Hello. Good morning, and welcome to the Barnes & Noble Education Earnings Call. At this time, for opening remarks and introductions, I would like to turn the call over to Andy Milevoj, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Good morning, and welcome to our fiscal 2023 first quarter earnings call. Joining us today are Mike Huseby, CEO; Tom Donohue, CFO; and Jonathan Shar, Executive Vice President, BNED Retail and President, Barnes & Noble College; David Henderson, President of MBS and David Nenke, President of DSS. Before we begin the call, I'd like to remind you that the statements we 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 the property of Barnes & Noble Education and are not for rebroadcast or use by any other party without prior written consent of Barnes & Noble Education. During this call, we will make 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. And now, I'll turn the call over to Mike Huseby.

Thanks, Andy. Good morning, everyone. Our first quarter began with a solid start, benefiting from a strong graduation season as many schools return to in-person graduation ceremonies and, in some cases, held multiple ceremonies to provide opportunities for those who were not allowed to attend and celebrate in-person over the past two years. We experienced stronger general merchandise sales, especially within our logo and emblematic products as on-campus traffic grew from increased student recruitment events and other activities as compared to each of the two prior years. Our first quarter is a seasonally slow academic period, which primarily consists of graduation activities, summer classes and preparing for to fall back to school rush. In addition to the strength of our general merchandise business, our first quarter results also benefited from the continued growth of our inclusive access programs, which drove a 1.5% increase in comparable course material sales. Total first day sales grew 67% to $45 million. Currently, we are in the thick of our peak Fall Rush annual sales period. As reported last quarter, we entered Fall Rush with strong year-over-year growth in our contracted First Day Complete or FDC Inclusive Access offerings. With FDC having achieved scale in fiscal year '22, we now have meaningful and objective proof points that FDC improved student outcomes through easier access, convenience and substantially enhanced affordability. Our surveys have shown that students believe our FDC model better prepares them academically, helps them achieve better grades and is easier to use than an a la carte model. Many students cited real benefits from FDC, such as reduced financial stress and the ease of getting all required books and materials ahead of classes, benefits that students said increase their likelihood to continue their education at that school. We have also received strong feedback from…

Thanks, Mike, and good morning, everyone. Please note that the first quarter of fiscal 2023 consists of 13 weeks ended on July 30, 2022. All comparisons will be to the first quarter of fiscal 2022, unless otherwise noted. As Mike said earlier, the first quarter is typically a low revenue quarter for the Company, consisting primarily of summer courses. We are encouraged by the rebound in our first quarter sales especially within our general merchandise business. Total sales for the quarter were $263.9 million compared with $240.8 million in the prior year. This $23.1 million or 9.6% increase was comprised of a $26 million increase in the Retail segment, a $7.4 million decrease in the Wholesale segment with a $0.9 million increase in the DSS segment. Retail sales increased by $26 million or 12.4% as compared to the prior year period benefiting from a rebound in both our general merchandise and course material sales. Sales grew on a strong graduation season, a continued growth of logo and emblematic products and higher demand for our cafe convenience offerings, which benefited from the increase of on-campus traffic as compared to the prior year period. Retail sales also benefited from the continued growth of our inclusive access programs, which drove a 1.5% increase in comparable gross material sales. Total First Day sales grew by 67% to $45 million, with First Day by core sales growing 49.8% to $28.1 million and First Day Complete sales doubling to $16.9 million. As Mike noted, we have 111 stores that are utilizing our First Day Complete offering for the fall term. While we previously expected to enter into the Fall term with 112 stores, as part of our ongoing efforts to operate more efficiently, we closed one store location within a larger school system that was essentially…

[Operator Instructions] The first question today comes from the line of Ryan MacDonald from Needham & Co. Please go ahead. Your line is now open.

Congrats on a nice quarter here. Maybe just to start, obviously, there's a lot of questions around the enrollment outlook and sort of what the picture is going to look like for this Fall. You made a couple of comments in the prepared remarks about sort of a strong Fall Rush or something that seems to be improving. We'll just be curious to see what you're seeing right now in terms of what the enrollment picture is looking like at the universities you work with and how that Fall Rush traffic is trending relative to last year?

Ryan, it's Jonathan Shar. Thank you for the question. It's really too early to provide a specific view on enrollment in order to quantify the traffic, although really optimistic that there is increased sort of traffic and students on campus and fewer restrictions on those campuses that we'll welcome on additional visitors and such to campus. Say some of our optimism is based on the fact that our general merchandise inventory is in much better shape as compared to last year, which was a start-up year for FLC, on the emblematic side of our business and last year's supply chain challenges are much improved from an inventory and replenishment standpoint. We also have, as we've noted, 111 campus stores that are utilizing First Day Complete as compared to 65% in the prior year and a significant 85% growth in the number of enrolled students. So we're really excited about that and the impact that will have on our course materials business, but we really won't know what the outlook for enrollment is going to be until after the ad drop period and when we get to sort of the national reporting on that.

Yes. Ryan, it's Mike. I think that the fact that we grew courseware sales in the summer, we grew them in fiscal year '22 speaks to the strategy of First Day Complete and why it was put in for exactly that reason, we knew enrollments at least longer term, as you know, are going to be affected by the demographic shift where the traditional college-age student demographic is going to be dropping off fairly dramatically in a couple of years. And so, we're starting -- while there are enrollment decreases over the last two years, particularly in two-year schools, I think that the way we're addressing it is effective. And as Jon said, we will have the enrollment data in a month or so, we just don't have it. We don't have it yet. There's really no way to get it until it's gathered by the right authority, so to speak.

Helpful color, I appreciate that. Maybe shifting the First Day Complete. So great to see the continued growth in a number of universities there. But in your, I guess, maybe second sort of big year in terms of adoption with First Day Complete in the Fall semester. I'm curious as you're looking back at the 2021 cohort as that's maturing into this fall. Any trends that you'd call out in terms of student usage or what the opt-in rates are looking like sort of into your second year with those existing -- that 2021 cohort as you go into this year? And then maybe a question on what you're seeing in terms of the mix of digital versus physical textbooks as a component of First Day Complete?

Yes. Ryan, it's Jonathan again. I would say that -- and that again, a little too early to tell because we're not through the ad drop period is when we get the information on opt out rates at schools that make that an option. So, we don't have any data to quantify. But through observation, and spent the last 2.5 weeks on campuses across the country who are entering Rush including many that are operating First Day Complete for both sort of an ongoing basis and for schools that are just transitioning to that model. I would say that the knowledge and acceptance of that is sort of significantly improved again, just from observation, and we've improved the process a lot through investment in technology, making things more seamless, clear. So -- we're anxious to see what the cohort is going to look like, but I think that there's going to be some sort of positive gains in the participation rates and the impact First Day Complete will have, even in the schools that had that prior to your point. So I think that's going to be something that will continue to track. But we are making investments and really focusing on improving the student experience as we learn. And I think the business will benefit and the First Day Complete schools will benefit from that.

And maybe just one more for me on DSS and Bartleby. Just curious what you're seeing in terms of pipeline for incremental opportunities to bundle Bartleby within First Day Complete? And then maybe just a bit of housekeeping. Can you remind us what the gross subscriber number for Bartleby is now and how that compares to -- I think you're at 400,000 gross subs last quarter?

David Nenke, take that question.

Yes, certainly. Thanks. The -- as we piloted the institutional package at Delgado in March of this year, I learned a lot. Really excited about the execution of both Delgado and EKU, as we get into Fall this year. We're on campus, and it's in the LMS and we're talking to students and kind of faculty to show them how to use the product, and we're excited about the possibility of the semester ahead. As we are talking with the institutional customers, good interest in -- from other institutions. So we'll continue to learn as much as we can and collect staff and talk to other institutions. So more to come on that. But there's, I think, a good deal of excitement from the schools that we're on at the moment as well as internally and certainly a lot of interest from schools that we're talking to. So, that's exciting as we get into the Fall semester. And as you mentioned, we were just over 400,000 subscribers last quarter. This quarter, another kind of general 11% increase on that for the quarter, so relatively consistent with the revenue number.

Thank you. The next question today comes from the line of Alex Fuhrman from Craig-Hallum Capital. Please go ahead. Your line is now open.

I wanted to ask about how your consumers have been feeling and spending over the past couple of months since we got the last update from you guys and you initially gave your guidance? We've obviously seen inflation getting a lot worse than a lot of other retailers talking about consumers pulling back on discretionary purchases. You guys obviously have a very specific consumer and are much more differentiated. Are you seeing the same thing where your students are being a little bit more conservative on apparel and general merchandise purchases? And curious, I know it's only been a week or so, but curious that there's maybe been any change in kind of spending behavior given the news about debt forgiveness that came out recently?

Yes. Alex, it's Mike. I'll take an initial crack at that. But I think it's maybe obvious, as you just said, that it's too soon to determine whether or not that's forgiveness, which pretty much relates to those who have already graduated, I think, more so than those that are in school that we're servicing right now, although there is, I'm sure, crossover too soon to know whether that's going to fuel additional spending on campus. We're certainly not counting on that. As it relates to consumer spending in general, I think we are geared up, I think, as Jon mentioned, and partnership with Fanatics and Lids and our stores for general merchandise, we have geared -- they have spent a lot of money with us, making sure that our stores are ready to satisfy the demand that we think is going to be there. We saw a bounce back last year and we published the increases in spending last year. We talked about it in our earnings release this year for general merchandise continuing to see increased spending in general merchandise. The impact of inflation has resulted in some price increases and what we sell in terms of general merchandise. We're trying to pass on as much of that. We've also tried to be very smart about how we deal with our offers as it relates to freight and who pays what, how do we share that with consumers, not offering free shipping for certain orders that we use software for that type of thing. So your question has got a couple of elements to it. I think in terms of consumer spending, we're certainly expecting, as we said in our release, a very robust, strong Fall Rush and we're geared up for that in the stores on general merchandise and also through our inclusive access and a la carte courseware programs. In terms of inflation and cost and how it impacts us, it is impacting us, but we're trying to anticipate that as much as we can and manage it by sharing those costs. And in other ways, and just really over -- really, really strong focus on our own internal cost structure which we've had for a number of years, which was really, really exacerbated and emphasized by COVID and our need to contain costs as something campuses shut down that are now all open. Thank goodness. We don't -- to answer your question directly, we don't have any data on consumer spending but we do expect a good Fall Rush number of activities, supporting activity. Keep in mind that last fall, we had Delta variance. And in January, we had Omicron variance -- variant rather not variance. And those variants did have an impact on our store traffic and also on spending. So we expect to see that -- we don't expect to see the repeat of those kinds of COVID impacts in this season. And so far, we are not seeing that. End of Q&A:

[Operator Instructions] There were no additional questions waiting at this time. So I'd like to pass the conference back over to Andy Milevoj for closing remarks.

Great. Thank you, and thank you all for joining today's call and your continued interest in BNED. Please note that our next scheduled financial release will be our fiscal 2023 second quarter release in December. Have a good day, everyone.

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.