Good day, everyone, and welcome to the Barnes & Noble Education Second Quarter 2016 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Thomas Donohue. Please go ahead.

Thank you. Good morning, and welcome to Barnes & Noble Education's Fiscal 2016 Second Quarter Earnings Call. Joining us today are Max Roberts, CEO; Patrick Maloney, President of Barnes & Noble College; and Barry Brover, CFO, as well as other members of the senior management team. Before we begin, I would remind you that this call is covered by the safe harbor disclaimer contained in our press release and public documents and is the property of Barnes & Noble Education. It is not for rebroadcast or use by any other party without 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 this call. At this time, I'll turn the call over to Max Roberts.

Thanks, Tom, and good morning, everyone. The company has successfully completed our first fall rush as a stand-alone independent company. Since we begin trading as a separate public company on August 3, we continue to execute our core strategies where our primary business focus is to increase market share by winning new accounts, increase sales at our existing bookstores, grow our digital learning platform and pursue strategic opportunities through acquisitions and partnerships. We are pleased with our top line and overall performance in the second quarter despite the lower enrollment in community colleges, which adversely affected our comparable sales. Our sales increased by 0.6% for the quarter and 1.8% year-to-date. This increase was driven by our new store growth, which is an integral part of our strategy. We are executing well. We continue to win new contracts, expand our footprint and increase our market share along with a number of students and faculties we serve throughout the United States. We opened 7 new stores in the quarter, while not closing any, bringing our total store count to 743. These 7 new stores represent approximately $7 million of estimated annual sales. In addition, we have signed contracts for another 10 new stores with estimated annual sales of $13 million, and we expect these stores to open later this year. Thus far, total estimated annual sales for new stores in fiscal 2016 exceeded $64 million. Our business model is dynamic with a compelling suite of products and services to support our campus partners and help drive student success, and we continue to look at opportunities to enhance our offerings. Our deep integration with our schools and our powerful omni-channel commerce platform delivers a great experience for the 5 million students and faculty that we serve. We create social and academic hubs that…

Thank you, Max. This morning, we released our second quarter results for fiscal 2016. Please note that the second quarter ended on October 31, 2015, and consisted of 13 weeks. The results of operations for the 26 weeks ended November 1, 2014, and the 13 weeks ended August 1, 2015, reflected in our consolidated financial statements are presented on a stand-alone basis since we were still part of Barnes & Noble, Inc. until August 1, 2015. The results of operations for the 13 weeks ended October 31, 2015, reflected in our consolidated financial statements are presented on a consolidated basis, as we became a separate public company. Please note all comparisons will be to the second quarter of fiscal 2015 unless otherwise noted. Total sales for the quarter were $755.9 million compared with $751.7 million from the prior year. The second quarter includes our fall back-to-school or rush sales and is our largest quarter. This sales increase of $4.2 million or 0.6% was driven by sales from net new stores, which contributed an additional $30.4 million in sales for the quarter and were partially offset by our comp store sales decline of $22.6 million. As Max discussed, our comparable store decline of 3% for the quarter and 1.9% year-to-date was primarily driven by the decrease in enrollments in 2-year community college. Products sales increased during the quarter, driven by the net new stores and continued growth in general merchandise sales, partially offset by the decline in textbooks. For the quarter, our general merchandise sales in comparable stores increased over the prior period by $2.2 million or 1.3%. While our emblematic apparel sales continue the strong increases, the back-to-school or rush quarter includes a larger percentage of school and computer supplies, which were impacted by the decrease in enrollments. Our rental…

[Operator Instructions] Our first question is from Alex Fuhrman from Craig-Hallum Capital Group.

I wanted to ask a little bit more about the lower comp store sales guidance for the year. It sounds like if I'm interpreting this correctly, that's the largest difference between this and your prior guidance is lower than expected community college enrollments, but it also sounds like your 4-year college comps were down a little bit here in the quarter. I mean, is that decline you saw in the 4-year colleges consistent with what you were expecting for the full year considering how strong the first quarter is or is there maybe something that's negatively impacting the trend of the 4-year schools as well?

We -- Alex, this is Max. We do not break out the guidance between community colleges when we planned it and the other schools we saw the enrollments decreasing in community colleges. And we look at the overall trend, which reflects the decrease in the community colleges, and also what we saw in the first 2 quarters year-to-date, and we came up with an overall guidance.

Okay. And then it sounds like great news about winning some new contracts here during the quarter. And it sounds like there haven't been any closure so far in the year. When you say that there's going to be 38 openings this fiscal year, I assume that's a gross number. How many closures would you expect to offset that in the balance of the year? And then however you look at it whether it's in terms of number of units or the volume of new business won, is this kind of a run rate that you would think is reasonable to shoot for in 2016 and '17 as well?

I'll let Barry talk a little about the closures that we -- but at the end of the day, our growth is very top line based. At the end of the day, we have seen a strong pipeline, we called out in the S-1. It's key to our strategy. And the reason for the top line growth is to position us to have a larger customer base, to expand our offerings and services and also to position it for mergers and acquisitions and have a larger customer base. Traditionally, the accounts that we have lost have been schools as we did last year that we voluntarily closed because of the operation and we have a number that we don't disclose necessarily as to what we budgeted for contingency of losing schools but it is minor and would not adversely affect the top line.

And just to add to that Alex, this is Barry, in the first quarter, we did close 9 stores, which, as Max alluded to, were typically smaller stores that were satellite stores that were unprofitable, were smaller stores that were part of a bigger contract. We did not close any stores in the second quarter and there are no known closings expected for Q3 at this point in time.

Our service model and the way we approach each school on a decentralized local basis with very strong relationships and events that we have on campus, we feel that our retention rate will continue as it always has in the past and generally, we have no expectations of closures with our existing accounts.

That's great. And then lastly, if we could just talk kind of broadly about Yuzu, was there anything specific or intentional about taking the spending down by a couple million from your prior guidance? Or is that perhaps just related to the timing of some spending you're going to have there as you get close to the end of the year? It sounds like obviously Yuzu has been very important in the sales process when approaching new business. Is there anything really to speak of yet in terms of explicit Yuzu revenues at this point? Or is that really the biggest value of the asset to you is how you're using it to pitch new business?

It's kind of all in. We -- Yuzu has been very important on the front side, it's acquiring new accounts, along with FacultyEnlight, which is also a digital product that we work directly with publishers on. And we see that since version 2 was released, we want to flex our spending between the different products and rationalize the expense structure based on what we see coming down the pipe for enhancements. And we feel comfortable that we're going to have a flat spend this year and when we originally looked at some development that we got behind us at this point in time.

[Operator Instructions] And it appears there are no further questions today. Mr. Donohue, I'll turn the conference back over to you.

Okay, thank you. And thank you for joining us on today's call. Please note that our next scheduled financial release will be our fiscal 2016 third quarter earnings which will be on or about March 8, 2016, and thank you for joining us today.

And that does conclude our conference today. Thank you all for your participation.