Franklin Covey(US:FC)2022-07-06 16:00Financial Performance - Consolidated sales for Q3 fiscal 2022 increased 13% or $7.4 million to $66.2 million compared to $58.7 million in the prior year[72] - All Access Pass (AAP) and related sales grew 32% in Q3 fiscal 2022 to $39.1 million[72] - Education Division revenues increased 21% due to higher consulting, coaching, and training days delivered[73] - International licensee revenues rose 9% over the prior year, with three of five international direct offices reporting improved sales[74] - Deferred subscription revenue increased 24% or $13.2 million to $68.5 million compared to the previous year[79] - Gross profit for Q3 fiscal 2022 increased 11% to $51.1 million, with a gross margin of 77.3%[80] - Operating income improved 91% to $5.9 million compared to $3.1 million in Q3 fiscal 2021[83] - Adjusted EBITDA for Q3 fiscal 2022 improved 27% to $10.9 million compared to $8.6 million in the prior year[83] - Cash flows from operating activities increased 28% to $39.5 million compared to $30.9 million in the first three quarters of fiscal 2021[84] Education Division Performance - Education Division sales grew by $2,540,000 (21.4%) to $14,439,000 for the quarter ended May 31, 2022, driven by increased consulting and training services[95] - Adjusted EBITDA for the Education Division increased by $755,000 (66.7%) to $1,887,000 for the quarter ended May 31, 2022[95] - Gross profit for the Education Division increased by $7,239,000 (41.3%) to $24,749,000 for the three quarters ended May 31, 2022[111] Direct Offices Segment - Direct Offices segment sales increased by $18,852,000 (16.4%) to $134,037,000 for the first three quarters of fiscal 2022, with U.S. and Canada offices growing by 19%[102] - SG&A expenses for the Direct Offices segment increased by $8,158,000 (11.4%) to $79,630,000 for the first three quarters of fiscal 2022[102] - Gross margin for the Direct Offices segment remained strong at 80.8%, slightly down from 80.9% in the prior year[104] Tax and Expenses - The effective income tax benefit rate for the quarter ended May 31, 2022, was approximately 29%, compared to 390% in the prior year[100] - Income tax provision for the three quarters ended May 31, 2022, was $0.9 million on pre-tax income of $13.8 million, resulting in an effective tax rate of approximately 7%[117] - SG&A expenses increased due to higher associate costs, additional commission expenses, and increased salaries compared to the prior year[114] - Depreciation expense is expected to total approximately $5.2 million in fiscal 2022, reflecting a decrease from the previous year[98] - Depreciation expense decreased by $1.2 million in the first three quarters of fiscal 2022 due to full depreciation of certain assets and reduced capital expenditures[115] - Amortization expense increased by $0.6 million primarily due to the acquisition of Strive Talent, Inc.[116] Cash and Financing - Cash and cash equivalents totaled $52.1 million as of May 31, 2022, with no borrowings on the $15.0 million revolving credit facility[119] - Cash used for investing activities totaled $3.5 million, primarily for purchases of property and equipment and investments in offerings[124] - Net cash used for financing activities totaled $30.7 million, including $23.9 million for common stock purchases[127] - Anticipated capital spending for curriculum development is expected to total $4.0 million during fiscal 2022[126] - Company expects to maintain operations for at least the upcoming 12 months with existing cash and cash flows from operating activities[131] Interest Rates and Market Risk - The effective interest rate on the company's term loans payable and line of credit facility was 2.7% as of May 31, 2022[141] - A 1% increase in the effective interest rate on term loans outstanding at May 31, 2022 would result in an additional interest expense of $0.1 million over the next 12 months[141] - The financing obligation has a fixed interest rate of 7.7%[141] - The company is prepared for the eventual transition away from LIBOR pricing as outlined in the 2019 Credit Agreement[142] - There have been no material changes in market risk disclosures since the previous annual report[143]