Hello, good morning, and welcome to the Barnes & Noble Education Earnings Call. At this time, for opening remarks and introductions, I would like to turn the call over to Andy Milevoj, Vice President, Corporate Finance and Investor Relations. Please go ahead.
Good morning, and welcome to our fiscal 2023 first quarter earnings call. Joining us today are Mike Huseby, CEO, Tom Donohue, CFO, Jonathan Shar, Executive Vice President, BNED Retail, and President, Barnes & Noble College, David Henderson, President of MBS, and David Nenke, President of DSS. 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. Now, I'll turn the call over to Mike Huseby.
Thanks, Andy. Good morning, everyone. Our first quarter began with a solid start, benefiting from a strong graduation season as many schools returned to in-person graduation ceremonies and, in some cases, held multiple ceremonies to provide opportunities for those who were not allowed to attend and celebrate in person over the past two years. We experienced stronger general merchandise sales, especially within our logo and emblematic products, as on-campus traffic grew from increased student recruitment events and other activities as compared to each of the two prior years. Our first quarter is a seasonally slow academic period, which primarily consists of graduation activities, summer classes, and preparing for the fall back-to-school rush. In addition to the strength of our general merchandise business, our first quarter results also benefited from the continued growth of our Inclusive Access programs, which drove a 1.5% increase in comparable course material sales.
Total first-day sales grew 67% to $45 million. Currently, we are in the thick of our peak fall rush annual sales period. As reported last quarter, we entered fall rush with strong year-over-year growth in our contracted First Day Complete, or FDC, inclusive access offerings. With FDC having achieved scale in fiscal year 2022, we now have meaningful and objective proof points that FDC improves student outcomes through easier access, convenience, and substantially enhanced affordability. Our surveys have shown that students believe our FDC model better prepares them academically, helps them achieve better grades, and is easier to use than an a la carte model. Many students cited real benefits from FDC, such as reduced financial stress and the ease of getting all required books and materials ahead of classes, benefits that students said increased their likelihood to continue their education at that school.
We have also received strong feedback from school faculty and administrators who have noted that the FDC model has made it easier to engage earlier in the term with their students who are getting their assignments completed earlier, as almost all of their students have their course materials on or before the first day of classes. Further validating our internal research on FDC's benefits, a research scientist at the University of New Hampshire examined the impact of equitable access course material models on student outcomes at two-year public institutions. The research explored the relationship between success rates, as defined by course completion rates, and a student's participation in an equitable access course materials program. Results of that study revealed a 16% increase in the course completion rate for participants compared to non-participants.
It also showed a 21% increase for Black students, a 17% increase for Pell Grant students, and a 16% increase for Hispanic students when comparing participants and non-participants. This independent research reveals powerful data that supports our proprietary research and positioning that First Day Complete improves student outcomes and enhances a student's academic journey. We believe this study should serve as a catalyst to accelerate demand for our FDC solution in the marketplace. 111 of our campus stores are utilizing First Day Complete for this fall term, representing undergraduate enrollment of approximately 545,000 students, representing an 85% growth rate over fall 2021 based on undergraduate student enrollment.
Additionally, we expect our general merchandise business to benefit from increased on-campus traffic and an increase in the number of activities and events as schools approach a more traditional learning experience. We are seeing tremendous demand for both FDC and our all-digital offering for First Day by Course across all types and sizes of institutions. With a strong pipeline of institutions that are currently evaluating the FDC program, we expect this growth to continue to accelerate. For example, in the spring term of this academic year, we are excited to begin offering First Day Complete at the University of Connecticut. These results reinforce BNED's differentiated and collaborative approach to working with our partner institutions to provide innovative solutions to help drive improved learning outcomes for students nationwide.
As Tom will discuss further, our retail non-GAAP adjusted EBITDA loss for this seasonally slower quarter was $25 million as compared to a loss of $19.6 million in the prior year period. The adjusted EBITDA loss increased on higher selling and administrative expenses, primarily related to the expanded staffing at stores in response to greater on-campus activity and to prepare for the peak fall term, including support for the growth of our First Day programs, which offset the sales and gross margin improvements during the quarter. Our wholesale business continued to be impacted by supply constraints from the lack of used book inventory available for sales, resulting from the disruption to the traditional on-campus buyback activity over the last few years, as well as lower overall demand due to declining enrollments and the transition to digital course materials.
Wholesale revenue declined 16.6% during the quarter, while EBITDA declined by $3.6 million. BSS continued its growth trajectory in the quarter. Total revenue grew 10.6% on a year-over-year basis. We are also continuing to see positive momentum in scaling our Bartleby institutional business. In addition to Delgado Community College, which we piloted in spring 2022, we are excited to announce Eastern Kentucky University, EKU, as our most recent institutional partner. We are integrating the full suite of Bartleby products into the EKU's learning management systems, providing 24/7 access to a full suite of on-demand study and writing resources for undergraduate and graduate students starting this fall. With that, I'll turn it over to Tom.
Thanks, Mike, and good morning, everyone. Please note that the first quarter of fiscal 2023 consists of 13 weeks ended on July 30, 2022. All comparisons will be to the first quarter of fiscal 2022 unless otherwise noted. As Mike said earlier, the first quarter is typically a low revenue quarter for the company, consisting primarily of summer courses. We are encouraged by the rebound in our first quarter sales, especially within our general merchandise business. Total sales for the quarter were $263.9 million, compared to $240.8 million in the prior year.
This $23.1 million or 9.6% increase was comprised of a $26 million increase in the retail segment, a $7.4 million decrease in the wholesale segment, and a $0.9 million increase in the DSS segment. Retail sales increased by $26 million or 12.4% as compared to the prior year period, benefiting from a rebound in both our general merchandise and course material sales. Sales grew on a strong graduation season, a continued growth of logo and emblematic products, and higher demand for our café and convenience offerings, which benefited from the increase of on-campus traffic as compared to the prior year period. Retail sales also benefited from the continued growth of our Inclusive Access programs, which drove a 1.5% increase in comparable course material sales.
Total First Day sales grew by 67% to $45 million, with First Day by Course sales growing 49.8% to $28.1 million and First Day Complete sales doubling to $16.9 million. As Mike noted, we have 111 stores that are utilizing our First Day Complete offering for the fall term. While we previously expected to enter into the fall term with 112 stores, as part of our ongoing efforts to operate more efficiently, we closed 1 store location within a larger school system that was essentially a rush pop-up shop. We are still serving the same student body population at this institution.
On a gross comparable store basis in which logo and emblematic sales fulfilled by Fanatics and Lids are included on a gross revenue basis, retail sales increased 15% during the quarter, consisting of a 1.5% increase in textbook sales, which is incremental to the 21.9% increase a year ago, and a 34% increase in general merchandise sales, which is incremental to the 119.4% increase a year ago. Please note that beginning this quarter and going forward, we included trade books within our general merchandise business category.
Net sales for the wholesale segment decreased $7.4 million or 16.6% to $37.1 million, primarily due to COVID-19 related supply constraints resulting from the lack of on-campus textbook buyback opportunities during the prior fiscal years. Lower customer demand resulting from a shift in buying patterns from physical textbooks to digital products. DSS sales grew $0.9 million or 10.6% to $9.2 million, benefiting from an increase in subscription sales. The consolidated gross margin rate for the quarter was 24.1% compared to 24.9% in the prior year period. The rate decline was primarily due to lower sales within the wholesale segment, as well as a decline in the wholesale margin rate.
Our selling and administrative expenses increased by $12.3 million compared to the prior year period, primarily due to expanded staffing in our stores in response to the resumption of greater on-campus activity and in the preparation for the upcoming fall term, including support for the growth of our First Day programs. We also continue to invest in our DSS business. At the end of the quarter, our cash balance was $9.1 million, with outstanding borrowings of $260.3 million, as compared to borrowings of $203.7 million in the prior year period. This increase is due to the impact that COVID-19 has had on our business and cash flows over the last two years. CapEx for the quarter was $9.7 million, as compared to $11.4 million in the prior year.
Currently, our retail segment operates 1,406 college, university, and K-12 school bookstores, comprised of 793 physical bookstores and their e-commerce sites, as well as 613 virtual bookstores. With that, we will open the call for questions. Operator, please provide instructions for those interested in asking a question.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, it is star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. The first question today comes from the line of Ryan MacDonald from Needham & Company. Please go ahead. Your line is now open.
Hi, thanks for taking my questions. Congrats on a nice quarter here. You know, maybe just to start, obviously, there's a lot of questions around the enrollment outlook and sort of what the picture's gonna look like for this fall. You made a couple of comments in the prepared remarks about sort of a strong fall rush or something that seems to be improving. Would just be curious to see, you know what you're seeing right now in terms of what you know, the enrollment picture is looking like at the universities you work with and how that fall rush traffic is trending relative to last year.
Hey, Ryan, it's Jonathan Shar. Thank you for the question. It's really too early to provide a specific view on enrollment or to quantify the traffic, although we're really optimistic that there is increased sort of traffic and students on campus and fewer restrictions on those campuses that will welcome you know additional visitors and such to campus. So, you know, some of our optimism is based on the fact that our general merchandise inventory is in much better shape as compared to last year, which was a startup year for FLC on the emblematic side of our business. Last year's supply chain challenges are much improved from a inventory and replenishment standpoint.
We also have, as we've noted, you know, 111 campus stores that are utilizing First Day Complete, as compared to 65 in the prior year, and significant 85% growth in the number of enrolled students. We're really excited about that and the impact that will have on our course material business. We really won't know what the outlook for enrollment's gonna be until after the add/drop period and when we get to sort of the national reporting on that.
Yeah, Ryan, it's Mike. I think that the fact that we grew courseware sales in the summer and we grew them in fiscal year 2022 speaks to the strategy of First Day Complete and why it was put in for exactly that reason. We knew enrollments, at least longer term, as you know, are gonna be affected by the demographic shift, where the traditional college-age student demographic is gonna be dropping off fairly dramatically in a couple of years. While there are enrollment, you know, decreases over the last two years, particularly in two-year schools, I think that the way we're addressing it, you know, is effective. As John says, we will have the enrollment data in a month or so. We just don't have it.
We don't have it yet, and there's really no way to get it until it's gathered by the right authority, so to speak.
Helpful color. I appreciate that. You know, maybe shifting to First Day Complete, so great to see the continued growth in the number of universities there. You know, you're in your, I guess, maybe second sort of big year in terms of adoption with First Day Complete in the fall semester. I'm curious, as you're looking back at the 2021 cohort, as that's maturing into this fall, any trends that you'd call out in terms of student usage or what the opt-in rates are looking like sort of into your second year with those existing, that 2021 cohort as you go into this year? And then maybe a question on what you're seeing in terms of the mix of digital versus physical textbooks as a component of First Day Complete.
Yeah, Ryan, it's Jonathan again. I would say that, you know, again, a little too early to tell because we're not through the add-drop period is when we get the information on opt-out rates at schools that make that an option. So we don't have any data to quantify. But through observation and spent the last 2.5 weeks on campuses across the country who are entering rush, including many that are operating First Day Complete for both, you know, sort of an ongoing basis and for schools that are just transitioning to that model. I would say that the knowledge and acceptance of that is, you know, sort of significantly improved, again, just from observation. We've improved the process a lot through investment in technology, making things more seamless, clear.
We're anxious to see what the cohort's gonna look like, but I think that there's gonna be some, you know, sort of positive gains in the participation rates and the impact First Day Complete will have even in the schools that had that the prior year, to your point. I think that's gonna be something that we'll continue to track. We're making, you know, investments in really focusing on improving the student experience as we learn. I think the business will benefit and the First Day Complete schools will benefit from that.
Yeah. Maybe just one more for me on DSS and bartleby. You know, just curious what you're seeing in terms of pipeline for incremental opportunities to bundle bartleby within First Day Complete, and then maybe just a bit of housekeeping. Can you remind us what the gross subscriber number for bartleby is now and how that compares to. I think you're at 400,000 gross subs last quarter. Thanks.
David, thank you. Take that question.
Yeah, certainly. Thanks. As we piloted the institutional package at Delgado in March of this year, learned a lot, really excited about the execution of both Delgado and EKU as we get into fall this year. We're on campus and it's in the LMS, and we're talking to students and kind of faculty to show them how to use the product, and we're excited about the possibility of the semester ahead. As we are talking with the institutional customers, good interest and from other institutions. We'll continue to learn as much as we can and collect stuff and talk to other institutions. More to come on that.
There's, I think, a good deal of excitement from the schools that we're on at the moment, as well as internally and certainly a lot of interest from schools that we're talking to. That's exciting as we get into the fall semester. In, as you mentioned, we were just over 400,000 subscribers last quarter. This quarter, another kind of 10% or 11% increase on that for the quarter, so relatively consistent with the revenue number.
Great. Thank you very much.
Thank you. The next question today comes from the line of Alex Fuhrman from Craig-Hallum Capital. Please go ahead. Your line is now open.
Hey, guys. Thanks very much for taking my question. You know, I wanted to ask about how your consumers have been feeling and spending over the past couple of months since we got the last update from you guys, and you initially gave your guidance. You know, we've obviously seen, you know, inflation getting a lot worse and a lot of other retailers talking about consumers pulling back on discretionary purchases. You guys obviously have a very specific consumer and are much more differentiated. Are you seeing the same thing where your students are being a little bit more conservative on apparel and general merchandise purchases?
Curious, I know it's only been a week or so, but you know, curious if there's maybe been any change in kinda spending behavior, given the news about debt forgiveness that came out recently.
Yeah. Alex, it's Mike. I'll take an initial crack at that, but I think it's maybe obvious, as you just said, that it's too soon to determine whether or not, you know, debt forgiveness, which pretty much relates to those who've already graduated, I think, more so than, you know, those that are in school that we're servicing right now, although there is, I'm sure, crossover, too soon to know whether that's gonna fuel additional spending on campus. We're certainly not counting on that. As it relates to consumer spending in general, I think we are geared up. I think as John mentioned, in partnership with Fanatics and Lids in our stores for general merchandise, we are geared up.
They have spent a lot of money with us making sure that our stores are ready to satisfy the demand that we think is gonna be there. We saw a bounce back last year, and you know, we published the increases in spending last year, and we talked about them in our earnings release this year for general merchandise, continuing to see increased spending on general merchandise. The impact of inflation has resulted in some price increases in what we sell in terms of general merchandise. We're trying to pass on as much of that.
We've also tried to be very smart about how we deal with our offers as it relates to freight and who pays what, how do we share that with consumers, not offering free shipping for certain orders that we used to offer for, that type of thing. Your question's got a couple of elements to it. I think in terms of consumer spending, you know, we're certainly expecting, as we said in our release, a very robust, strong fall rush, and we're geared up for that in the stores on general merchandise and also through our Inclusive Access and à la carte courseware programs.
In terms of inflation and costs and how it impacts us, it is impacting us, but we're trying to anticipate that as much as we can and manage it by sharing those costs and, you know, in other ways and just really strong focus on our own internal cost structure, which, you know, we've had for a number of years, which was really exacerbated and emphasized by COVID and our need to, you know, contain costs as some of the campuses shut down that are now all open, thank goodness. To answer your question directly, we don't have any data on consumer spending, but we do expect, you know, we do expect a good fall rush with a number of activities, sporting activity.
Keep in mind that last fall we had Delta variants, and in January we had Omicron variants. Those variants did have an impact on our store traffic and also on spending. We expect to see that. We don't expect to see the repeat of those kinds of COVID impacts in this season, and so far we are not seeing that.
That's great. Thank you very much.
Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. There are no additional questions waiting at this time. I'd like to pass the conference back over to Andy Milevoj for closing remarks.
Great. Thank you. Thank you all for joining today's call and your continued interest in BNED. Please note that our next scheduled financial release will be our fiscal 2023 second quarter release in December. Have a good day, everyone.
This concludes today's conference call. Thank you all for your participation. You may now disconnect your line.