FC Franklin Covey Co

Consolidated First Quarter Revenue Increases to $69.1 Million compared with $68.4 Million in the First Quarter of Fiscal 2024

Education Division First Quarter Revenue Increases 11% to $16.5 Million compared with $14.9 Million in the Prior Year

New North America Sales Force Structure Now in Place with Sales Hiring Activities Ahead of Plan

Liquidity Remains Strong at over $115 Million, with $53.3 Million of Cash and No Drawdowns on the Company’s $62.5 Million Credit Facility

Company Affirms Guidance for Fiscal 2025

Franklin Covey Co. (NYSE: FC), a leader in organizational performance improvement that creates, and on a subscription basis, distributes world-class content, training, processes, and tools that organizations and individuals use to achieve systemic changes in human behavior to transform their results, today announced financial results for the first quarter of fiscal 2025, which ended on November 30, 2024.

Financial Highlights

The Company’s consolidated revenue for the quarter ended November 30, 2024 grew 1% to $69.1 million compared with $68.4 million in the first quarter of fiscal 2024. Rolling four-quarter revenue for the period ended November 30, 2024 increased 3% to $287.9 million compared with $279.6 million for the comparable period ended November 30, 2023. The Company’s financial performance for the first quarter of fiscal 2025 included the following:

• Enterprise Division revenues for the first quarter of fiscal 2025 were $51.6 million compared with $52.4 million in fiscal 2024. The decrease was primarily due to decreased revenue through the Company’s offices in China and Japan and by decreased international licensee revenues as North America segment sales were essentially flat for the quarter. North America segment sales were essentially in-line with the Company’s expectations as the Company transitions its sales force in North America to a more focused structure that is expected to accelerate sales growth in future periods. All Access Pass (AAP) subscription plus subscription services revenue was $41.0 million in the first quarter of fiscal 2025 compared with $41.6 million in the prior year.
• Education Division revenues in the first quarter increased 11% to $16.5 million compared with $14.9 million in the first quarter of the prior year. First quarter revenue growth was primarily due to increased sales of classroom and training materials, due in part to a new initiative with a state that began in the first quarter of 2025, increased coaching and consulting revenue, and increased membership subscription revenues resulting from new schools which started The Leader in Me during fiscal 2024. Delivery of training and coaching days remained strong during the first quarter of fiscal 2025, as the Education Division delivered approximately 100 more training and coaching days than the prior year.
• Total Company subscription and subscription services revenues reached $55.8 million, a 2% increase over $54.8 million in the first quarter of fiscal 2024. For the first quarter of fiscal 2025, subscriptions invoiced equaled the first quarter of the prior year at $24.7 million.
• The Company’s operating expenses for the quarter ended November 30, 2024, increased $4.3 million compared with the prior year, which was primarily due to a $3.0 million increase in selling, general, and administrative (SG&A) expenses and a $1.4 million increase in restructuring expenses. The increase in SG&A expenses was primarily due to increased associate costs related to new personnel, including new sales and sales support personnel hired in connection with the restructuring of the North America sales force, compensation increases, and benefits costs; and from advertising and promotional costs primarily related to the launch of the Company’s refreshed The 7 Habits of Highly Effective People offering, which was released during the first quarter. Restructuring costs were for severance related to the execution of sales and sales management restructuring initiatives that began in fiscal 2024.
• Operating income for the quarter ended November 30, 2024 was $1.5 million compared with $5.3 million in fiscal 2024, and reflected the factors noted above. Net income for the first quarter of fiscal 2025 was $1.2 million, or $0.09 per diluted share, compared with $4.9 million, or $0.36 per diluted share, in the first quarter of the prior year.
• Adjusted EBITDA for the first quarter of fiscal 2025 was in-line with expectations at $7.7 million compared with $11.0 million in the prior year. In constant currency, Adjusted EBITDA was $8.1 million in the first quarter of fiscal 2025. Adjusted EBITDA for the rolling four quarters ended November 30, 2024 increased to $52.0 million compared with $47.6 million for the comparable period ended November 30, 2023.
• Deferred subscription revenue at November 30, 2024 increased 10% to $95.7 million compared with $87.2 million at November 30, 2023. Unbilled deferred subscription revenue at November 30, 2024, was $73.0 million compared with $82.5 million at November 30, 2023. At November 30, 2024, 55% of the Company’s AAP contracts in North America were for at least two years, compared with 54% at November 30, 2023, and the percentage of contracted amounts represented by multi-year contracts at November 30, 2024 was equal to the prior year at 60%.
• Cash flows from operating activities for the first quarter of fiscal 2025 remained strong and totaled $14.1 million compared with $17.4 million in fiscal 2024. Free Cash Flow for the first quarter totaled $11.4 million compared with $13.7 million in the prior year. The decrease in cash flows during the first quarter of fiscal 2025 was due to lower operating income than in the prior year resulting primarily from the growth investments associated with the realignment of the North America sales force in the Enterprise Division.
• The Company purchased 145,768 shares of its common stock for $6.0 million during the first quarter of fiscal 2025. These shares were withheld to cover statutory income taxes on stock-based compensation awards that vested and were issued during the first quarter.

Paul Walker, President and Chief Executive Officer, said, “Our first quarter revenue grew 1% to $69.1 million compared with $68.4 million in last year’s first quarter. This result reflects strong growth in our Education Division where revenue grew 11% while sales were flat in the Enterprise Division, which was in-line with our expectations when we began the transition of our sales force to a more focused and powerful go-to-market model in North America. First quarter Adjusted EBITDA was $7.7 million, or $8.1 million in constant currency, which was also in-line with our expectations for the quarter. This result compares with $11.0 million of Adjusted EBITDA in fiscal 2024 and includes the first quarter impact of $16 million of expected growth investments in fiscal 2025 to transform our sales structure and accelerate sales growth in North America.”

Walker continued, “In our earnings call held in November, we shared that we were pleased to have substantially achieved the three big strategic initiatives we began in previous years. These initiatives included 1) the transition of our business model to a subscription-based model; 2) significant prior and ongoing investment in technology to enable our solutions to be delivered seamlessly across all modalities and in more than 25 languages worldwide; and 3) significant prior and ongoing investment to ensure that our content, offerings, and solutions represent the gold standard in our market. Now that these initiatives are substantially in place, we are now positioned to leverage these strategic achievements by accelerating our go-to-market efforts to capture an even greater share of our total addressable market.”

Walker concluded, “The two key areas of focus and investment in our go-to-market efforts are: First, to achieve significant ongoing increases in client penetration, which is the sole focus of a large number of our client partners, and provide them with the additional client support resources necessary to achieve this expansion within our existing clients; and second, to make winning a significantly increased number of new clients the only focus of a separate, specially trained group of client partners. Our target was to begin the second quarter of fiscal 2025 fully transitioned into the new sales structure and we are pleased to report that we hit that target. Today in our Enterprise North America segment every salesperson is either focused fully on client expansion or on winning new clients. We expect the impact of these go-to-market initiatives to result in a significant increase in our sustainable revenue growth rate to consistently achieve double-digit growth and to also generate accelerated levels of Adjusted EBITDA and cash flows in the future.”

Fiscal 2025 Guidance Affirmed

Based on fiscal 2025 financial results and the expected success of investments in its sales and marketing efforts, the Company affirms its expected fiscal 2025 revenue to be in the range of $295 million to $305 million in constant currency. The Company expects revenue to increase even though a significant amount of the invoiced sales from these initiatives will be recorded as deferred subscription revenue and recognized over the lives of the underlying contracts. Consistent with previous disclosure, the Company believes strategic investments in projects and initiatives, which are expected to result in long-term revenue growth and value creation, are effective and well thought out uses of the Company’s capital. Considering the impact of $16 million of expected investments in additional sales, sales support, and marketing personnel, combined with anticipated increases in revenue, the Company currently anticipates Adjusted EBITDA for fiscal 2025 to be in the range of $40 million to $44 million in constant currency. As revenue growth from these initiatives accelerates, the impact of these additional expenses is expected to be more than offset and growth in Adjusted EBITDA and cash flows are expected to pick up and then increase significantly in future years.

Earnings Conference Call

On Wednesday, January 8, 2025, at 5:00 p.m. Eastern (3:00 p.m. Mountain) Franklin Covey will host a conference call to review its first quarter fiscal 2025 financial results. Interested persons may access a live audio webcast at https://edge.media-server.com/mmc/p/gk9ap76y or may participate via telephone by registering at https://register-conf.media-server.com/register/BI388e927ba68843d696247ac1d22afb0f (this is an updated link required by the vendor). Once registered, participants will have the option of 1) dialing into the call from their phone (via a personalized PIN); or 2) clicking the “Call Me” option to receive an automated call directly to their phone. For either option, registration will be required to access the call. A replay of the conference call webcast will be archived on the Company’s website for at least 30 days.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including those statements related to the Company’s future results and profitability and other goals relating to the growth and operations of the Company. Forward-looking statements are based upon management’s current expectations and are subject to various risks and uncertainties including, but not limited to: general macroeconomic conditions; renewals of subscription contracts; the impact of strategic projects and initiatives on future financial results; growth in and client demand for add-on services; market acceptance of new products or services, including new AAP portal upgrades and content launches; the ability to achieve sustainable double-digit revenue growth in future periods; impacts from geopolitical conflicts; inflation; and other factors identified and discussed in the Company’s most recent Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond the Company’s control or influence, any one of which may cause future results to differ materially from the Company’s current expectations, and there can be no assurance that the Company’s actual future performance will meet management’s expectations. These forward-looking statements are based on management’s current expectations and the Company undertakes no obligation to update or revise these forward-looking statements to reflect events or circumstances subsequent to this press release.

Non-GAAP Financial Information

This earnings release includes the concepts of Adjusted EBITDA, Free Cash Flow, and “constant currency” which are non-GAAP measures. The Company defines Adjusted EBITDA as net income excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other infrequently occurring items such as restructuring costs. Free Cash Flow is defined as GAAP calculated cash flows from operating activities less capitalized expenditures for purchases of property and equipment, curriculum development, and content or license rights. Constant currency is a non-GAAP financial measure that removes the impact of fluctuations in foreign currency exchange rates and is calculated by translating the current period’s financial results at the same average exchange rates in effect during the prior year and then comparing this amount to the prior year. The Company references these non-GAAP financial measures in its decision-making because they provide supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods and the Company believes they provide investors with greater transparency to evaluate operational activities and financial results. Refer to the attached tables for the reconciliation of the non-GAAP financial measure, Adjusted EBITDA, to consolidated net income, a related GAAP financial measure, and for the calculation of Free Cash Flow.

The Company is unable to provide a reconciliation of the above forward-looking estimate of non-GAAP Adjusted EBITDA to GAAP measures because certain information needed to make a reasonable forward-looking estimate is difficult to obtain and dependent on future events which may be uncertain, or out of the Company’s control, including the amount of AAP contracts invoiced, the number of AAP contracts that are renewed, necessary costs to deliver the Company’s offerings, such as unanticipated curriculum development costs, and other potential variables. Accordingly, a reconciliation is not available without unreasonable effort.

About Franklin Covey Co.

Franklin Covey Co. (NYSE: FC) is a global leadership company with directly owned and licensee partner offices providing professional services in 150 countries and territories around the world. The Company transforms organizations by partnering with its clients to build leaders, teams, and cultures that achieve breakthrough results through collective action, which leads to a more engaging work experience for their people. Available through the Franklin Covey All Access Pass, the Company’s best-in-class content and solutions, experts, technology, and metrics seamlessly integrate to ensure lasting behavioral change at scale. Solutions are available in multiple delivery modalities in more than 20 languages.

This approach to leadership and organizational change has been tested and refined by working with tens of thousands of teams and organizations over the past 30 years. Clients have included organizations in the Fortune 100, Fortune 500, and thousands of small- and mid-sized businesses, numerous governmental entities, and educational institutions. To learn more, visit www.franklincovey.com, and enjoy exclusive content from Franklin Covey’s social media channels at: LinkedIn, Facebook, Twitter, Instagram, and YouTube.

FRANKLIN COVEY CO. Condensed Consolidated Income Statements (in thousands, except per-share amounts, and unaudited)   Quarter Ended

November 30,

 

November 30,

 

2024

 

 

 

2023

 

  Net revenue

$

69,086

 

$

68,399

 

Cost of revenue

 

16,375

 

 

16,122

 

Gross profit

 

52,711

 

 

52,277

 

  Selling, general, and administrative

 

47,204

 

 

44,205

 

Restructuring costs

 

1,984

 

 

581

 

Depreciation

 

950

 

 

1,091

 

Amortization

 

1,098

 

 

1,071

 

Income from operations

 

1,475

 

 

5,329

 

Interest income (expense), net

 

112

 

 

(53

)

Income before income taxes

 

1,587

 

 

5,276

 

Income tax provision

 

(406

)

 

(425

)

Net income

$

1,181

 

$

4,851

 

  Net income per share: Basic

$

0.09

 

$

0.37

 

Diluted

 

0.09

 

 

0.36

 

  Weighted average common shares: Basic

 

13,092

 

 

13,244

 

Diluted

 

13,271

 

 

13,636

 

  Other data: Adjusted EBITDA(1)

$

7,674

 

$

10,969

 

(1)

Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, stock-based compensation, and certain other items) is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results. For a reconciliation of this non-GAAP measure to a comparable GAAP measure, refer to the Reconciliation of Net Income to Adjusted EBITDA as shown below.   FRANKLIN COVEY CO. Reconciliation of Net Income to Adjusted EBITDA (in thousands and unaudited)   Quarter Ended

November 30,

 

November 30,

 

2024

 

 

 

2023

 

Reconciliation of net income to Adjusted EBITDA: Net income

$

1,181

 

$

4,851

 

Adjustments: Interest (income) expense, net

 

(112

)

 

53

 

Income tax provision

 

406

 

 

425

 

Amortization

 

1,098

 

 

1,071

 

Depreciation

 

950

 

 

1,091

 

Stock-based compensation

 

2,167

 

 

2,897

 

Restructuring costs

 

1,984

 

 

581

 

Adjusted EBITDA

$

7,674

 

$

10,969

 

  Adjusted EBITDA margin

 

11.1

%

 

16.0

%

  FRANKLIN COVEY CO. Additional Financial Information (in thousands and unaudited)   Quarter Ended

November 30,

 

November 30,

 

2024

 

 

 

2023

 

Revenue by Division/Segment: Enterprise Division: North America

$

40,137

 

$

40,293

 

International direct offices

 

8,239

 

 

8,730

 

International licensees

 

3,203

 

 

3,423

 

 

51,579

 

 

52,446

 

Education Division

 

16,464

 

 

14,891

 

Corporate and other

 

1,043

 

 

1,062

 

Consolidated

$

69,086

 

$

68,399

 

  Gross Profit by Division/Segment: Enterprise Division: North America

$

32,821

 

$

32,764

 

International direct offices

 

6,113

 

 

6,613

 

International licensees

 

2,864

 

 

3,081

 

 

41,798

 

 

42,458

 

Education Division

 

10,410

 

 

9,475

 

Corporate and other

 

503

 

 

344

 

Consolidated

$

52,711

 

$

52,277

 

  Adjusted EBITDA by Division/Segment: Enterprise Division: North America

$

8,744

 

$

10,441

 

International direct offices

 

(224

)

 

1,158

 

International licensees

 

1,644

 

 

1,916

 

 

10,164

 

 

13,515

 

Education Division

 

266

 

 

110

 

Corporate and other

 

(2,756

)

 

(2,656

)

Consolidated

$

7,674

$

10,969

 

FRANKLIN COVEY CO.

Condensed Consolidated Balance Sheets (in thousands and unaudited)  

November 30,

 

August 31,

 

2024

 

 

 

2024

 

Assets Current assets: Cash and cash equivalents

$

53,294

 

$

48,663

 

Accounts receivable, less allowance for credit losses of $2,141 and $3,015

 

61,419

 

 

86,002

 

Inventories

 

3,828

 

 

4,002

 

Prepaid expenses and other current assets

 

20,247

 

 

21,586

 

Total current assets

 

138,788

 

 

160,253

 

  Property and equipment, net

 

8,733

 

 

8,736

 

Intangible assets, net

 

37,163

 

 

37,766

 

Goodwill

 

31,220

 

 

31,220

 

Deferred income tax assets

 

834

 

 

870

 

Other long-term assets

 

23,168

 

 

22,694

 

$

239,906

 

$

261,539

 

  Liabilities and Shareholders' Equity Current liabilities: Current portion of notes payable

$

835

 

$

835

 

Current portion of financing obligation

 

2,166

 

 

3,112

 

Accounts payable

 

5,961

 

 

7,862

 

Deferred subscription revenue

 

88,868

 

 

101,218

 

Customer deposits

 

21,815

 

 

16,972

 

Accrued liabilities

 

23,893

 

 

32,454

 

Total current liabilities

 

143,538

 

 

162,453

 

  Notes payable, less current portion

 

789

 

 

775

 

Financing obligation, less current portion

 

1,312

 

 

1,312

 

Other liabilities

 

10,707

 

 

10,732

 

Deferred income tax liabilities

 

2,913

 

 

3,132

 

Total liabilities

 

159,259

 

 

178,404

 

  Shareholders' equity: Common stock

 

1,353

 

 

1,353

 

Additional paid-in capital

 

227,273

 

 

231,813

 

Retained earnings

 

124,385

 

 

123,204

 

Accumulated other comprehensive loss

 

(970

)

 

(768

)

Treasury stock at cost, 13,867 and 14,084 shares

 

(271,394

)

 

(272,467

)

Total shareholders' equity

 

80,647

 

 

83,135

 

$

239,906

 

$

261,539

 

  FRANKLIN COVEY CO. Condensed Consolidated Free Cash Flow (in thousands and unaudited)   Quarter Ended

November 30,

 

 

November 30,

2024

 

 

 

2023

 

(unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $

1,181

 

$

4,851

 

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization

2,048

 

2,162

 

Amortization of capitalized curriculum costs

1,033

 

691

 

Stock-based compensation

2,167

 

2,897

 

Deferred income taxes

(216

)

(1,048

)

Amortization of right-of-use operating lease assets

162

 

199

 

Changes in working capital

7,770

 

7,686

 

Net cash provided by operating activities

14,145

 

17,438

 

  CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment

(998

)

(1,072

)

Curriculum development costs

(1,432

)

(2,668

)

Reacquisition of license rights

(324

)

-

 

Net cash used for investing activities

(2,754

)

(3,740

)

  Free Cash Flow $

11,391

 

$

13,698

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20250108056330/en/

Investor Contact: Franklin Covey Boyd Roberts 801-817-5127 investor.relations@franklincovey.com

Media Contact: Franklin Covey Debra Lund 801-817-6440 Debra.Lund@franklincovey.com