Good day and welcome to the Barnes & Noble Education Second Quarter 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Thomas Donohue. Please go ahead, sir.

Thank you. Good morning and welcome to our second quarter 2017 earnings call. Joining us today are Max Roberts, our CEO; Patrick Maloney, our Chief Operating Officer, Barnes & Noble Education and President of Barnes & Noble College; Barry Brover, our CFO; Kanuj Malhotra, our Chief Operating Officer of Digital Education, as well as other members of our senior management team. Before we begin, I’d 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 content of this call are for 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 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 the time, I’ll turn the call over to Max Roberts.

Thanks, Tom, and good morning, everyone. As we reported this morning, sales for the second quarter increased 2% to $770.7 million. This increase reflects the large amount of new business we signed in 2016 and in the first quarter of 2017. We opened 34 new stores in the first six months of the year, including UConn, University of California and Irvine, Georgetown, Colorado College, and UNC Chapel Hill, and we expect to open two additional stores before the spring rush. These new stores represent approximately 250,000 additional students and faculty, and we expect annualized sales of approximately $118 million from these new stores. Second quarter 2017 comparable store sales declined $22 million or 2.9%. This was driven by lower enrollments, along with the softer retail environment that impacted general merchandize sales, particularly in apparel. We have therefore revised our guidance to reflect the possibility that general merchandize sales remains soft throughout this fiscal year. Barry will review the details on our outlook in a few minutes. But first, I would like to provide our perspective on the operating environment and an update on sales initiatives and portfolio expansion. Enrollment trends in Q2 were generally down. In community colleges, enrollments declined in the mid-single digits, which is consistent with last year’s decline. Excluding community colleges, enrollments in the traditional four year private and state schools experienced slowing trends compared with prior year increases. As we have noted in prior calls, we expect enrollments at community colleges to continue along the same trends as we experienced this year and last year. But longer term, the overall enrollment trend is expected to be positive and we remain confident in the initial [ph] projections of higher education enrollments to reach 23.8 million students by 2022. This is an increase of 15.5% from the 2013…

Thank you, Max. Please note that the second quarter ended on October 29, 2016 consisted of 13 weeks and is presented on a standalone basis. All comparisons will be for the second quarter of fiscal 2016, which is also presented on a standalone basis. Total sales for the quarter were $778.7 million compared with $755.9 million from the prior year. This increase of $14.8 million or 2% was primarily driven by an increase in sales from new stores of $50 million, partially offset by a decrease in sales of close stores of $10.7 million along with the comparable stores sales decrease of $22.4 million or 2.9% for the quarter. Comparable store textbook sale declined 3.3% or $19.1 million for the quarter, compared with a decline of 4.2% or $24.4 million in the same period last year. While comparable store general merchandise sales declined 1.3% or $2.3 million compared with a 1.3% increase in the same period last year. For the quarter, our general merchandise sales were $189 million and this include new stores. Our rental income for the quarter was $72.7 million, an increase of $0.9 million or 1.2% demonstrating that textbook rentals continue to be student’s first choice. As a result of the later sort of rush the deferred revenue associated with rental at the end of the quarter increased by $3.6 million compared with last year. This will be fully recognized in revenue in our third quarter. Gross margins decreased by $3.6 million or 2.1% to $171.5 million. The 80 basis point product and other margin decrease was primarily the result of lower margin rates of 40 basis points due to increased markdowns on textbooks, which includes 15 basis points related to our price matching program and the prior year benefits from inventory management not repeating this year.…

Thank you. [Operator Instructions] And we'll now take our first question. Please go ahead.

Great, thanks for taking my question. Would love to get a little bit more clarity on the guidance, specifically in the back half of the year, it looks like you’re looking for pretty strong increase in revenue, especially relative to the same store sales that you’re expecting in the back of the year. If you could talk about a little bit where that increase in revenue comes from and looks like the spread between total revenue and comps is expected to get a little bit wider. And then similarly with EBITDA down a little bit in the first half of the year, looking for that to be up in the back half of the year. If you can just give us a little bit more color on where that is expected to come from? Thank you.

Good morning. Alex it’s -- good morning. The -- we believe that the price matching is very successful and in the backside of the year that by rolling it out to the remaining stores. We had -- in the price match stores the decrease was minus 2% versus the 7.4%, very successful program. We also have confidence in our general merchandize promotional program and our assortment that we believe that the sales -- reluctance of the customer was more early in the first quarter and second quarter than it would be in the third quarter and fourth quarters.

Great, that’s very helpful. And then just thinking about the decline in general merchandize sales, which it sounds like had been growing pretty consistently for a while there, I mean how much of that do you think is either lower than expected enrollments versus just the younger consumer being a little bit more cautious this year or do you think that there is perhaps some market share that’s being lost elsewhere in the landscape?

Two things and I will turn it over to Patrick to elaborate. The first is, if you look at the 18 to 24 year old retailers, sales are down significantly. If you look at the supply retailers, sales were down significantly. We believe that’s more a function of consumer behavior than it is the enrollment, but certainly when you have decreased store traffic or less units on the campus in some big schools, it’s going to impact the general merchandizing.

This is Patrick, Alex. And as Max pointed out before, we are confident in our assortments, we have analyzed every SKU, we have stepped up some in a very measured way and courses way, we have stepped up some of our promotional programs. So we feel good about the second half for the year, we had a good Cyber Monday increase over last year. So we feel confident that we have a good mix of product, a good assortment, and we have what our consumers will be looking for comeback to school in January.

Great, that’s really helpful. Thank you very much.

And we’ll take our next question. Please go ahead.

Hi guys, thanks for taking my call, its Greg Pendy, at Sidoti. Just kind of wondering now that you’re going to aggressively rollout the price matching strategy to all your campuses, how do you guys plan on marketing that? Is it going to be kind of a bigger broader program now that it’s pretty much a standard? Thanks.

Hey, Greg this is Patrick. We promoted both primarily online with our customers informing in and really getting that message out to them when they are making their buying discussions early on in the process. So and then we’ve also promoted in-store with assigned package of course and we also work very closely with our -- many of our partners, partner schools, who also sent out the message that the students can expect to save money at the campus book store and experience all the conveniences being able to pick up their purchases in the store whether it’s a purchase or a rental. And with the assurances that they’re going to have the correct book for their courses and the convenience of being able to return that book right back to the store should they decide to drop out of the class rather than sending it back through the UPS or the mail.

Okay, thanks that's helpful. And then is the price matching strategy I guess is it having any impact, it doesn't look like it did, but on the rental side of the business. Thanks.

No, it definitely did. We increased our rental units as Barry pointed out by $0.9 million in sales. So it would definitely help and we match like product to like product. So it's a huge rental price against that price.

Got it, thanks a lot.

And we do have an additional question. Please go ahead.

Hi guys. Thanks for taking the question. I guess everyone covered pretty much the price matching questions. Just looking forward, and you're implementing the price match and gross margins on textbooks will probably not go much higher. Do you think that’s going to help get better churns assigning at new schools?

Yeah we believe that the complete offering that we have including LoudCloud or course materials, price matching, the promotions that we have them on the campus has been part of the reason of our huge success, and we're much more focused on a very complete tailored retail environment to these campuses, and pricing on a campus-by-campus basis is very, very important to that customization.

Well if I could just rephrase that question, what I meant was do you think that's going to get you better returns in terms of how you sign up the schools in terms of the percentage of sales you give them. If your margins are going lower, are you going to be able to maybe get more concessions out of them on that?

Our commissions are generally a percent. So therefore as the reduction in the sales occur the commission is less. However as we review the pricing strategy on a campus-by-campus basis we’ll always talking to the schools about the commission rate that we have.

Okay. And is there a target number of total stores you have for the end of the year if you could share?

No.

No, this is Barry. The new store funding is tremendous seasonality in there. As of now we know two stores that we will be opening based on contracts signed to-date. We're always in the market with a large number of proposals outstanding. The timing of when those proposals turned into signed bids is always subject to a lot of timing factors. And whether we're able to realize additional stores before the end of the fiscal year or whether they will occur next fiscal year is a very difficult thing to gauge.

But our pipeline is strong at this point in time. And the presentations we're making are very strong.

Okay. And then one last question, I know you had announced rolling out the price match in the 90 schools. You had said it was only for the first week, is it still just for the first week of classes or has it been stretched out?

It nears our refund policy to make it more understandable for our students. So we do price match the first week of classes through the first week. That gives students the confidence to place their orders in December for January classes knowing that when they get to the campus they can still make a bench of the price match program. And then similar to our refund policy on course material it's the day of purchase after the first week of classes.

Okay, thank you.

[Operator Instructions] It appears there are no further questions at this time. I would like to turn the conference back to Mr. Donohue.

Thank you. And thank you for joining today's call. Please note our next scheduled financial release will be our fiscal 2017 third quarter earnings. And will be on or about March 7th. Thank you and have a great day.

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