Barnes & Noble Education, Inc. Q3 FY2023 earnings call

• Mike Huseby thanked team members for adapting to challenges, mentioned early benefits of cost management actions. Total Retail segment saw growth driven by First Day Complete, first day by course, and general merchandise sales. DSS focused on profitability, reached cash flow breakeven in January. AI integration in DSS, using tools like OpenAI's API. Wholesale revenue up due to easing supply constraints. Progress on First Day Complete with hundreds of institutional partners, some schools deferring adoption to fall 2024, others winding down relationships. Store count expected to be lower but more profitable in future.
• Tom Donohue discussed consolidated sales, gross profit increase, gross margin rate improvement. Selling and administrative expenses down. Balance sheet details, store count, and CapEx decrease.

Total Retail segment revenue increased 12.4% to $421.2 million. Retail gross comp store sales increased 5.9%, with course material same-store sales growing 7.4% and general merchandise same-store sales up 2.3%. Third quarter retail EBITDA was $6.2 million, a $21.6 million year-over-year increase. DSS revenues decreased 4.5% to $9 million. Wholesale revenue increased 5.2% to $38.9 million.

Continue to expect FY 2023 adjusted EBITDA of $20 million to $30 million.

Uncertain macro environment, specific challenges in higher education market, potential impact of store count changes on profitability, competition from AI tools like ChatGPT affecting DSS segment.

Q: Ryan MacDonald asked about accelerating First Day Complete adoption, timeline for transition, and DSS segment's AI integration.

A: Jonathan Shar and Mike Huseby discussed substantive conversations with hundreds of institutions, focus on majority of institutions moving to FDC by fall '24 or fiscal '25, bridge years for some schools, and AI integration in DSS using tools like ChatGPT.

Q: Alex Fuhrman asked about schools not transitioning and Q4 guidance.

A: Mike Huseby said details will be in June, Tom Donohue mentioned FDC revenue scaling and cost management measures impacting Q4, still confident within adjusted EBITDA range for FY 2023.