Barnes & Noble Education(BNED) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total sales for the quarter were $550.3 million, a decrease of$ 53.1 million or 8.8% compared to $603.4 million in the prior year [35] - The consolidated gross margin rate was 24.2%, down slightly from 24.4% in the prior year [41] - Selling and administrative expenses decreased slightly compared to the prior year, with BNC expenses down by$ 2.1 million or 2.3% [42] Business Line Data and Key Metrics Changes - Comparable store sales at BNC decreased by 7.7%, with textbook sales down by 11.2% [36] - MBS net sales were $116.4 million, a decrease of 16.2% compared to the prior year [39] - DSS sales were$ 5.2 million, down from $5.5 million in the prior year [40] Market Data and Key Metrics Changes - Total comp sales at BNC decreased by 7.7%, primarily due to declines in textbook sales [19] - MBS wholesale net sales decreased by 6.4%, attributed to decreased demand for physical books [39] - The industry shift from physical to digital continues to accelerate, impacting revenue and EBITDA for BNC and MBS segments [18] Company Strategy and Development Direction - The company is focusing on enhancing digital offerings across all segments, particularly through the Bartleby Digital Study subscription products [7][8] - There is an emphasis on integrating and leveraging the strengths of the three business segments to provide more value to campus partners [16] - The company is exploring inclusive access bundles to enhance affordability and accessibility for students [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's vision for the future and the importance of digital transformation [31][32] - The management acknowledged the challenges posed by the industry shift and the need for faster adaptation to digital trends [32] - The company expects to see meaningful financial impacts from digital offerings within 12 to 18 months [14] Other Important Information - The company has signed a content licensing agreement with a major publisher to expand Bartleby's content library [14] - Capital expenditures for the third quarter were$ 8.6 million, an increase from $7.7 million in the prior year, primarily due to investments in digital [46] - The company expects consolidated sales for fiscal year 2019 to be in the range of$ 2.15 billion to $2.2 billion [48] Q&A Session Summary Question: Did Student Brands lose subscribers during the current quarter? - Management indicated that some weaknesses at Student Brands were intentional to avoid exacerbating churn, focusing on responsible monetization [51] Question: How has the introduction of Cengage Unlimited impacted the business? - Management stated that they are aggregating and distributing Cengage Unlimited without marketing it as a preference over other products, sharing in the margin [65] Question: Has the Spring Rush season been weaker than expected? - Management confirmed that textbook sales declined slightly more than anticipated during the Spring Rush, particularly in wholesale [64]