Franklin Covey(US:FC)2026-01-09 21:14Financial Performance - Consolidated revenue for the quarter ended November 30, 2025, was $64.0 million, a decrease of 7.5% from $69.1 million in the same quarter of fiscal 2025[62] - Gross profit for the first quarter of fiscal 2026 was $48.4 million, down from $52.7 million in the prior year, resulting in a gross margin of 75.5% compared to 76.3%[62] - Enterprise Division revenues for the first quarter of fiscal 2026 totaled $47.5 million, a decline of 7.9% from $51.6 million in the first quarter of fiscal 2025[63] - Education Division revenues were $16.1 million, down from $16.5 million in the prior year, primarily due to reduced classroom and training materials sales[63] - Consolidated subscription and subscription services revenues for the first quarter of fiscal 2026 were $52.0 million, compared to $55.8 million in the prior year[63] - Net loss for the first quarter of fiscal 2026 was $(3.3) million, or $(0.27) per share, compared to net income of $1.2 million, or $0.09 per diluted share, in the first quarter of fiscal 2025[66] - Adjusted EBITDA for the first quarter of fiscal 2026 totaled $3.7 million, down from $7.7 million in the prior year[66] Segment Performance - North America segment revenue was $36.3 million, a decrease of 9.7% from $40.1 million in the prior year, impacted by lower invoiced amounts and canceled government contracts[65] - International segment revenue was $11.2 million, a decrease of 2.1% from $11.4 million in the prior year, primarily due to lower revenue from the China office[69] - Education Division revenue for Q1 FY2026 decreased by 2% to $16.1 million compared to $16.5 million in Q1 FY2025, primarily due to lower sales of classroom and training materials[72] - Gross profit for the Education Division declined to $9.9 million, with a gross margin of 61.6%, down from 63.2% in the prior year, attributed to increased fixed costs and lower revenue[73] Expenses and Cash Flow - SG&A expenses increased to $10.8 million, representing 67.4% of sales, due to higher associate expenses and changes in compensation plans[74] - Cash provided by operating activities was $0.1 million, a significant decrease from $14.1 million in the prior year, mainly due to unfavorable changes in working capital[84] - Cash used for investing activities totaled $3.8 million, with $2.0 million allocated to the development of offerings and $1.7 million for property and equipment[86][88] Liquidity and Capital Expenditures - The company had $80 million in available liquidity as of November 30, 2025, consisting of $17.5 million in cash and a $62.5 million undrawn revolving credit facility[80] - The company anticipates capital spending for curriculum development to be between $8 million and $10 million in FY2026[87] Tax and Interest Rates - The effective tax benefit rate for Q1 FY2026 was 9.4%, significantly lower than the 25.6% rate in Q1 FY2025, due to a decrease in non-deductible executive compensation[78] - The effective interest rate on the 2023 Credit Agreement was 5.5% as of November 30, 2025[105] - There were no outstanding borrowings under the 2023 Credit Agreement as of November 30, 2025, indicating no material impact from interest rate changes on interest expense and cash flows[105] - The company has fixed long-term obligations primarily from the purchase of Strive Talent, Inc., which influences overall interest rate sensitivity[105] - The company did not utilize any foreign currency or interest rate derivative instruments during the quarter ended November 30, 2025[106] Future Outlook - Forward-looking statements include expectations about future revenue levels and financial results, particularly for fiscal 2026[101] - Anticipated increases in add-on subscription services revenue and delivered training and coaching days are part of the company's future outlook[101] - The company is focused on hiring sales professionals to support its growth strategy[101] - The company acknowledges risks such as cybersecurity, macroeconomic factors, and competition that may affect future performance[102] - The market price of the company's common stock has been volatile, influenced by quarter-to-quarter variations in revenues and earnings[103] - The company does not undertake any responsibility to update forward-looking statements except as required by law[104]