Barnes & Noble Education, Inc. (NYSE:BNED) Q2 2024 Earnings Call Transcript

Alex Fuhrman: And certainly sounds like a big milestone to have reached that point. So congratulations to you and the whole team that I know has been working on that for years to get to that moment here. Certainly understand that having more predictable and recurring revenue should help you on the cost side. I did want to just ask you about the comment in the press release, I guess, given the nature of how some of these early deals were struck, it sounds like you’re not actually collecting any cash until after the drop add dates. Can you just talk to us about that dynamic a little bit more? Does it perhaps counterintuitively mean that you might actually need a larger credit facility over time as First Day Complete becomes a bigger share of revenue and more of the cash collection is deferred to farther into the semester?

Mike Huseby: I don’t think it speaks to the size of the credit facilities and working capital timing issue that we’ve improved a lot in terms of our ability to collect receivables much more quickly. Under the old traditional model you’re collecting at the point of sale at the cash register from students, but you really couldn’t predict what that was going to be when you have a contract and in advance, you have a fairly tight range of being able to forecast what the take rates are, what the participation rates are, I should say, you know what the price per credit hour is, becomes much more predictable. And I guess the other thing that I would say about the transition and working capital is that we’re really transitioning the company to a B2B revenue model as opposed to B2C.

That’s what the First Day, First Day Complete really is. So it really lines up the financial model we have with the operating model we have. We’re a contract service provider where our real strength is the relationships and the contracts with exclusivity provisions that we enter into with the schools. And so putting that financial model on more of a B2B basis really makes sense, because we’re dealing with the school on a business basis and structuring the contracts and transferring that model to more of a we build you school, we collect from you. And they can see the benefit of it, we can see the benefit of it, and it becomes much more of a joint partnership working to optimize that courseware delivery model.

Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you all for joining. You may now disconnect.