Franklin Covey(FC) - 2022 Q4 - Annual Report

Financial Performance - Consolidated net sales for the fiscal year ended August 31, 2022, totaled $262.8 million[13] - Fiscal 2022 consolidated revenue grew 17% to $262.8 million compared to $224.2 million in fiscal 2021, driven by strong subscription sales[175] - Net income for fiscal 2022 was $18.4 million, or $1.27 per diluted share, compared to $13.6 million, or $0.96 per diluted share, in fiscal 2021[182] - Adjusted EBITDA increased 51% to $42.2 million in fiscal 2022, up from $28.0 million in fiscal 2021[182] - Cash flows from operating activities increased 13% to $52.3 million in fiscal 2022 compared to $46.2 million in the prior year[184] Client and Market Growth - The number of client partners increased from 214 on August 31, 2018, to 300 on August 31, 2022, reflecting a growth of approximately 40%[27] - The U.S. training industry is expected to grow by 10% over 2021, reaching an estimated size of $101.6 billion[30] - Education Division revenues rose 26% to $61.9 million, with a record addition of 739 new Leader in Me schools in the U.S. and Canada[172] - The number of new Leader in Me schools added in the U.S. and Canada reached 739, a 29% increase over fiscal 2021[206] Subscription Services - All Access Pass subscription sales increased 28% to $144.5 million in fiscal 2022, up from $112.5 million in fiscal 2021[171] - AAP subscription and related revenues grew 28% to $144.5 million in fiscal 2022, with annual revenue retention remaining above 90%[198] - The company plans to launch the new Impact Platform in October 2022, aiming to enhance its subscription services and technology integration[174] Workforce and Culture - The company has approximately 1,150 associates worldwide, with a focus on diversity, equity, and inclusion in its workforce[29][46] - The associate turnover rate in the United States and Canada was 17% from June 1, 2021, to May 31, 2022, which is considered reasonable for the industry[49] - In the 2022 Culture Survey, 86% of associates reported having at least one meaningful conversation with their manager in the past year[50] - The Mentorship Program has grown from 30 pairs of mentors and mentees to 86 pairs of participants[52] - The company emphasizes a culture of feedback, encouraging ongoing dialogue between leaders and associates[50] Operational Challenges - The company has faced significant volatility and uncertainty due to the ongoing COVID-19 pandemic, impacting operations and financial results[70] - Economic and political conditions significantly impact client budgets for training, with a prolonged downturn potentially reducing demand for services[76] - Global economic instability, including inflation and energy shortages, may continue to pressure the company's operating results and financial condition[75] - The company operates in a highly competitive training industry, which may affect its ability to sell offerings[72] - The training and consulting services industry is highly competitive, with larger competitors having superior resources, which may adversely affect the company's ability to deliver quality services[73] Compliance and Legal Risks - Cybersecurity risks are heightened due to the internet-based nature of subscription services, with potential breaches leading to significant legal and financial exposure[94] - Compliance with evolving data protection laws, such as GDPR, is essential, as non-compliance could result in substantial fines[99] - The PRC Personal Information Protection Law (PIPL) imposes fines up to RMB 50,000,000 or 5% of global annual turnover for noncompliance, which could significantly impact the company's operations in China[102] - The California Consumer Privacy Act (CCPA) and its amendments require companies to disclose data practices and allow consumers to opt out of data sales, with enforcement beginning on July 1, 2023[103] Financial Strategy and Capital - The company may need to raise additional capital through debt or equity offerings to support growth initiatives and respond to competitive pressures[115] - The company did not pay or declare dividends during the fiscal years ended August 31, 2022, or 2021, and anticipates retaining all available funds for liabilities and growth[150] - The company has repurchased 504,411 shares of its common stock for $20.5 million under a Board-approved repurchase plan[154] Global Operations - The company operates globally with sales and support associates in various locations, including wholly owned subsidiaries in multiple countries[21] - The company operates in 150 countries and territories, with a wide range of content delivery options including digital online learning and on-site training[168] - Global operations expose the company to complex risks, including currency exchange fluctuations and political instability, which may affect financial performance[127] - The uncertainty surrounding Brexit may lead to economic and legal challenges, impacting the company's operations and financial condition in the UK and EU markets[128]