Thomas Donohue - IR Mike Huseby - Chairman & CEO Patrick Maloney - COO and President, Barnes & Noble College Barry Brover - CFO Kanuj Malhotra - SVP of Strategy & COO of Digital Education

Alex Fuhrman - Craig Hallum Greg Pendy - Sidoti

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, Chief Operating Officer of Barnes & Noble Education and President of Barnes & Noble College; Barry Brover, CFO; and Kanuj Malhotra, Senior Vice President of Strategy and Chief Operating Officer 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.

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

Thanks, Tom, and good morning everyone. The higher education market continues to evolve rapidly.

Enrollments particularly at two year colleges continue to decline and we are 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, course ware alternatives including digital offering.

All factors that serve the higher education industry have market driven pressure change and adapt business models. This reality applies to the businesses that BNED operates with necessary changes in both a short-term and longer-term nature.

Each of our businesses B&N College including LoudCloud and Student Brands digital services, MBS with its wholesale MBS Direct virtual stores and MBS systems customer base are all executing our plans to respond to these changes taking place in the markets we serve, including changes related to the following well publicized challenges. There is an increasing emphasis on affordability and measurable achievement by our college partners, students, faculty and many state governmental agencies.

All are demanding higher value to cost ratio from providers of services and content. Declining enrollment trend particularly locally -- local and state-wide community colleges that has shown higher 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 education 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 sales prices as mentioned on educational units offered by publishers declined this past rush as a mix of formats resulted in overall low 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 the increasing number of schools and strategic partners.

Given these dynamics, we’re focused on actively transforming our business, which means successfully pivoting from our historically total reliance on traditional bookstore management model to become a leading aggregator and distributor of both physical and digital educational content, within and importantly also outside of the footprint of managed stores that we have. We significantly expanded our addressable market by executing a strategy of organic growth, acquisitions, strategic partnerships and continued innovation.

Our goal remains to offer the most comprehensive suite of quality educational products and services to our existing and future customers. Before moving on to segment results, I’d like to briefly highlight our consolidated results for the quarter.

The B2B consolidated sales of 886.9 million increased 15.1% as compared to a prior year period. Year-to-date consolidated sales of 1,242.6 million increased 23% versus last year.

Consolidated second quarter GAAP net income was 48.4 million compared to 29.3 million in the prior year period and year-to-date GAAP net income was 13.6 million compared to 1.4 million in the prior year period. Consolidated second quarter non-GAAP adjusted EBITDA was 102.4 million, an increase of 32 million compared to prior year period and year-to-date non-GAAP adjusted EBITDA was 70 million, an increase of 36.1 million versus last year.

Moving to our Q2 financial results and the business priorities we are focusing on each of our two segments. In our Barnes & Noble College segment, second quarter 2018 sales were approximately 9 million less than last year and 2 million higher for the six months of this fiscal year compared to the last year.

This is in line with our guidance and our expectations. The comparable store sales decline was 33.8 million or a decline of 4.4% primarily driven by lower textbook sales which were down 5% on a comparable store basis.

The lower textbook sales reflect decreasing enrollments as mentioned especially at community colleges, which we believe declined in the mid-single digits again this fall compared to last year as well as increased competitive factors mentioned earlier. Approximately 30% of our comparable textbook sales declined relates to lower average textbook prices.

Clearly, students have prioritized by course materials not only by price but also by ease of access. The lower cost of course materials and expanded customization options affected the mix of learning materials sold and rented in the quarter.

We saw large increases in the sale of digital textbook and smaller decreases in the sale of new physical textbooks while sales in rentals of used textbook decreased dramatically. General merchandise sales in Q2 increased by 3.4 million or 1.9% on a comp store basis while year-to-date GM comp increased by 0.1%.

General merchandise sale accounted for approximately 25% of total sales for BNC for the quarter. GM sales in the second quarter are driven by traditional back-to-school categories like school suppliers, computers and computer products.

These categories continue to decline a bit faster than our general retail trends offset by implemented clothing and gift which continue to grow. In response to these trends, we continue to develop and expand our multi-channel retail experience ensuring that our customers have access to our products in our stores and increasingly online for our school branded e-commerce site and mobile apps.

Our web orders for the quarter continue to grow increasing 4.4% over last year, representing approximately 30% of BNC’s total sales for the quarter. This channel not only provides our students with ease of access they're demanding but highlights the value of our physical locations as more than 60% of those orders are picked up in the stores.

We continue to capture new customers and sales through True Spirit Athletic and Alumni-focused websites. We operate in five True Spirit sites, which is approximately double than we operated a year ago including sites for our Penn State, University of South Carolina, Georgetown and Liberty University.

We expect to continue growing the number of True Spirit websites given their positive impact on sales for both us and our partners with an additional 30 sites expected to launch in the coming year. We believe BNC has an extremely important industry role as it relates to inclusive access programs, which we brand as First Day.

Inclusive access program effectively address the needs of students, the institutions and the publishers by providing authentic course materials to the whole class in a digital format at a discounted rate charged through the students' tuition on the first day of class. We have been investing in the systems necessary to integrate, aggregate and distribute publisher and other digital content and transact commerce through our payment system.

We will be live on campuses including Penn State, Texas Tech, FIU and USF in January of 2018, ready for the spring rush with a complete rollout next fall. We expect to double the amount of First Day adoptions and using our scalability expect to substantially increase the sell-through of content by us and our publishing partners in a manner that is consistent with the students being rampant at the same time.

As we continue to roll our First Day initiatives, we are continuing to recourse our contractual exclusivity with our school partners by enforcing our rights as a sole provider of course materials on those campuses that have such contractual rights, approximately 90% of our contracts provide for such exclusivity right. The strength of our brand and our footprint enables us to reach our core college demographic, making BNED a strong partner of choice for many brand marketers.

As we improve our sophistication and understanding behaviors and preferences of our customers to the data we provide, we continue to refine and better target our own marketing and also better able to assist our brand partners in reaching their audiences with high value offers. This fall, we are excited to partnering with Target on their back-to-school strategy.

Our marketing partnership which kicked off in the fourth quarter of 2017 leverages our unique access to students and parents to promote Target's college essentials to our college campuses across the country. We and Target are pleased with the results so we have renewed the partnership for next fall.

We are also continuing to pursue other new marketing partnerships with brands seeking to engage the college consumer and look to increase the value of renewals on other current partnerships that we have as well. Just last week, we announced a very key strategic partnership with The Princeton Review.

This demonstrates our commitment to building a comprehensive ecosystem of high quality services that will support students throughout their academic journey. This partnership will enable us to offer The Princeton Review’s test products and services to our network of more than 6 million students.

As our partnership grows, we look forward to offering even more services that will support our students as they progress through their education. We believe that providing our students with these enhanced services to empower them to accomplish their academic and career goals will be an important competitive differentiator for BNED and help position us for continued growth.

As we move forward, we’ll continue to explore relationships with companies that enhanced our educational services or distribution platforms although that create compelling content offering for our partners and our students. Regarding Student Brands and our digital services, we continue to compete and win in a marketplace for our core bookstore business while we also continue to grow those digital offerings.

We have gained significant momentum in OER courseware adoptions with a number of institutional clients including community colleges, four-year public universities and four-year private universities. This past fall, we offered 10 OER courses serving more than 130,00 students.

We also recently announced key strategic initiatives for our digital business as we continue to execute on our direct-to-student model and plans. Our obvious acquisition of Student Brands gave us our first direct-to-student sales channel expanding our digital footprint to include Student Brands, 20 million unique monthly visitors.

As a leading direct-to-student subscription base writing skills service business, Student Brands contributed 4.5 million of revenue and 2.4 million of adjusted EBITDA to BNC in its first full quarter of integration. Importantly, Student Brands brings us strong technology and business knowledge to help build our direct-to-student product base and new digital services.

Another exciting strategic initiative underway is the partnership with Portland State University to co-develop a degree-planning solution. PSU is an active participant and leader in the frontier set convened by the Bill & Melinda Gates Foundation with partnerships from the Association of Public and Land-Grant Universities and others.

This agreement with PSU further broadens our suite of analytic solutions while allowing us to serve customers outside of BNC’s historical managed store footprint. Under this partnership, PSU and BNED will be able to help more students graduate on time to better pathways to employment and provide longer term planning to those universities.

Looking ahead, we’re continuing to focus on providing an unmatched retail and digital learning experience by optimizing our physical and digital assets together and separately. Regarding MBS, their total sales for the quarter were 134.9 million with 47.5 million attributable to MBS wholesale and 87.4 million attributable to MBS direct.

We’re very pleased with the progress we’ve made integrating MBS and the business performance has met our expectations. MBS has significantly expanded our footprint which now includes 6 million students served by nearly 1,500 physical and virtual stores and it has enhanced our financial flexibility and improved efficiency across the organization at the same time.

We’ve integrated MBS and BNC’s marketing team that are pitching to perspective schools of one offering not only for virtual solutions through MBS direct but hybrid solutions with BNC operating physical locations and MBS direct fulfilling of course break in the meetings. During the second quarter, we continue to realize synergies from inventory optimization, transferring underutilized inventory from BNC and MBS, which was unable to sell a large portion of that inventory.

We also continue to benefit from the supply cost management and optimize textbook sourcing MBS provides and increased efforts to monetize both our MBS and Student Brands customer basis through brand partnerships. Our key members in all of our businesses are relationship and service driven and they know their customers.

They are adapting to changing service models that incorporate a higher percentage of digital services and product into our institutional offerings. We understand that our cost structure will need to adapt as our business does, but we will endeavor to make our current talent workforce as part of that change by empowering them as change agents in the respective college communities whether physical or virtual.

We believe that campus bookstores will continue to have an important role in the community health and student service center for the foreseeable future and it is our job as senior leadership to work closely with all of our customer facing team members to constantly adapt to the changes in our business offerings and model. As we head to all inclusive models that should have much higher sell-through for us, we need to leverage that increased penetration across our various offering to the benefit of our college partners, students, our publishing partners and our company.

Before I turn the call over to Barry, I would like to note that we greatly value the feedback we have received from the investment community around how we report. We are committed to continually improving and engaging with our shareholders in responding to your feedback.

As always, we appreciate your continued support. In closing, we continue to be energized by all of our team members working, not just within each of their own business units, but also across all of our businesses together to create and deliver what our customers are demanding, affordable and high-quality integrated educational services and content that will result in improved student and partner experiences and outcomes.

We are strengthening our core business while developing new ones such as direct-to-student digital services will allow us to offer services outside our managed course footprint with margins and scale much higher than our historical business. We are focused on executing our strategy for change to drive results and build long-term value.

With that, I will turn the call over to Barry for the financial review. Thank you.

Thank you, Mike. Please note that the second quarter ended on October 28, 2017 and consisted of 13 weeks.

All comparisons will be to the second quarter of fiscal 2017, which excludes MBS and Student Brands both of which were acquired after last year’s second quarter. Total sales for the quarter were 886.9 million compared with 770.7 million from the prior year.

The increase of 116.2 million or 15.1% was primarily driven by revenue of 134.9 million from the MBS segment, partially offset by an 8.9 million decrease at the BNC segment and inter-company sales eliminations of 9.8 million. The sales at BNC decreased as the comparable store sales declined 33.8 million exceeded the sales increased related to net new stores of 21.1 million and increases of service revenue which includes Student Brands revenue of $4.5 million.

Our service revenue includes high margin revenue from Student Brands, income from brand partnerships such as Target along with Promoversity and LoudCloud. All of these allow us to derive new sources of revenue in and out of our footprint and further monetize our customer base, a strategic priority of the Company as Mike had mentioned.

Comparable store sales declined by 4.4%, as compared to a decline of 3.2% in the prior year period, comparable stores sales were impacted by lower student enrollment specifically in two-year community colleges, increased consumer purchases directly from the publishers and other online providers and other more general negative retail trend. Textbook sales for the second quarter declined 5% compared to a prior year declined of 3.7% impacted by the items previously mentioned and by lower average selling price of course materials driven by lower publisher prices resulting from the shift to lower cost and more affordable solutions including digital.

Sales for MBS in the second quarter were 134.9 million and in line with expectations. The second quarter is the highest sales quarter for MBS direct due to the back-to-school sales for the higher Ed accounts while wholesale is primarily filling late orders for college book stores.

Fiscal year-to-date sales at MBS were 274.9 million compared to 302.6 million in the fiscal 2017 pro forma quarterly financials. The $27.9 million decline is in whole and primarily the result of a lower supply of bulk purchases of new textbooks in the two largest publishers, which has historically represented less than 10% of MBS wholesale supply and produces one of our lowest gross margins.

MBS continues to expand the existing sources of inventory as well as for some new sources of wholesale supply in order to replace the decreased supply from the publishers. Our rental income for the quarter was 69 million, a decrease of 3.7 million or 5.1% as a result of more affordable publisher solutions, lower average selling prices and lower supply of used inventory in BNC stores as we continue to optimize the inventory between BNC and MBS.

Gross margins increased by 26.3% to 216.6 million or 24.4% of sales. The margin at BNC of 22.5% was 20 basis points higher than the previous period.

The increase was primarily the result of including the high margin student grant service revenue, higher rental margin rates and lower contract cost partially offset by an unfavorable sales mix. The adjusted margin rate at MBS was 25.4% excluding the incremental cost or sales related to the inventory step up as part of the purchase accounting which was fully amortized in the second quarter.

Selling and administrative expenses increased 14 million or 13.9% due to the $15 million of expenses at MBS including 1.7 million of expense allocation from BNC to MBS. BNC's selling and administrative expense decreased by $1 million or 1% to 110.1 million from 101.1 million, the decrease was primarily due to a $2.6 million decrease in comparable store payroll and operating expenses and $1.7 million of shared corporate overhead costs allocated to MBS.

These decreases were partially offset by a $1.4 million increase in new payroll and operating expenses net of closed stores as a result of $21.1 million increase in net new store sales and a $1.9 million increase in Student Brands and digital expenses. The intercompany elimination of sales and cost of sales are primarily related to the sales from MBS to BNC, and wholesale commissions earned on textbooks sold to MBS from BNC.

As expected, in the quarter the gross profit elimination from the first quarter reverse and we realized $11.7 million of adjusted EBITDA as BNC sold through returned the inventory purchase from MBS and on hand at the end of the first quarter. The fiscal year-to-date adjusted EBITDA impact is $45,000.

The fiscal second quarter net income of $48.1 million or $1.03 per diluted share compared with $29.3 million or $0.63 per diluted share in the prior year. Due to the acquisition of MBS and Student Brands and their results, total adjusted EBITDA increased by $32 million to $102.4 million for the quarter compared to $70.4 million in the prior year.

During the quarter, BNC contributed $71.6 million of adjusted EBITDA while MBS contributed $19.2 million of adjusted EBITDA and we received the $11.7 million benefit of the reversal of the gross profit elimination from the prior quarter. Fiscal year-to-date, BNC adjusted EBITDA was $34.7 million an increase by $0.8 million as the contribution of net new stores, the acquisition of Student Brands and the segment allocations to MBS exceeded the impact of the comp store sales decline.

Fiscal year-to-date MBS adjusted EBITDA was $35.2 million and decreased $2.3 million as compared to the pro forma financials as the EBITDA impact of the lower sales and the BNC segment allocations exceeded the favorable margin and expense savings. The effective tax rate for the fiscal second quarter was 40.6% compared with 47.8% in the prior year.

The lower tax rate compared with last year reflects the reduced impact of non-deductible expenses of our executive compensation program, the income tax provision for the current period also incorporates the reduced realization of deferred tax assets associated with divesting of certain equity awards. Our cash balance at the end of the quarter was $17.5 million and we had $41.8 million in outstanding borrowing.

We remained out of the facility with no borrowings outstanding for approximately seven weeks during the quarter. The lower cash and higher borrowings compared with last year are the result of the MBS and Student Brands acquisition and we expect average debt to be approximately $150 million over the course of the year.

At the end of the fiscal second inventory increased by 114.2 million compared to the same period in fiscal 2017, primarily due to the inclusion of MBS as BNC inventory decreased by 19.8 million as a result of continued improving and in purchasing and inventory management and BNC realizing the synergies related to inventory optimization by transferring underutilized inventory for BNC to MBS. Accounts payable was $19.1 million higher also reflected the inclusion of MBS.

CapEx for the second quarter was 14.5 million compared to 11.3 million in the prior year. The increase of 3.2 million was primarily due to both new store contracts and both renewals of existing stores as well as MBS.

Cash flow from operating activities increased by 20.3 million due to our improvements in earnings mostly as a result of recent acquisitions. Currently, our BNC store count is 777 opening zero new stores and closing four in the quarter.

We will be opening another six stores in fiscal 2018 based upon the new contract signed today with an additional 18.3 million of annualized estimated sales bringing the BNC today annualized new business in $70 million. Our MBS direct store count is 706 having signed 14 and closed 20 contracts during the fiscal year-to-date period.

In addition, MBS contracts open an additional four stores bringing the total to 18 new stores with estimated annual sales of 5.2 million. Turning to our fiscal 2018 outlook, for fiscal 2018, the Company expect sales at BNC to be relatively flat while BNC comparable store sales are projected to decline in the low to mid single digit percentage point range year-over-year.

In addition, the Company expects consolidated sales to be in the range of 2.25 billion to 2.35 billion before intercompany eliminations. The Company expects BNED’s adjusted EBITDA to be in the range a 105 to $120 million.

Capital expenditures are expected to be approximately 50 million, an increase in fiscal 2017 due to the new store growth at BNC. With that, we will open the call for questions.

Operator, please provide the instructions to those interested in asking a question.

This is Alex Fuhrman with Craig Hallum. Congratulations on a really nice looking quarter here.

You know why to ask about some of the partnerships that you’ve mentioned throughout the quarter, The Princeton Review partnership that was recently announced. Can you give us a sense of what exactly you will be selling of The Princeton Review?

Obviously, they have a lot of physical materials, but certainly a lot of interesting services as well curious which exactly services you could be selling-through through you BNED stores? And how that partnership could look?

And then just more broadly thinking about the renewal of the Target partnership and just other efforts to leverage the really attractive position you guys are in technically on college campuses. Could there be a lot more kind of partnerships like this going forward in which you leverage your student base?

Or are these kind of the big ones for now?

Alex, it’s Mike. Yes, definitely there could be more.

I think that what we are trying to do and the objectives of what we are trying to do, what we are doing is we are building a suite of digital services in go direct-to-student, I am talking to your first point in first question this right now. The Princeton Review, highly respected source of test prep and other services, I'll let Kanuj hope to get into specifically what they are.

But to be competitive, you have to either -- if you want to go direct-to-student and available comprehensive product suites of services you either have to build it yourself or you have to do with partnership. We determined that we are going to do a combination of those.

Students Brands was the first kind of step in going direct-to-student gave us great capabilities and by adding different rates to the store, we will end up with the comprehensive suite of digital services, we can market both across our footprint as you point out and then also outside of our footprint. I'll let Kanuj talk about The Princeton Review.

He did this deal, worked hard on it and understands it intimately.

Hey, Alex, it’s Kanuj. So in the test prep market, our thinking was that wasn’t something we wanted to try to replicate just with the brand value and depth of experience that The Princeton Review had as a company.

We felt that was something that was a perfect opportunity for a partnership and also a perfect opportunity from their perspective to access students with both our store base and our commerce base. So we think we can bring to their very unique and compelling value proposition, jointly.

I think it was basically due to leverage in-store events for things like [MPAS] and GREs and different modality online whether it’s synchronous or asynchronous learning. They are also a leader in the tutoring space, so we are talking and thinking through how to best increase some of those services.

We felt in consuming those services and offering them to students those are ones that were ideally suited with the partnership. So, that’s in a nutshell.

Yes, regarding the brand partnership and ability to do more on leverage, Patrick is going to address that.

So, our partnership team has had an ongoing conversations with numerous either current partners such Target with renewals, which they were so happy with the results that we produced jointly through the back-to-school rush that they’ve already renewed their relationship for about a year. Our pipeline of new leads is very, very strong.

We are having a lot of coverage out in that market space. So, we continue to grow this business.

We see this is one of our key drivers in the future as we grow the BNED into a multi-faceted company.

Yes, I think one of the points to make about that too, and Joel is here, who runs our general merchandise business, but as you see some of -- there is a trade-off between some of these partnerships, what you do with the Target for example and some of the products like school supplies and those kinds of things that we sell inside the store. So, we look at that in terms of its impact on our stores where we operated, where we can I think leverage the brand partnership the best versus how it might affect our business internally and our general merchandise business, which complimentary and we're not going to allow total access to all of our stores.

We are going to do it in a way that’s thoughtful and that balances the impact of the financial impact as well as the strategic impact and the impact on each of our campuses that are important to us with a brand partnership versus being ourselves.

And then if I could switch gears and ask a question about the accounting. It looks like the MBS intersegment elimination on the gross profit line from Q1 was more or less exactly reversed here in Q2.

Is that basically the dynamic that we should expect to see going forward? Is that whatever elimination you have in the first and third quarter gets more or less equally reverse in the second and fourth quarter?

And then specifically just thinking Q2, I imagine has the overwhelming majority of your fall rush incorporated within it; however, I'm sure you lose a little bit more of your spring rush into February which is Q4. So, is there anything about that kind of reversal that we saw between the first and second quarter that could look differently in the third and fourth quarter?

Hi, Alex, it's Barry. Yes, so as it relates to the elimination, as we have talked in Q1, clearing the first quarter MBS is selling inventory to the BNC stores that is the end of Q1 inventories at a high point.

Therein Q2, we sell through that inventory and return the unsold. So in essence of the end of Q2, we are very little owned inventory from MBS in our stores.

As we go into Q3 where we will be buying inventory again in November and December building that inventory, January we will sell it down a bit. So, the elimination will be less, as we move into the end of April and through Q4, again, we return unsold inventory and the only inventory that we have on hand that came from MBS at the end of the fiscal year is a small amount of the inventory that we've purchased through the summer season.

That was essentially purchased in the last week or two of April. But otherwise, the seasonality and the increase and decrease of the gross profit elimination, we would expect to be very consistent year-over-year.

It’s Greg Pendy of Sidoti. Thanks for taking my call.

I just wanted to I guess dive into -- correct me if I'm wrong, but are we cycling all the stores right now were price matching this year versus maybe 50% last year? Is that correct?

Yes, this is Patrick, Greg. Yes, we are fully price matching at every one of our locations.

And I think this is -- I think we were doing that also last year in the second half of the year, but it was the majority of our stores last year for some time.

And was that a factor in the gross margins? I know they were up 20 basis points and you called out some items, but did that have an offsetting impact at all?

It has a small impact on it, Greg. But when it's worked through us in the confidence of our student customers is far our way by any margin reduction.

I think it was 40 basis points Barry. So it was a very small amount to pay for the amount of goodwill and confidence that you’ve generated amongst your core customer base.

And then I guess just one other question. This is probably the first time you guys have talked this much about, the digital side of things, and I know in the past you had sort of a concentrated effort.

Can you kind of speak to us just how LoudCloud plays into that market? And is there anything out there?

Is it may be the lowered price? Is it mainly price driven?

Do you think that strong people towards the digital offerings out there in the market that they’re starting to see, it seems like accelerating a bit?

Yes, I will let, Kanuj -- this is Mike. I will let Kanuj answer that in more detail.

It’s important we talk about digital and kind of define what you need and dealing with the LoudCloud, get their services are Student Brands. Within LoudCloud, you have an analytics base product that as we said during the prepared remarks that we adapted for different things at -- and we talked about Eastern Gateway, I think last quarter and we talked Portland State this quarter.

There is a different -- there is a platform that LoudCloud has built after the years to customize products for different needs institutionally. Within LoudCloud, you also have OER products just content.

And the reason I'm mentioning this is because it’s important as you go to inclusive access to realize that these digital products could be followed into inclusive access product as well. We are working with our publishing partners, distributing their digital content and working hard to be probably more inclusive access integration and distribution.

There are also things that need to do with LoudCloud’s products in First Day, but I'll let Kanuj talk more directly to your question about what you see in the market in terms and what -- where the demand is coming from, it’s really a question.

Yes, I think for LoudCloud especially on the OER content side and more broadly as Mike referred to in his earlier comment, there is a general demand fall for more affordable solutions. So we look at it as a filler to slot in LoudCloud products where there’s need.

So specifically in and around of affordability and accessibility, there are some schools that OERs right work, where those schools have shown an interest in right work. We have been pretty much in the mix and really getting some nice traction, especially our partnership in Eastern Gateway has driven out very nicely.

Otherwise, the broad need is in and around analytics which is less driven by affordability and price, but its more solution design to improve outcomes and ultimately retention. So, we are seeing built strong demand for OER content, courseware as well as the analytics product and solutions, both the existing LoudCloud, which is our retention solution as well as one that’s under development with Portland State.

We’re probably seeing a lot of clients shown interest in those as broad suite of products so.

If you think about affordability, one of the interesting about this going on at PSU that could replicated elsewhere would be great planning, many students don’t graduate in four years. So we think about affordability and textbook and other forms of curriculum, so if you are spending an extra year of longer in school because you haven’t really focused in around that requirements or your major, how to get there as quickly as possible during four years, I mean there is a large affordability benefit in these products as well as benefits for outcome measurement.

So, it's all coming together and these objectives in just ways, but it's very iterative in terms of what's going on in the market right now for digital. And I think Kanuj and his team, everybody at the table a lot of credit, everybody in our stores, we have a lot of feedback on what these analysts got 10,000 student every week, every talk to that what do you want, and we really listen or trying to tailor our products what will help both the students and the institutions.

So, yes, there is increased emphasis in this earnings call and digital because digital is coming more rapidly than we have seen it in prior years and seasons and we are right in the middle of it. We have work to do, but we are going to -- one of the reasons our EBITDA guidance range just as wide it is, is because we want to make sure we have some flexibility to invest and the things we need to invest in to grow the Company in the future as opposed try to hit a EBITDA number that maybe within a $2 million here or there that sacrifices our long-term growth and long term value of the Company.

And that’s kind of a long way to answer your questions trying to but we will start to figure out how to break out digital as we go forward and show more of a way on it. Obviously, it's important from a value perspective externally as well as internally.

Thank you, Lynn, and thank you for joining today's call. Please not that our next scheduled financial release will be our fiscal 2018 third quarter earnings, which will be on or about March 6th.

Thank you. Have a good day.