[10-Q] Franklin Covey Company Quarterly Earnings Report
Sezzle Inc. (SEZL) filed an amended Form 4 on 7 July 2025 to correct an error in a prior insider-trading report. The original filing dated 3 July 2025 had shown Chief Executive Officer, Executive Chairman, Director and 10% owner Charles Youakim disposing of 6,978 common shares. The amendment clarifies that no disposition actually occurred.
Following the correction, Mr. Youakim’s direct beneficial ownership remains unchanged at 12,353,427 common shares (par value $0.00001). No derivative securities transactions were reported. The document contains no other transactions, prices, or changes in beneficial ownership.
This amendment removes the appearance of insider selling, which could have been interpreted negatively by investors. However, because the filing merely corrects clerical information and does not reflect a new purchase or sale, it has limited financial impact on Sezzle’s fundamentals.
Sezzle Inc. (SEZL) ha presentato un modulo Form 4 modificato il 7 luglio 2025 per correggere un errore in una precedente comunicazione su operazioni di insider trading. La dichiarazione originale del 3 luglio 2025 indicava che il CEO, Presidente Esecutivo, Direttore e azionista al 10% Charles Youakim aveva ceduto 6.978 azioni ordinarie. La modifica chiarisce che in realtà non è avvenuta alcuna cessione.
Dopo la correzione, la proprietà diretta di Mr. Youakim rimane invariata a 12.353.427 azioni ordinarie (valore nominale $0,00001). Non sono state segnalate transazioni su strumenti derivati. Il documento non contiene altre operazioni, prezzi o variazioni nella proprietà effettiva.
Questa modifica elimina l’apparenza di una vendita da parte di un insider, che avrebbe potuto essere interpretata negativamente dagli investitori. Tuttavia, poiché la comunicazione corregge solo un errore formale e non riflette un nuovo acquisto o vendita, ha un impatto finanziario limitato sui fondamentali di Sezzle.
Sezzle Inc. (SEZL) presentó un formulario Form 4 enmendado el 7 de julio de 2025 para corregir un error en un informe previo sobre operaciones de información privilegiada. La presentación original del 3 de julio de 2025 mostraba que el CEO, Presidente Ejecutivo, Director y propietario del 10% Charles Youakim había vendido 6,978 acciones ordinarias. La enmienda aclara que en realidad no se realizó ninguna venta.
Tras la corrección, la propiedad directa de Mr. Youakim permanece sin cambios en 12,353,427 acciones ordinarias (valor nominal $0.00001). No se reportaron transacciones con valores derivados. El documento no contiene otras transacciones, precios ni cambios en la propiedad efectiva.
Esta enmienda elimina la apariencia de una venta por parte de un insider, que podría haber sido interpretada negativamente por los inversores. Sin embargo, dado que la presentación solo corrige un error administrativo y no refleja una compra o venta nueva, tiene un impacto financiero limitado en los fundamentos de Sezzle.
Sezzle Inc. (SEZL)은 2025년 7월 7일 이전 내부자 거래 보고서의 오류를 정정하기 위해 수정된 Form 4를 제출했습니다. 2025년 7월 3일자 원본 제출서에는 최고경영자(CEO), 집행 의장, 이사 및 10% 지분 보유자인 찰스 유아킴(Charles Youakim)이 6,978 보통주를 처분한 것으로 나타나 있었습니다. 이번 수정은 실제로는 처분이 이루어지지 않았음을 명확히 합니다.
정정 후 유아킴 씨의 직접적인 실질 소유 주식 수는 12,353,427 보통주 (액면가 $0.00001)로 변함이 없습니다. 파생 증권 거래는 보고되지 않았습니다. 문서에는 다른 거래, 가격 또는 소유권 변경 사항이 포함되어 있지 않습니다.
이번 수정은 투자자들에게 부정적으로 해석될 수 있었던 내부자 매도 의혹을 해소합니다. 하지만 이번 제출은 단순히 행정적 오류를 바로잡은 것으로 새로운 매수나 매도를 반영하지 않아 Sezzle의 기본 재무 상태에 미치는 영향은 제한적입니다.
Sezzle Inc. (SEZL) a déposé un formulaire Form 4 modifié le 7 juillet 2025 afin de corriger une erreur dans un rapport précédent sur des opérations d'initiés. Le dépôt initial daté du 3 juillet 2025 indiquait que le PDG, président exécutif, administrateur et détenteur de 10 % Charles Youakim avait cédé 6 978 actions ordinaires. L'amendement précise qu'aucune cession n'a en réalité eu lieu.
Suite à cette correction, la propriété directe de M. Youakim reste inchangée à 12 353 427 actions ordinaires (valeur nominale de 0,00001 $). Aucune transaction sur titres dérivés n'a été signalée. Le document ne contient aucune autre transaction, prix ou modification de la propriété effective.
Cette modification supprime l'apparence d'une vente par un initié, ce qui aurait pu être perçu négativement par les investisseurs. Cependant, puisque le dépôt ne fait que corriger une information administrative et ne reflète pas un nouvel achat ou une nouvelle vente, son impact financier sur les fondamentaux de Sezzle est limité.
Sezzle Inc. (SEZL) reichte am 7. Juli 2025 ein berichtigtes Formular Form 4 ein, um einen Fehler in einem früheren Insiderhandelsbericht zu korrigieren. Die ursprüngliche Meldung vom 3. Juli 2025 zeigte, dass der CEO, Executive Chairman, Direktor und 10%-Eigentümer Charles Youakim 6.978 Stammaktien veräußert hatte. Die Berichtigung stellt klar, dass tatsächlich keine Veräußerung stattgefunden hat.
Nach der Korrektur bleibt das direkte wirtschaftliche Eigentum von Herrn Youakim unverändert bei 12.353.427 Stammaktien (Nennwert $0,00001). Es wurden keine Transaktionen mit derivativen Wertpapieren gemeldet. Das Dokument enthält keine weiteren Transaktionen, Preise oder Änderungen im wirtschaftlichen Eigentum.
Diese Berichtigung beseitigt den Eindruck eines Insider-Verkaufs, der von Investoren negativ interpretiert werden könnte. Da die Meldung jedoch lediglich eine formale Korrektur darstellt und keinen neuen Kauf oder Verkauf widerspiegelt, hat sie nur begrenzte finanzielle Auswirkungen auf die Fundamentaldaten von Sezzle.
- No insider sale occurred; CEO’s 12.35 million-share ownership remains intact, removing a potential negative perception of insider selling.
- Prompt corrective filing suggests management is attentive to disclosure accuracy and regulatory compliance.
- Initial reporting error indicates a lapse in internal controls over Section 16 filings, raising minor governance concerns.
Insights
TL;DR: CEO did not sell; ownership steady at 12.35 M shares—signal is neutral to mildly positive.
The amendment eliminates a previously reported 6,978-share sale by Charles Youakim, confirming he maintains his full 12.35 million-share stake. The correction removes a potential bearish signal of insider selling, yet the share count involved (≈0.06% of his holdings) was immaterial. No cash changed hands and no valuation metrics are affected. Therefore, the market impact is negligible, albeit mildly reassuring.
TL;DR: Filing error corrected; governance impact limited but accuracy controls need attention.
Restating the Form 4 demonstrates management’s willingness to correct disclosure mistakes promptly, a positive governance trait. Still, the initial misreporting highlights procedural lapses in Section 16 reporting controls. Investors should monitor future filings for accuracy but need not infer any strategic intent from this clerical amendment.
Sezzle Inc. (SEZL) ha presentato un modulo Form 4 modificato il 7 luglio 2025 per correggere un errore in una precedente comunicazione su operazioni di insider trading. La dichiarazione originale del 3 luglio 2025 indicava che il CEO, Presidente Esecutivo, Direttore e azionista al 10% Charles Youakim aveva ceduto 6.978 azioni ordinarie. La modifica chiarisce che in realtà non è avvenuta alcuna cessione.
Dopo la correzione, la proprietà diretta di Mr. Youakim rimane invariata a 12.353.427 azioni ordinarie (valore nominale $0,00001). Non sono state segnalate transazioni su strumenti derivati. Il documento non contiene altre operazioni, prezzi o variazioni nella proprietà effettiva.
Questa modifica elimina l’apparenza di una vendita da parte di un insider, che avrebbe potuto essere interpretata negativamente dagli investitori. Tuttavia, poiché la comunicazione corregge solo un errore formale e non riflette un nuovo acquisto o vendita, ha un impatto finanziario limitato sui fondamentali di Sezzle.
Sezzle Inc. (SEZL) presentó un formulario Form 4 enmendado el 7 de julio de 2025 para corregir un error en un informe previo sobre operaciones de información privilegiada. La presentación original del 3 de julio de 2025 mostraba que el CEO, Presidente Ejecutivo, Director y propietario del 10% Charles Youakim había vendido 6,978 acciones ordinarias. La enmienda aclara que en realidad no se realizó ninguna venta.
Tras la corrección, la propiedad directa de Mr. Youakim permanece sin cambios en 12,353,427 acciones ordinarias (valor nominal $0.00001). No se reportaron transacciones con valores derivados. El documento no contiene otras transacciones, precios ni cambios en la propiedad efectiva.
Esta enmienda elimina la apariencia de una venta por parte de un insider, que podría haber sido interpretada negativamente por los inversores. Sin embargo, dado que la presentación solo corrige un error administrativo y no refleja una compra o venta nueva, tiene un impacto financiero limitado en los fundamentos de Sezzle.
Sezzle Inc. (SEZL)은 2025년 7월 7일 이전 내부자 거래 보고서의 오류를 정정하기 위해 수정된 Form 4를 제출했습니다. 2025년 7월 3일자 원본 제출서에는 최고경영자(CEO), 집행 의장, 이사 및 10% 지분 보유자인 찰스 유아킴(Charles Youakim)이 6,978 보통주를 처분한 것으로 나타나 있었습니다. 이번 수정은 실제로는 처분이 이루어지지 않았음을 명확히 합니다.
정정 후 유아킴 씨의 직접적인 실질 소유 주식 수는 12,353,427 보통주 (액면가 $0.00001)로 변함이 없습니다. 파생 증권 거래는 보고되지 않았습니다. 문서에는 다른 거래, 가격 또는 소유권 변경 사항이 포함되어 있지 않습니다.
이번 수정은 투자자들에게 부정적으로 해석될 수 있었던 내부자 매도 의혹을 해소합니다. 하지만 이번 제출은 단순히 행정적 오류를 바로잡은 것으로 새로운 매수나 매도를 반영하지 않아 Sezzle의 기본 재무 상태에 미치는 영향은 제한적입니다.
Sezzle Inc. (SEZL) a déposé un formulaire Form 4 modifié le 7 juillet 2025 afin de corriger une erreur dans un rapport précédent sur des opérations d'initiés. Le dépôt initial daté du 3 juillet 2025 indiquait que le PDG, président exécutif, administrateur et détenteur de 10 % Charles Youakim avait cédé 6 978 actions ordinaires. L'amendement précise qu'aucune cession n'a en réalité eu lieu.
Suite à cette correction, la propriété directe de M. Youakim reste inchangée à 12 353 427 actions ordinaires (valeur nominale de 0,00001 $). Aucune transaction sur titres dérivés n'a été signalée. Le document ne contient aucune autre transaction, prix ou modification de la propriété effective.
Cette modification supprime l'apparence d'une vente par un initié, ce qui aurait pu être perçu négativement par les investisseurs. Cependant, puisque le dépôt ne fait que corriger une information administrative et ne reflète pas un nouvel achat ou une nouvelle vente, son impact financier sur les fondamentaux de Sezzle est limité.
Sezzle Inc. (SEZL) reichte am 7. Juli 2025 ein berichtigtes Formular Form 4 ein, um einen Fehler in einem früheren Insiderhandelsbericht zu korrigieren. Die ursprüngliche Meldung vom 3. Juli 2025 zeigte, dass der CEO, Executive Chairman, Direktor und 10%-Eigentümer Charles Youakim 6.978 Stammaktien veräußert hatte. Die Berichtigung stellt klar, dass tatsächlich keine Veräußerung stattgefunden hat.
Nach der Korrektur bleibt das direkte wirtschaftliche Eigentum von Herrn Youakim unverändert bei 12.353.427 Stammaktien (Nennwert $0,00001). Es wurden keine Transaktionen mit derivativen Wertpapieren gemeldet. Das Dokument enthält keine weiteren Transaktionen, Preise oder Änderungen im wirtschaftlichen Eigentum.
Diese Berichtigung beseitigt den Eindruck eines Insider-Verkaufs, der von Investoren negativ interpretiert werden könnte. Da die Meldung jedoch lediglich eine formale Korrektur darstellt und keinen neuen Kauf oder Verkauf widerspiegelt, hat sie nur begrenzte finanzielle Auswirkungen auf die Fundamentaldaten von Sezzle.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[
For the quarterly period ended
or
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
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including area code |
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No £
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer |
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Non-accelerated Filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per-share amounts)
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ASSETS |
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Current assets: |
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Cash and cash equivalents | $ | |
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Accounts receivable, less allowance for credit losses of $ |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Deferred income tax assets |
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Other long-term assets |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Current portion of notes payable | $ | |
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Current portion of financing obligation |
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Accounts payable |
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Deferred subscription revenue |
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Customer deposits |
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Accrued liabilities |
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Total current liabilities |
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Notes payable, less current portion |
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Financing obligation, less current portion |
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Other liabilities |
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Deferred income tax liabilities |
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Total liabilities |
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Shareholders’ equity: |
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Common stock, $ |
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Treasury stock at cost, |
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Total shareholders’ equity |
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See notes to condensed consolidated financial statements
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(in thousands, except per-share amounts)
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| Quarter Ended |
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Revenue | $ | |
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Cost of revenue |
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Gross profit |
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Selling, general, and administrative |
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Restructuring costs |
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Impairment of asset |
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Depreciation |
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Amortization |
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Interest income |
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Interest expense |
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Income (loss) before income taxes |
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Net income (loss) | $ | ( |
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Net income (loss) per share: |
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Basic | $ | ( |
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Diluted |
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Weighted average number of common shares: |
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COMPREHENSIVE INCOME (LOSS) |
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Net income (loss) | $ | ( |
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Foreign currency translation adjustments, |
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net of income taxes of $ |
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Comprehensive income (loss) | $ | ( |
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See notes to condensed consolidated financial statements
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income (loss) | $ | ( |
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Adjustments to reconcile net income (loss) to net cash |
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provided by operating activities: |
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Depreciation and amortization |
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Amortization of capitalized curriculum costs |
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Stock-based compensation |
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Impairment of asset |
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Deferred income taxes |
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Amortization of right-of-use operating lease assets |
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Changes in assets and liabilities: |
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Decrease in accounts receivable, net |
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Increase in inventories |
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Decrease in prepaid expenses and other assets |
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Decrease in accounts payable and accrued liabilities |
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Decrease in deferred revenue and customer deposits |
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Increase (decrease) in income taxes payable/receivable |
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Decrease in other long-term liabilities |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchases of property and equipment |
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Curriculum development costs |
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Reacquisition of license rights |
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Net cash used for investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Principal payments on notes payable |
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Principal payments on financing obligation |
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Purchases of common stock for treasury |
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Proceeds from sales of common stock held in treasury |
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Net cash used for financing activities |
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Effect of foreign currency exchange rates on cash and cash equivalents |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period | $ | |
| $ | |
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Supplemental disclosure of cash flow information: |
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Cash paid for income taxes | $ | |
| $ | |
Cash paid for interest |
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Non-cash investing and financing activities: |
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Acquisition of property and equipment and capitalized curriculum |
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financed by accounts payable | $ | |
| $ | |
Consideration for reacquired license rights from liabilities of seller |
| |
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| - |
Acquisition of right-of-use operating lease assets for operating lease liabilities |
| |
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Acquisition of content rights financed by accrued liabilities and other liabilities |
| |
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| |
See notes to condensed consolidated financial statements
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(in thousands and unaudited)
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| Accumulated |
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| Common |
| Common |
| Additional |
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| Other | Treasury |
| Treasury |
| Stock |
| Stock |
| Paid-In |
| Retained |
| Comprehensive | Stock |
| Stock |
| Shares |
| Amount |
| Capital |
| Earnings |
| Loss | Shares |
| Amount |
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Balance at August 31, 2024 | | $ | | $ | | $ | | $ | ( | ( | $ | ( |
Issuance of common stock from |
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treasury |
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Purchases of common shares |
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for treasury |
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Stock-based compensation |
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Cumulative translation |
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adjustments |
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Net income |
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Balance at November 30, 2024 | |
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Issuance of common stock from |
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treasury |
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Purchases of common shares |
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for treasury |
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Stock-based compensation |
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Unvested stock award |
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Cumulative translation |
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adjustments |
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Net loss |
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Balance at February 28, 2025 | |
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Issuance of common stock from |
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treasury |
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Purchases of common shares |
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for treasury |
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Stock-based compensation |
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Cumulative translation |
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adjustments |
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Net loss |
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Balance at May 31, 2025 | | $ | | $ | | $ | | $ | ( | ( | $ | ( |
See notes to condensed consolidated financial statements
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY –
PRIOR YEAR
(in thousands and unaudited)
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| Accumulated |
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| Common |
| Common |
| Additional |
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| Other | Treasury |
| Treasury |
| Stock |
| Stock |
| Paid-In |
| Retained |
| Comprehensive | Stock |
| Stock |
| Shares |
| Amount |
| Capital |
| Earnings |
| Loss | Shares |
| Amount |
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Balance at August 31, 2023 | | $ | | $ | | $ | | $ | ( | ( | $ | ( |
Issuance of common stock from |
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treasury |
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Purchases of common shares |
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for treasury |
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Stock-based compensation |
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Cumulative translation |
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adjustments |
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Net income |
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Balance at November 30, 2023 | |
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Issuance of common stock from |
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treasury |
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Purchases of common shares |
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for treasury |
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Stock-based compensation |
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Unvested stock award |
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Cumulative translation |
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adjustments |
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Net income |
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Balance at February 29, 2024 | |
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Issuance of common stock from |
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treasury |
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Purchases of common shares |
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for treasury |
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| ( |
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Stock-based compensation |
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Cumulative translation |
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adjustments |
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| ( |
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Net income |
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Balance at May 31, 2024 | | $ | | $ | | $ | | $ | ( | ( | $ | ( |
See notes to condensed consolidated financial statements
FRANKLIN COVEY CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
We have some of the best-known offerings in the training industry, including a suite of individual-effectiveness and leadership-development training content based on the best-selling books, The 7 Habits of Highly Effective People, The Speed of Trust, The Leader in Me, The 4 Disciplines of Execution, and Multipliers, and proprietary content in the areas of Leadership, Execution, Productivity, Educational Improvement, and Sales Performance. Our offerings are described in further detail at www.franklincovey.com. The information posted on our website is not incorporated into this report.
The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and results of operations of the Company as of the dates and for the periods indicated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2024.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
The results of operations for the quarter and three quarters ended May 31, 2025, are not necessarily indicative of results expected for the entire fiscal year ending August 31, 2025, or for any future periods.
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Disaggregation of Income Statement Expenses, which requires a public entity to disclose certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset
amortization on an annual and interim basis. The guidance in ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The provisions within the update may be applied retrospectively for all periods presented in the financial statements. While we are still evaluating the specific impacts and adoption method, we anticipate this guidance will have a significant impact on our consolidated financial statement disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU is intended to improve the reportable segment disclosure primarily by requiring entities to provide more disaggregated expense information about their reportable segments. The new guidance also improves interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. ASU 2023-07 is effective for public entities in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Since this guidance only impacts disclosures, we do not expect the adoption of ASU 2023-07 to have a material impact on our consolidated financial statements.
On December 14, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 provides guidance to enhance transparency about income tax information through improvements to income tax disclosures primarily related to the effective income tax rate reconciliation and income taxes paid. This new guidance also includes certain other amendments to improve the effectiveness of income tax disclosures. For public companies, the guidance in ASU 2023-09 is effective for annual periods beginning after December 15, 2024. We are currently assessing the anticipated impact of this standard on our consolidated financial statements.
Our purchases of common stock during the first three quarters of fiscal 2025 consisted of shares purchased on the open market and shares withheld for income taxes on stock-based compensation awards. Our stock-based compensation plans allow shares to be withheld to cover statutory income taxes if elected by the award recipient. These shares are valued at the market price on the date the shares are withheld. Our fiscal 2025 purchases of common stock through May 31, 2025, were comprised of the following (in thousands):
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| Shares |
| Cost | ||
Shares withheld for taxes on stock- |
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based compensation awards |
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| $ | |
Open market purchases |
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| $ | |
On April 18, 2024, our Board of Directors approved a new plan to purchase up to $
Contract Balances
Our deferred subscription revenue totaled $
Deferred subscription revenue primarily consists of billings or payments received in advance of revenue being recognized from subscription services. Deferred revenue is recognized in revenue as the applicable revenue recognition criteria are met. We generally invoice customers in annual installments upon execution of a contract. The Leader in Me membership
offering is bifurcated into a portal membership obligation and a coaching delivery obligation. We have determined that it is appropriate to recognize revenue related to the portal membership over the term of the underlying contract and to recognize revenue from coaching as those services are performed. The combined contract amount is recorded in deferred subscription revenue until the performance obligations are satisfied. Any additional coaching or training days which are contracted independent of The Leader in Me membership are recorded as revenue in accordance with our general policy for services and products as described in our Annual Report on Form 10-K for the fiscal year ended August 31, 2024.
Remaining Performance Obligations
Whenever possible, we enter into multi-year non-cancellable contracts which are invoiced either upon execution of the contract or at the beginning of each annual contract period. Remaining transaction price represents contracted revenue that has not yet been recognized, including unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price is influenced by factors such as inflation, the average length of the contract term, and the ability of the Company to continue to enter into multi-year non-cancellable contracts. At May 31, 2025, we had $
Disaggregated Revenue Information
Refer to Note 7, Segment Information, to these unaudited condensed consolidated financial statements for our disaggregated revenue information.
Our stock-based compensation expense was comprised of the following for the periods presented (in thousands):
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| Quarter Ended |
| Three Quarters Ended | |||||||
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| May 31, |
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| May 31, |
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| May 31, |
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| 2025 |
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| 2024 |
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| 2025 |
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| 2024 |
Long-term incentive awards | $ | |
| $ | |
| $ | |
| $ | |
Strive acquisition compensation |
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Unvested stock awards |
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Employee stock purchase plan |
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| $ | |
| $ | |
| $ | |
| $ | |
During the quarter and three quarters ended May 31, 2025, we issued
At each reporting date, we reevaluate the expected number of shares to vest under the terms of our performance-based long-term incentive plan awards and adjust the amount of stock-based compensation based on any revisions to the number of shares expected to vest. During the second quarter of fiscal 2025, revisions to these estimates reduced our stock-based compensation by $
Annual Long-Term Incentive Performance and Retention Plan
We have a long-term equity incentive plan for client partners, managing directors, and certain other associates that we believe are critical to our long-term success. The number of shares granted to sales-related roles is generally based on the achievement of specified annual revenue goals while other awards are for an amount determined by the Organization and Compensation Committee of the Board of Directors. These time-based awards are granted after the completion of each fiscal year and vest over a service period, with of the shares vesting on August 31 of each year following the grant. We granted a total of
Fiscal 2025 Board of Directors Unvested Share Award
Our annual unvested stock award granted to non-employee members of the Board of Directors is administered under the terms of our omnibus incentive plan, and is designed to provide our non-employee directors, who are not eligible to participate in our employee stock purchase plan, an opportunity to obtain an interest in the Company through the acquisition of shares of our common stock as part of their compensation. The annual award is normally granted in January of each year on the same day as our annual shareholders’ meeting. For the fiscal 2025 award, each eligible director received a whole share grant equal to $
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Unvested stock awards at |
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August 31, 2024 |
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Granted |
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Forfeited |
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Vested |
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Unvested stock awards at |
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May 31, 2025 |
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| $ | |
Employee Stock Purchase Plan
Our fiscal 2025 restructuring costs were for the continued implementation of our new Enterprise Division go-to-market strategy, alignment of personnel and refinements to the new model, and to reduce operating expenses in certain areas of our operations. In fiscal 2024, we began restructuring our North America sales force to a more focused structure that is designed to drive additional sales growth in the future. In the first quarter of fiscal 2025, we expanded this restructuring effort to certain areas of our International Direct Office segment. Through May 31, 2025, the cost of these restructuring activities totaled $
During the quarter ended May 31, 2025, we expensed $
In the first quarter of fiscal 2025, we expensed $
The following schedule shows the calculation of net income (loss) per common share for the periods presented (in thousands, except per-share amounts).
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| Quarter Ended |
| Three Quarters Ended | ||||||||
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Numerator for basic and |
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diluted income per share: |
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Net income (loss) | $ | ( |
| $ | |
| $ | ( |
| $ | |
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diluted income per share: |
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outstanding |
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Effect of dilutive securities: |
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Diluted weighted average |
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shares outstanding |
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EPS Calculations: |
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Net income (loss) per share: |
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Basic | $ | ( |
| $ | |
| $ | ( |
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Diluted |
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Segments
Our sales are primarily comprised of training and consulting services and our internal reporting and operating structure is currently organized around
Our operations consist of
North America – Our North America segment has a depth of expertise in helping organizations solve problems that require changes in human behavior, including leadership, productivity, execution, trust, and sales performance. We have a variety of principle-based offerings that help build winning and profitable cultures. This segment includes our sales personnel and operations that serve the United States and Canada.
International Direct Offices – Our international direct offices provide the same offerings and content in countries outside of North America, which includes Australia, Austria, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom.
International Licensees – Our independently owned international licensees provide our offerings and services in countries where we do not have a directly-owned office. These licensee partners allow us to expand the reach of our services to large multinational organizations as well as smaller organizations in their countries. This segment’s sales are primarily comprised of royalty revenues received from the licensees.
Education Practice – Centered around the principles found in The Leader in Me, the Education practice is dedicated to helping educational institutions build a culture that will produce great results. We believe these results are manifested by increases in student performance, improved school culture, decreased disciplinary issues, and increased teacher engagement and parental involvement. This segment includes our domestic and international Education practice operations, which are focused on sales to educational institutions such as elementary schools, high schools, and colleges and universities.
Corporate and Other – Our corporate and other information includes leasing operations, shipping and handling revenues, royalty revenues from Franklin Planner Corp., and the cost of certain administrative functions.
We have determined that the Company’s CODM continues to be the Chief Executive Officer, and the primary measurement tool used in business unit performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts disclosed by other companies. Adjusted EBITDA is a non-GAAP financial measure. For reporting purposes, our consolidated Adjusted EBITDA may be calculated as net income or loss excluding interest, income taxes, depreciation expense, intangible asset amortization expense, stock-based compensation, and certain other charges such as restructuring and headquarters moving costs. We reference this non-GAAP financial measure in our decision making because it provides supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods and we believe it provides investors with greater transparency to evaluate operational activities and financial results.
Our operations are not capital intensive and we do not own any manufacturing facilities or equipment. Accordingly, we do not allocate assets to the reportable segments for analysis purposes. Interest expense and interest income are primarily generated at the corporate level and are not allocated. Income taxes are likewise calculated and paid on a corporate level (except for entities that operate in foreign jurisdictions) and are not allocated for analysis purposes.
We account for the following segment information on the same basis as the accompanying unaudited condensed consolidated financial statements (in thousands). The prior period segment information has been recast to conform with the new reporting segment presentation described above.
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| Revenue From |
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Quarter Ended |
| External |
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| Adjusted |
May 31, 2025 |
| Customers |
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| Gross Profit |
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| EBITDA |
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Enterprise Division: |
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North America | $ | |
| $ | |
| $ | |
International direct offices |
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International licensees |
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Education practice |
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Corporate and eliminations |
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| ( |
Consolidated | $ | |
| $ | |
| $ | |
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Quarter Ended |
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May 31, 2024 |
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Enterprise Division: |
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North America | $ | |
| $ | |
| $ | |
International direct offices |
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International licensees |
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Education practice |
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Corporate and eliminations |
| |
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| |
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| ( |
Consolidated | $ | |
| $ | |
| $ | |
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Three Quarters Ended |
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May 31, 2025 |
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Enterprise Division: |
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|
|
North America | $ | |
| $ | |
| $ | |
International direct offices |
| |
|
| |
|
| ( |
International licensees |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Education practice |
| |
|
| |
|
| |
Corporate and eliminations |
| |
|
| |
|
| ( |
Consolidated | $ | |
| $ | |
| $ | |
|
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Three Quarters Ended |
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May 31, 2024 |
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|
|
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Enterprise Division: |
|
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|
|
|
|
|
|
North America | $ | |
| $ | |
| $ | |
International direct offices |
| |
|
| |
|
| |
International licensees |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Education practice |
| |
|
| |
|
| |
Corporate and eliminations |
| |
|
| |
|
| ( |
Consolidated | $ | |
| $ | |
| $ | |
A reconciliation of our consolidated Adjusted EBITDA to consolidated net income (loss) is provided below (in thousands).
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| Quarter Ended |
| Three Quarters Ended | ||||||||
|
| May 31, |
|
| May 31, |
|
| May 31, |
|
| May 31, |
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
Segment Adjusted EBITDA | $ | |
| $ | |
| $ | |
| $ | |
Stock-based compensation |
| ( |
|
| ( |
|
| ( |
|
| ( |
Restructuring costs |
| ( |
|
| ( |
|
| ( |
|
| ( |
Headquarters moving costs |
| ( |
|
| - |
|
| ( |
|
| - |
Impaired asset |
| - |
|
| - |
|
| - |
|
| ( |
Depreciation |
| ( |
|
| ( |
|
| ( |
|
| ( |
Amortization |
| ( |
|
| ( |
|
| ( |
|
| ( |
Income (loss) from operations |
| ( |
|
| |
|
| ( |
|
| |
Interest income |
| |
|
| |
|
| |
|
| |
Interest expense |
| ( |
|
| ( |
|
| ( |
|
| ( |
Income (loss) before income taxes |
| ( |
|
| |
|
| ( |
|
| |
Income tax benefit (provision) |
| |
|
| ( |
|
| |
|
| ( |
Net income (loss) | $ | ( |
| $ | |
| $ | ( |
| $ | |
Disaggregated Revenue
|
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| Quarter Ended |
| Three Quarters Ended | ||||||||
|
| May 31, |
|
| May 31, |
|
| May 31, |
|
| May 31, |
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
Americas | $ | |
| $ | |
| $ | |
| $ | |
Asia Pacific |
| |
|
| |
|
| |
|
| |
Europe/Middle East/Africa |
| |
|
| |
|
| |
|
| |
| $ | |
| $ | |
| $ | |
| $ | |
The following table presents our revenue disaggregated by type of service (in thousands).
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Quarter Ended |
| Services and |
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| Leases and |
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|
May 31, 2025 |
| Products |
|
| Subscriptions |
|
| Royalties |
|
| Other |
|
| Consolidated |
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Enterprise Division: |
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North America | $ | |
| $ | |
| $ | |
| $ | - |
| $ | |
International direct offices |
| |
|
| |
|
| |
|
| - |
|
| |
International licensees |
| |
|
| |
|
| |
|
| - |
|
| |
|
| |
|
| |
|
| |
|
| - |
|
| |
Education practice |
| |
|
| |
|
| |
|
| - |
|
| |
Corporate and eliminations |
| - |
|
| - |
|
| |
|
| |
|
| |
Consolidated | $ | |
| $ | |
| $ | |
| $ | |
| $ | |
|
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Quarter Ended |
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May 31, 2024 |
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Enterprise Division: |
|
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|
|
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|
|
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|
|
|
North America | $ | |
| $ | |
| $ | |
| $ | - |
| $ | |
International direct offices |
| |
|
| |
|
| |
|
| - |
|
| |
International licensees |
| |
|
| |
|
| |
|
| - |
|
| |
|
| |
|
| |
|
| |
|
| - |
|
| |
Education practice |
| |
|
| |
|
| |
|
| - |
|
| |
Corporate and eliminations |
| - |
|
| - |
|
| |
|
| |
|
| |
Consolidated | $ | |
| $ | |
| $ | |
| $ | |
| $ | |
|
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Three Quarters Ended |
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May 31, 2025 |
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Enterprise Division: |
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|
|
|
North America | $ | |
| $ | |
| $ | |
| $ | - |
| $ | |
International direct offices |
| |
|
| |
|
| |
|
| - |
|
| |
International licensees |
| |
|
| |
|
| |
|
| - |
|
| |
|
| |
|
| |
|
| |
|
| - |
|
| |
Education practice |
| |
|
| |
|
| |
|
| - |
|
| |
Corporate and eliminations |
| - |
|
| - |
|
| |
|
| |
|
| |
Consolidated | $ | |
| $ | |
| $ | |
| $ | |
| $ | |
|
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Three Quarters Ended |
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May 31, 2024 |
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Enterprise Division: |
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North America | $ | |
| $ | |
| $ | |
| $ | - |
| $ | |
International direct offices |
| |
|
| |
|
| |
|
| - |
|
| |
International licensees |
| |
|
| |
|
| |
|
| - |
|
| |
|
| |
|
| |
|
| |
|
| - |
|
| |
Education practice |
| |
|
| |
|
| |
|
| - |
|
| |
Corporate and eliminations |
| - |
|
| - |
|
| |
|
| |
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| |
Consolidated | $ | |
| $ | |
| $ | |
| $ | |
| $ | |
NOTE 8 – CORPORATE HEADQUARTERS LEASE
On December 20, 2024, we signed a new lease agreement (the Lease) for one floor of a five-story office building located in Draper, Utah to house our corporate headquarters. The Lease requires initial base rent of approximately $
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of financial condition and results of operations (Management’s Discussion and Analysis) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management’s current expectations and are subject to various uncertainties and changes in circumstances. Important factors that could cause actual results to differ materially from those described in forward-looking statements are set forth below under the heading “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995.”
We suggest that the following discussion and analysis be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2024, as filed with the SEC on November 12, 2024.
Non-GAAP Measures
This Management’s Discussion and Analysis includes the concept of Adjusted EBITDA, which is a non-GAAP financial measure. We define 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 items such as restructuring and headquarters moving costs. We reference this non-GAAP measure in our decision making because it provides supplemental information that facilitates consistent internal comparisons to the operating performance of prior periods and we believe it provides investors with greater transparency to evaluate our operational activities and financial results. For a reconciliation of our reporting segment Adjusted EBITDA to net income (loss), a related GAAP measure, refer to Note 7, Segment Information, to our unaudited condensed consolidated financial statements.
RESULTS OF OPERATIONS
Overview
Franklin Covey Co. is a global company focused on individual and organizational performance improvement. Our mission is to “enable greatness in people and organizations everywhere,” and our worldwide resources are organized to help individuals and organizations achieve sustained superior performance at scale through changes in human behavior. We believe that our content and services create the connection between capabilities and results. Our business is currently structured around two divisions, the Enterprise Division and the Education Division. The Enterprise Division consists of our North America, International Direct Office, and International Licensee segments and is focused on selling our offerings to corporations, governments, not-for-profits, and other related organizations. Our offerings delivered through the Enterprise Division are designed to help organizations and individuals achieve their own great results. Our Education Division is centered around the principles found in The Leader in Me and is dedicated to helping educational institutions build cultures that will produce great results, including increased student performance, improved school culture, and increased parental and teacher involvement.
During the quarter ended May 31, 2025, our operations were heavily impacted by various macroeconomic factors, including specific actions to reduce U.S. federal government spending, threatened or enacted tariffs that have created significant business environment uncertainty, and ongoing geopolitical tensions which continue to produce instability in certain areas of the world. While threatened or enacted tariffs have not directly impacted our operations, the uncertainty created by the threatened tariffs have adversely impacted our clients both domestically and internationally. In response to the economic uncertainty, many of our clients and prospective clients have sought to reduce their spending to maintain profitability. Despite these macroeconomic issues, we are pleased that the majority of our clients are renewing their All Access Pass subscriptions and Leader in Me memberships. Our solutions are designed to help clients achieve their own great purposes and manage difficult and uncertain times. The Company’s recently implemented new go-to-market strategy entered its second quarter of operations and these initiatives are designed to enable us to systematically drive growth in both the breadth and depth of our client relationships at scale.
Our consolidated revenue for the third quarter ended May 31, 2025, was $67.1 million, compared with $73.4 million in the third quarter of fiscal 2024 and reflected the impact of conditions previously described. Foreign exchange rates did not have a material impact on our consolidated revenue during the third quarter. The Company’s revenue performance during the third quarter of fiscal 2025 included the following key metrics:
oEnterprise Division revenues for the third quarter of fiscal 2025 totaled $47.3 million compared with $51.9 million in fiscal 2024. Enterprise Division revenue performance was impacted by a $3.5 million decrease in North America segment revenues and a $1.0 million decrease in International Direct Office revenues, which were both affected by macroeconomic uncertainties and canceled government contracts. These challenging economic and business conditions adversely impacted new logo sales and expansion activity in the third quarter.
oEducation Division revenues in the third quarter of fiscal 2025 were $18.6 million compared with $20.2 million in the prior year. The decrease was primarily due to reduced classroom materials sales. In the third quarter of fiscal 2024, we entered into a new state-wide initiative and other new district-wide initiatives that included large materials orders during the first year of the contracts. Materials orders from these contracts did not repeat at the same level in fiscal 2025. However, decreased materials revenue was partially offset by increased training and coaching revenue and membership subscription revenues. Delivery of training and coaching days remained strong in the third quarter of fiscal 2025 and benefited from higher revenue per day than in same period of the prior year. Education deferred subscription revenue at May 31, 2025, increased 21% over the balance at May 31, 2024.
oConsolidated subscription and subscription services revenues for the third quarter of fiscal 2025 were $57.7 million compared with $60.8 million in the third quarter of fiscal 2024. For the quarter ended May 31, 2025, subscription revenue invoiced was $31.7 million compared with $34.5 million in fiscal 2024.
oConsolidated deferred subscription revenue on May 31, 2025, increased 7% to $89.3 million compared with $83.8 million on May 31, 2024.
oAs of May 31, 2025, 58% of our AAP contracts are for at least two years, compared with 55% at May 31, 2024, and the percentage of contracted amounts represented by multi-year contracts was 62% compared with 60% as of May 31, 2024.
oUnbilled deferred subscription revenue on May 31, 2025, was $62.0 million compared with $69.4 million on May 31, 2024. Unbilled deferred revenue represents business that is contracted, but unbilled and therefore excluded from our balance sheet.
The following is a summary of other unaudited consolidated financial information from the third quarter of fiscal 2025, which ended on May 31, 2025:
Cost of Revenue/Gross Profit – For the quarter ended May 31, 2025, our cost of revenue totaled $15.8 million compared with $17.2 million in the prior year. Gross profit for the third quarter of fiscal 2025 was $51.3 million compared with $56.2 million in the prior year. The decrease in gross profit was primarily due to decreased revenue as described above. Gross margin for the third quarter of fiscal 2025 remained strong and was 76.5% of revenue compared with 76.6% in the third quarter of fiscal 2024.
Operating Expenses – Our operating expenses for the third quarter of fiscal 2025 totaled $53.5 million and increased $5.7 million compared with the prior year, which was primarily due to a $4.0 million increase in restructuring charges and a $1.6 million increase in selling, general, and administrative (SG&A) expenses. During the third quarter of fiscal 2025, we continued to restructure our sales force in the Enterprise Division and to reduce costs in certain areas of our operations. We incurred $4.7 million of expenses for these restructuring activities primarily for severance and related costs. 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 implementation of our new go-to-market strategy and the restructuring of our North America sales force.
Income Taxes – Our income tax benefit for the quarter ended May 31, 2025, was $0.7 million on a pre-tax loss of $(2.1) million, for an effective benefit rate of 33.8%. In the third quarter of the prior year, our income tax provision was $2.6 million on pre-tax income of $8.4 million, reflecting an effective income tax rate of 31.6%. The slightly higher benefit rate in the current quarter is primarily attributable to our expectation that withholding taxes on foreign-source income will remain consistent year-over-year, while pre-tax income is expected to be lower, thus increasing the impact on our effective rate.
Net Income (Loss) and Adjusted EBITDA – For the third quarter of fiscal 2025, we realized a net loss of $(1.4) million, or $(0.11) per share, compared with net income of $5.7 million, or $0.43 per diluted share, in the third quarter of the prior year, reflecting the factors previously discussed. Our Adjusted EBITDA for the quarter ended May 31, 2025, exceeded our previously announced expectations and totaled $7.3 million compared with $13.9 million in the third quarter of fiscal 2024. Foreign exchange rates had a $0.5 million favorable impact on our Adjusted EBITDA for the quarter ended May 31, 2025.
Liquidity and Financial Position – Our liquidity and financial position remained strong throughout the third quarter of fiscal 2025. At May 31, 2025, we had over $95 million of available liquidity which consisted of $33.7 million of cash and our full undrawn $62.5 million line of credit even after purchasing $23.0 million of our common stock during the first three quarters of fiscal 2025.
Further details regarding our results for the quarter ended May 31, 2025, are provided throughout the following Management’s Discussion and Analysis.
Quarter Ended May 31, 2025 Compared with the Quarter Ended May 31, 2024
Enterprise Division
North America Segment
The North America segment includes our personnel that serve clients in the United States and Canada. The following comparative information is for our North America segment in the periods indicated (in thousands):
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| Quarter Ended |
|
|
| Quarter Ended |
|
|
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|
| May 31, | % of |
|
| May 31, | % of |
|
|
|
|
| 2025 | Sales |
|
| 2024 | Sales |
|
| Change |
Revenue | $ | 37,054 | 100.0 |
| $ | 40,592 | 100.0 |
| $ | (3,538) |
Cost of revenue |
| 6,346 | 17.1 |
|
| 7,167 | 17.7 |
|
| (821) |
Gross profit |
| 30,708 | 82.9 |
|
| 33,425 | 82.3 |
|
| (2,717) |
SG&A expenses |
| 24,507 | 66.1 |
|
| 22,603 | 55.7 |
|
| 1,904 |
Adjusted EBITDA | $ | 6,201 | 16.7 |
| $ | 10,822 | 26.7 |
| $ | (4,621) |
Revenue. For the quarter ended May 31, 2025, North America segment revenue was $37.1 million compared with $40.6 million in the prior year. North America segment revenues for the quarter were adversely impacted by the uncertain macroeconomic environment and by canceled or postponed government contracting. During the third quarter of fiscal 2025, total Enterprise Division AAP subscription plus subscription services revenues were $39.9 million compared with $42.6 million in the prior year. Rolling four quarter AAP subscription and subscription service revenues were $160.2 million compared with $163.3 million for the corresponding period ended May 31, 2024. We remain optimistic about the expected results of our new North America go-to-market strategy and sales force restructuring as our new North America sales force structure is in place and began executing on their directives earlier in fiscal 2025. However, continued economic uncertainty, including threatened or enacted tariffs, may prevent us from achieving expected sales goals in the near term. Foreign exchange rates had an insignificant impact on North America revenues and operating results during the third quarter of fiscal 2025.
Gross Profit. Gross profit was impacted by lower revenue as described above. North America gross margin remained strong during the quarter ended May 31, 2025, and increased to 82.9% of revenue compared with 82.3% in the third quarter of fiscal 2024.
SG&A Expense. North America SG&A expenses increased primarily due to associate costs resulting from new sales and sales support personnel primarily related to our new go-to-market strategy and the restructuring of our North America sales force.
International Direct Offices
Our directly owned international offices serve clients in Australia, Austria, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom. The following comparative information is for our International Direct Office segment in the periods indicated (in thousands):
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| Quarter Ended |
|
|
| Quarter Ended |
|
|
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|
| May 31, | % of |
|
| May 31, | % of |
|
|
|
|
| 2025 | Sales |
|
| 2024 | Sales |
|
| Change |
Revenue | $ | 7,496 | 100.0 |
| $ | 8,540 | 100.0 |
| $ | (1,044) |
Cost of revenue |
| 2,006 | 26.8 |
|
| 1,911 | 22.4 |
|
| 95 |
Gross profit |
| 5,490 | 73.2 |
|
| 6,629 | 77.6 |
|
| (1,139) |
SG&A expenses |
| 5,177 | 69.1 |
|
| 5,361 | 62.8 |
|
| (184) |
Adjusted EBITDA | $ | 313 | 4.2 |
| $ | 1,268 | 14.8 |
| $ | (955) |
Revenue. International Direct Office revenues for the quarter ended May 31, 2025, were adversely affected by ongoing economic uncertainty and geopolitical tensions as previously discussed. Third quarter revenues decreased in Japan by 22%, in the United Kingdom by 21%, and in China by 15% and were reflective of the macroeconomic conditions and their impact on existing and potential clients. Decreases in these offices were partially offset by increased revenue recognized through our new France office. The fluctuation of foreign exchange rates had a $0.1 million favorable impact on our International Direct Office revenue and an insignificant impact on operating results in the third quarter of fiscal 2025. We believe the resolution of multiple international trade issues and improving economic conditions will lead to improved sales performance in future periods. However, the successful resolution of these macroeconomic issues is not within our control and may not generate expected revenue growth at our International Direct Offices in future periods.
Gross Profit. Gross profit in the International Direct Office segment decreased primarily due to reduced revenue as described above. Gross margin for the third quarter of fiscal 2025 was 73.2% of sales compared with 77.6% in the prior year and decreased primarily due to a shift in the mix of services delivered and products sold during the third quarter of fiscal 2025 when compared with fiscal 2024.
SG&A Expenses. International Direct Office SG&A expenses decreased $0.2 million primarily due to cost reduction initiatives enacted to offset the impact of decreased revenue.
International Licensees Segment
In foreign locations where we do not have a directly owned office, our training and consulting services are delivered through independent licensees. The following comparative information is for our International Licensee operations in the periods indicated (in thousands):
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| Quarter Ended |
|
|
| Quarter Ended |
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|
| May 31, | % of |
|
| May 31, | % of |
|
|
|
|
| 2025 | Sales |
|
| 2024 | Sales |
|
| Change |
Revenue | $ | 2,716 | 100.0 |
| $ | 2,747 | 100.0 |
| $ | (31) |
Cost of revenue |
| 337 | 12.4 |
|
| 284 | 10.3 |
|
| 53 |
Gross profit |
| 2,379 | 87.6 |
|
| 2,463 | 89.7 |
|
| (84) |
SG&A expenses |
| 1,030 | 37.9 |
|
| 1,111 | 40.4 |
|
| (81) |
Adjusted EBITDA | $ | 1,349 | 49.7 |
| $ | 1,352 | 49.2 |
| $ | (3) |
Revenue. International licensee revenue is primarily comprised of royalties on sales of our content by the licensees. For the quarter ended May 31, 2025, our International Licensees’ revenue was essentially flat when compared with the prior year at $2.7 million as licensee royalty revenues were relatively flat for the quarter. Our International Licensees’ operations continue to be unfavorably impacted by difficult macroeconomic conditions, such as geopolitical trade tensions and economic uncertainty, which have negatively impacted the industries that some of our licensees serve. While we remain optimistic about future growth in our International Licensee operations, ongoing economic uncertainty and geopolitical instability may impair or reduce their growth compared with our expectations. Foreign exchange rates had an immaterial impact on International Licensee revenues and operating results for the quarter ended May 31, 2025.
Gross Profit. Despite consistent revenue performance when compared with the prior year, gross profit for the quarter ended May 31, 2025 decreased compared to fiscal 2024 primarily due to changes in the mix of services and products sold.
These changes in product mix reduced International Licensee gross margin from 89.7% in fiscal 2024 to 87.6% in the current year.
SG&A Expenses. International licensee SG&A expenses decreased $0.1 million primarily due to cost-cutting initiatives implemented during fiscal 2025.
Education Division
Our Education Division is comprised of our domestic and international Education practice operations (focused on sales to educational institutions) and includes our widely acclaimed The Leader in Me program. The following comparative information is for our Education Division in the periods indicated (in thousands):
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| Quarter Ended |
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| May 31, | % of |
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| May 31, | % of |
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| 2025 | Sales |
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| 2024 | Sales |
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Revenue | $ | 18,640 | 100.0 |
| $ | 20,235 | 100.0 |
| $ | (1,595) |
Cost of revenue |
| 6,413 | 34.4 |
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| 6,965 | 34.4 |
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| (552) |
Gross profit |
| 12,227 | 65.6 |
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| 13,270 | 65.6 |
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| (1,043) |
SG&A expenses |
| 10,174 | 54.6 |
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| 10,128 | 50.1 |
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| 46 |
Adjusted EBITDA | $ | 2,053 | 11.0 |
| $ | 3,142 | 15.5 |
| $ | (1,089) |
Revenue. For the third quarter of fiscal 2025, Education Division revenue was $18.6 million compared with $20.2 million in the third quarter of fiscal 2024. The decrease in Education Division revenue during the quarter was primarily due to a $2.2 million decrease in training materials revenue, which was partially offset by increased coaching and consulting revenue and increased membership subscription revenues resulting primarily from new schools which started The Leader in Me during fiscal 2024. During the third quarter of fiscal 2024 a new state-wide initiative began that included $1.4 million of classroom materials sales and we also recognized significant materials sales from other new district-wide initiatives. These contracts included large materials orders in the first year and did not repeat at the same level in fiscal 2025. The delivery of training and coaching services remained strong during the third quarter of fiscal 2025 and benefited from higher revenue per day than the prior year. Training and coaching days are recognized as revenue when they are delivered. Education subscription and subscription services revenues in the third quarter of fiscal 2025 decreased 2% compared with the same period of the prior year due to decreased materials revenue. Foreign exchange rates had an immaterial impact on Education Division revenue and operating results for the third quarter of fiscal 2025.
Gross Profit. Education Division gross profit in the third quarter of fiscal 2025 decreased primarily due to revenue performance as previously described. Education Division gross margin remained strong and was consistent with the prior year at 65.6% of sales.
SG&A Expenses. Education SG&A expenses were relatively flat compared with the prior year and increased slightly due to the impact of new personnel, recognition of previously deferred commissions, and increased salaries compared with the prior year. These increases were mostly offset by decreased variable pay and marketing expenses.
Other Operating Expense Items
Interest Expense – Our interest expense of $0.1 million decreased by $0.1 million compared with the third quarter of fiscal 2024 due to decreased term loan and financing obligation liabilities as payments have been made in the normal course of business.
Income Taxes
Our income tax benefit for the quarter ended May 31, 2025, was $0.7 million on a pre-tax loss of $(2.1) million, for an effective benefit rate of 33.8%. In the third quarter of the prior year, our income tax provision was $2.6 million on pre-tax income of $8.4 million, reflecting an effective income tax rate of 31.6%. The slightly higher benefit rate in the current quarter is primarily attributable to our expectation that withholding taxes on foreign-source income will remain consistent year-over-year, while pre-tax income is expected to be lower, thus increasing the impact on our effective rate.
Three Quarters Ended May 31, 2025 Compared with the Three Quarters Ended May 31, 2024
Enterprise Division
North America Segment
The following comparative information is for our North America segment in the periods indicated (in thousands):
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| May 31, | % of |
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| May 31, | % of |
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| 2025 | Sales |
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| 2024 | Sales |
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Revenue | $ | 111,711 | 100.0 |
| $ | 116,439 | 100.0 |
| $ | (4,728) |
Cost of revenue |
| 19,208 | 17.2 |
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| 20,338 | 17.5 |
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| (1,130) |
Gross profit |
| 92,503 | 82.8 |
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| 96,101 | 82.5 |
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| (3,598) |
SG&A expenses |
| 72,715 | 65.1 |
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| 65,680 | 56.4 |
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| 7,035 |
Adjusted EBITDA | $ | 19,788 | 17.7 |
| $ | 30,421 | 26.1 |
| $ | (10,633) |
Revenue. North America segment revenue for the first three quarters of fiscal 2025 totaled $111.7 million compared with $116.4 million in fiscal 2024. North America segment revenues were adversely impacted by continued business environment uncertainties and by canceled government contracts resulting from efficiency initiatives, which began in the second quarter of fiscal 2025. Our results for the first three quarters of fiscal 2025 were also somewhat lower than our expectations as we implemented a new go-to-market strategy and transitioned our sales force in North America to a more focused structure. For the first three quarters of fiscal 2025, total Enterprise AAP subscription plus subscription services revenues were $117.0 million compared with $121.6 million in fiscal 2024. While we remain optimistic about the expected results of our North America sales force restructuring and associated growth initiatives, other factors such as further reductions in government spending and continued uncertainty in the business environment in North America may delay or lower expected revenue growth from these initiatives. Foreign exchange rates had an insignificant impact on North America revenues and operating results for the three quarters ended May 31, 2025.
Gross Profit. Gross profit decreased due to revenue performance as discussed above. North America gross margin remained strong during the first three quarters of fiscal 2025 and increased to 82.8% compared with 82.5% in fiscal 2024.
SG&A Expense. North America SG&A expenses increased primarily due to associate costs resulting from new sales and sales support personnel (primarily related to our new go-to-market strategy and the restructuring of our North America sales force), compensation increases, and benefit costs, as well as increased advertising and promotional costs from the launch of our refreshed The 7 Habits of Highly Effective People offering in the first quarter of fiscal 2025.
International Direct Offices
The following comparative information is for our International Direct Office segment in the periods indicated (in thousands):
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| 2025 | Sales |
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| 2024 | Sales |
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Revenue | $ | 21,936 | 100.0 |
| $ | 24,533 | 100.0 |
| $ | (2,597) |
Cost of revenue |
| 5,773 | 26.3 |
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| 5,789 | 23.6 |
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| (16) |
Gross profit |
| 16,163 | 73.7 |
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| 18,744 | 76.4 |
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| (2,581) |
SG&A expenses |
| 17,047 | 77.7 |
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| 16,426 | 67.0 |
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| 621 |
Adjusted EBITDA | $ | (884) | (4.0) |
| $ | 2,318 | 9.4 |
| $ | (3,202) |
Revenue. International Direct Office revenues for the first three quarters of fiscal 2025 were adversely affected by ongoing economic uncertainty and geopolitical tensions as previously discussed. Fiscal 2025 year-to-date revenues decreased in China by 22%, in Japan by 19%, in the United Kingdom by 15%, and in our Germany, Switzerland, and Austria operations by 3% compared with fiscal 2024. These decreases were partially offset by increased sales through our Australia office and by revenue from our new France office. The fluctuation of foreign exchange rates for the first three quarters of fiscal 2025 had a $0.1 million impact on International Direct Office revenue and an insignificant impact on operating results.
Gross Profit. Gross profit in the International Direct Office segment decreased primarily due to reduced revenue as previously described. Gross margin for the first three quarters of fiscal 2025 remained strong and was 73.7% of sales
compared with 76.4% in fiscal 2024. The fluctuation in gross margin was primarily due to changes in the mix of services delivered and products sold compared with the prior year.
SG&A Expenses. International Direct Office SG&A expenses increased primarily due to increased bad debt expense and increased advertising and marketing expense related to the launch of the new The 7 Habits of Highly Effective People offering, which occurred in the first quarter of fiscal 2025.
International Licensees Segment
The following comparative information is for our international licensee operations in the periods indicated (in thousands):
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| May 31, | % of |
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| May 31, | % of |
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| 2025 | Sales |
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| 2024 | Sales |
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| Change |
Revenue | $ | 8,749 | 100.0 |
| $ | 8,951 | 100.0 |
| $ | (202) |
Cost of revenue |
| 1,007 | 11.5 |
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| 1,010 | 11.3 |
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| (3) |
Gross profit |
| 7,742 | 88.5 |
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| 7,941 | 88.7 |
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| (199) |
SG&A expenses |
| 3,293 | 37.6 |
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| 3,315 | 37.0 |
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| (22) |
Adjusted EBITDA | $ | 4,449 | 50.9 |
| $ | 4,626 | 51.7 |
| $ | (177) |
Revenue. For the first three quarters of fiscal 2025, our International Licensees’ revenue decreased primarily due to decreases in services revenue and in our share of AAP revenue. Licensee royalty revenues were essentially flat compared with fiscal 2024. During fiscal 2025, our foreign licensees have encountered ongoing macroeconomic uncertainty and geopolitical instability in the regions where they operate, which have adversely impacted their operations. Foreign exchange rates had an immaterial impact on International Licensee revenues and operating results for the first three quarters of fiscal 2025.
Gross Profit. Gross profit decreased due to lower licensee revenue compared with the prior year. However, International Licensee gross margin remained strong and was 88.5% in the first three quarters of fiscal 2025 compared with 88.7% in the first three quarters of the prior year.
SG&A Expense. International Licensee SG&A expenses for the first three quarters of fiscal 2025 decreased primarily due to cost cutting efforts implemented during fiscal 2025 in response to decreased revenue.
Education Division
The following comparative information is for our Education Division in the periods indicated (in thousands):
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| May 31, | % of |
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| May 31, | % of |
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| 2025 | Sales |
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| 2024 | Sales |
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Revenue | $ | 50,169 | 100.0 |
| $ | 49,815 | 100.0 |
| $ | 354 |
Cost of revenue |
| 18,201 | 36.3 |
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| 18,395 | 36.9 |
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| (194) |
Gross profit |
| 31,968 | 63.7 |
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| 31,420 | 63.1 |
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| 548 |
SG&A expenses |
| 29,962 | 59.7 |
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| 28,642 | 57.5 |
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| 1,320 |
Adjusted EBITDA | $ | 2,006 | 4.0 |
| $ | 2,778 | 5.6 |
| $ | (772) |
Revenue. Education Division revenue for the first three quarters of fiscal 2025 increased 1%, or $0.4 million, compared with the first three quarters of fiscal 2024. Fiscal 2025 revenue growth was primarily attributable to increased coaching and consulting revenue and increased membership subscription revenue, which were partially offset by decreased sales of classroom and training materials, primarily due to a new state-wide initiative and district contracts that included large training materials orders in the third quarter of fiscal 2024. These materials orders did not repeat at the same levels in the third quarter of fiscal 2025. Delivery of training and coaching days remained strong during the first three quarters of fiscal 2025 as the Education Division delivered approximately 70 more training and coaching days than in fiscal 2024. Education subscription and subscription services revenues in the first three quarters of fiscal 2025 increased 4% compared with the prior year and Education deferred subscription revenue at May 31, 2025, increased 21% over the balance at May 31, 2024. Education Division growth during the first three quarters of fiscal 2025 was partially offset by changes in foreign exchange rates, which adversely impacted revenue by $0.2 million and operating results by $0.4 million. We continue to be pleased with the strength and momentum of our Education Division, which added 728 new The Leader in Me schools during fiscal 2024. We believe the momentum generated in fiscal 2024 and over the first three quarters of
fiscal 2025 will continue through the remainder of fiscal 2025 as we continue to add new schools. At May 31, 2025, nearly 8,000 schools around the world were using The Leader in Me program.
Gross Profit. Education Division gross profit increased primarily due to revenue growth as previously discussed. Education Division gross margin remained strong and increased to 63.7% compared with 63.1% in the same period of the prior year.
SG&A Expenses. Education SG&A expenses increased primarily due to new personnel and increased commissions on higher sales when compared with the prior year.
Other Operating Expense Items
Depreciation – Through May 31, 2025, our depreciation expense was consistent with the prior year at $3.0 million in each period. We currently expect depreciation expense to total approximately $4 million in fiscal 2025.
Amortization – Amortization expense for the first three quarters of fiscal 2025 was $3.3 million compared with $3.2 million in the prior year. The slight increase was primarily due to the reacquisition of license rights for our France operations, which occurred in the first quarter of fiscal 2025. We currently expect definite-lived intangible asset amortization expense will total approximately $4.5 million during fiscal 2025.
Interest Expense – Our interest expense of $0.5 million decreased by $0.4 million compared with the first three quarters of fiscal 2024 primarily due to decreased term loan and financing obligation liabilities as payments have been made in the normal course of business.
Income Taxes
For the first three quarters of fiscal 2025, we recognized an income tax benefit of $0.6 million on a pre-tax loss of $(1.9) million, resulting in an effective tax benefit rate of 30.9%. For the corresponding period of the prior year, we recognized income tax expense of $3.6 million on pre-tax income of $15.1 million for an effective tax rate of 24.0%.
The year-to-date effective tax rate reflects the impact of permanent differences, including non-deductible expenses and foreign withholding taxes not eligible for U.S. foreign tax credits. We currently expect our annual effective tax rate for fiscal 2025 to be approximately 39%, which exceeds the combined U.S. federal and average state statutory rate, primarily due to non-deductible executive compensation under Internal Revenue Code Section 162(m).
During the first three quarters of fiscal 2025 we paid $7.1 million of cash for income taxes, most of which related to our fiscal 2024 income tax liability. Over the long term, we expect annual cash tax payments to approximate our annual income tax provision.
LIQUIDITY AND CAPITAL RESOURCES
Introduction
At May 31, 2025 we had over $95 million of available liquidity, which consisted of $33.7 million in cash combined with our undrawn $62.5 million revolving credit facility. Of our $33.7 million of cash on May 31, 2025, $13.4 million was held outside the U.S. by our foreign subsidiaries. We routinely repatriate cash from our foreign subsidiaries and consider cash generated from foreign activities a key component of our overall liquidity position. Our primary sources of liquidity are cash flows from the sale of services and products in the normal course of business and available proceeds from our credit facility. Our primary uses of liquidity include payments for operating activities, opportunistic purchases of our common stock, working capital expansion, capital expenditures (including curriculum development), and debt and lease payments.
In fiscal 2023, we entered into a credit agreement (the 2023 Credit Agreement) with KeyBank National Association leading a group of financial institutions. The 2023 Credit Agreement provides up to $70.0 million in total credit, of which $7.5 million was used to replace the outstanding term loan balance from the previous credit agreement. The remaining
$62.5 million is available as a revolving line of credit or for future term loans. The 2023 Credit Agreement matures on March 27, 2028.
As defined in the 2023 Credit Agreement, we are (i) required to maintain a Leverage Ratio of less than 3.00 to 1.00 and a Fixed Charge Coverage Ratio greater than 1.15 to 1.00; and (ii) we are restricted from making certain distributions to stockholders, including repurchases of common stock. However, we are permitted to make distributions, including through purchases of outstanding common stock, provided that we are in compliance with the Leverage Ratio and Fixed Charge Coverage Ratio financial covenants before and after such distribution. At May 31, 2025, we believe that we were in compliance with the terms and covenants contained in the 2023 Credit Agreement.
The following discussion is a description of the primary factors affecting our cash flows and their effects upon our liquidity and capital resources during the three quarters ended May 31, 2025.
Cash Flows Provided By Operating Activities
Our primary source of cash from operating activities was the sale of services to our customers in the normal course of business. Our primary uses of cash for operating activities were payments for SG&A expenses, direct costs necessary to conduct training programs, to fund working capital changes, and to suppliers for materials used in training manuals sold. Our cash provided by operating activities during the first three quarters of fiscal 2025 was $19.0 million compared with $38.4 million in the first three quarters of fiscal 2024. The decrease in cash flows from operating activities was primarily attributable to lower operating income in the first three quarters of fiscal 2025 as previously discussed, and an $8.3 million decrease in taxes payable as we no longer benefit from the utilization of our net operating loss position compared with the prior year. While we expect our cash flows from operating activities to improve in future periods, certain conditions are beyond our control or influence such as general macroeconomic conditions, further reductions in government spending, and business conditions in international locations which impact our financial results at our international direct offices and international licensees.
Cash Flows Used For Investing Activities and Capital Expenditures
Through May 31, 2025, our cash used for investing activities totaled $8.5 million. Our primary uses of cash for investing activities consisted of additional investments in the development of our offerings and purchases of property and equipment in the normal course of business.
In the first three quarters of fiscal 2025, we spent $4.1 million on the development of our various offerings and related content. During the first half of fiscal 2025, we launched a significantly refurbished The 7 Habits of Highly Effective People offering and expect to release additional/refurbished content in the remainder of fiscal 2025 and in future years. We believe continued investment in our offerings and content is key to future growth and the development of our business. We currently expect that our capital spending for curriculum development will total between approximately $7 million and $9 million in fiscal 2025.
Our purchases of property and equipment during the first three quarters of fiscal 2025 totaled $4.1 million and consisted primarily of computer software, hardware, and leasehold improvements at our new headquarters office. We are currently in the process of moving our corporate offices to a new location and will continue to use cash for leasehold improvements to build out and furnish the new office space through the remainder of fiscal 2025. Including the spending for these leasehold improvements, we currently anticipate that our purchases of property and equipment will total between approximately $10 million and $12 million in fiscal 2025.
In the first quarter of fiscal 2025, we reacquired the license rights to sell our content in France for $0.3 million in cash and $0.2 million of forgiven receivables from the former licensee. The operations of the newly opened direct office in France are included in the International Direct Office segment. We look forward to expanding our business and operations in France over the coming years.
Cash Flows Used For Financing Activities
For the first three quarters of fiscal 2025, our net cash used for financing activities totaled $25.6 million. Our primary uses of financing cash were $23.0 million used to purchase shares of our common stock, which consisted of shares
purchased on the open market and shares withheld for income taxes on stock-based compensation awards (Note 2), and $3.7 million used for principal payments on our financing obligation and notes payable. Partially offsetting these uses of cash for financing activities were $1.1 million of proceeds received from our ESPP participants to purchase shares of common stock during the first three quarters of fiscal 2025.
On April 18, 2024, our Board of Directors approved a plan to purchase up to $50.0 million of our outstanding common stock. The previously existing common stock purchase plan was canceled, and the new common share purchase plan does not have an expiration date. At May 31, 2025, we had $27.9 million remaining on the current common share purchase authorization.
Our uses of financing cash during the remainder of fiscal 2025 are expected to include required payments on our financing obligation and may include purchases of our common stock. However, the timing and amount of common stock purchases is dependent on a number of factors, including available resources, and we are not obligated to make purchases of our common stock during any future period.
Sources of Liquidity
We expect to pay the liabilities from our leases, financing obligation, and notes payable; pay for projected capital expenditures; and meet other obligations in fiscal 2025 and beyond from current cash balances and future cash flows from operating activities. Going forward, we will continue to incur costs necessary for the day-to-day operation of the business and may use additional credit and other financing alternatives, if necessary, for these expenditures. During fiscal 2023, we entered into the 2023 Credit Agreement which we expect to renew and amend on a regular basis to maintain the long-term borrowing capacity of this credit facility. Additional potential sources of liquidity available to us include factoring receivables, issuance of additional equity, or issuance of debt to public or private sources. If necessary, we will evaluate all of these options and select one or more of them depending on overall capital needs and the associated cost of capital.
We believe that our existing cash and cash equivalents, cash generated by operating activities, and the availability of external funds as described above, will be sufficient for us to maintain our operations for at least the upcoming 12 months. However, our ability to maintain adequate capital for our operations in the future is dependent upon a number of factors, including sales trends, macroeconomic activity, our ability to contain costs, levels of capital expenditures, collection of accounts receivable, and other factors. Some of the factors that influence our operations are not within our control, such as general economic conditions, business conditions in international locations, geopolitical tensions in various locations, and the introduction of new offerings or technology by our competitors. We will continue to monitor our liquidity position and may pursue additional financing alternatives, as described above, to maintain sufficient resources for future growth and capital requirements. However, there can be no assurance such financing alternatives will be available to us on acceptable terms, or at all.
Material Uses of Cash and Contractual Obligations
We do not operate any manufacturing, mining, or other capital-intensive facilities, and we have not structured any special purpose entities, or participated in any commodity trading activities, which would expose us to potential undisclosed liabilities or create adverse consequences to our liquidity. However, we have normal ongoing cash expenditures and are subject to various contractual obligations that are required to run our business. Our material cash requirements include the following:
Associate and Consultant Compensation
Information Technology Expenditures
Content Development Costs
Income Taxes
Other Contractual Obligations
These material cash requirements are discussed in more detail in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2024, which was filed with the SEC on November 12, 2024 (our Annual Report). During the quarter and three quarters ended May 31, 2025, there have been no material changes to our expected uses of cash and contractual
obligations from those discussed in our Annual Report except for the addition of a leasing arrangement on our new corporate headquarters location as discussed in Note 8 to the financial statements contained herein. However, current economic conditions and other forecasts may change and could alter our expected material uses of cash in future periods. For further information on our material uses of cash and contractual obligations, refer to the information included in our Annual Report.
CRITICAL ACCOUNTING ESTIMATES
Our consolidated financial statements were prepared in accordance with GAAP. For information on our critical accounting policies, see “Critical Accounting Estimates” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report. Refer to those disclosures for further information regarding our uses of estimates and critical accounting policies. There have been no significant changes to our previously disclosed estimates or critical accounting policies.
Estimates
Some of the accounting guidance we use requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements. We regularly evaluate our estimates and assumptions and base those estimates and assumptions on historical experience, factors that are believed to be reasonable under the circumstances, and requirements under GAAP. Actual results may differ from these estimates under different assumptions or conditions, including changes in economic conditions and other circumstances that are not within our control, but which may have an impact on these estimates and our actual financial results.
NEW ACCOUNTING PRONOUNCEMENTS
Refer to Note 1 to our unaudited condensed consolidated financial statements for a description of new accounting pronouncements that may impact us.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements made by the Company in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 as amended (the Exchange Act). Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “project,” or words or phrases of similar meaning. In our reports and filings we may make forward-looking statements regarding, among other things, our expectations about future revenue levels and financial results, our financial performance during fiscal 2025, our expectations regarding a new go-to-market strategy and sales force restructuring, future training and consulting revenue, expected increases in add-on subscription services revenue and delivered training and coaching days, anticipated renewals of subscription offerings, our ability to hire sales professionals, the amount and timing of capital expenditures, anticipated expenses, including SG&A expenses, depreciation, and amortization, future gross margins, the release of new services or products, the adequacy of existing capital resources, our ability to renew or extend our line of credit facility, expected effective income tax rates, the amount of cash expected to be paid for income taxes, our ability to maintain adequate capital for our operations for at least the upcoming 12 months, the expected impact of the resolution of significant macroeconomic issues and geopolitical tensions, the seasonality of future revenues, future compliance with the terms and conditions of our line of credit, the ability to borrow on our line of credit, expected collection of accounts receivable, estimated capital expenditures, and cash flow estimates used to determine the fair value of long-lived assets. These, and other forward-looking statements, are subject to certain risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are disclosed from time to time in reports filed by us with the SEC, including reports on Forms 8-K, 10-Q, and 10-K. Such risks and uncertainties include, but are not limited to, the matters discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended August 31, 2024, entitled “Risk Factors.” In addition, such risks and uncertainties may include unanticipated developments in any one or more of the following areas: cybersecurity risks; inflation and other macroeconomic risks; litigation; unanticipated costs or capital expenditures; delays or unanticipated outcomes relating to our strategic plans; dependence on existing products or services; the rate and consumer acceptance of new product introductions, including the All Access Pass; competition; the impact of foreign exchange rates; the number and nature of customers and their product orders, including changes in the timing or mix of product or training orders; pricing of our
products and services and those of competitors; adverse publicity; and other factors which may adversely affect our business.
The risks included here are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors may emerge and it is not possible for our management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any single factor, or combination of factors, may cause actual results to differ materially from those contained in forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.
The market price of our common stock has been and may remain volatile. In addition, stock markets in general have experienced significant volatility. Factors such as quarter-to-quarter variations in revenues and earnings or losses and our failure to meet expectations could have a significant impact on the market price of our common stock. In addition, the price of our common stock can change for reasons unrelated to our performance, such as government actions on spending and trade. Due to our low market capitalization, the price of our common stock may also be affected by conditions such as a lack of analyst coverage, and fewer potential investors.
Forward-looking statements are based on management’s expectations as of the date made, and we do not undertake any responsibility to update any of these statements in the future except as required by law. Actual future performance and results will differ and may differ materially from that contained in or suggested by forward-looking statements as a result of the factors set forth in this Management’s Discussion and Analysis and elsewhere in our filings with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity
At May 31, 2025, our long-term obligations primarily consisted of a long-term lease agreement (financing obligation) on our corporate headquarters facility, a fixed rate note payable from the purchase of Strive Talent, Inc., and deferred payments and potential contingent consideration resulting from previous business acquisitions. Since our long-term obligations have fixed interest rates, our overall interest rate sensitivity is currently influenced by any amount borrowed on our 2023 Credit Agreement, and the prevailing interest rate on this credit facility. The effective interest rate on the 2023 Credit Agreement is variable and was 6.0% on May 31, 2025, and our financing obligation has a payment structure equivalent to a long-term leasing arrangement with a fixed interest rate of 7.7%.
There have been no other material changes from the information previously reported under Part II, Item 7A of our Annual Report. We did not utilize any foreign currency or interest rate derivative instruments during the quarter or three quarters ended May 31, 2025.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.
There were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Franklin Saltlake LLC, the landlord (the Landlord) for leased premises which housed the Company’s corporate offices previously located at 2200 West Parkway Blvd, Salt Lake City, UT, filed suit on December 20, 2024, in Third District Court, Salt Lake County, Utah, alleging that we have breached the lease by failing to make certain repairs and replacements to equipment on the premises. The Landlord originally sought approximately $2.3 million in damages and a right to enter the premises to make the alleged repairs. The Landlord filed an amended complaint on February 11, 2025, and the Company filed a motion to dismiss on February 25, 2025, which was subsequently denied by the court. In April 2025, the Landlord increased its damage claim to approximately $3.8 million. The Company vacated the premises on June 30, 2025; however, the Landlord now contends that the Company is in holdover. The Company denies all material allegations; contends that the premises and associated equipment remain in sound operating condition and use, and that no such repairs are warranted or needed. The Company intends to vigorously defend; however, given the early stages of litigation, any outcome remains uncertain.
Item 1A.RISK FACTORS
Refer to Part I, Item 1A, Risk Factors, of our Annual Report for a detailed description of our significant risk factors. Other than the risk factor disclosed in this Item 1A below, there have been no significant changes to these risk factors during the first three quarters of fiscal 2025.
The loss of governmental funding and contributions from charitable organizations could harm our Education Division’s ability to grow and expand into new schools in the future.
Schools in the United States benefit from governmental funding initiatives, such as the Elementary and Secondary School Emergency Relief (ESSER) program, which provide additional funding for schools to pursue improvement programs such as The Leader in Me offering. In addition, we partner with charitable organizations to fund The Leader in Me programs in many schools across the country. Supported by numerous studies and endorsements, we believe The Leader in Me program provides meaningful and measurable improvement to the academic environment of schools, which enable the educational institutions to utilize governmental funding and attract additional support from charitable organizations to implement The Leader in Me offering. If governmental funding for school improvement expires or is reduced, or charitable organizations decide not to continue to support The Leader in Me schools, our results of operations, cash flows, and financial position may be adversely impacted.
Our work with governmental clients exposes us to additional risks that are inherent in the government contracting process.
Our clients include national, state, provincial, and local governmental entities, and our work with these governmental entities has various risks inherent in the governmental contracting process. These risks include, but are not limited to, the following:
Governmental entities typically fund projects through appropriated monies. While these projects are often planned and executed as multi-year projects, the governmental entities usually reserve the right to change the scope of, or terminate, these projects for lack of approved funding, budgetary changes, and other discretionary reasons. Changes in governmental priorities or other political developments, including disruptions in governmental operations, could result in reductions in the scope of, or in termination of, our existing contracts.
Governmental entities often reserve the right to audit our contract costs, including allocated indirect costs, and conduct inquiries and investigations of our business practices with respect to our government contracts. Findings from an audit may result in our being required to prospectively adjust previously agreed-upon rates for our work, which may adversely affect our future margins.
If a governmental client discovers improper activities in the course of audits or investigations, we may become subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions, or debarment from doing business with other agencies of that government.
Political and economic factors such as pending elections, the outcome of elections, revisions to governmental tax policies, sequestration, debt ceiling negotiations, and reduced tax revenues can affect the number and terms of new governmental contracts signed. For example, in the first three quarters of fiscal 2025, we have experienced decreased revenue due to delayed or canceled government contracts resulting from efficiency initiatives adopted by the current administration. Continued actions under such efficiency initiatives, as well as macroeconomic uncertainty created by such actions, may continue to adversely affect our revenue. In addition, the current administration’s adoption and adjustment of tariffs have created economic uncertainty and geopolitical tensions which have adversely affected our clients and, as a result, our results of operations.
The occurrences or conditions described above could affect not only our business with the particular governmental agency involved, but also our business with other agencies of the same or other governmental entities. Additionally, because of their visibility and political nature, governmental contracts may present a heightened risk to our reputation. Any of these factors could have an adverse effect on our business or our results of operations.
Adverse resolution of litigation may harm our operating results or financial condition.
We are subject to various legal proceedings and claims in the ordinary course of business domestically and internationally. Any litigation can be costly, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of lawsuits could materially harm our business, operating results, or financial condition.
On December 20, 2024, our office Landlord filed a lawsuit alleging breach of lease for failure to perform certain equipment repairs and replacements. While we believe that the premises and associated equipment remain in sound operating condition, and that no such repair is warranted or needed and we intend to respond to all claims vigorously, we cannot predict with certainty the outcome of current or future legal proceedings. The outcome of legal proceedings, whether or not meritorious, is inherently uncertain. Defending against claims requires significant management attention and financial resources. We may incur costs through defense expenses, settlements, or adverse judgments. These proceedings could materially harm our business operations, financial results and condition, management focus and resources, and reputation and brand value. The costs and distractions of litigation, particularly if claims increase in scope or number, could materially impact our business success and shareholder value.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table summarizes the purchases of our common stock during the fiscal quarter ended May 31, 2025:
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Period |
| Total Number of Shares Purchased |
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| Average Price Paid Per Share |
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
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| Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(1) (in thousands) |
March 1, 2025 to March 31, 2025 |
| - |
| $ | - |
| - |
| $ | 36,206 |
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April 1, 2025 to April 30, 2025 |
| 126,355 |
| $ | 20.27 |
| 126,355 |
| $ | 33,644 |
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May 1, 2025 to May 31, 2025 |
| 246,272 |
| $ | 23.43 |
| 246,272 |
| $ | 27,873 |
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Total Common Shares |
| 372,627 |
| $ | 22.36 |
| 372,627 |
| $ | 27,873 |
(1)On April 18, 2024, our Board of Directors approved a plan to purchase up to $50.0 million of our outstanding common stock. The previously existing common stock purchase plan was canceled, and the new common share purchase plan does not have an expiration date. The actual timing, number, and value of common shares purchased under our plan will be determined at our discretion and will depend on a number of factors, including, among others, general market and business conditions, the trading price of our common shares, and applicable legal requirements. We have no obligation to purchase any common shares under the authorization, and the
purchase plan may be suspended, discontinued, or modified at any time for any reason. The purchase price of the shares shown in table above includes the applicable 1% required excise tax.
Item 5. OTHER INFORMATION
Indemnification Agreements
On July 7, 2025, we entered into indemnification agreements (the “Indemnification Agreements”) with our directors and executive officers, including our named executive officers. The Indemnification Agreements require us to indemnify our directors and executive officers, including our named executive officers, to the fullest extent permitted by Utah law against liability that may arise by reason of their service to the Company, and to advance certain expenses incurred as a result of any proceeding against such director or officer as to which they could be indemnified.
The foregoing description of the Indemnification Agreements is not complete and is qualified in its entirety by reference to the full text of the form of Indemnification Agreement, which is attached as Exhibit 10.1 to this Quarterly Report on Form 10-Q.
Rule 10b5-1 Trading Arrangements
During the quarter ended May 31, 2025,
Item 6. EXHIBITS
(A)Exhibits:
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10.1 | Form of Indemnification Agreement* |
31.1 | Rule 13a-14(a) Certifications of the Chief Executive Officer.* |
31.2 | Rule 13a-14(a) Certifications of the Chief Financial Officer.* |
32 | Section 1350 Certifications.** |
101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.** |
101.SCH | Inline XBRL Taxonomy Extension Schema Document.** |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.** |
101.DEF | Inline XBRL Taxonomy Definition Linkbase Document.** |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.** |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.** |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).** |
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* | Filed herewith. |
** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| FRANKLIN COVEY CO. | |
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Date: July 8, 2025 | By: | /s/ Paul S. Walker |
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| Paul S. Walker |
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| President and Chief Executive Officer |
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| (Duly Authorized Officer) |
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Date: July 8, 2025 | By: | /s/ Jessica G. Betjemann |
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| Jessica G. Betjemann |
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| Chief Financial Officer |
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| (Principal Financial Officer) |
FAQ
What did Sezzle (SEZL) correct in the amended Form 4/A?
How many Sezzle shares does CEO Charles Youakim now own?
Were any new transactions reported in this Form 4/A?
Does the correction impact Sezzle’s financial results?
Why is an accurate Form 4 important to investors?
