Good day ladies and gentlemen, and welcome to the Barnes & Noble Education Fourth Quarter and Full Year 2017 Earnings Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Thomas Donohue. Please go ahead, sir.

Thank you. Good morning and welcome to our fourth quarter and full fiscal year ended April 29, 2017 earnings call. Joining us today are Max Roberts, our CEO; Patrick Maloney, President of Barnes & Noble College; Barry Brover, CFO; Kanuj Malhotra, Chief Operating Officer of Digital Education, as well as other members of our senior management team. Before we begin, I would remind you that the statements we will make on today's call are covered by the Safe Harbor disclaimer contained in our press release and public documents. The contents of this call are for the property of Barnes & Noble Education, and are not for rebroadcast or use by any other party without written consent from 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 maybe made or discussed during this call. I would also like to tell you that following the completion of our acquisition of MBS we are reporting two segments, Barnes & Noble College Book Sellers, LLC, or BNC, and MBS Textbook Exchange, LLC, or MBS. And our fourth quarter and full year results include the nine weeks of MBS results between the acquisition date of February 27, 2017, and our fiscal year-end. Prior to the acquisition BNC was our only reportable segment. At this time, I'll turn the call over to Max Roberts.

Thanks, Tom, good morning everyone, and thank you for joining us. On today's call I will provide a summary of our results, our high-level view of the higher education marketplace, and the strategic and competitive initiatives we executed this past year to strengthen Barnes & Noble Education and enhance our ability to deliver solutions designed to help our partner institutions achieve student success. Finally, I will review our fiscal 2018 outlook. After that, Barry will discuss our fiscal 2017 fourth quarter and full year results in more detail. In fiscal 2017, we made solid progress in many areas, increasing sales by approximately 2% at BNC, continuing to sign new business, and growing our market share. For the full year adjusted EBITDA, excluding the nine weeks of MBS' results, was $82.5 million, an increase of $2 million over fiscal 2016. We also made excellent strides in new business wins for fiscal 2017. Along with MBS, we now have a complete solution to provide schools with physical, virtual, hybrid physical-virtual bookstore solutions. We have received an enthusiastic response from the marketplace regarding our product and service offerings. At BNC, during fiscal 2017, we signed new contracts with estimated annual sales of $118 million, representing 38 new physical stores while only closing 20 physical stores, bringing our total store locations to 769. MBS Direct, our virtual bookstore solution, has demonstrated solid performance, signing 80 new contracts representing $17 million in estimated revenue in fiscal 2017. We now offer an almost 1,500 physical and virtual bookstores serving over six million students in higher ed and K-12. This momentum has continued into fiscal 2018 as the current pipeline for new business remains strong. In fiscal 2018 so far, we have been awarded new contracts with estimated annual sales of $50 million for BNC and $8…

Thank you, Max, and good morning. Please note in my remarks this morning, all comparisons will be to the fourth quarter of fiscal 2016 unless otherwise noted. Total sales for the quarter were $342.8 million, an increase of $48 million or 16.3%. Total sales for the full fiscal year were $1.87 billion compared with $1.81 billion from the prior fiscal year, an increase of $66.4 million or 3.7%. The quarter and the full year includes $34.1 million of sales from MBS for the last two months of the year. For the full year, we realized incremental sales of $109.5 million from new stores, partially offset by a decrease in sales related to close stores of $23.8 million and a comparable store sales decline of $50.6 million. In addition our service revenue which includes revenue from Promoversity and LoudCloud along with our brand partnership income increased by $5.8 million compared with last year. As we further derived revenue from outside out footprint and monetize our customer base. Comparable store sales increased 1.4% for the quarter and decreased 3% for the fiscal year. Textbook revenue increased for the quarter $2.9 million in comparable stores primarily due to the later spring rushes. For the full year comparable store textbooks sales decreased 4% or $46.1 million. For the quarter, our general merchandize sales in comparable stores increased over the prior year by $0.6 million or 0.5% including new stores our general merchandize sales for the quarter were $135.5 million and $571 million for the full fiscal year and continues to be an increasing percentage of our sales which generates higher gross margins. Our rental income for the quarter was $76.6 million and increase of 2.3% compared with the prior year. For the full year rental income was $235.4 million and increase of 3.1% when…

Thank you. [Operator Instructions] And we'll hear from Mark Rosenkranz with Craig-Hallum Capital Group.

Hi, great. Thanks for taking my questions, guys. Starting off, now you've had nine weeks under the hood at MBS, just wondering if you could talk a little more on some of the inventory optimization and procurement savings you discussed in the last call, just where do you kind of see the opportunities throughout fiscal '18?

Sure. Thanks for your question, Mark. Good to talk to you again. Look, we've already started as a matter of fact at the end of the fiscal year to maximize the inventory by transferring excess inventory that we had at the college businesses into MBS to be liquidated. Patrick and his team and Dave have spent a tremendous amount of time going through the process of how we can best liquidate the inventories, and also achieve optimal purchasing. And it's in the early stages, and we expect it to be maximized throughout fiscal 2018, but has already started and helped us with this fiscal year. Patrick, you want to add anything on that?

Sure, Max. Mark, I couldn't be more happy with the way that the two management teams have blended and are working together. Everything has been extremely positive with their interactions as we expected it would be because of our long-term relationship as management teams. In addition to the inventory that Max spoke about, we're also focused on increased new business for both companies, expanding our product offerings across all of the different formats that we serve, as well as monetizing our customer base further. And we are looking to expand the use of the MBS warehouse and distribution center to benefit the Barnes & Noble College stores.

Okay, great, that's helpful. And then kind of switching gears to the general merchandise, how much would you say the products you've been seeing recently have been related to kind of changing consumer behavior versus some of the enrollment trends you've been seeing. And just kind of going forward into '18, how much comprises the mix in terms of your expectation.

Great question. I'll talk a little bit about our general sales trend. As you noticed, for the year we were $50 million down, without the community colleges it would've been $23 million. And for the first time since 2008, we had a decrease in general merchandise sales. And consequently that was $14 million. So our sales and profitability would've dramatically changed for the general merchandise if the general merchandisers remain stable. I believe it's a combination of, obviously, there are less students in higher ed, and that is a definite trend that is supported. What is also interested is the decrease in enrollments both in community colleges and many of the private schools and other schools are in full-time based students as opposed to part-time based. And that significantly affects the number of transactions at the register, along with the student possibly spending greater amount of time on the campus. So it is a level of traffic decrease, and there is clearly apathy by the consumer across all retail channels, general merchandise channels, both traditional stores and other formats, and in clothing and general merchandise. So it's a combination of both. It's hard to determine because our transactions obviously are down because of enrollments, but we're being very aggressive. Our web sales are continuing to grow. We have one of the best omni channels that exist. We are powering up our social media, our web programs, our marketing programs along with an optimization of SEM and SEO. So at the end of the day we are -- and we'll also be putting in a tremendous amount of events and promotions within the stores. We're not going to sit passively behind. One of the reasons for the guidance is we will react to this decrease, and we will promote and we will spend marketing dollars to regain that customer. And it is tied also to the enrollment issue. So we're not passively waiting for the consumer to come back.

Okay, great. That's really helpful. That's so much for your time.

Thank you. And we'll continue to Vahid Khorsand with BWS Financial.

Hi. First question on the general merchandise inventory line, so that is all -- the increase is all attributable to MBS?

Hi. Yes. When we're talking about our comp general merchandise sales, it's pure BNC. If your question is on the inventory levels on our balance sheet, the increase in inventory levels is entirely related to MBS, as the BNC stores actually experienced an inventory decrease.

Okay. And then you made several references to authentic textbooks, and I'm going to just assume that's related to what [indiscernible] was going through or is going through. With that said, in going back to your commentary on MBS and its relationship with publishers, wouldn't that in itself want publishers to sell more to MBS and then have MBS then fulfill more sales to universities and other schools?

Yes, it's a great question. We're not going to comment on any litigation of the industry or competitors or anything along that line. As you may have listened to a lot of the publishers' earnings calls they are maximizing their inventories. I think that's had a short-term effect on what they would sell to MBS. But absolutely, we believe that that is an opportunity to source from publishers, bring it back to the levels. But at the same time, we're reacting very rapidly to this decrease, and have other alternatives for sourcing.

Okay. And then related to that, did you know that publishers were reluctant to increase their sales or push sales to MBS before you acquired it?

No. No, this happens within the current season. And this is the inventory investment period for MBS. And each year it stands on its own, and the sources stand on their own, and at the end of the day next year we could have excess inventories from publishers and we may have no inventory from publishers. But the sourcing season was post transaction. We believe that that's -- I want to go back to the MBS. MBS had already been vital to our strategy. I think it's disappointing that the stock price has not reflected the MBS valuation in there, but the company needs a virtual solution. The company needs a lower cost of inventory acquisition, and MBS provides those. And as a matter of fact, in the contract managed bookstore industry there has never been a contract operator that didn't have a wholesale operation. And this really completes the portfolio, our competitors have it. And it has more advantages than just the sourcing of inventory in used books. It's a very strategic asset. And quite frankly I can honestly say we have not received the value we deserve on.

I wouldn't disagree with the undervaluation in the stock price [indiscernible]. One last question though, going forward, are you not going to provide EBITDA guidance or is that something you're just not going to do for right now?

Vahid, this is Barry. We will evaluate it on a quarter-by-quarter basis at this point in time as we go into our peak selling season with all of the changes in the industry, as Max talked to, we did not think it was appropriate to provide the guidance.

It's very hard to predict enrollments of 700 admission centers -- 769 admission sites throughout the United States. And given the apathy of the retail consumer, as I said, the first time since 2008 we've ever seen a decline -- we feel that the investment that we have to make in order to promote sales, the investment that we have to make in our digital businesses which is growing. And we really believe clearly now that the digital future is both content and analytics, and that's a combined process. And that will improve the outcomes as opposed to just traditional content. And we are fully entrenched in that business through LoudCloud and digital operations. So, given all of those factors, it really doesn't make sense, and compounded also is last year our guidance would have basically had $90 million, we wound up at $82.5. That's a very narrow range to be trying to predict given in the industry that had decreases in enrollments a level of retail question as to whether that side nationwide will turn around. So, basically we are not giving any guidance till we can stable it.

Okay, thank you.

Thank you. Our next question will come from Greg Pendy with Sidoti.

Hey, guys. Thanks for taking my call. I guess just two quick questions; one; if I'm not mistaken, this year again you are cycling sort of a later buying period. So is this becoming the new normal that we should be thinking about when we look out to 2018, where the business is becoming arguably a little bit less seasonal quarter-to-quarter as you start to see a later buying periods in both the spring and fall rush?

This is Barry. Our selling season for rush is really dependent on when the school reopens and goes back to class, whether it's the fall or post-Christmas period. So it's going to fall quarter-to-quarter between the second half and the first half. You kind of have to look at it six months and six months. And that's the best way -- that's the way we manage it, and you know, there is really no predictability as to how the sales will fall.

Okay, that's helpful. And then, I guess, just one follow-up, and I'm sorry if I missed it; I know you went into a lot of detail on the SG&A costs. If I'm not mistaken, the original guidance as you switched the lower costs LoudCloud platform was roughly about 12 million in savings alone, and as we look out to 2018, how shall we be thinking about that? Is that you know something that we're going to go and continue on that run rate, or do you think that the SG&A as possible other areas?

Well, we certainly have not. As we're not giving EBITDA guidance, we are not in a position to give S&A guidance either. The digital savings that we talked about last fiscal year of -- you know, we delivered a decrease in expenses this year of $11.2 million as a result of the restructuring. So we are proud of our ability to be able to deliver you know, as we had discussed, we will as -- we will be adding new stores that will increase our S&A, and we will continue to look at opportunities to better improve our cost structure and better leverage ourselves to be able to take more from the bottom line in this time of changing industry dynamics and lower comp sales.

Okay, that's helpful. Thanks a lot.

Thank you. [Operator Instructions] And with no additional questions in the queue, I'd like to turn the conference back over to Mr. Tom Donohue.

Thank you for joining us today. Please note that our next scheduled financial release will be our fiscal 2018 first quarter earnings and which should be on or about September 6th. Thank you very much.

Thank you, ladies and gentlemen. Again, that does conclude today's conference, thank you all again for your participation.