Good day and welcome to the Barnes & Noble Education First Quarter 2019 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Tom Donohue. Please go ahead, sir.

Thank you. Good morning and welcome to our first quarter fiscal 2019 earnings call. Joining us today are Mike Huseby, Chairman and CEO; Patrick Maloney, President of Barnes & Noble College; Barry Brover, CFO; and Kanuj Malhotra, President of Digital Student Solutions 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 our 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 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. At this time, I will turn the call over to Mike Huseby.

Thanks, Tom. Good morning, everyone and thank you for joining us today. We are pleased with the results of our first quarter of fiscal 2019. We have a very seasonal business and the first quarter is a low sales activity quarter relative to our total fiscal year sales of 17% of what we are guiding to for the Europe. Nonetheless, we are very excited about what has been accomplished from an operational standpoint this quarter. We continue to transform and expand the digital offerings of our BNC and MBS businesses and grow our direct-to-student segment through significant investment in internal product development, content and strategic acquisitions. Our MBS, Student Brands and LoudCloud acquisitions continue to provide us with the significant synergy, cash flow and talent benefits that we expected when we close these transactions. Importantly, we continue to deliver on our stated company purpose for BNED serving all who work to elevate their lives through education. This purpose grounds us in all we do strategically and operationally. Higher education continues to transform rapidly. We remained focused on thinking strategically and acting decisively to ensure that we are offering the content, products and services our customers are demanding. There is nothing more important to us than the students, educators and institutions we serve. By innovating and adapting our unique asset platform to market changes, we are accomplishing our strategy of transforming our BNC and MBS businesses, while simultaneously developing and growing our new [DSS] business. We believe our strategy is sound and well-understood by our people. Now, we can focus our energy and financial resources on relentless execution. An example of leveraging our unique asset platform to adapt to market changes is our role in the center of the new publisher rental programs. As we announced earlier this year, we entered…

Thank you, Mike. Please note that the first quarter ended on July 28, 2018 and consisted of 13 weeks. All comparisons will be to the first quarter of fiscal 2018 unless otherwise noted. Effective with the fourth quarter of fiscal 2018, we have commenced reporting for our three segments BNC, MBS and DSS. In addition, unallocated shared service costs will be reported in corporate services, which includes corporate level expenses and other governance and executive functions including areas such as accounting, treasury and legal. As part of our fiscal 2018 year end release, we provide historical quarterly data for each segment for fiscal year ‘18 and fiscal year ‘17. As Mike noted earlier BNED is a highly seasonal business and our first quarter has historically been a period of low sales. Total sales for the quarter were $337.5 million compared with $355.7 million from the prior year. This decrease of $18.2 million or 5% was primarily driven by a $4.8 million decrease at the BNC segment, a $9.5 million decrease from the MBS segment and a larger elimination of $9.6 million reflecting increased sales for MBS to BNC and anticipation of the fall rush, partially offset by $5.7 million from the DSS segment. Comparable store sales at BNC decreased by 2.2% in the quarter which is consistent with the prior year period. Again, historically the first quarter is the lowest sales quarter to BNC. Comparable store textbook sales for the quarter decreased by 5% compared to a prior year decrease of 7.9%. While unit sales trends improved as compared with the prior year period, lower average selling prices of course materials driven by lower publisher prices resulting from a shift to lower cost and more affordable solution continued in the summer sessions. General merchandise comparable store sales for the quarter…

Thank you. [Operator Instructions] We will take our first question from Alex Fuhrman with Craig-Hallum.

Great. Thank you very much for taking my question. I wanted to ask about the potential growth of the DSS segment here. It sounds like you mentioned in your prepared remarks that you are starting to see a lot of synergies of rolling out some of these Student Brands products across some of the campuses where you have a presence on the BNC side. Can you talk a little bit about what specifically you are doing to drive that revenue growth? Is it marketing the digital assets in your physical bookstores? And then curious how you see PaperRater fitting into that now that you have made that acquisition as well?

Hey Alex, it’s Kanuj. So primarily, we started with a small test that we increased over the course of the summer. It was primarily using our commerce sites and really presenting the StudyMode writing services product merchandised in the cart when students are looking they have the ability to search across all the websites and see it, their banner ads. So, it’s really primarily initially been just online over the summer. As we are rolling through the fall, it’s sort of a more multimedia approach where it’s both going to be in-store as well as on the commerce sites. PaperRater we think it’s just – our research, our product focused groups have shown there is a strong need for plagiarism detection and writing revision as well as the auto scoring, which allows us to really get a lot of content, which we can publish on the websites, which monetizes in the form of more subscriptions, but we are very excited about PaperRater. We think it really rounds out a suite of services, so we can help students work across different points of the writing journey and we would envision marketing in similar fashions through the websites and online.

Great, that’s really helpful. Thanks.

Sorry, one other point, Alex, I would point out that we have actually bought the site from the owners of 123HelpMe. So, we have an experience with having worked with them before, understanding the quality of content that they have which we were able to increase the monetization rates post purchase on the order of multiples, in the order of 2 to 4 times what they saw. So, we are very excited about it for multiple reasons, not the least of which is our prior experience with the owner and the sorts of businesses he had built.

Great. That’s really helpful. Thank you. And then if I could just ask as we are kind of getting into the fall rush season on a lot of campuses, do you have a sense of what you are expecting from the fall semester and what type of textbook level of buying you have purchased to here in the fall semester?

It’s really we are just starting, Alex, this is Patrick, by the way, we are just really starting the fall rush season and it’s just way too early to tell. But we will be monitoring it closely and we are ready for this. Our first day growth has been significant year-over-year, that’s our inclusive access platform, which is growing in popularity with schools across the country. We are on approximately 100 campuses this fall. We will see those sales come through in Q2 once we settle all the accounts with the students that go into the LMS and receive their learning materials on the very first day of class. So we are very, very excited about the progress that we made there.

Great, thank you very much.

Thank you. We will take our next question from Greg Pendy.

Hi guys. Thanks for taking my question. Just I guess one real quick one on, I know it’s not seasonally important, but I think last year you said there were less courses offered in the summer, was that similar this year just for year-over-year comparison?

Greg, this is Patrick. We haven’t broken down all of the data yet from the summer. But my guess would be, yes it was probably fewer courses again as schools look to reduce their expenses at this time of the year. So I would expect it would, but we haven’t gone through and done an analysis of it yet.

Okay. And then just one more, last quarter you kind of mentioned the competitive environment for the bidding process, is there any kind of update or thoughts since then just how you think the competitive overall environment is on new contracts?

Greg, what we have done is we have fully analyzed every one of the contracts that we were not successful in either winning or we lost the school. We have completed all that. We are looking at everything that we do in marketing ourselves, we feel very confident in the future. We have had a good year so far a new business which was up from last year’s signings at this point in time. So we are confident about it and we are looking and analyzing what happened where we [were at] last year. And moving forward we are very confident that we can continue to grow our footprint.

One of the other comments Greg, this is Mike is that we are trying through MBS Direct and other means that we will disclose later trying to give our competitive position as many arrows to shoot as possible in terms of alternatives for customers, potential partners whether they want to be in-store virtual or hybrid or there are some other emerging platforms. So we are – we have got the bases covered now by virtue of the primarily the MBS acquisition with MBS Direct, but also looking at other ways to partner and acquire assets that we have a full capability of all the different models that are out there right now.

Okay, that’s helpful. Thanks a lot.

Thank you. We will take our next question from Michael Schechter [ph].

Good morning, Mike. Given the proxy drop last night of the level of stock have you given any thoughts you buying back stock to offset the dilution from compensation, RSUs and options?

Yes. As you know, our stock price is volatile being our trade is on very, very low volumes as you saw this morning when it opened some of the headline. Actually one of the headlines was picked up wrong by one of the other big services, I am saying that’s why it dropped. But yes, we consider that all the time as you know we have done it in the past. I think we do currently as a Board we view the potential for valuation increase and impact on stock price, the investment in our DSS and other digital services, BNC and MBS is the better use of capital at the moment. You're asking me to react to I guess the stock price dropped this morning, but the stock went up last few weeks, it goes up and goes down on very low volume. And to be honest we are more concerned with what we are doing with the assets that we have because we think if you look at what we are doing in terms of investing to create value it’s probably a better use of our capital. I mean what you are asking is whether we want to take the company private, I think because that would be the ultimate stock buyback. Otherwise, we are not going to have much of it. You would have to buyback a lot of stock to have any impact on the stock price, I mean that’s been our experience thus far having done it under an authorization that we had 2 years ago that we acted upon. So yes, of course, we will consider it, it’s a matter for the Board and we have a Board meeting, regularly scheduled Board meeting end of September, we will consider then if not before again.

I think you have misunderstood a little bit, I was just talking about offsetting the dilution from option issuance given where the stock price is?

Well, we don’t have any options per se, we have in terms of stock compensation are you talking about?

Yes, I mean the RSUs and stock and other forms of stock.

Yes. What we have tried to do there during stock buyback is that I don’t know if you read – did you read the proxy yet?

I did.

Okay. What you will see is that we have actually reduced the burn rate substantially from the prior year. We had some of our NEOs give up contractual rights that they had for stock this year in order to make that happen. So, that was at the suggestion at the behest of our compensation committee that and very diligently looking at the question of what is the burn rate relative to our peers and Mike, what do we need to issue in terms of stock to keep our talent and also attract talent as we are trying to transform the company in a very complex environment. It’s not easy to attract talented people that have digital skills and digital transformation skills if you don’t give them some equity interest in the company. And our peer burn rate is what it is, but it’s lower than some of the highers and it’s higher than some of the lowers, but it’s been dealt with by our comp committee in a matter that they feel comfortable with which they would be happy to discuss with you directly if you want to contact them.

I will take it offline.

Okay.

Thank you. [Operator Instructions] At this time, we have no further questions. I will turn it back to Mr. Donohue for closing remarks.

Thank you and thank you for joining our call today. Our next scheduled financial release will be our fiscal 2019 second quarter earnings, which will be on or about December 6. Thank you.

Thank you. Ladies and gentlemen, this concludes today’s conference. You may now disconnect.