Franklin Covey Reports Strong Fourth Quarter Financial Results to Finish Fiscal 2024
Consolidated Fourth Quarter Revenue Increases
Fourth Quarter Net Income Increases
Cash Flows From Operating Activities For Fiscal 2024 Increase to
Liquidity Remains Strong at over
Company Announces Guidance for Fiscal 2025
Financial Highlights
The Company’s consolidated revenue for the quarter ended August 31, 2024 grew
-
Enterprise Division revenues for the fourth quarter of fiscal 2024 increased
12% , or$6.1 million $58.5 million $52.4 million 3% compared with the fourth quarter of fiscal 2023 and AAP subscription plus subscription services revenue grew4% in the fourth quarter compared with the prior year. Legacy revenues increased primarily due to strong intellectual property license sales during the quarter. Enterprise revenue for the fiscal year ended August 31, 2024 increased2% to$208.8 million $205.7 million the United States andCanada remained strong and were greater than90% . -
Education Division revenues for the fourth quarter were consistent with the prior year at
$24.1 million 5% to$73.5 million $69.7 million the United States andCanada . -
Total Company subscription and subscription services revenues reached
$65.8 million 2% increase over the fourth quarter of the prior year. For the fiscal year ended August 31, 2024, subscription and subscription service revenue reached$231.8 million $9.0 million 4% increase over fiscal 2023. -
For the fourth quarter of fiscal 2024, subscriptions invoiced were
$62.9 million $64.0 million 5% to$156.8 million $150.0 million -
Operating income for the quarter ended August 31, 2024 increased
70% , or$7.4 million $17.9 million $10.6 million 76% , or$5.1 million $12.0 million $0.89 $6.8 million $0.49 32% , or$5.6 million $23.4 million $1.74 $17.8 million $1.24 -
Adjusted EBITDA for the fourth quarter of fiscal 2024 increased
39% to$22.9 million $16.5 million 15% , or$7.2 million $55.3 million $48.1 million -
Consolidated deferred subscription revenue at August 31, 2024 increased
9% to$107.9 million $99.0 million $75.2 million $87.4 million 56% of the Company’s AAP contracts inNorth America are for at least two years, compared with54% at August 31, 2023, and the percentage of contracted amounts represented by multi-year contracts at August 31, 2024 was consistent with the prior year at59% . -
Cash flows from operating activities for fiscal 2024 increased
69% , or$24.5 million $60.3 million $35.7 million 121% , or$26.8 million $48.9 million $22.2 million -
The Company purchased 127,252 shares of its common stock on the open market for
$4.9 million $30.7 million
Paul Walker, President and Chief Executive Officer said, “We delivered strong performance in the fourth quarter and for the fiscal year ended August 31, 2024, with full-year revenue of
Walker continued, “Having successfully converted to our technology-enabled subscription business model and having made the significant investments in technology and content to further strengthen our strategic position, we are now ready to make the necessary investments to accelerate our revenue growth from mid-single digits to solid double digits. This increased growth will be driven by investments in two areas: first, we are seeking to further expand our presence within existing clients. Since our conversion to a subscription model, our average revenue per client has already increased from
Walker concluded, “We expect these investments to begin to produce favorable results in the back half of fiscal 2025, and then fundamentally shift our growth curve thereafter. We anticipate revenue growth will accelerate from approximately
Fiscal 2025 Guidance
Based on the expected success of investments in its sales and marketing efforts, the Company expects fiscal 2025 revenue to be in the range of
Earnings Conference Call
On Wednesday, November 6, 2024, at 5:00 p.m. Eastern (3:00 p.m. Mountain) Franklin Covey will host a conference call to review its fourth quarter and full fiscal 2024 financial results. Interested persons may access a live audio webcast at https://edge.media-server.com/mmc/p/djbumumn or may participate via telephone by registering at https://register.vevent.com/register/BI2c309c7ae5274c6e9ba8c8285922ffea. 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 and Free Cash Flow, 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 and impaired assets. 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 rights. 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 | Fiscal Year Ended | |||||||||||||||
| August 31, | August 31, | August 31, | August 31, | |||||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|||||
| Revenue | $ |
84,124 |
|
$ |
77,955 |
|
$ |
287,233 |
|
$ |
280,521 |
|
||||
| Cost of revenue |
|
18,387 |
|
|
18,650 |
|
|
66,161 |
|
|
67,031 |
|
||||
| Gross profit |
|
65,737 |
|
|
59,305 |
|
|
221,072 |
|
|
213,490 |
|
||||
| Selling, general, and administrative |
|
45,854 |
|
|
45,960 |
|
|
175,941 |
|
|
177,951 |
|
||||
| Restructuring costs |
|
- |
|
|
565 |
|
|
3,008 |
|
|
565 |
|
||||
| Impaired asset |
|
- |
|
|
- |
|
|
928 |
|
|
- |
|
||||
| Depreciation |
|
910 |
|
|
1,141 |
|
|
3,905 |
|
|
4,271 |
|
||||
| Amortization |
|
1,045 |
|
|
1,071 |
|
|
4,248 |
|
|
4,342 |
|
||||
| Income from operations |
|
17,928 |
|
|
10,568 |
|
|
33,042 |
|
|
26,361 |
|
||||
| Interest income (expense), net |
|
63 |
|
|
(122 |
) |
|
4 |
|
|
(492 |
) |
||||
| Income before income taxes |
|
17,991 |
|
|
10,446 |
|
|
33,046 |
|
|
25,869 |
|
||||
| Income tax provision |
|
(6,035 |
) |
|
(3,634 |
) |
|
(9,644 |
) |
|
(8,088 |
) |
||||
| Net income | $ |
11,956 |
|
$ |
6,812 |
|
$ |
23,402 |
|
$ |
17,781 |
|
||||
| Net income per common share: | ||||||||||||||||
| Basic | $ |
0.92 |
|
$ |
0.52 |
|
$ |
1.78 |
|
$ |
1.30 |
|
||||
| Diluted |
|
0.89 |
|
|
0.49 |
|
|
1.74 |
|
|
1.24 |
|
||||
| Weighted average common shares: | ||||||||||||||||
| Basic |
|
13,020 |
|
|
13,162 |
|
|
13,171 |
|
|
13,640 |
|
||||
| Diluted |
|
13,387 |
|
|
13,886 |
|
|
13,472 |
|
|
14,299 |
|
||||
| Other data: | ||||||||||||||||
| Adjusted EBITDA(1) | $ |
22,933 |
|
$ |
16,508 |
|
$ |
55,273 |
|
$ |
48,066 |
|
||||
(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 to Adjusted EBITDA as shown below. |
||||||||||
| FRANKLIN COVEY CO. | ||||||||||||||||||
| Reconciliation of Net Income to Adjusted EBITDA | ||||||||||||||||||
| (in thousands and unaudited) | ||||||||||||||||||
| Quarter Ended | Fiscal Year Ended | |||||||||||||||||
| August 31, | August 31, | August 31, | August 31, | |||||||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|||||||
| Reconciliation of net income to Adjusted EBITDA: | ||||||||||||||||||
| Net income | $ |
11,956 |
|
$ |
6,812 |
|
$ |
23,402 |
|
$ |
17,781 |
|
||||||
| Adjustments: | ||||||||||||||||||
| Interest expense (income), net |
|
(63 |
) |
|
122 |
|
|
(4 |
) |
|
492 |
|
||||||
| Income tax provision |
|
6,035 |
|
|
3,634 |
|
|
9,644 |
|
|
8,088 |
|
||||||
| Amortization |
|
1,045 |
|
|
1,071 |
|
|
4,248 |
|
|
4,342 |
|
||||||
| Depreciation |
|
910 |
|
|
1,141 |
|
|
3,905 |
|
|
4,271 |
|
||||||
| Stock-based compensation |
|
3,050 |
|
|
3,163 |
|
|
10,142 |
|
|
12,520 |
|
||||||
| Restructuring costs |
|
- |
|
|
565 |
|
|
3,008 |
|
|
565 |
|
||||||
| Impaired asset |
|
- |
|
|
- |
|
|
928 |
|
|
- |
|
||||||
| Increase in the fair value of contingent consideration liabilities |
|
- |
|
|
- |
|
|
- |
|
|
7 |
|
||||||
| Adjusted EBITDA | $ |
22,933 |
|
$ |
16,508 |
|
$ |
55,273 |
|
$ |
48,066 |
|
||||||
| Adjusted EBITDA margin |
|
27.3 |
% |
|
21.2 |
% |
|
19.2 |
% |
|
17.1 |
% |
||||||
| FRANKLIN COVEY CO. | ||||||||||||||||||
| Additional Financial Information | ||||||||||||||||||
| (in thousands and unaudited) | ||||||||||||||||||
| Quarter Ended | Fiscal Year Ended | |||||||||||||||||
| August 31, | August 31, | August 31, | August 31, | |||||||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|||||||
| Revenue by Division/Segment: | ||||||||||||||||||
| Enterprise Division: | ||||||||||||||||||
| Direct offices | $ |
56,100 |
|
$ |
49,827 |
|
$ |
197,610 |
|
$ |
194,021 |
|
||||||
| International licensees |
|
2,403 |
|
|
2,597 |
|
|
11,229 |
|
|
11,645 |
|
||||||
|
58,503 |
|
|
52,424 |
|
|
208,839 |
|
|
205,666 |
|
|||||||
| Education Division |
|
24,117 |
|
|
24,105 |
|
|
73,519 |
|
|
69,736 |
|
||||||
| Corporate and other |
|
1,504 |
|
|
1,426 |
|
|
4,875 |
|
|
5,119 |
|
||||||
| Consolidated | $ |
84,124 |
|
$ |
77,955 |
|
$ |
287,233 |
|
$ |
280,521 |
|
||||||
| Gross Profit by Division/Segment: | ||||||||||||||||||
| Enterprise Division: | ||||||||||||||||||
| Direct offices | $ |
47,243 |
|
$ |
40,715 |
|
$ |
162,430 |
|
$ |
156,915 |
|
||||||
| International licensees |
|
2,110 |
|
|
2,323 |
|
|
9,971 |
|
|
10,507 |
|
||||||
|
49,353 |
|
|
43,038 |
|
|
172,401 |
|
|
167,422 |
|
|||||||
| Education Division |
|
15,992 |
|
|
15,921 |
|
|
47,149 |
|
|
44,418 |
|
||||||
| Corporate and other |
|
392 |
|
|
346 |
|
|
1,522 |
|
|
1,650 |
|
||||||
| Consolidated | $ |
65,737 |
|
$ |
59,305 |
|
$ |
221,072 |
|
$ |
213,490 |
|
||||||
| Adjusted EBITDA by Division/Segment: | ||||||||||||||||||
| Enterprise Division: | ||||||||||||||||||
| Direct offices | $ |
17,399 |
|
$ |
11,986 |
|
$ |
50,376 |
|
$ |
44,198 |
|
||||||
| International licensees |
|
1,076 |
|
|
1,087 |
|
|
5,647 |
|
|
5,874 |
|
||||||
|
18,475 |
|
|
13,073 |
|
|
56,023 |
|
|
50,072 |
|
|||||||
| Education Division |
|
6,930 |
|
|
6,118 |
|
|
9,522 |
|
|
7,426 |
|
||||||
| Corporate and other |
|
(2,472 |
) |
|
(2,683 |
) |
|
(10,272 |
) |
|
(9,432 |
) |
||||||
| Consolidated | $ |
22,933 |
|
$ |
16,508 |
|
$ |
55,273 |
|
$ |
48,066 |
|
||||||
| FRANKLIN COVEY CO. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (in thousands and unaudited) | ||||||||
| August 31, | August 31, | |||||||
2024 |
2023 |
|||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ |
48,663 |
|
$ |
38,230 |
|
||
| Accounts receivable, less allowance for | ||||||||
| doubtful accounts of |
|
86,002 |
|
|
81,935 |
|
||
| Inventories |
|
4,002 |
|
|
4,213 |
|
||
| Prepaid expenses and other current assets |
|
21,586 |
|
|
20,639 |
|
||
| Total current assets |
|
160,253 |
|
|
145,017 |
|
||
| Property and equipment, net |
|
8,736 |
|
|
10,039 |
|
||
| Intangible assets, net |
|
37,766 |
|
|
40,511 |
|
||
| Goodwill |
|
31,220 |
|
|
31,220 |
|
||
| Deferred income tax assets |
|
870 |
|
|
1,661 |
|
||
| Other long-term assets |
|
22,694 |
|
|
17,471 |
|
||
$ |
261,539 |
|
$ |
245,919 |
|
|||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of notes payable | $ |
835 |
|
$ |
5,835 |
|
||
| Current portion of financing obligation |
|
3,111 |
|
|
3,538 |
|
||
| Accounts payable |
|
7,863 |
|
|
6,501 |
|
||
| Deferred subscription revenue |
|
101,218 |
|
|
95,386 |
|
||
| Customer deposits |
|
16,972 |
|
|
12,137 |
|
||
| Accrued liabilities |
|
32,454 |
|
|
28,252 |
|
||
| Total current liabilities |
|
162,453 |
|
|
151,649 |
|
||
| Notes payable, less current portion |
|
775 |
|
|
1,535 |
|
||
| Financing obligation, less current portion |
|
1,312 |
|
|
4,424 |
|
||
| Other liabilities |
|
10,732 |
|
|
7,617 |
|
||
| Deferred income tax liabilities |
|
3,132 |
|
|
2,040 |
|
||
| Total liabilities |
|
178,404 |
|
|
167,265 |
|
||
| Shareholders' equity: | ||||||||
| Common stock |
|
1,353 |
|
|
1,353 |
|
||
| Additional paid-in capital |
|
231,813 |
|
|
232,373 |
|
||
| Retained earnings |
|
123,204 |
|
|
99,802 |
|
||
| Accumulated other comprehensive loss |
|
(768 |
) |
|
(987 |
) |
||
| Treasury stock at cost, 14,084 and 13,974 shares |
|
(272,467 |
) |
|
(253,887 |
) |
||
| Total shareholders' equity |
|
83,135 |
|
|
78,654 |
|
||
$ |
261,539 |
|
$ |
245,919 |
|
|||
| FRANKLIN COVEY CO. | ||||||||
| Condensed Consolidated Free Cash Flow | ||||||||
| (in thousands and unaudited) | ||||||||
| YEAR ENDED AUGUST 31, | 2024 |
|
2023 |
|
||||
| In thousands | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 23,402 |
|
$ | 17,781 |
|
||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 8,153 |
|
8,613 |
|
||||
| Amortization of capitalized curriculum development costs | 3,172 |
|
3,084 |
|
||||
| Deferred income taxes | 1,885 |
|
4,748 |
|
||||
| Stock-based compensation expense | 10,142 |
|
12,520 |
|
||||
| Impaired asset | 928 |
|
- |
|
||||
| Change in the fair value of contingent consideration liabilities | - |
|
7 |
|
||||
| Amortization of right-of-use operating lease assets | 760 |
|
834 |
|
||||
| Changes in working capital | 11,815 |
|
(11,849 |
) |
||||
| Net cash provided by operating activities | 60,257 |
|
35,738 |
|
||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | (3,694 |
) |
(4,515 |
) |
||||
| Capitalized curriculum development costs | (6,866 |
) |
(9,035 |
) |
||||
| Acquisition of content rights | (750 |
) |
- |
|
||||
| Net cash used for investing activities | (11,310 |
) |
(13,550 |
) |
||||
| Free Cash Flow | $ | 48,947 |
|
$ | 22,188 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20241106009928/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.
