Barnes & Noble Education, Inc. (NYSE:BNED) Q2 2018 Earnings Conference Call Transcript

Dec 05, 2017 • 10:00 am ET

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Barnes & Noble Education, Inc. (NYSE:BNED) Q2 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Barnes & Noble Education Second Quarter Earnings 2018 Conference Call. Today's conference is being recorded. At this time, I'd like to turn our conference over to Mr. Thomas Donohue. Please go ahead, sir.

Executive
Thomas Donohue

Good morning, and thank you, and welcome to our second quarter 2018 earnings call. Joining us today are Mike Huseby, Chairman and CEO; Patrick Maloney, COO, Barnes & Noble Education and President of Barnes & Noble College; Barry Brover, our CFO; Kanuj Malhotra, SVP of Strategy and COO 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 our 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 prior written consent of Barnes & Noble Education.

(Forward-Looking Cautionary Statements)

At this time, I'll turn the call over to Mike Huseby.

Executive
Michael Huseby

Thanks, Tom, and good morning, everyone. The higher-education market continues to evolve rapidly. Enrollments, particularly at 2-year colleges, continue to decline and we're experiencing rapid competitive changes. This fall, we experienced lower average selling prices on course materials for the first time in many years, driven by lower publisher prices and continued student migration to lower-cost Courseware alternatives, including digital offerings. All sectors that serve the higher education industry have market-driven pressure to change and adapt business models. This reality applies to the businesses that BNED operates with necessary changes being of both a short-term and longer-term nature.

Each of our businesses, BN College, including LoudCloud's and Student Brands' digital services, MBS, with its wholesale MBS Direct virtual stores and MBS systems customer base, are all executing on plans to respond to these changes taking place in the markets we serve, including changes related to the following well-publicized challenges. There's an increasing emphasis on affordability and measurable achievement by our college partners, students, faculty and many state governmental agencies. All are demanding a higher value to cost ratio from providers of services and content. Declining enrollment trends, particularly at local and state-wide community colleges that have shown highly elastic negative demand correlated to very low unemployment rates in the U.S. An accelerating shift to digital and other less costly formats of developing and delivering educational content, including declining physical textbook volumes whether sold or rented, new or used, which we expect to continue to decline as a percentage of total learning formats used. For the first time, average sale prices, as mentioned, on educational units offered by publishers declined this past rush as the mix of formats resulted in overall lower pricing.

Importantly, though, despite these trends, we believe that the opportunity in our industry has never been greater for BNED. We're well positioned to capture new market share and collaborate with an increasing number of schools and strategic partners. Given these