 2020, compared to $(41.7) million in the prior year, a decrease of approximately 48.0%[169] Strategic Initiatives - The company has retained Morgan Stanley & Co. as a financial advisor to explore strategic opportunities, including potential partnerships and acquisitions[98] - A significant cost reduction program was implemented in February 2020, with expected annualized cost savings primarily realized beginning in Fiscal 2021, and a restructuring charge anticipated between $10 million to $15 million[95] - The company implemented a cost reduction program in February 2020 to streamline operations and drive profitability[146] Market Conditions and Risks - The overall economic environment and college enrollment trends are critical factors affecting the company's business performance, with a noted decline in community college enrollments[105] - The company anticipates potential risks including a decline in college enrollment and competitive conditions that may impact future performance[184] - The company is unable to predict future trends for the consumer price index and inventory levels, making it difficult to project tax liabilities[175] Stock and Shareholder Information - The stock repurchase program authorized by the Board of Directors allows for up to $50 million in repurchases, with approximately $26.7 million remaining available as of January 25, 2020[176] - During the 39 weeks ended January 25, 2020, the company repurchased 374,733 shares outside of the stock repurchase program for employee tax withholding obligations[177] - The company has not repurchased any shares under the stock repurchase program during the 39 weeks ended January 25, 2020[176]

Financial Data and Key Metrics Changes - Total sales for Q3 2020 were $502.3 million, a decrease of $45.7 million or 8.3% compared to $548 million in the prior year [34] - Consolidated gross margin for the quarter was 23.6%, down from 24.3% in the prior year [38] - Selling and administrative expenses decreased by $4.8 million or 4.3% compared to the prior year [39] - Cash balance at the end of the quarter was $9.8 million, a decrease of $12.2 million from $22 million in the prior year [40] - Expected adjusted EBITDA for fiscal 2020 is between $80 million and $85 million [46] Business Line Data and Key Metrics Changes - Retail segment sales decreased by $40.1 million, with comparable store sales down 7.3% for the quarter [34][35] - Wholesale segment net sales were $67 million, a decrease of $11.5 million or 14.7% compared to the prior year [37] - Digital Student Solutions (DSS) sales increased to $6.4 million, up $1.2 million or 22.9% due to increased Bartleby subscriptions [38] Market Data and Key Metrics Changes - Year-to-date, contracts to open new stores are expected to generate over $110 million in gross sales, with approximately $50 million net after store closings [16] - Comparable course material sales decreased by 9.3%, impacted by lower average selling prices [36] Company Strategy and Development Direction - The company is focusing on growing its high-margin DSS business and expanding course material adoptions through new digital models [8] - A significant cost reduction program is being implemented to streamline operations and enhance profitability [27][43] - The launch of the new e-commerce platform is expected to drive substantial value and increase revenue for the general merchandise business [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to stabilize and achieve meaningful cash flow growth beginning in fiscal year 2022 [31] - The company is adapting to the evolving higher education industry and is focused on delivering innovative solutions to both institutions and students [7][28] Other Important Information - The company is implementing a restructuring charge of $10 million to $15 million during Q4 fiscal 2020, with expected annualized savings of $8 million to $12 million [45] - The First Day Complete program is gaining traction, with expectations of 4 to 5 times growth in participating institutions in fiscal 2021 [20][66] Q&A Session Summary Question: Can you talk about the cost reduction program and specific areas for optimization? - Management indicated that cost reductions have been ongoing for 12 to 18 months, with a more focused program now being implemented [48][49] Question: What are the usage trends for Bartleby during busy academic periods? - Usage rates for Bartleby have peaked, with high engagement metrics indicating students find value in the service [53] Question: Have there been any changes in foot traffic due to concerns around coronavirus? - Management noted that it was too early to see significant impacts from coronavirus on business, but they are monitoring the situation closely [60][62] Question: What is the uptake of the First Day Complete offering? - The First Day Complete program has shown significant demand, with expectations for substantial growth in the number of institutions adopting it [66][68]

Business Operations - The company operates 1,436 physical and virtual bookstores, serving over 6 million students[88]. - The company opened 95 new stores and closed 107 stores during the 26 weeks ended October 26, 2019, resulting in a total of 1,436 stores[114]. Financial Performance - Total sales for the 13 weeks ended October 26, 2019, were $772,228,000, a decrease of 5.2% from $814,766,000 for the same period in 2018[103]. - Net income for the 13 weeks ended October 26, 2019, was $35,931,000, down 39.8% from $59,697,000 in the prior year[103]. - Adjusted EBITDA for the 13 weeks ended October 26, 2019, was $74,544,000, a decrease of 22.0% compared to $95,541,000 for the same period in 2018[103]. - Total sales decreased by $60.4 million, or 5.2%, to $1,091.9 million during the 26 weeks ended October 26, 2019, from $1,152.3 million during the 26 weeks ended October 27, 2018[112]. - Net income for the 26 weeks ended October 26, 2019, was $3.8 million, a decline of 82.0% from $21.1 million in the prior year[141]. - Adjusted Earnings (non-GAAP) for the 26 weeks ended October 26, 2019, was $7.8 million, down from $21.6 million in the same period of 2018, a decrease of 63.9%[145]. Revenue and Sales Trends - Total revenue from the First Day inclusive access program increased by 93% compared to the prior year[88]. - Retail sales decreased by $42.1 million, or 5.4%, to $741.8 million for the 13 weeks ended October 26, 2019, compared to $783.9 million for the same period in 2018[114]. - Product sales and other for the 13 weeks ended October 26, 2019, were $718.5 million, a decrease of 5.0% compared to $756.2 million for the same period in 2018[110]. - Rental income for the 13 weeks ended October 26, 2019, was $53.7 million, down 8.4% from $58.6 million in the prior year[110]. Cost and Expenses - Total employee benefit expense for defined contribution plans was $2,839 for the 26 weeks ended October 26, 2019, down from $3,469 in the prior year[76]. - Stock-based compensation expense for the 26 weeks ended October 26, 2019, was $4,181, compared to $4,973 for the same period in the prior year[83]. - Selling and administrative expenses for the 13 weeks ended October 26, 2019, totaled $113.4 million, an increase from $115.3 million in the same period last year[110]. - Total cost of sales for the 13 weeks ended October 26, 2019, was $585.3 million, compared to $604.0 million for the same period in 2018[110]. Taxation - The effective income tax rate for the 26 weeks ended October 26, 2019, was 56.3%, significantly higher than the 12.4% rate for the same period in the prior year[84]. - Income tax expense for the 13 weeks ended October 26, 2019, was $19.1 million on pre-tax income of $55.0 million, resulting in an effective tax rate of 34.7%[141]. Market Conditions and Competition - The company experienced a decline in enrollment trends, particularly at community colleges, attributed to an improved economy and a dip in the U.S. birth rate[96]. - Price competition remains significant, with students being highly price-sensitive and able to shift spending easily among providers[95]. - The company is facing increasing competition from alternative media and sources for textbooks, including e-commerce outlets and digital platforms[95]. - The overall economic environment and funding levels at colleges and universities are impacting the company's business performance[96]. Future Outlook and Risks - The company anticipates continued growth in online degree program enrollments despite overall declining higher education enrollment[96]. - The company expects new bookstore contracts to drive future growth, with a trend towards outsourcing in the campus bookstore market[96]. - The company operates in a competitive environment with various risks including changes in college enrollment and funding availability[169]. - Digital sales growth may not exceed the rate of investment spend, impacting profitability[169]. - The company faces risks related to the integration of acquisitions and realization of anticipated synergies[169]. Cash Flow and Capital Management - Net cash flows provided by operating activities during the 26 weeks ended October 26, 2019, were $161.4 million, down from $236.6 million in the prior year, a decrease of 32%[153]. - Capital expenditures for the 26 weeks ended October 26, 2019, totaled $19.3 million, compared to $23.2 million in the same period of 2018[154]. - Cash, cash equivalents, and restricted cash at the end of the period were $25.4 million, compared to $20.8 million at the end of the previous year[151]. - The company had no outstanding borrowings under the Credit Agreement as of October 26, 2019, and had borrowed $150 million during the 26 weeks ended[156].

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]

Financial Performance - Total sales decreased by $17.8 million, or 5.3%, to $319.7 million for the 13 weeks ended July 27, 2019, compared to $337.5 million for the same period in 2018[108]. - Product sales and other decreased by 4.9% to $302.2 million for the 13 weeks ended July 27, 2019, from $317.8 million for the same period in 2018[108]. - Rental income decreased by 11.2% to $17.4 million for the 13 weeks ended July 27, 2019, compared to $19.6 million for the same period in 2018[108]. - Retail sales decreased by $12.4 million, or 4.3%, to $274.7 million during the 13 weeks ended July 27, 2019, compared to $287.1 million during the same period in 2018[112]. - Comparable store sales decreased by $9.0 million, or 3.5%, during the 13 weeks ended July 27, 2019, compared to a decrease of $6.4 million, or 2.5%, in the same period in 2018[116]. - Wholesale sales decreased by $17.6 million, or 19.6%, to $72.3 million during the 13 weeks ended July 27, 2019, from $89.9 million during the same period in 2018[117]. - The company reported a net loss of $32.2 million for the 13 weeks ended July 27, 2019, compared to a net loss of $38.6 million for the same period in 2018[104]. - Adjusted EBITDA improved to a loss of $25.1 million for the 13 weeks ended July 27, 2019, compared to a loss of $32.5 million for the same period in 2018[104]. Cost and Expenses - Total cost of sales decreased to $248.0 million for the 13 weeks ended July 27, 2019, from $270.9 million for the same period in 2018[107]. - Selling and administrative expenses increased to $97.7 million for the 13 weeks ended July 27, 2019, compared to $99.1 million for the same period in 2018[107]. - Total employee benefit expense for defined contribution plans was $1.538 million for the 13 weeks ended July 27, 2019, down from $2.085 million in the prior year[78]. - Stock-based compensation expense for the 13 weeks ended July 27, 2019, was $2.321 million, slightly down from $2.341 million in the prior year[82]. - Total selling and administrative expenses decreased by $1.4 million, or 1.5%, to $97.7 million during the 13 weeks ended July 27, 2019, from $99.1 million during the same period in 2018[125]. Impairment and Restructuring - The company recognized a non-cash impairment loss of $433,000 in the Retail segment during the 13 weeks ended July 27, 2019[10]. - Restructuring and other charges totaled $1.466 million, primarily for severance and professional service costs[75]. - The company recognized a non-cash impairment loss of $0.4 million in the Retail segment during the 13 weeks ended July 27, 2019[131]. Tax and Interest - The company recorded an income tax benefit of $(14.189) million on a pre-tax loss of $(46.344) million, resulting in an effective tax rate of 30.6%[83]. - Net interest expense decreased by $1.0 million to $2.5 million due to lower borrowings during the 13 weeks ended July 27, 2019[134]. Cash Flow and Borrowings - Cash, cash equivalents, and restricted cash at the end of the period was $8.98 million, down from $14.00 million at the end of the prior year period[145]. - The company had $174.1 million of borrowings under the Credit Agreement as of July 27, 2019[143]. - Net cash flows used in operating activities were $(40.2) million for the 13 weeks ended July 27, 2019, compared to $(27.4) million in the prior year[145]. - Cash flows provided by financing activities were $40.6 million for the 13 weeks ended July 27, 2019, compared to $33.8 million in 2018, reflecting a net change of $6.8 million due to increased net borrowings[147]. - As of July 27, 2019, the company had net total outstanding borrowings of $174.1 million, down from $230.2 million as of July 28, 2018[148]. Business Operations and Strategy - The Retail Segment operates 1,491 bookstores, including 777 physical and 714 virtual bookstores, serving over 6 million students[88]. - First Day total revenue increased by 46% compared to the prior year, driven by the inclusive access program[88]. - The company plans to grow by introducing scalable digital solutions and expanding market share through acquisitions and partnerships[88]. - The company opened 84 new stores and closed 41 stores, ending the period with a total of 1,491 stores[112]. - The company continues to see downward enrollment trends at colleges and universities, impacting overall business growth[98]. - Online degree program enrollments are expected to grow, despite declining overall higher education enrollment[98]. Risks and Future Outlook - The company believes future cash from operations and access to borrowings will adequately fund operating and financing needs, although future capital requirements depend on various factors including economic conditions and inventory levels[151]. - The company faces various risks including competitive conditions, economic environment, and potential changes in consumer demand that could impact future performance[161]. - The company has no off-balance sheet arrangements as of July 27, 2019[156]. - The company did not repurchase any shares under its stock repurchase program during the 13 weeks ended July 27, 2019, leaving approximately $26.7 million available for future repurchases[153].