Good morning. My name is Adam and I will be your conference operator today. At this time, I'd like to welcome everyone to the Barnes & Noble Education Fiscal 2019 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Tom Donahue, CFO, you may begin your conference.

Good morning and welcome to our third quarter fiscal 2019 earnings call. Joining us today are Mike Huseby, Chairman and CEO; Barry Brover, EVP Operations; Kanuj Malhotra, President of Digital Students Solutions; Lisa Malat, Chief Operating Officer, Barnes & Noble College; 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 content of this call are for the property of Barnes & Noble Education, and they're 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 risk 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 Mike Huseby.

Thanks, Tom. Good morning everyone and thanks for joining us today. This quarter, we continue to accelerate our business transformation, advancing our efforts to ship to enhance digital offerings in all of our segments. The acceleration is most evident in our DSS segment where we successfully launched our Bartleby Digital Study subscription products in our BNC and MBS scores. As a reminder, the Bartleby Study subscription is a new direct-to-student product that provides access to step-by-step textbook solutions and experts Q&A. After initial soft launch in August, January-March to start of our first selling season for Bartleby within our store footprint. It was very encouraging start what we project as important driver of long-term growth. In January and February, we proved out our strategy of leveraging our vast store footprint and strong relationships with faculty, administrators and students to introduce new scalable and valuable digital products and services. Each day, we are improving Bartleby's ability to compete by significantly expanding the number of textbook solutions we offer students. We're pleased to report that we surpassed the 1 million of such solutions in January. Because of our unique role at the campus physical or virtual book store, we know which course materials are most widely adopted by faculty and used by students and which subject students are most frequently struggling to master. We're leveraging our deep knowledge of student course material consumption to better inform and manage the cost of our content development. This is the key point of differentiation for us. In addition to saving time and development cost, our unique relationships and insight will allow us to scale Bartleby relatively quickly and efficiently. Bartleby gains more than 50,000 gross subscribers to the Spring Rush period including the month of February. Importantly, the majority of those subscribers were originated by…

Thank you, Mike. Please note that the third quarter end and on January 26, 2019, consisting of 13 weeks. All comparisons will be to the third quarter fiscal 2018 unless otherwise noted. Total sales for the quarter were $550.3 million, compared with $603.4 million in the prior year. This decrease was $53.1 million or 8.8% was comprised of $39.9 million decrease from the BNC segment, the $22.5 million a decrease from the MBS segment and the $0.3 million decrease in the DSS partially offset by lower elimination is between the BNC and MBS. Comparable store sales at BNC decreased by 7.7% in the quarter as compared to a 6.2% decline in the prior year period. Comparable textbook sales for the quarter decreased by 11.2% as compared to the prior year increase of 7.2%. Textbook sales continue to be impacted by lower average selling prices of course materials, enrollment declines and student purchases from publishers directly and other online providers. General merchandise comparable store sales recorded increased by 1.6% compared with a 2.8% decrease in the prior year, driven by strong growth preservation products, computer and supplier products and the previous and caffeine convenience product sales trends. As Mike mentioned earlier, consistent with prior year Spring Rush period extended beyond the quarter due to later school openings and the continued pattern of students buying course materials later in the semester. Factoring in the month of February, comparable store sales at BMC decreased 4.9% on a year-to-date basis. Net sales for MBS in the third quarter were 116.4 million, compared with 138.9 million in the prior year period, a decrease of 22.5 million or 16.2%. MBS wholesale net sales were 77 million, a decrease of 15.1 million or 6.4%. This decline was higher than anticipated due to decreased demand for physical books…

Thank you. [Operator Instructions] And your first question comes from Greg Pendy. Greg, Your line is open.

Can you just give us a little bit of color on, it sounds like Student Brands, did you lose subscribers I guess during the current quarter? And can you guys give us kind of a rough estimate? You told us Bartleby had 50,000, I guess subscribers. Are you ultimately looking to combine the two offerings of the both Student Brands and Bartleby?

Greg, this is Kanuj. In terms of looking at a bundle, it's premature to say, we're going to optimize the pricing plans that has the best use for students. There are different used cases riding in the study subscriptions. I think for the moment, the initial thought is that they remain separate a la carte subscriptions. In terms of some of the weaknesses at Student Brands, some of that's been purposeful as Tom referred to, in terms of the monetization opportunities. So last year, we had things like a for $2 for two essays to promote increasing new subscriber activity. We eased off of that because that actually exacerbates churn later on. So, we were trying to monetize in a more responsible way where we're publishing a lot more content that ultimately that publishing content ranks through SEO. That takes some time for Google to start indexing it and longer term we think with the acquisition of PaperRater, we see that there's a lot of white space and we envision that that business goes back to growth. Tom, I don't believe you disclosed subscriber numbers. So I won't say anything there in terms of that, but overall in terms of writing, we think that a lot of room for -- there's a lot of white space there for students to have not only the existing product attributes, but things will launch in the future like our Triple Play writing, which has other features like plagiarism detection and revision assistance and other writing aspects.

Okay, but is that being pushed I guess in the store as much as Bartleby is? Or were you kind of focused right now -- it's an impressive ramp 50,000, I assume, some of those weren't paying subscribers on Bartleby. But are you also putting Student Brands, I guess, point-of-sale within the stores?

There's good point. We did -- we actually did give preference to Bartleby as a new product. So whereas in the fall, we had marketed the writing product, but our goal is to really accelerate Bartleby. But we're becoming much more segmented where we can do both, we think there's the opportunity to both. But the used case for writing is different than Bartleby study subscriptions. But there was definitely a preference given to ramping Bartleby given it was launched in production.

Your next question comes from Alex Fuhrman. Alex, your line is open.

Would love to get a better sense of the opportunity or perhaps risk ahead, as some of the publishers you do business with are looking to have their top titles available for rental? And it sounds like Barnes & Noble Education is, I think in your words, ready and willing and able to help fulfill these rentals. Are there other companies that you're going to be competing with for some of that business? And can you just talk about the potential that you may be seen or heard from some of these publishers perhaps going direct to the consumer with digital rentals? Just trying to gauge, if we should think about that as potentially an opportunity for BNED or maybe equally as large of a risk?

Alex, this is Mike. It's both, obviously, maybe not obviously, but it is. In terms of the opportunity and MBS being ready and able, they're also under contract with a couple of the large publishers. We released those press releases early last year, as we talked about this. In the last quarter, we anticipated Pearson and McGraw-Hill and they talked about this in their own earnings calls, really rolling out the pub rental program much more fully last fall. Without getting into the reasons why that didn't happen, as we understand them, they're talking about it publicly now in our discussions with them, they're committed to doing it this coming fall. One of the things about this business is that it's, it becomes into kind of big chunks every year the seasons are the Fall Rush in the Spring Rush. There are other things we sell all year long general merchandise et cetera in our e-commerce business. But as you know, a high proportion of revenues and cash flow is earned in the fall and Spring Rush. So the opportunity is for MBS to be the distributor of choice for those two large publishers and possibly some other publishers are those are the two that are really pushing the pub rental opportunity. They've disclosed they'll have over 700, I think of their top titles available for rental. And it's a good opportunity for MBS because and this is a good opportunity for the publishers. MBS interact with about 3,500 stores, including our stores, pallet stores and independent stores as a wholesaler. And as a service provider, we have our systems in 400 of those stores. So from a publisher's perspective, if they want to rent their top titles, they can deal with MBS and get basically one invoice for all…

[Operator Instructions] Your next question comes from Karim Foad from Barclays. Karim your line is open.

This is Karim Foad from Barclays speaking. Just two from me. So, how is the introduction of Cengage Unlimited impacted the business? So that's the first one. And secondly, focusing more textbooks, you've mentioned the Spring Rush season initially in February. Has that been weaker than your expectation leading into it?

Can you clarify the second part of the question on textbooks? Would you mind repeating that, which…

So with the textbook sales with the Spring Rush season, has it been weaker than what your expectation were leading into the rush season?

Yes. I think that we said that. It was textbook sales decline slightly higher than we thought. They were going to in the Spring Rush particularly wholesale. We anticipated that MBS would be able to sale through a higher percentage of returns they received in the fall, for example, the demand would be higher than it was. As a retail level, while we expected slightly higher demand, the 4.9% decrease in comp sales that BNC experience was within our expectations and our guidance. Regarding Cengage Unlimited, they're offering subscriptions through physical and virtual campus stores as well as schools and branded e-commerce sites. We understand and agree with the intent of what they're doing, which is to offer more affordable course materials to drive student success and deal with one of the big main points of the student, which is the saving money. Our role just like any other offering from a publisher is to aggregate and distribute Cengage Unlimited. We don't market it as a preference over any other publisher product. We let the students make that choice or the faculty whoever's making the decision, we share. We have an agreement with them specifically on CU where we share in the margin. So we're very happy to help them and students take advantage of Cengage Unlimited.

[Operator Instructions] And we have no further questions at this time. So, I'll turn the call back over to Tom Donohue for closing remarks.

Thank you, Adam, and thank you for joining today's call. Please note that our next scheduled financial release will be our fiscal 2019 fourth quarter earnings call on about June 25th. Have a great day. Thank you.

And that does conclude today's conference call. You may now disconnect.