Greetings and welcome to the Build-A-Bear Workshop Third Quarter 2018 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allison Malkin of ICR. Thank you. You may begin.

Good morning. Thank you for joining us. With me today are Sharon Price John, CEO and Voin Todorovic, CFO. For today’s call, Sharon will begin with a discussion of our 2018 third quarter performance and review the progress made on the priorities we set at the start of the year. Voin will review the third quarter financials and our fiscal 2018 guidance. We will then open the call to take your questions. We ask that you limit your questions to one question and one follow-up. This way, we can get to everyone’s questions during this 1 hour call. Feel free to re-queue if you have further questions. Members of the media who maybe on our call today should contact us after this conference call with your questions. Please note the call is being recorded and broadcast live via the Internet. The earnings release is available on the Investor Relations portion of our corporate website. A replay of both our call and webcast will be available later today on the IR site. Before I turn the call over to management, I will remind everyone that forward-looking statements are inherently subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including those set forth in the Risk Factors section in the company’s Annual Report on Form 10-K. We undertake no obligation to revise any forward-looking statements. Finally, I want to remind you that we will review results for fiscal 2018 third quarter and 39 weeks ended November 3, 2018. Given the previously announced fiscal year change, references to the prior year results are based on the un-audited recast results for the fiscal year ended February 3, 2018. And now, I will turn the call over to Sharon.

Thanks, Allison and good morning everyone. In a seasonally small third quarter in which we had forecasted a loss, we ultimately delivered both sales and profitability that were lower than our expectations. Although the rollercoaster ride and residual benefits of the Pay Your Age event drove positive sales through August, they were offset with disappointing results for the balance of the quarter, particularly in September. We attribute the results to a variety of reasons some in our control and some that were out of our control, which I will outline shortly. Notably, while we were actively managing the short-term unpredictability of the aftermath of an event with the scale and impact of Pay Your Age, we continue to make progress towards the longer term transformation of our Company. As noted on our last call, we believe the unprecedented consumer response to the July event is a clear and leverageable proof point of the power of our brand. We expect to ultimately profitably monetize its equity was further evolving and diversifying our real estate portfolio and revenue stream. But looking at the third quarter, we attribute the softer-than-expected results to three situations. First, we made a tough strategic decision to purposefully limit our planned marketing, PR and promotional focus for early September, which had been scheduled to celebrate one of our largest annual sales generating event, National Teddy Bear Day and redirected that effort to a new event that is now planned for January. As you may recall, the Pay Your Age event in mid-July, which was created to launch our year-long Count Your Candles’ birthday program far exceeded expectations for sales and accounting for a highest traffic day in the history of our Company. The lines that rest around malls resulted in intensified attention in the press and social media.…

Thanks, Sharon, and good morning, everyone. As I begin, I want to note that given our previously announced fiscal year-end change, all references to prior year third quarter results are based on the recast 13 weeks ended October 28, 2017. In a quarter that was challenging top and bottom line results, we focused on the disciplined management on expenses, inventory, and capital expenditures, while implementing our strategy to diversify and grow new revenue streams to broaden the accessibility of the Build-A-Bear brand beyond the four walls of our traditional retail stores, such as outbound licensing, international franchising, wholesale revenue, shop-in-shops and the new full-service Build-A-Bear Workshop stores inside select Wal-Mart locations. The added diversity positions Build-A-Bear Workshop to deliver more consistent growth longer term. And while not clearly evident in our performance this quarter, our strategy to have more stores in locations as families go for shopping and entertainment continues to pay dividend. As Sharon noted, our quarterly consolidated revenue and profits were pressured by a variety of factors. However, it is important to note our consolidated retail transactions were up slightly in the quarter tempered by a decline in our dollars per transaction driven by higher promotional activity associated with Pay Your Age Day and the lower mix of licensed product sales associated with the lack of high-profile kids-centric theatrical releases. With that backdrop, let me share an overview of our third quarter results in more detail. In total, third quarter consolidated revenues were $68.7 million, a decrease of $7.5 million from $76.2 million in the fiscal 2017 third quarter. This reflects an approximately $2.5 million combined negative impact from the adoption of the new revenue recognition standard and the January closure of one of our most productive stores at Disney Anaheim. Of the 9.8% decrease in consolidated revenue,…

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Steph Wissink with Jefferies. Please proceed with your question.

Hi, this is Ashley on for Steph Wissink. Thanks for taking our question. So our first question is on your franchise locations are the concourse model shops available for franchising and is that part of your strategy at all? Second, how should we expect commercial sales to scale? And last any early feedback on the Wal-Mart partnership? Thank you.

Yes, the franchise question, yes, it is available it’s not widely out there yet, but because it has a smaller footprint and is a lot requires a lot less capital, it serves a distinct purpose for some of our franchise partners, particularly in China as I look at both the bigger markets by putting flagships in those markets, like Shanghai and Beijing, but when you get into the secondary type of markets, their belief that the concourse could be a really great tool for them to roll it out with a lot roll out Build-A-Bear across the country with a lot less capital, so it’s a great tool and then it’s been also on the same side it’s been a great tool for us in the United States as a leverageable tool for us to drive the negotiation with our own in our own mall systems on the second question, I’ll turn that over to Voin on the commercial sales.

Yes, so hi Ashley, commercial sales and some of these other non-traditional revenue streams are expected to grow as you know, we have shown some strong indicators that our strategies are working, and we are expanding in that particular area as Sarah noted, we are starting our relationship with Great Wolf Lodge, and we are expecting to be in a lot of their locations next year we continue to work with similar models that are really highly accreted to us, as well as we are looking at other revenue streams in form of wholesaling and really to diversify our business model so there are a lot of other initiatives that we are working on in addition to the wholesale piece we talked, outbound licensing initiatives continue to work we had like large slipper programs even in the Q3 that was partially driving our strong improvement in commercial revenue year-over-year we feel good about the progress that we are making against those initiatives but again, we are still in early innings across a lot of these initiatives we believe there is much more upside over the longer haul, as well as our international franchise opportunities are still a big opportunity as recently we announced that India addition of the India franchisee as well as we continue to see expansion on the China front.

Right. On the Wal-Mart question, we are in six pilot locations right now as we noted in the remarks, the initial feedback looks very positive, and we’re particularly thrilled that it is expanding the accessibility of our brand based on some of the Bonus Club Data coming in as over 50%, over 60% of the guests have never shopped at a Build-A-Bear before so that’s a really positive piece of feedback as far as we’re concerned Wal-Mart could be a very important partner for us we just but it is a relationship and we will make these decisions together but as a dovetailing into Voin’s remarks, as an example, even the slipper business that he was the successful slipper business that we have, Wal-Mart’s our largest partner with that particular program so there is a potential to be intertwined in a number of ways.

Thank you both.

[Operator Instructions] Thank you. It appears we have no further questions at this time. Ms. Price John, I would now like to turn the floor back over to you for closing comments.

Okay, thanks for joining us everyone today. We really appreciate it and we hope everyone has a happy and healthy holiday season. Look forward to speaking to you next year.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.