Franklin Covey Reports Second Quarter Fiscal 2025 Financial Results
Consolidated Revenue for the Second Quarter Totals
Education Division Second Quarter Revenue Increases
Deferred Subscription Revenue at February 28, 2025 increases
Liquidity Remains Strong at over
Company Provides Revised Guidance for Fiscal 2025
Second Quarter Fiscal 2025 Financial Results
The Company’s consolidated revenue for the quarter ended February 28, 2025 was
-
Enterprise Division revenues for the second quarter of fiscal 2025 totaled
$43.6 million $45.6 million $1.1 million $1.0 million North America segment revenues, which were impacted by canceled government contracts and macroeconomic and business environment uncertainties. These challenging economic and business conditions were partially offset by new logo sales and strong client expansion activity in the second quarter from the Company’s newly restructuredNorth America sales force. Enterprise Division subscription plus subscription services revenue was$36.1 million $37.5 million -
Education Division revenues in the second quarter of fiscal 2025 increased
3% to$15.1 million $14.7 million -
Consolidated subscription and subscription services revenues for the second quarter were
$49.5 million $50.3 million $33.9 million $34.6 million -
The Company’s operating expenses for the second quarter of fiscal 2025 increased
$1.8 million $4.3 million $1.7 million $0.9 million North America sales force, compensation increases, and employee benefit costs. -
The Company’s consolidated operating results for the quarter ended February 28, 2025 were a loss of
$(1.5) million $1.4 million $(1.1) million $(0.08) $0.9 million $0.06 -
Adjusted EBITDA for the second quarter of fiscal 2025 was in-line with Company expectations at
$2.1 million $7.4 million $2.6 million -
Consolidated deferred subscription revenue at February 28, 2025, increased
10% to$94.4 million $86.1 million 55% of the Company’s AAP contracts inNorth America are for at least two years, compared with56% at February 29, 2024, and the percentage of contracted amounts represented by multi-year contracts was61% compared with62% at February 29, 2024. Unbilled deferred revenue totaled$64.5 million $72.7 million -
The Company purchased 250,772 shares of its common stock on the open market for
$8.7 million $14.7 million
Paul Walker, President and Chief Executive Officer, commented, “The current economic and business environment is turbulent and uncertain. While our clients are not immune to the challenges in the broader economic and political landscape, we are pleased that first, the nature and importance of the opportunities and challenges we help organizations address are critical in both good and challenging business environments, and that our business model is strong; second, that we are already seeing significant traction from the implementation of our new go-to-market and sales force strategy in
Walker continued, “We are now just 90 days into our new go-to-market and sales force strategy in
Fiscal 2025 Year-to-Date Financial Results
Consolidated revenue for the first two quarters of fiscal 2025 was
Operating expenses for the two quarters ended February 28, 2025 increased
Fiscal 2025 Guidance
The objectives of the Company’s new go-to-market transformation remain unchanged. Despite the on-the-margin interruptions in revenue from government and international operations, as described above: (a) The engines in the Company’s Enterprise Division in
However, due to the impacts of Government actions and the current business environment on certain areas of the business, the Company is adjusting its guidance for fiscal 2025.
Last year the Company achieved revenue of
Due to the impact of Government actions and the current business environment, the Company now expects fiscal 2025 revenue to be between
While the
The Company did not anticipate the full impact of Government actions and other business environment challenges, but it is committed to taking quick actions to reduce the cost structure in government, international, and other areas of the business. The Company expects these actions will partially offset some of the government-related challenges and result in an even higher percentage of incremental revenue flowing through to Adjusted EBITDA next year. Therefore, the Company expects this will be a one-year step back, and that in fiscal 2026 the Company’s Adjusted EBITDA will approach fiscal 2025 expectations and then continue its climb from there. The Company expects to provide specific fiscal 2026 revenue and Adjusted EBITDA guidance in November.
Earnings Conference Call
On Wednesday, April 2, 2025, at 5:00 p.m. Eastern (3:00 p.m. Mountain) Franklin Covey will host a conference call to review its second quarter fiscal 2025 financial results. Interested persons may access a live audio webcast at https://edge.media-server.com/mmc/p/zq4jny5e or may participate via telephone by registering at https://register-conf.media-server.com/register/BIa528563697bf49788ba39527c0d81092. 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; impacts from geopolitical trade tensions and the general business environment; 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 or loss 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 | Two Quarters Ended | ||||||||||||||
|
February 28, |
February 29, |
|
February 28, |
February 29, |
||||||||||
|
|
2025 |
|
|
|
2024 |
|
|
2025 |
|
|
|
2024 |
|
|
| Revenue | $ |
59,612 |
|
$ |
61,336 |
|
$ |
128,698 |
|
$ |
129,736 |
|
|||
| Cost of revenue |
|
13,866 |
|
|
14,485 |
|
|
30,241 |
|
|
30,607 |
|
|||
| Gross profit |
|
45,746 |
|
|
46,851 |
|
|
98,457 |
|
|
99,129 |
|
|||
| Selling, general, and administrative |
|
45,087 |
|
|
40,771 |
|
|
92,291 |
|
|
84,976 |
|
|||
| Restructuring costs |
|
- |
|
|
1,726 |
|
|
1,984 |
|
|
2,307 |
|
|||
| Impaired asset |
|
- |
|
|
928 |
|
|
- |
|
|
928 |
|
|||
| Depreciation |
|
1,016 |
|
|
913 |
|
|
1,967 |
|
|
2,005 |
|
|||
| Amortization |
|
1,098 |
|
|
1,071 |
|
|
2,196 |
|
|
2,142 |
|
|||
| Income (loss) from operations |
|
(1,455 |
) |
|
1,442 |
|
|
19 |
|
|
6,771 |
|
|||
| Interest income (expense), net |
|
107 |
|
|
(27 |
) |
|
220 |
|
|
(80 |
) |
|||
| Income (loss) before income taxes |
|
(1,348 |
) |
|
1,415 |
|
|
239 |
|
|
6,691 |
|
|||
| Income tax benefit (provision) |
|
272 |
|
|
(541 |
) |
|
(134 |
) |
|
(966 |
) |
|||
| Net income (loss) | $ |
(1,076 |
) |
$ |
874 |
|
$ |
105 |
|
$ |
5,725 |
|
|||
| Net income (loss) per common share: | |||||||||||||||
| Basic | $ |
(0.08 |
) |
$ |
0.07 |
|
$ |
0.01 |
|
$ |
0.43 |
|
|||
| Diluted |
|
(0.08 |
) |
|
0.06 |
|
|
0.01 |
|
|
0.42 |
|
|||
| Weighted average common shares: | |||||||||||||||
| Basic |
|
13,102 |
|
|
13,263 |
|
|
13,097 |
|
|
13,253 |
|
|||
| Diluted |
|
13,102 |
|
|
13,484 |
|
|
13,236 |
|
|
13,560 |
|
|||
| Other data: | |||||||||||||||
| Adjusted EBITDA(1) | $ |
2,060 |
|
$ |
7,448 |
|
$ |
9,734 |
|
$ |
18,418 |
|
|||
(1) |
The term 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 GAAP measure, refer to the Reconciliation of Net Income (Loss) to Adjusted EBITDA as shown below. | |||||
| FRANKLIN COVEY CO. | ||||||||||||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDA | ||||||||||||||||||
| (in thousands and unaudited) | ||||||||||||||||||
Quarter Ended |
|
Two Quarters Ended |
||||||||||||||||
February 28, |
|
February 29, |
|
February 28, |
|
February 29, |
||||||||||||
|
2025 |
|
|
|
2024 |
|
|
|
2025 |
|
|
|
2024 |
|
||||
| Reconciliation of net income (loss) to Adjusted EBITDA: | ||||||||||||||||||
| Net income (loss) | $ |
(1,076 |
) |
$ |
874 |
|
$ |
105 |
|
$ |
5,725 |
|
||||||
| Adjustments: | ||||||||||||||||||
| Interest expense (income), net |
|
(107 |
) |
|
27 |
|
|
(220 |
) |
|
80 |
|
||||||
| Income tax provision (benefit) |
|
(272 |
) |
|
541 |
|
|
134 |
|
|
966 |
|
||||||
| Amortization |
|
1,098 |
|
|
1,071 |
|
|
2,196 |
|
|
2,142 |
|
||||||
| Depreciation |
|
1,016 |
|
|
913 |
|
|
1,967 |
|
|
2,005 |
|
||||||
| Stock-based compensation |
|
1,346 |
|
|
1,368 |
|
|
3,513 |
|
|
4,265 |
|
||||||
| Restructuring costs |
|
- |
|
|
1,726 |
|
|
1,984 |
|
|
2,307 |
|
||||||
| Headquarters moving costs |
|
55 |
|
|
- |
|
|
55 |
|
|
- |
|
||||||
| Impaired asset |
|
- |
|
|
928 |
|
|
- |
|
|
928 |
|
||||||
| Adjusted EBITDA | $ |
2,060 |
|
$ |
7,448 |
|
$ |
9,734 |
|
$ |
18,418 |
|
||||||
| Adjusted EBITDA margin |
|
3.5 |
% |
|
12.1 |
% |
|
7.6 |
% |
|
14.2 |
% |
||||||
| FRANKLIN COVEY CO. | ||||||||||||||||||
| Additional Financial Information | ||||||||||||||||||
| (in thousands and unaudited) | ||||||||||||||||||
Quarter Ended |
|
Two Quarters Ended |
||||||||||||||||
February 28, |
|
February 29, |
|
February 28, |
|
February 29, |
||||||||||||
|
2025 |
|
|
|
2024 |
|
|
|
2025 |
|
|
|
2024 |
|
||||
| Revenue by Division/Segment: | ||||||||||||||||||
| Enterprise Division: | ||||||||||||||||||
$ |
34,520 |
|
$ |
35,554 |
|
$ |
74,657 |
|
$ |
75,847 |
|
|||||||
| International direct offices |
|
6,201 |
|
|
7,263 |
|
|
14,440 |
|
|
15,993 |
|
||||||
| International licensees |
|
2,830 |
|
|
2,781 |
|
|
6,033 |
|
|
6,204 |
|
||||||
|
43,551 |
|
|
45,598 |
|
|
95,130 |
|
|
98,044 |
|
|||||||
| Education Division |
|
15,065 |
|
|
14,689 |
|
|
31,529 |
|
|
29,580 |
|
||||||
| Corporate and other |
|
996 |
|
|
1,049 |
|
|
2,039 |
|
|
2,112 |
|
||||||
| Consolidated | $ |
59,612 |
|
$ |
61,336 |
|
$ |
128,698 |
|
$ |
129,736 |
|
||||||
| Gross Profit by Division/Segment: | ||||||||||||||||||
| Enterprise Division: | ||||||||||||||||||
$ |
28,974 |
|
$ |
29,911 |
|
$ |
61,795 |
|
$ |
62,675 |
|
|||||||
| International direct offices |
|
4,560 |
|
|
5,502 |
|
|
10,673 |
|
|
12,115 |
|
||||||
| International licensees |
|
2,499 |
|
|
2,397 |
|
|
5,363 |
|
|
5,478 |
|
||||||
|
36,033 |
|
|
37,810 |
|
|
77,831 |
|
|
80,268 |
|
|||||||
| Education Division |
|
9,331 |
|
|
8,675 |
|
|
19,741 |
|
|
18,150 |
|
||||||
| Corporate and other |
|
382 |
|
|
366 |
|
|
885 |
|
|
711 |
|
||||||
| Consolidated | $ |
45,746 |
|
$ |
46,851 |
|
$ |
98,457 |
|
$ |
99,129 |
|
||||||
| Adjusted EBITDA by Division/Segment: | ||||||||||||||||||
| Enterprise Division: | ||||||||||||||||||
$ |
4,843 |
|
$ |
9,158 |
|
$ |
13,587 |
|
$ |
19,599 |
|
|||||||
| International direct offices |
|
(973 |
) |
|
(107 |
) |
|
(1,197 |
) |
|
1,051 |
|
||||||
| International licensees |
|
1,456 |
|
|
1,358 |
|
|
3,100 |
|
|
3,274 |
|
||||||
|
5,326 |
|
|
10,409 |
|
|
15,490 |
|
|
23,924 |
|
|||||||
| Education Division |
|
(313 |
) |
|
(474 |
) |
|
(47 |
) |
|
(364 |
) |
||||||
| Corporate and other |
|
(2,953 |
) |
|
(2,487 |
) |
|
(5,709 |
) |
|
(5,142 |
) |
||||||
| Consolidated | $ |
2,060 |
|
$ |
7,448 |
|
$ |
9,734 |
|
$ |
18,418 |
|
||||||
| FRANKLIN COVEY CO. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (in thousands and unaudited) | ||||||||
February 28, |
|
August 31, |
||||||
|
2025 |
|
|
|
2024 |
|
||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ |
40,393 |
|
$ |
48,663 |
|
||
| Accounts receivable, less allowance for | ||||||||
| credit losses of |
|
53,287 |
|
|
86,002 |
|
||
| Inventories |
|
4,094 |
|
|
4,002 |
|
||
| Prepaid expenses and other current assets |
|
23,270 |
|
|
21,586 |
|
||
| Total current assets |
|
121,044 |
|
|
160,253 |
|
||
| Property and equipment, net |
|
9,554 |
|
|
8,736 |
|
||
| Intangible assets, net |
|
36,067 |
|
|
37,766 |
|
||
| Goodwill |
|
31,220 |
|
|
31,220 |
|
||
| Deferred income tax assets |
|
821 |
|
|
870 |
|
||
| Other long-term assets |
|
22,634 |
|
|
22,694 |
|
||
$ |
221,340 |
|
$ |
261,539 |
|
|||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of notes payable | $ |
835 |
|
$ |
835 |
|
||
| Current portion of financing obligation |
|
1,201 |
|
|
3,112 |
|
||
| Accounts payable |
|
6,796 |
|
|
7,862 |
|
||
| Deferred subscription revenue |
|
88,435 |
|
|
101,218 |
|
||
| Customer deposits |
|
19,960 |
|
|
16,972 |
|
||
| Accrued liabilities |
|
16,849 |
|
|
32,454 |
|
||
| Total current liabilities |
|
134,076 |
|
|
162,453 |
|
||
| Notes payable, less current portion |
|
804 |
|
|
775 |
|
||
| Financing obligation, less current portion |
|
1,312 |
|
|
1,312 |
|
||
| Other liabilities |
|
9,639 |
|
|
10,732 |
|
||
| Deferred income tax liabilities |
|
2,983 |
|
|
3,132 |
|
||
| Total liabilities |
|
148,814 |
|
|
178,404 |
|
||
| Shareholders' equity: | ||||||||
| Common stock |
|
1,353 |
|
|
1,353 |
|
||
| Additional paid-in capital |
|
228,143 |
|
|
231,813 |
|
||
| Retained earnings |
|
123,309 |
|
|
123,204 |
|
||
| Accumulated other comprehensive loss |
|
(1,012 |
) |
|
(768 |
) |
||
| Treasury stock at cost, 14,075 and 14,084 shares |
|
(279,267 |
) |
|
(272,467 |
) |
||
| Total shareholders' equity |
|
72,526 |
|
|
83,135 |
|
||
$ |
221,340 |
|
$ |
261,539 |
|
|||
| FRANKLIN COVEY CO. | |||||||
| Condensed Consolidated Free Cash Flow | |||||||
| (in thousands and unaudited) | |||||||
| Two Quarters Ended | |||||||
February 28, |
|
|
February 29, |
||||
2025 |
|
|
|
2024 |
|
||
| (unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
| Net income | $ | 105 |
|
$ | 5,725 |
|
|
| Adjustments to reconcile net income to net cash | |||||||
| provided by operating activities: | |||||||
| Depreciation and amortization | 4,163 |
|
4,146 |
|
|||
| Amortization of capitalized curriculum costs | 2,171 |
|
1,501 |
|
|||
| Stock-based compensation | 3,513 |
|
4,265 |
|
|||
| Impaired asset | - |
|
928 |
|
|||
| Deferred income taxes | (145 |
) |
(978 |
) |
|||
| Amortization of right-of-use operating lease assets | 287 |
|
403 |
|
|||
| Changes in working capital | 2,682 |
|
14,222 |
|
|||
| Net cash provided by operating activities | 12,776 |
|
30,212 |
|
|||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
| Purchases of property and equipment | (2,271 |
) |
(1,716 |
) |
|||
| Curriculum development costs | (2,380 |
) |
(3,770 |
) |
|||
| Reacquisition of license rights | (324 |
) |
- |
|
|||
| Net cash used for investing activities | (4,975 |
) |
(5,486 |
) |
|||
| Free Cash Flow | $ | 7,801 |
|
$ | 24,726 |
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20250402286626/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
Source: Franklin Covey Co.
