BNED - NYSE

Ladies and gentlemen, thank you for standing by, and welcome to the Barnes & Noble Education Fiscal 2021 First Quarter Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Andy Milevoj. Please go ahead.

Good morning, and welcome to our fiscal 2021 first quarter earnings call. Joining us today are Mike Huseby, CEO and Chairman; Tom Donohue, CFO; Jonathan Shar, Executive Vice President BNED Retail and Client Solutions; Lisa Malat, President of Barnes & Noble College; Kanuj Malhotra, President of Digital Student Solutions; and David Henderson, President of MBS. 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, and thank you all for joining us this morning. I'd like to begin by providing a brief update on the conclusion of our strategic review process and then I'll provide our business review. On August 24, our board of directors announced that it had concluded this review of strategic opportunities. After extensive evaluation and deliberation and in consultation with its financial and legal advisors, the board unanimously determined that the continued execution of BNED's current business plan is the best path forward for the company and its shareholders. Shortly after the strategic review commenced, the COVID-19 pandemic emerged, which gave rise to significant challenges to the company's business. At the same time, the company also made significant progress toward implementing and executing its digital transformation strategy, which further enhanced the company's importance and relevance to its customers, particularly after proposed COVID-19 shift through remote learning. As I'll discuss in further detail, BNED has successfully grown its high margin DSS business, improved its share of course material adoptions through BNC First Day, BNC First Day Complete and other new digital models. We've added revenue from new business wins, leveraged our MBS remote fulfillment and virtual capabilities and strengthened and improved our general merchandise business with the recent release of our new eCommerce platform. As we move forward, we are confident that we have the right strategy in place to deliver enhanced value for our shareholders. Importantly, we continue to believe that we have sufficient sources of liquidity to manage through the continued impact of COVID-19. We are very focused on preserving liquidity during this challenging time and are carefully balancing capital allocation and liquidity preservation, while we continue to build our momentum and execute our strategic plan to drive long-term sustainable shareholder value creation. Additionally, toward the end of July, we were pleased to have entered into a cooperation agreement with our largest shareholder, Outerbridge Capital. As part of that agreement, Lowell Robinson has joined our board of directors, and the company agreed to nominate

Thanks Mike. Please note that the first quarter of fiscal 2021, consisting of 13 weeks, ended on August 1, 2020. All comparisons will be to the first quarter of fiscal 2020 unless otherwise noted. The first quarter is historically a low revenue period and our results were significantly impacted by COVID-19-related campus closures. That being said, our sales came in line with our expectations. As Mike highlighted, our flexible offerings, which included a shift to our CSS model, virtual bookstores and digital offerings, including First Day and DSS, enabled us to partially mitigate the bookstore sales decline. Most importantly, we were able to provide uninterrupted service to our campus partners in what is a very fluid and continuously evolving situation. Total sales for the quarter were $204 million compared with $319.7 million in the prior year. This decrease of $115.6 million or 36% was comprised of $115.9 million decrease from the retail segment and $8 million increase from the wholesale segment and $0.5 million increase from the DSS segment. The majority of our stores were closed during the first quarter and schools adopted a remote learning model, leading to a 42.8% retail comparable sales decline. Our comparable course material sales fared better than our overall performance, declining 10.1%, while our general merchandise business, which includes clothing and food, was far more impacted by store closures in the absence of students, declining 68.3%. This was somewhat mitigated by our eCommerce sales. We expect further improvement of online sales as we roll out our next generation eCommerce platform. BNC's First Day offering, which is adopted by faculty and incorporates lower cost digital course materials into the tuition fee, grew 156% to $9.1 million during the quarter. Net sales for the wholesale segment increased $8 million or 11% to $80.3 million, benefiting from the shift to the CSS model and lower returns and allowances due to the sales mix. DSS sales grew $0.5 million or 9.3% to $5.9 million benefiting from growth in bartleby subscriptions, somewhat offset by a decline in the Student Brands business. Bartleby subscriptions revenue doubled to $1.4 million, while Student Brands revenue declined 3.9% to $4.5 million. We have now entered our Fall Rush period and have been encouraged by the results we've experienced over the first few weeks. As Mike stated, our sales benefited from many schools and students returning to campus earlier than normal. We do expect some headwinds later in the quarter as some of this benefit may be due to timing coupled with cancelled sporting events and diminished store traffic that will impact our general merchandise business. Turning back to Q1, the consolidated gross margin rate for the quarter was 15.1%, down from 22.4% in the prior year period. This was primarily due to the shift to lower margin digital courseware and lower sales of our higher margin general merchandise products as well as higher markdowns. This was partially offset by our efforts to renegotiate lower contract costs. To further offset the sales decline and preserve liquidity, we took immediate cost reduction actions, including to furlough the majority of our retail workforce and the elimination of non-essential spend. These actions coupled with cost reduction actions taken in fiscal '20, enabled us to reduce selling and administrative expenses by $27.7 million or 28.3% compared with the prior year period. At the end of the quarter, our cash balance was $7.5 million as compared to $8.2 million in the prior year period. There were $234.6 million in outstanding borrowings, which was essentially our peak borrowing level compared with $174.1 million in the prior year period. In conjunction with our expense reduction efforts, our entire organization continues to be very disciplined on the use and preservation of cash. These efforts coupled with the current Rush period have reduced our total borrowings to approximately $55 million as of August 31. Our current and projected liquidity remained strong despite the challenging climate. CapEx for the quarter was $7.1 million compared with $8.3 million in the prior year. Due to all the uncertainty that COVID presents in the near and intermediate term, we are not providing fiscal '21 guidance. We do expect that COVID will continue to have a significant impact on our business during fiscal '21. Currently, our retail segment operates 1,442 college, university and K-12 school bookstores comprised of 772 physical bookstores in their e-commerce sites as well as 670 virtual bookstores. As of today, we have contracts to open an additional 11 stores in fiscal 2021 with 12 additional known closings, primarily of smaller unprofitable stores. This will bring our total physical and virtual store count to 1,441 locations net of the closed stores. With that, we will open the call for questions. Operator, please provide instructions for those interested in asking a question.

[Operator Instructions] First question comes from Ryan MacDonald with Needham.

I guess, I wanted to start with comments, some of the comments you just talked about, made about sort of reaching peak borrowings sort of surpassing that. Can you talk about sort of the confidence you have as you move toward through the fall here? And what you're - some of the assumptions you're making around sort of expectations for foot traffic versus the typical fall? And how you're thinking about staffing to meet those needs and managing inventory optimization? Thanks.

Yes. Thanks, Ryan. Sure. So I mentioned in my remarks, we're really laser-focused on liquidity at the end of August with approximately $55 million in borrowings, down from that what was essentially the peak for the summer of $234 million, which is approximately $60 million higher than we had at the end of the fiscal - last fiscal year end. We continue to adapt our retail model specifically as it relates to cost. And as you know, we furloughed about 11,000 folks back in early April and we brought a lot of them back as the stores have opened and we needed staff to get through the summer and certainly through the beginning of the Fall Rush. But there's still about a third of those folks that are remaining on furlough at this point in time. So we continue to adapt the store model to reduce the expenses. The other thing, and you'll notice as you're looking at the balance sheet and certainly when you get a chance to read the Q hopefully later today when it's filed, our inventories are down dramatically year-over-year, approximately $150 million. So it's really the discipline that specifically the retail team along with our book folks are really not getting ahead of themselves in terms of the expenses, but also the spend. With the sales down as much as they are specifically - especially with general merchandise, we really continue to not spend the money to build the inventories for the press sales that we've seen through this COVID environment. So liquidity remains very strong. We continue to pay down that debt. And we'll see where we get our next peak. It would probably be some time in December, remains to be seen if it's higher than lower, but I wouldn't anticipate that being much different than the peak that we have now. But we are encouraged by the beginning of the Rush in terms of sales and we've been able to pay back and pay down that debt and continue to do so.

I'm going to ask - this is Mike. I was going to ask Lisa Malat just to comment on the store traffic because what we're seeing is with reopening a lot of the stores when we get the students and other customers and they are buying. But I wanted Lisa to comment on that and some of the creative things that we're doing to try to drive store traffic.

Yes. No, absolutely, Mike. I mean there is - while the schools are still being very flexible, as we read every day in the papers on how they're delivering learning, there is still plenty of campuses across the country that aren't fully opened with in-person classes and residential-wise. In those stores, in the no schools, we are seeing robust traffic in our stores, and we have reset our physical space to be able to maximize sales while the students are within our footprint. We are offering, as Mike said, mobile pickup from a safety perspective, but also looking for ways to safely execute events and shopping experiences for the students through personal shopping services. We have also been successful in working very closely on a deeper level with our schools in getting more access to students so we can communicate more frequently and more successfully with what the bookstore offerings are.

That's extremely helpful. I guess the next question is around some of the digital trends you're seeing. As you started the fall semester here, can you talk about what you're seeing in terms of usage of bartleby and how that compares to say, earlier this spring once students went remote? Are you seeing sort of a increase in usage given that it might not have the same types of resources on campus?

Ryan, this is Kanuj. Maybe I'll take that. I think we definitely saw a massive acceleration post-COVID. Our traffic was about 18% of Chegg's. We were up 50% in traffic between March and April. So we definitely saw the usage spike. We think there is both increased TAM and increased market share that we're gaining relative to the competitive set. And as it relates to fall, it's very hard to say yet, it's very early in the semester. Typically the use cases, as the assignment start to come on board, a lot of the schools are still - people are just buying their course material. So homework assignments, studying all that use cases is still actually starting to actually accelerate right now. But the other measure of usage as measured by questions in Q&A and other usage has been - we've been very strong, as you know.

And then just last one from me. Great to see sort of the continued adoption trends that are healthy with First Day and First Day Complete. Can you talk about how the conversations are evolving with your university partners for that solution? And then what sort of additional steps you need to take to sort of increase student awareness of the offering as well as we move through the fall and into next year?

Yes. I'll let Jon Shar answer that one.

Ryan, it's Jonathan. Yes, we're really excited about First Day as it drives down the cost of course materials for students and secures a higher sell-through rate for the company. In the first quarter, year-over-year revenue increased, as both Mike and Tom stated, by 156%. We are benefiting from the accelerated move to digital courseware, which is driving the growth. I think strategically and overall, the value proposition of access, affordability and achievement, which is supported by First Day is more relevant than ever in today's environment. And the adoption and conversation and the acceleration of the implementation of that across campuses is very active, and our expectation is that we'll continue to see significant growth with our First Day program.

This is Mike. Just a couple of follow-up comments, Ryan, unless you have any other questions. First off on bartleby. As we said, we've just entered into partnerships with VitalSource and we just - this was the first time we talked about the Blackboard partnership, which more detail will be coming out in about a month. But I think those are validations that substantial companies that are working directly with students and other institutions, looked at the quality of the product and saw the quality of the product is good, it's competitive and it's also price disruptive. And the way it can be packaged and the access those students that they have contract with is very compelling. So I think that's a significant thing that's coming out of today's call as it relates to bartleby as we always do face challenges with point sale versus prior year and that type of thing given the store openings. The second thing I would say is on the First Day - First Day Complete. We're pushing our First Day Complete not just externally and getting the message out, but we're doing a lot of things internally to make sure that we can scale that First Day Complete product because there is a substantial pipeline of schools that are interested in it from fall of '21 where we expect to have a multiple of what we have in this fall. We had four test schools last fall, we have 12. We expect it to be a higher multiple of that relationship going into fall of next year. So to make sure we can do that, sort of probably our key success metric together with bartleby growth and general merchandise coming back and new business, we're doing a lot of things internally to make sure we're ready for that, both in terms of systems and people, very focused on the details operationally. And I think as a result of the business model we have because we share the revenue, keeping the adoption so called in the contract is important to schools now who are looking for every financial resource they can get to help them. So we share our revenues with them from First Day and First Day Complete. And to the extent we can drive our penetrations up from 30%, 35% close to 100%, they benefit from that also, so do the publishers. We're really, really focused on it.

Next question comes from Alex Fuhrman with Craig-Hallum Capital.

Thanks very much for taking my question, and congratulations. Hard to think of a retailer that's been more impacted by everything going on this year than you guys. So quite an accomplishment that your stores are back up and running. And it seems like you guys haven't missed a beat here. One thing I wanted to ask about is, it seems like a big opportunity just given everything going on here in 2020 with the first Day Complete package. Can you talk to us a little bit about what the sales cycle is for that? I imagine if these decisions were made on a moment's notice, you probably could have had even more schools this year just with schools looking to limit traffic and a lot of people going virtual. Can you talk about - I know you've said it's your hope to get more schools by spring. Can you talk about that opportunity? Is that something that could potentially be many schools or is it really more fall next year when the bulk of these schools are going to be making those decisions? It just seems like an offering that's so tailor-made for everything right now. We'd love to get a sense of how quickly you think that could be scaled up in the spring and next fall?

This is Mike. I'll just make one comment then turn it over to Jon, he's leading that effort from a product and sales perspective together, at least. He is also doing distribution and sales, just direct conversations with our clients. But to answer one of your questions that was embedded in that longer question. In terms of the attitude of schools to discuss its cut-offs ways. Initially one called it, yes. The mind share was all dedicated to what is this, how do we protect our students and faculty, do we really have time to deal with anything else. So there were a couple of schools, I'll say a couple, but probably even more than that, where we had planned to implement First Day Complete. And this fall, we said, let's wait for spring or let's possibly wait till next year because we just can't deal with not having these times - this many conversations at the same time even though they still want to do it with a less benefit. On the other hand, there are schools that have flipped around and said, we needed to do it as fast as we can. And we just added one recently within the last month. So with that, I'll let Jon talk about the pacing and the scaling.

Yes. Thank you. Hey Alex, it's Jonathan. Yeah, so last, as Mike stated, last fiscal year, we had four schools in First Day Complete. This fall we have 12. And there are a few more we're looking to transition within this fiscal year, but starting with the spring term, as Mike said, that may have had to defer or there is renewed interest in that. So we've been working with those institutions for a while. The big opportunity though based on the amount of conversations that we're having is fall where we're expecting a significant multiple over this fiscal year. Really from a lead time perspective, the critical timing and why there is some lead time in the sales cycle is when fees and/or tuition is published because it's a model where the course materials are either embedded into tuition and/or a course material fee. So when that is published along with the offerings of the course catalog for an upcoming term, that's really the point when the program gets implemented for an institution and the approval cycle is prior to that. And that's why the focus for us is conversations today leading up to the fall '21 implementations that we're expecting. So - but real significant momentum, value proposition of convenience for students, affordability and impact for the institution is really something that is quite active. We're making significant investments internally to ensure that we can operationalize and create the seamless experiences that are expected from our - by our campus partners. And so we're prepared for that growth for next Fall Rush.

And then just from a big picture, a lot of your schools are either virtual or hybrid with a lot of your students non-on-campus. What are the things that you guys are doing this year to stay relevant with those students? So next year sophomores might not have had the opportunity to shop at the book store this year nor they go there and visit for the rest of their college career when you're back up next year?

I'll let Lisa handle that question.

Sure, sure. Thanks. I think that one of the most important things we've done this year that I mentioned before is really get increased partnership and collaboration with the schools to be able to get the message and our offerings out to students, even though they're not on campus. We're able to follow the student journey, we identified whether you're a new student sophomore or graduating teens and it sort of customize our messages and campaigns offerings in that way. So we were able to get ahead of that and keep close and conducted to the students following their journey. And you will see by the growth of e-commerce, especially in the GM world that we're getting traction there. The continued growth of our Vendor Direct program, which is allowing us to offer a much larger increased assortment as higher as the retails is really driving relevancy especially with seniors and alumni parents. So we are able to keep that connection and relevancy with the students by working closely with the schools and being able to pivot it later.

I think also rolling out the new e-commerce system that we talked about is much more personalized to much better user experience and it allows students to buy both general merchandise and their courseware in a fairly seamless way. And that's one of the reasons - we've always talked in the past about general merchandise business, which is so important to us, as you can see in the first quarter and that you will see that ongoing effects, although we're trying to counter the fact mitigated to e-commerce activity. But that 55% of our GM sales were online compared to 9% in the first quarter of last year. We've always thought that we needed new e-commerce system, we need new processes, and everything has been invested to have that accomplished on. We started the rollout of new e-commerce system in July and now it'll rollout for rest of our schools over the rest of this year. But getting that percentage up partially an answer to your question in terms of creating the awareness. The bookstore is not just a physical bookstore, it's the online bookstore as well and the two have been tied together. The messaging that we can get to students through that new e-commerce system about the events and everything else we do in the physical bookstores is going to be important. So the timing of that, we would have liked to obviously have that in place earlier, but it's working well now and the positive feedback we are getting from schools where we've rolled it out is confirming that this will make a difference for us, a significant difference.

Next question comes from Rory Wallace with Outerbridge Capital.

Thanks for taking my questions, and appreciate you providing all the breakout and more granularity around the different segments, in particular, the First Day breakout already registering pretty healthy percentage of courseware sales is good to see. So I was wondering, Mike and Jon, is it safe to assume that when you're talking about a multiple of new business that you're looking to sign in the fall of '21. Is it fair to infer that based on your comments you're looking to win some multiple, say three times or five times the number of First Day schools next fall as compared to this fall? I just want to make sure that I was clear on that.

Yes. I'll clarify what I said. What I said was that we did three times in this fall versus last fall. We expect the multiple to be higher in terms of number of schools next fall versus this fall, bucketing into a number. And I think, Rory, another important point there is, we're not so focused on the number of schools, but making sure we have the contribution in our margin. The substantial increase in revenue and margin from some schools that go in First Day Complete. We can double the revenue and increase the margin. So it's really a function of getting the right schools on First Day Complete, not just the number of schools. But even with that, the number of schools we expect should be a multiple that's higher than the three times, that's what I was trying to infer without getting specific in terms of what that number of school is.

And then as far as the new business that you are winning, it's obviously a decent scale to post that type of number. But we've heard that you're starting to get into more high-profile institutions in certain cases. And I guess, when do you think you might be able to disclose some more of the names in the First Day accounts that you've either won or that are in the pipeline, because I think there is certainly a halo effect once you start to bring in some brand name institutions that everyone's familiar with?

I think you'll start to see some publicity and some of the - as was natural last year when we got the pilot accounts and some of the accounts this year that we brought in and that will grow in terms of, as you know, in this business that certain schools once they're attracted into this type of a model, there are others that will follow. So we are focused on some of the higher profile, as you call them and schools. I think that the - publishing their names and that type of thing is probably something that will occur more through media and attention given the enthusiasm of the schools and students are going to have for the program, but that's something we can talk about. I don't know if Jon, do have any other comments on there?

No, I think we'll start to see that throughout this fiscal year. And by the positive feedback we will get from the program and new schools being excited to talk about this as part of their offering for their students.

And then on MBS, it's obviously providing a lot of strategic value during this time. How do you think your competitors are faring in this environment? It seems like you must be taking some market share on a combined basis in the courseware segment just given that it didn't really decline particularly much honestly in light of the overall environment that you're operating in. So do you think you are taking market share? And I guess, do you think that more importantly this might set you up to win a lot of new business given that I think you said $70 million you've won in the quarter, which seems like a pretty good number with everything being physically closed. And I guess, you could parlay that into a pretty good year overall for new business?

Yes. I think there is two separate questions there. One is our new business, which we said an estimated $70 million obviously with COVID. The $70 million is really the contract value that we talked about with the school and when we come back on the win, so to speak. That's the level of revenue that we should be able to get to and hopefully improve if we change these models over time with general merchandise and First Day Complete. I'm going to let Dave Henderson respond to the wholesale question, which is really a separate question, although the mix of assets that we have and MBS' capability to fulfill on a virtual basis is they've done - they've been running through warehouses non-stop since March to fulfill directly to students homes. That's a big competitive advantage when we do new business proposals and just dealing with our hybrid clients, so our custom storage solutions. I'll let Dave talk more about the wholesale competitive environment.

Thanks Mike. Yes, to that point, we have been running our three shifts without interruption since the shelter in place orders went back in March as we were designated an essential business serving higher ed and students learning online. The MBS facility, the distribution automation gives us a very unique competitive advantage over our over-the-market out there. As was referred to in the script back in the summer term starts when the hard shutdown occurred, MBS was able to onboard over 300 of Barnes Noble College Stores that were not able to open and service students for course materials for the summer term starts in May and June terms. This is a very unique advantage we have. What we're able to do with this - what this model has is rather than course materials being in the store, they are acquired by the MBS team and warehoused in the MBS facility. However, the students' shopping experience is on the Barnes & Noble College eCommerce site, which is branded of course to the institutions. So they are on our site that they're very familiar with. And more importantly, on a campus-by-campus basis, they are able to use a proprietary tenders that are unique to that campus to acquire the course materials. Those orders are seamlessly communicated to MBS and we do the pick, pack, ship and deliver either to the students' residence or going forward, if they so desire, as stores open, we can deliver to the store or store pickup, whichever the student decide is more convenient to them. There's really no one else in the market that can do that. Obviously, we have our pure virtual business with original physical bookstores, whatsoever. But this model allows us to support the large number of college footprint out there, offering campuses a very wide range of opportunities and how they want to serve their students, be it in this COVID environment or going forward with the most efficient means to get the course materials to the students prior the class start. Hope that answers your question?

Yes. Thank you, Dave. That's - and congrats on pulling off that combination of the assets. So it sounds like it's definitely a better way to run that business. With - I guess with the bartleby business, I think you'd mentioned to the - and I might have misheard, but did you say you've also, Kanuj and Mike, booked a Blackboard partnership in addition to Vital?

Yes, Rory, this is Kanuj. We entered into a strategic partnership for bartleby. Students in this COVID environment spend an enormous amount of time, as you'd expect, in the LMS centering around all the activity, so both educators and students. And we think it's just - it's a really unique channel for us to go after and help students exactly where they are, when they are in moment of learning they can access these tools. We can't really say much more I think for competitive reasons, but we're super excited about the partnership and the potential to really impact student outcomes and be right there. Unlike our distribution channel, it's not necessarily in the stores. It's early when you purchase your course materials. But both through things like Blackboard an increasingly VitalSource will be more Institute in the moment. So we're super excited about it.

Yes. I think generally speaking, one of our challenges with bartleby is just - is coming out of such a new product is getting the brand awareness out there, while we're trying to manage our spend and keep really, such as Tom said, laser focused on liquidity. And that trade-off that exist between making sure we're using our brand awareness, marketing and other dollars as efficiently as we can with bartleby to get the name out there and to get the adoptions, utilization up. And extending and leveraging these partnerships with VitalSource, which has been a tremendous partner and now Blackboard, which we're very excited about, I think is really important to help us, especially during these periods of time when there is not quite as much store traffic as used to and we rely on our - our store booksellers have now become store bartleby sellers. So it's a really important development for us.

I guess, the only other thing I would add, Rory is, like couple - like the bookstores, obviously, we're adapting to the COVID environment and POS, as Mike alluded to, had been traditionally a big portion of our acquisition. But in the background, I don't think it's as resident, but you could see it when you see we're up about three times in subscribers in the quarter. Really underlying all of that is the efficacy of the SEO strategy and the fact that Google's our biggest customer and Google is liking us a ton more. Students are finding it. The traffic is increasing. So it's getting out. Everything reinforces each other. So Vital and Blackboard, the SEO strategy, obviously, we serve 6 million of the 20 million students in higher ed. So we're trying to make it firing on all cylinders and it's really starting to come together. The notion of being as disruptively priced as we are in providing that value to students also is clearly resonating. It's just, as Mike said, creating the awareness to both the brand and the solution set.

I really appreciate that answer, Kanuj and Mike. And then just the last one for Tom. You mentioned borrowings are down $55 million through the end of August, and I imagine you continued to generate cash for a while. And then you mentioned you'll rebuild inventory again going into December for Spring Rush. I guess, how are you approaching that working capital build? First of all, how are you tracking, I guess, versus your prior liquidity plan? It sounds like at least, obviously those early reopenings, which is helpful. But just, I guess, there's a lot of moving parts. I mean, we could have a much better potentially spring term, but I imagine you don't really want to get out ahead of that by building too much inventory. So how do you think you'll approach sort of walking that line between preparing for business potentially being improved in spring versus making sure that you're not overextending?

Yes, and that's a great point, Rory. It really comes down to that inventory management. And the mantra that we've adopted really is, don't get out ahead of it if you don't expect or anticipate the sale, there is no reason to start replenishing things or trying new things. So it's really managing to what we think it is, but it's probably even a degree or perhaps better said, managing below that. And the team is anticipating - had anticipated intercollegiate sports being disrupted in fall, and that goes into the planning as well. So it really comes down to managing the inventory very conservatively and not getting ahead of it. And that's really - I think if we don't see the sales, we're not going to get the inventory and that will continue for the rest of the year. But at the same time, we have the ability to adapt, and I think that's the keyword there is, the ability to adapt if things change and things improve. And we'll make sure that we have the inventory to meet the sales needs.

And at this time, I will turn the call over to Mr. Milevoj.

Great. Thank you, and thank you all for joining us on today's call and for your continued interest in BNED. Please note that our next scheduled financial release will be our fiscal 2021 second quarter earnings on or about December 3, 2020. Have a great day, everyone.