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Barnes & Noble Education Inc (BNED 0.24%)
Q4Â 2019 Earnings Call
Jun 25, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning. My name is Simon and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes & Noble Education Fiscal 2019 Year End Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.
Mr. Tom Donohue, you may begin your conference.
Thomas D. Donohue -- Executive Vice President, Chief Financial Officer
Thank you. Good morning, and welcome to our Fourth Quarter and Full Fiscal Year-end 2019 Earnings Call. Joining us today are Mike Huseby, Chairman and CEO; Barry Brover, EVP of Operations; Kanuj Malhotra, President of Digital Students Solutions; Lisa Malat, Chief Operating Officer, Barnes Noble College; 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 the 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.
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 risk 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.
At this time, I'll turn the call over to Mike Huseby.
Michael P. Huseby -- Chairman and Chief Executive Officer
Thanks, Tom. Good morning, everyone, and thank you for joining us. Fiscal 2019 was truly a transformative year for BNED. I'm proud of all that our people accomplished as we continue to pivot our platforms and offerings to digital delivery.
Fiscal year 2019 results were in line with our expectations as we continue to generate significant EBITDA and, as a result, strong free cash flow. We're making important changes throughout our organization as we continue our digital pivot. We are very encouraged by our significant progress, including the development of our first internally developed digital study product, initially introduced as Bartleby Textbook Solutions and now branded as Bartleby Learn. Unification of the BNC and MBS sales teams, creating an expanded and incentivized new business sales team with a revitalized go-to-market strategy.
The continued growth of our FirstDay inclusive access program which substantially increases courseware sales penetration volumes when adopted. The upcoming launch of our BNC adoption and insights portal, a new courseware adoption and insights platform for faculty and academic leadership that leapfrogs our prior adoption platform, an important enhancement to our institutional sales capabilities.
And the introduction and completion of a pilot of four highly curated concept shops focused on elevating our in-store experience. These concept shops drove very meaningful improvement in sales trends in our pilot stores during the test period. Additionally, this fiscal year, we have begun to make important investments to drive growth for our general merchandise business in fiscal 2020 and 2021, including drop ship capabilities this fall and the next generation digital commerce platform expected to be live in fiscal 2021.
As disclosed in this morning's press release, we have realigned our reporting segments to reflect our new go-to-market approach. We now have the following three reportable segments: Retail, Wholesale and DSS. The new Retail and Wholesale segments reflect changes we have made internally to combine physical and virtual store sales teams to more proactively identify and actively pursue new institutional business. The Retail Segment combines the operations of the former BNC segment with MBS Direct's virtual bookstore sales' operations from the former MBS segment.
The Wholesale Segment is comprised of the MBS wholesale business, which provides a comprehensive selection of new and used textbooks at a lower cost of supply to approximately 3,500 physical bookstores, including our Retail segment's 772 physical campus bookstores. Our Wholesale business also sources and distributes new and used textbooks to our 676 virtual bookstores. Additionally, through our Wholesale segment, we sell hardware and a software suite of applications that provide inventory management and point-of-sale solutions to approximately 400 college bookstores.
The DSS segment operating components of Student Brands and Bartleby remain unchanged. We believe the realignment of the resources and related reporting segments will deliver significant benefits and allow BNED to deliver growth and net new store contracts.
Our campus stores, whether physical, virtual or a combination of both, provide the incredible value to institutions across the country and are key competitive differentiator for BNED. We're already starting to see the positive impacts of our larger and combined new business sales force. In fiscal 2019, net new store sales were impacted by some large competitive losses and fewer new business wins. So far, in fiscal 2020, we expect annualized net new store sales to be approximately $35 million as we drive new business wins and narrow competitive losses. We are very encouraged by these initial results of our new unified sales teams.
We introduced our DSS reporting segment just one year ago and by -- this upcoming Fall Rush, Bartleby Learn is expected to grow -- to offer nearly 2 million step-by-step homework solutions across approximately 1,200 titles. Students can also now access a relatively new and developing Q&A feature to ask homework questions to experts virtually. We experienced a strong initial demand for Bartleby Learn, which added more than 50,000 subscribers during our first in-store sales push in our Spring Rush period. We are focused on and anticipate continued Bartleby subscription acquisition growth as we head into our Fall Rush period and greet a brand-new cohort of students.
Our physical footprint on campuses nationwide, together with our deep knowledge of student course material consumption, remains a significant competitive advantage allowing us to better inform and manage the cost of our Bartleby content development. Our entire Company is focused on growing Bartleby subscribers and recognition of the value we can deliver to both students and institutions and also the high margins this business will contribute to BNED as it scales.
DSS is a much different business than our historical one. The power of leveraging all of our physical and virtual assets together is unique to us and will become evident as Bartleby scales. The success of our DSS segment is key to unlocking shareholder value, and we are very focused on making that happen.
Our DSS offerings also complement our institutional offerings and can bring added value to our partners and the students that they serve. We recently completed a survey of more than 100,000 students nationwide, which found that nearly 50% of first year students are interested in paying a one-time cost for access to all supplemental digital tools and resources that are bundled with tuition. We believe there is a strong opportunity to offer these types of bundled offerings through BNC FirstDay, our inclusive access model, delivering institutional digital product bundles, and an inclusive access model would accelerate Bartleby scale objectives with minimal acquisition costs while mitigating the churn so normally associated with such digital subscription products. We are actively exploring institutional Bartleby offerings to determine the optimal packaging and pricing.
FirstDay is a strong example of the value we can bring to partners from a content distribution standpoint. Inclusive access has become increasingly popular in college campuses as institutions look for solutions that will drive down costs and enhance outcomes for students. Entering fiscal 2019, we had already entered into digital distribution agreements with the three largest higher ed publishers. This year, we expanded our digital distribution and FirstDay relationships with multiple publishers, including Oxford, Wiley, Macmillan Learning, SAGE and Norton, enabling us to offer even more content through our FirstDay platform. Inclusive access models are incredibly important in terms of increased penetration that they drive.
At our schools using FirstDay, we see sell-through of more than 90% versus the traditional sell-through rate of approximately 35%. So even as digital content pricing is lower than physical content ASPs, the increased volumes result in a better business model for both BNED and the publishers, and importantly, more affordable prices for students. As more content moves digital in the long-term, FirstDay high sell-through penetration is expected to be a significant driver of revenue. We continue to see success with our FirstDay model with revenues from FirstDay sales increasing 92% year-over-year.
To further enhance the value we offer institutions, this summer, we are launching the BNC adoption and insights portal. A new innovative platform that will transform how faculty and academic leadership research submit and monitor course material selections, affordability and student success. This tool provides a highly personalized user-friendly experience, actionable insights with high-impact reporting dashboards and more. The initial reactions to the portal from the current and prospective clients, as well as publishers who may benefit from the platform has been incredibly positive. We're installing this platform in a relatively small number of schools in August and look forward to rolling it out to more campus partners prospectively. Tools such as this adoption and insights portal are important to our strategy for packaging and pricing digital offerings that solves for multiple pain points that our college university partners, as well as their students and faculty are facing. Accordingly, the value of this and other tools we are investing in and offering to campus partners is directly contributing to recent new business success.
In our physical stores, we have introduced some exciting changes to strengthen our advantage as the official on-campus retailer. In four of our stores, we have successfully completed an innovative and promising pilot of highly curated and relevant concept shops focused on elevating our store's experience. We're very pleased with the initial results of these pilot concept shops, which drove higher customer engagement and improvements in sales trends during the test period. We plan to introduce these new concepts to an additional 70 stores this summer.
We are also very pleased to announce an exciting collaboration with Urban Outfitters, a favorite brand of our students. This partnership will create a one-of-a-kind retail experience in our stores, bringing trend-relevant apparel and home decor direct-to-the-college consumer. Urban Outfitters concept shops are planned for introduction in some of our stores beginning this fall.
Looking ahead, we are continuing to make important strategic investments to drive increased levels of success in our Retail business, particularly, in the areas of general merchandise and emblematic apparel. This includes advanced digital commerce capabilities that will extend our product assortment and real-time availability for customers. We expect to see incremental online sales growth in the first half of this fiscal year when we greatly expand our online assortment through our new drop ship capabilities and other customer engagement enhancements. In fiscal 2021, we expect to launch our developing next-generation digital commerce platform which will further unlock sales growth by leveraging dynamic product discovery, personalization, promotions and user experience tools to ensure that shopping experience for customers across all our stores, physical or virtual, is best-in-class. Historically, we have underinvested in our e-commerce platforms and we have substantial upside to capture by making online shopping and fulfillment a much better experience for our customers.
Fiscal 2019, as I said, has been a year of significant change and progress toward our objective of pivoting to a leading provider of both digital and physical offerings to institutional and student customers we strive to delight. Fiscal 2020 will be a year when we will continue to allocate human, expense and investment capital to our digital pivot. But we also expect to begin to see more meaningful operating results from these investments as we expect to grow Bartleby subscribers, increase general merchandise sales, continue to add inclusive access model to customers and add significant net new manage store business.
We will continue to manage our cost structure to reflect the realities of our physical book-related trends during this transition period we are in. We would also like to thank our entire workforce for being fully dedicated as shown by the very personal commitments and contributions each of them are making during this transition period. Our people are contributing substantially to our purpose and strategy while also, essentially, investing in BNED's future with the understanding that their personal economics successes are tied to BNED's success.
In our Wholesale Segment, revenue was down 13.5% year-over-year primarily due to lower demand. We continue to transform our Wholesale Segment to position MBS as an innovative service provider to the industry while also exploring additional ways to utilize MBS' advanced distribution capabilities as in the case of publisher consignment rental programs. As a reminder, under these agreements, we do not take titles to rental books but earn margin and a fee for processing the rentals for the publishers. This model has faced market acceptance and publisher execution issues. We are working closely with the two large publishers with whom we have consignment rental agreements to facilitate improved execution for Fall Rush of the more than 700 titles subject to this program. While we originally anticipated that the benefits from these consignment rental programs will be more recognized in fiscal 2019, we now anticipate increased cash flow benefits to be recognized this fiscal year.
While the public market appears to value BNED as a traditional and perhaps even trouble retailer, the strength of our assets such as our store footprint, distribution capability and general merchandise business, together with our investments in digital such as Bartleby, inclusive access and our adoption and insights portal are already beginning to yield positive momentum.
BNED has a unique set of assets and a strategic business model that are very hard to replicate. We remain confident in our role as a leading aggregator and distributor of educational contents, both within and outside of our store footprint. Our management team continues to lead the execution of our strategy for digital transformation. And though change at this scale is challenging and never happens fast enough, our entire Company is energized and confident in BNED's future and future values. As we prepare for the upcoming Fall Rush, we are highly focused on leveraging the unique strengths and expertise of each of our business units that help drive success to all of our customers.
I'll turn it back over to Tom now for the financial review.
Thomas D. Donohue -- Executive Vice President, Chief Financial Officer
Thank you, Mike. Please note that the fourth quarter ended on April 27, 2019, consisting of 13 weeks. All comparisons will be to the fourth quarter of fiscal 2018 unless otherwise noted.
As Mike stated and as disclosed in this morning's press release, we realigned our business and sales organization into the following three reportable segments: Retail, Wholesale and DSS. The Retail Segment combines the operations of the former BNC segment with the MBS Direct virtual bookstore operations. The Wholesale Segment is comprised of MBS Wholesale business, and the DSS Segment remains unchanged.
Total sales for the quarter were $334.4 million, compared with $357.7 million in the prior year. This decrease of $23.3 million or 6.5% was comprised of a $15.2 million decrease from the Retail Segment, a $5.8 million decrease from the Wholesale Segment and a $0.2 million decrease from the DSS Segment.
Comparable store sales in the Retail Segment increased by 0.9% in the quarter as compared to a 2% increase in the prior-year period. Comparable store sales for the full year declined 5.1%, consistent with our expectations.
Comparable textbook sales for the quarter increased 0.9% as compared to the prior year increase of 1.8%. Comparable textbook sales for the full year declined 8%, also consistent with our expectations. Textbook sales continue to be impacted by lower average selling prices of course materials, enrollment declines and students' purchases from publishers directly, as well as other online providers.
Net sales for the Wholesale Segment for the quarter were $14.1 million, a decrease of $5.8 million. Net sales for the full fiscal year were $223.4 million, a decline of $35 million or 13.5%. Wholesale sales were down primarily due to lower demand.
DSS sales were $5.5 million in the quarter compared to $5.6 million in the prior-year period. Sales for the full year were $21.3 million as compared to $15.8 million in the prior year.
The consolidated gross margin rate for the quarter was 35.1%, down from 35.9% in the prior-year period. The consolidated gross margin rate for the full fiscal year was 25.9%, up slightly from 25.3% in the prior-year period. The -- this is primarily attributable to a shift of lower-margin digital products and higher contract costs related to contract renewals and new store contracts.
Selling and administrative expenses in the fourth quarter decreased by $7.6 million or 7.2% compared with the prior-year period and decreased $9.9 million or 2.3% for the full fiscal year. The decrease in the Retail Segment for the quarter and the full year was primarily as a result of decreases in physical store payroll and operating expenses, a decrease in the LoudCloud digital operations, a decrease in virtual store payroll and operating expenses, and a decrease in corporate payroll and infrastructure. Wholesale expenses decreased in the fourth quarter and in the full year primarily due to lower payroll expenses and professional fees.
DSS selling and administrative expenses increased in the quarter and the full year primarily due to the ongoing costs associated with the development of Bartleby, as well as costs related to the student brands and other digital offerings. Corporate Services in the quarter and the full year increased as a result of higher professional fees.
During the fourth quarter, due to the change in our segment presentation reporting units, we performed an interim goodwill impairment test and concluded that the carrying values of the Retail and Wholesale reporting units exceeded their respective fair values. As such, we recognized a non-cash goodwill impairment loss of $49.3 million or $36.5 million after tax on a next tax basis, consistent -- consisting of the carrying value of goodwill allocated to each of those segments. Additionally, as a result of certain other operational changes, we recognized an $8.5 million non-cash impairment loss primarily related to certain other long-lived assets.
We recognized a $4.7 million and a $7.2 million charge of restructuring and other charges during the fourth quarter and during fiscal year 2019, respectively. Restructuring and other charges are primarily comprised of severance and transition payments related to senior management changes, employee termination costs and benefit costs.
Our cash balance at the end of the quarter was $14 million, a slight decrease compared to the $16.1 million in the prior-year period. There was 135 -- $133.5 million in outstanding borrowings compared with $196.4 million in outstanding borrowing in the prior-year period. This decrease in borrowings for the year is primarily attributable to the improved free cash flow. In fiscal 2020, we expect the average debt to be approximately $100 million with peak borrowings of approximately $200 million, fully repaid during our Fall Rush with additional borrowings until the end of the fiscal year. This is a similar pattern to fiscal 2019.
CapEx for the fourth quarter was $14.7 million, compared with $12.7 million in the prior year. CapEx for the full fiscal year was $46.4 million as compared to $42.8 million in the prior year. Increases in CapEx were due to our continued investments in digital.
Currently, our Retail Segment operates 1,448 college, university and K-12 school bookstores comprised of 772 physical bookstores and 676 virtual bookstores. As of today, we've contracted to open an additional 78 stores in fiscal 2020 with 37 additional known closings. This would bring our total physical and virtual store count to 1,489 locations net of closed stores.
For fiscal 2020, we expect consolidated adjusted EBITDA to be between $90 million and $100 million. Due to the continued investments, capital expenditures are expected to increase from fiscal 2019 by approximately $10 million and are expected to be in the range of $50 million to $60 million. We expect free cash flow to be between $25 million to $40 million as compared to the $39.7 million in fiscal year 2019. We define free cash flow as adjusted EBITDA less capital expenditures, cash interest and cash taxes.
With that, we'll open the call for questions. Operator, please provide instructions for those interested in asking a question.
Questions and Answers:
Operator
Certainly. (Operator Instructions) Your first question comes from the line of Alex Fuhrman with Craig-Hallum Capital. Your line is open.
Alex Fuhrman -- Craig-Hallum Capital Group LLC -- Analyst
Great. Thanks very much for taking my question. Wanted to ask about the outlook for next year. I apologize if I missed this maybe in the prepared remarks, but didn't see a revenue guidance in the press release. So just curious, as you're thinking about your EBITDA and free cash flow guidance for the year, just what type of revenue trends are baked into that? And specifically, looking at the new reportable segments, is there anything major to call out in terms of trends you're seeing so far this year on the top line?
Michael P. Huseby -- Chairman and Chief Executive Officer
Hey, Alex, this is Mike. We decided not to give revenue guidance. I mean, there's so much change in business model around -- here's an example like publisher consignment rental where we don't take titles of books, we don't -- we book -- only book the fees and the margin that we receive of those transactions. We want to get away from comp store sales because we get thrown into the retail bucket. While it's important information, we'll continue to disclose it. We really are trying to focus managing the business on margin and cash flows and move to more and more digital, and the deals that we're cutting with publishers and other partners are really more focused that way.
So, in terms of revenue trends, I think the one thing that we have alluded to is the new business. We're really happy with -- we're pleased thus far with the new sales force and what they're doing and just our approach, the go-to-market approach. So, we're getting some information on what we expect -- at least have experienced thus far on net new store sales. I think there's no reason to believe that the trends that we've been seeing are going to change markedly as it relates to physical books in the coming year. Trying to forecast average prices and what publishers are doing in the mix is proved to be very difficult. For example, they sold a lot of lower-margin, loose-leaf types of publications to schools last year instead of following through on the publisher consignment rental. So we're -- the revenue forecast to us just aren't as germane as trying to give the market a sense of what EBITDA and free cash flow look like in CapEx. CapEx is really important because of the investments that we're making and how they're driving the expansion of the products and accelerating the time to digital.
I would -- one thing I talk about during the conferences is that the adoption and insights portal that we're rolling out. That's been invested in. We'll see the benefits of that, but the important thing there also is that it's really a tool that's needed by colleges and the ones that we're showing it to with proposals and other current situations are really want these tools now to manage what's increasingly complex business for them.
So the answer to your question simply, we're not giving revenue guidance. We're not going to talk about forecasting the specific trends unless it's something we have fairly high degree of confidence on, but I don't think that on the physical side, the trends directionally will change from where they've been in the last few years. So, we don't tend to give value based on revenue and revenue movements. All our conversations on our evaluation in the public market seem to be more based around EBITDA and what we're dealing with pivoting to digital self and we're emphasizing this, we're managing to.
Alex Fuhrman -- Craig-Hallum Capital Group LLC -- Analyst
Sure. No, that's helpful. Thanks. And then if I could ask just about the Digital Segment. Specifically, I guess, the Bartleby piece, I mean, it sounds like you're -- you've got some nice early signs of subscriber growth there. Just wondering what it's really going to take for you to get that business and turn it into a growth engine. Obviously, there is a big competitor out there with a similar product that's been doing very, very well over the last couple of years. I mean, do you feel that you have the content -- is as robust as you need it to be to really be able to put the foot on the gas in terms of marketing? Or is there may be some lifting still there to happen? Just curious where you feel that product is heading into the new school year?
Kanuj Malhotra -- Executive Vice President, Corporate Development and President, Digital Student Solutions
Hey, Alex, this is Kanuj. I think by fall, we feel very good about where the content will be in terms of coverage of the most important, most frequently used titles, so we think we'll have fairly good coverage in area of increased investment. Our focus is Q&A, and we are very focused on being able to grow that library. So, I guess, in short, we feel very good about both sort of the headwind that exist in the market, having a new freshman class, as Mike alluded to earlier, for students that aren't in ecosystem yet is a really big opportunity, leveraging our titles in footprint, as well as out of footprint increasingly. So, we feel very good about being able to really start to drive that given where the content will be relative to where it was in the spring.
Alex Fuhrman -- Craig-Hallum Capital Group LLC -- Analyst
Great. That's really helpful.
Michael P. Huseby -- Chairman and Chief Executive Officer
You mean about 25% of the titles in the spring that we have in the fall, 20% to 25%. So in other words very...
Kanuj Malhotra -- Executive Vice President, Corporate Development and President, Digital Student Solutions
More than doubled, yeah.
Michael P. Huseby -- Chairman and Chief Executive Officer
Yes. It's more than -- well, doubled or tripled in terms of the titles that we've got available for textbook solutions, and we've gained 50,000 subscribers with primarily most of those coming from in-store support. So, to answer your question and expand on a little bit, if we had -- didn't have to worry so much about managing the EBITDA, we probably step on the gas a little harder, but I think that we'll know more as we get into the fall season and we may do some of that. That's one of the reasons that our free cash flow estimates are somewhat variable. We want to be able to take advantage of the opportunities as we see them happening during the course of the year.
Kanuj Malhotra -- Executive Vice President, Corporate Development and President, Digital Student Solutions
I mean, and the last point I'd just add, Alex, is that, relative to where competitors are priced, we're priced very disruptively, roughly a 30% discount. So we think once we get it into a consideration set, increase that awareness, students will naturally move toward a product that has comparable, if not, better features.
Alex Fuhrman -- Craig-Hallum Capital Group LLC -- Analyst
Great. That's really helpful. Thank you very much.
Operator
Your next question comes from the line of Ryan MacDonald with Needham. Your line is open.
Ryan MacDonald -- Needham & Company, LLC -- Analyst
Hey, good morning, everyone. I guess, just following up on sort of the Bartleby question and as you're sort of looking at the growth trajectory there. Now, we're in at the end of June, you've had sort of a full semester to sort of monitor the usage and sort of habits of the 50,000 subscribers you got in the spring. Can you just talk about maybe what you've learned about retention and utilization from the students, from what you've seen thus far with that 50,000 number?
Kanuj Malhotra -- Executive Vice President, Corporate Development and President, Digital Student Solutions
Hey, Ryan, it's Kanuj. We've seen sort of typical patterns emerge for a user sort of what you would suspect in terms of Q&A usage becoming more piqued during midterms and final periods and sort of -- it's consistent with what we thought in terms of churn behavior. Likewise, the seasonal falloff, that's associated with the summer. So it's pretty much according to pattern now. We are trying to get more nuanced on how we can drive more engagement and more usage. And I'd say it's early stages there, but we remain focused on being able to, as the previous question alluded to, get the content library expanded so we can cover students in all need shapes and all subject disciplines. I think the fall will be more just positive in learning more. But right now, I'd say, it's probably according to where we thought it would be.
Ryan MacDonald -- Needham & Company, LLC -- Analyst
Yeah. Thanks. And, I guess, following up sort of on the new retail operating segments, sort of combining the MBS and the BNC sales teams there, it sounds like there is a lot of interesting developments in innovation going around in terms of the adoption insights and some of these concept stores. Can you talk about sort of what the go-to-market or how you're sort of positioning that competitively with your sales teams just to try and win more Retail business through sort of both two initiatives?
Michael P. Huseby -- Chairman and Chief Executive Officer
I'll give a quick answer, and I'll let Lisa Malat, who's our COO of college who's heading up the sales effort, expand on it. But in essence, what we've done is expanded that sales team using internal resources. We promoted people from within the BNC field manager ranks, regional manager ranks, as well as combined the formally MBS Direct sales team quite effectively so that we more than double the number of salespeople that we have in the market and really taken a much more what I'd call proactive approach by targeting potential new business in a very intelligent way and emphasis on those that have bigger general merchandise, portfolios, in some cases. And it's a very disciplined approach that emphasizes all the new things we're doing, as well as what we've done in the past and have a great tradition of service, et cetera.
I'll let Lisa talk about the competitive position a little bit more.
Lisa Malat -- Chief Operating Officer of Barnes Noble College
Yeah. I mean, I think we all know what -- understand the transformation that's happening with the industry. And as much as we're feeling it, higher education is experiencing at even greater levels. But we feel that we're in a very, very unique position right now to really be able to offer innovative, really state-of-the-art solutions to our higher education partners, ones that really are differentiating us in the marketplace such as -- Mike talked about with AIP or some of our new retail concepts. And we're finding that these solutions are really resonating with our partners because we do a really good job of listening and understanding the different needs of all of our constituencies. We understand the pain points for academic leadership. We understand that higher education is looking to create these community centers or cultural hubs and points of engagements with the retail footprints wanting to bring students together. So we take these learnings from our campus partners, and we create these innovative solutions that are really helping us win contracts and grow top line for the business.
Michael P. Huseby -- Chairman and Chief Executive Officer
It's really important for us to continue to grow our store contracts' footprint because as you saw in January, just as it relates to Bartleby, the engagement we have from our in-store personnel was critical to growing that business. 70% or so of the subscriptions came from in-store -- the physical in-store sales. And while we expect that distribution between in-store and online to probably change when scale occurs to a certain extent growing the in-store -- the store managed footprint is essential not just in terms of selling digital but it also -- it leverages all the skills we have within Barnes & Noble College across a broader footprint, which makes our -- obviously, it helps to make our cost structure and the way we run the business more effective.
So from a competitive perspective, I think we're doing very well versus where we were about 1.5 year, one year ago where -- as you look at the exhibits of the earnings release, you can see that we ended up losing net new -- net business from store closures over store openings. We had a great significant impact on our financials. And so, that's another reason why it's important. It's not for the revenue growth. It's per se. It's for the opportunity that we have in margin expansion with general merchandise, with digital and also to leverage our organization across the broader footprint.
Ryan MacDonald -- Needham & Company, LLC -- Analyst
Yeah. Thank you very much.
Michael P. Huseby -- Chairman and Chief Executive Officer
Thanks, Ryan.
Operator
(Operator Instructions) Your next question comes from the line of Greg Pendy with Sidoti. Your line is open.
Gregory Pendy -- Sidoti & Company, LLC -- Analyst
Hey, guys, thanks for taking my questions. I just -- I wanted to, I guess, understand the 50,000 subs, that was last quarter, and I just want to understand that was with one month free, correct? And I know there'll be some serious seasonality to the Bartleby Textbook subscriptions but it's not -- it wasn't at 50,000 during this quarter, was it?
Michael P. Huseby -- Chairman and Chief Executive Officer
50,000 was the number of subs we acquired during the Spring Rush, which was what we disclosed. There was initial introduction of the product, Greg, and we discussed it fairly thoroughly I think in the last quarter call. And as Kanuj said, it's fairly early days in analysis and the learnings on retention and engagement and that type of thing. But no, it's not this quarter. It's the same information disclosed from last quarter.
As we go forward, we'll decide what details we wanted to disclose on subscribers and that type of thing. That was just an initial rollout to see if we could be successful, which -- we deemed that it would be a successful launch, especially, with the relatively disadvantage number of titles, et cetera, we have versus the competition. And the fact that it was the Spring Rush, where we were coming in with many students having already selected their online supplemental provider in the fall period. As you pointed out, we have a new cohort coming in, so we'll disclose more information on subscribers going forward. But to answer your question, no, it's not another 50,000 this quarter. It's the same 50,000 from the first quarter when we had the initial push.
Gregory Pendy -- Sidoti & Company, LLC -- Analyst
Understood. And then just one more question. I mean, just the bundled offering with FirstDay, it sounds exciting given where you stand, having the college store footprint. But just kind of wondering, I think a competitor of yours in the space is trying to bundle sort of the writings of the -- has at least talked about bundling their textbook solutions and writing solutions. Is that something you guys would be thinking about as well?
Michael P. Huseby -- Chairman and Chief Executive Officer
So I alluded to in my comments actually that we do have some schools that are interested in it, and from our personal perspective, our home run would be in addition to selling it direct to students, if you put yourself in the place of a student or a parent that's looking at a bill for inclusive access and that bill includes tuition, it includes your course where in other words your books are digital access codes or your access to digital content. It also includes some digital products, it could be Bartleby Learn, it could be Bartleby Writing, which we're just releasing, self-tutoring, self-study aids that's all included in, one inclusive access package whether it's build in one amount to all students or whether it's different, which we thought FirstDay complete or different model, I think you can see that.
These students -- these schools, rather, that are competing with each other, we can offer them a lot of value in an inclusive access package. Not all schools want to have Bartleby in their lineup to offer. Many do if you look at those that are -- especially community colleges and others, large foyer public schools. They're looking to pack as much value into these packages that they can get to give the most value to the students which equates to affordability win. So that's something we're exploring with schools. When you think about selling subscriptions on a la carte basis and you think about bundling in thousands of subscriptions at a time and institutionalizing them and the cost of that and what the churn would be going forward, relatively flat, relatively zero. That's the discussion we're having but we don't have that in place. As I said, we're exploring it, and I think that it gives us an interesting conversation that we can have with schools that really want to provide as much possible value and an inclusive access package as possible.
As it relates to the illusion to the competitor, I don't think -- I think that we're designing Bartleby under Kanuj's supervision to be much more institutional-friendly than maybe the -- some of the other products that are out there that aren't really viewed that way by the institutions. So that's different. We can sell it out of footprint a la carte as well but in footprint, every school we serve has a different way of looking at how they want to teach their students and we respect that and, therefore, we're customizing what we do with our institutional partners. That gives us the ability to customize all these different tools we have.
Gregory Pendy -- Sidoti & Company, LLC -- Analyst
Okay. That's helpful. And then just one final one if I could get one more question in. You mentioned 78, I think, store openings. Can you just talk a little bit, is that wins or is that Company a lot -- are you seeing colleges kind of move to the outsourcing model? I think roughly 50% of college bookstores are still managed internally. Can you just kind of give us a sense on just the overall environment? Are you seeing it -- that shift continuing? Or is it just a less competitive environment than last year from winning new campuses?
Lisa Malat -- Chief Operating Officer of Barnes Noble College
As I -- this is Lisa. So as I was mentioning before, definitely the complexity in the market is creating a lot of opportunity for us to grow the top line. So, truly a combination of both, but we're continuing to see a shift of self-operated bookstores looking to -- looking for solutions, looking for experts, looking for innovation, which is why the products and services we are bringing to the market are resonating.
Gregory Pendy -- Sidoti & Company, LLC -- Analyst
Okay, great. Thanks helpful.
Michael P. Huseby -- Chairman and Chief Executive Officer
And we're also competing head-to-head with our primary competitor in that field and feel like we're doing well in that regard as well. So, at least, that's a combination of both.
Lisa Malat -- Chief Operating Officer of Barnes Noble College
Yeah.
Gregory Pendy -- Sidoti & Company, LLC -- Analyst
Okay, great. Thanks a lot guys.
Michael P. Huseby -- Chairman and Chief Executive Officer
Thanks, Greg.
Operator
And there are no further questions at this time. I'll turn it back over to Mr. Donohue.
Thomas D. Donohue -- Executive Vice President, Chief Financial Officer
Thank you for joining today's call. Please note that our next scheduled financial release will be our fiscal 2020 first quarter earnings call on or about August 27. Thank you, and have a good day.
Operator
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
Duration: 45 minutes
Call participants:
Thomas D. Donohue -- Executive Vice President, Chief Financial Officer
Michael P. Huseby -- Chairman and Chief Executive Officer
Alex Fuhrman -- Craig-Hallum Capital Group LLC -- Analyst
Kanuj Malhotra -- Executive Vice President, Corporate Development and President, Digital Student Solutions
Ryan MacDonald -- Needham & Company, LLC -- Analyst
Lisa Malat -- Chief Operating Officer of Barnes Noble College
Gregory Pendy -- Sidoti & Company, LLC -- Analyst
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