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Franklin Covey(FC) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition ITEM 1. FINANCIAL STATEMENTS This section presents Franklin Covey Co.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and equity changes, with explanatory notes Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets (in thousands $) | Item | Feb 29, 2024 (in thousands $) | Aug 31, 2023 (in thousands $) | | :-------------------------------- | :--------------------------- | :--------------------------- | | ASSETS | | | | Cash and cash equivalents | $40,904 | $38,230 | | Accounts receivable, net | $57,153 | $81,935 | | Total current assets | $122,435 | $145,017 | | Total assets | $221,933 | $245,919 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Deferred subscription revenue | $82,365 | $95,386 | | Total current liabilities | $138,465 | $151,649 | | Total liabilities | $151,106 | $167,265 | | Total shareholders' equity | $70,827 | $78,654 | | Total liabilities and shareholders' equity | $221,933 | $245,919 | Condensed Consolidated Income Statements and Statements of Comprehensive Income This statement outlines the company's financial performance, detailing net sales, gross profit, operating income, net income, and EPS Condensed Consolidated Income Statements (in thousands $, except per-share amounts) | Item | Q2 2024 (in thousands $) | Q2 2023 (in thousands $) | YTD 2024 (in thousands $) | YTD 2023 (in thousands $) | | :-------------------------------- | :----------------------- | :----------------------- | :------------------------ | :------------------------ | | Net sales | $61,336 | $61,756 | $129,736 | $131,125 | | Gross profit | $46,851 | $47,210 | $99,129 | $99,952 | | Income from operations | $1,442 | $2,828 | $6,771 | $9,221 | | Net income | $874 | $1,739 | $5,725 | $6,406 | | Basic net income per share | $0.07 | $0.13 | $0.43 | $0.46 | | Diluted net income per share | $0.06 | $0.12 | $0.42 | $0.44 | Condensed Consolidated Statements of Cash Flows This statement details cash inflows and outflows from operating, investing, and financing activities for the reported periods Condensed Consolidated Statements of Cash Flows (in thousands $) | Item | YTD Feb 29, 2024 (in thousands $) | YTD Feb 28, 2023 (in thousands $) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $30,212 | $11,208 | | Net cash used for investing activities | $(5,486) | $(7,921) | | Net cash used for financing activities | $(21,957) | $(8,724) | | Net increase (decrease) in cash and cash equivalents | $2,674 | $(5,396) | | Cash and cash equivalents at end of period | $40,904 | $55,121 | Condensed Consolidated Statements of Changes in Shareholders' Equity These statements present changes in shareholders' equity components, including common stock, paid-in capital, retained earnings, and treasury stock Changes in Shareholders' Equity (in thousands $) | Item | Balance at Aug 31, 2023 (in thousands $) | Balance at Feb 29, 2024 (in thousands $) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Common Stock Amount | $1,353 | $1,353 | | Additional Paid-In Capital | $232,373 | $225,776 | | Retained Earnings | $99,802 | $105,527 | | Accumulated Other Comprehensive Loss | $(987) | $(1,075) | | Treasury Stock Amount | $(253,887) | $(260,754) | | Total Shareholders' Equity | $78,654 | $70,827 | - The company purchased 461 thousand shares of common stock for treasury at a cost of $18.4 million during the first two quarters of fiscal 2024, including shares withheld for taxes on stock-based compensation awards and open market purchases30 Notes to Condensed Consolidated Financial Statements These notes provide additional information on accounting policies, estimates, and specific financial statement line items, including segment data NOTE 1 – BASIS OF PRESENTATION This note describes the company's business, mission, offerings, and the basis of presentation for its unaudited GAAP financial statements - Franklin Covey Co. is a global company focused on organizational performance improvement, offering content and solutions through various delivery options like AAP subscription, Leader in Me membership, digital learning, and onsite training21 - The company is evaluating new FASB ASUs 2023-07 (Segment Reporting) and 2023-09 (Income Tax Disclosures), effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively, and does not anticipate significant challenges in adoption2628 NOTE 2 – INVENTORIES This note details inventory composition, valued at the lower of cost or net realizable value using the FIFO method Inventories (in thousands $) | Item | Feb 29, 2024 (in thousands $) | Aug 31, 2023 (in thousands $) | | :---------------- | :--------------------------- | :--------------------------- | | Finished goods | $4,196 | $4,204 | | Raw materials | $- | $9 | | Total | $4,196 | $4,213 | NOTE 3 – PURCHASES OF COMMON STOCK FOR TREASURY This note details common stock repurchases, including shares withheld for taxes and open market purchases, and the repurchase plan Common Stock Purchases (in thousands $) | Item | Shares (in thousands) | Cost (in thousands $) | | :-------------------------------- | :-------------------- | :-------------------- | | Shares withheld for taxes on stock-based compensation awards | 252 | $10,333 | | Open market purchases | 209 | $8,080 | | Total | 461 | $18,413 | - The Board of Directors approved a new plan on February 14, 2023, to purchase up to $50.0 million of outstanding common stock, with $7.7 million remaining on the authorization as of February 29, 202430 NOTE 4 – REVENUE RECOGNITION This note explains revenue recognition policies, focusing on contract balances, deferred revenue, and remaining performance obligations Contract Balances (in thousands $) | Item | Feb 29, 2024 (in thousands $) | Aug 31, 2023 (in thousands $) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Total deferred subscription revenue and other deferred revenue | $108,100 | $111,200 | | Deferred subscription revenue | $86,100 | $99,000 | | Previously deferred subscription revenue recognized (Q2) | $35,600 | N/A | | Previously deferred subscription revenue recognized (YTD) | $72,200 | N/A | - As of February 29, 2024, the company had $158.8 million in remaining performance obligations, including deferred subscription revenue, indicating future contracted revenue yet to be recognized33 NOTE 5 – STOCK-BASED COMPENSATION This note details stock-based compensation expense components, including long-term incentive awards, acquisition compensation, and ESPP Stock-Based Compensation (in thousands $) | Item | Q2 2024 (in thousands $) | Q2 2023 (in thousands $) | YTD 2024 (in thousands $) | YTD 2023 (in thousands $) | | :-------------------------------- | :----------------------- | :----------------------- | :------------------------ | :------------------------ | | Long-term incentive awards | $889 | $2,866 | $3,353 | $5,204 | | Strive acquisition compensation | $190 | $200 | $385 | $366 | | Unvested stock awards | $220 | $175 | $400 | $340 | | Employee stock purchase plan | $69 | $74 | $127 | $140 | | Total | $1,368 | $3,315 | $4,265 | $6,050 | - A $1.6 million cumulative reduction to stock-based compensation expense for long-term incentive awards resulted from a reassessment of shares expected to vest under the fiscal 2024 and 2023 LTIP awards37 - The fiscal 2024 LTIP award includes both time-based (25% vesting on Aug 31, 2026) and performance-based tranches (variable vesting from 50% to 200% based on Adjusted EBITDA by Aug 31, 2026)40 NOTE 6 – RESTRUCTURING This note describes the Q2 fiscal 2024 restructuring plan, involving workforce reduction and severance charges for growth initiatives - The company commenced a restructuring plan in Q2 fiscal 2024, reducing its workforce by approximately 50 associates and incurring $1.7 million in severance charges, primarily in the Direct Office segment ($1.2 million)42 - An additional $0.6 million charge was incurred in Q1 fiscal 2024 for restructuring operations in the Direct Offices segment, with all accrued costs paid in Q2 fiscal 202443 NOTE 7 – IMPAIRED ASSET This note explains the impairment of a student leadership assessment asset due to societal changes and potential legal challenges - The company impaired an asset related to a student leadership assessment, suspending its development due to societal changes in perception regarding student information collection and potential legal challenges, resulting in a $0.9 million impairment charge44 NOTE 8 – EARNINGS PER SHARE This note provides the calculation of basic and diluted net income per share, including weighted average common shares outstanding Earnings Per Share Calculation (in thousands, except per-share amounts) | Item | Q2 2024 (in thousands) | Q2 2023 (in thousands) | YTD 2024 (in thousands) | YTD 2023 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Net income | $874 | $1,739 | $5,725 | $6,406 | | Basic weighted average shares outstanding | 13,263 | 13,900 | 13,253 | 13,888 | | Diluted weighted average shares outstanding | 13,484 | 14,533 | 13,560 | 14,520 | | Basic EPS | $0.07 | $0.13 | $0.43 | $0.46 | | Diluted EPS | $0.06 | $0.12 | $0.42 | $0.44 | NOTE 9 – SEGMENT INFORMATION This note disaggregates financial information by Direct Offices, International Licensees, and Education segments, including Adjusted EBITDA reconciliation and revenue by type - The company's operations are structured into two divisions (Enterprise and Education) and three reportable segments: Direct Offices, International Licensees, and Education Practice, with Adjusted EBITDA as the primary performance measurement tool474850 Consolidated Sales and Adjusted EBITDA (in thousands $) | Item | Q2 2024 Sales (in thousands $) | Q2 2023 Sales (in thousands $) | YTD 2024 Sales (in thousands $) | YTD 2023 Sales (in thousands $) | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------------ | :------------------------------ | | Consolidated Sales | $61,336 | $61,756 | $129,736 | $131,125 | | Consolidated Adjusted EBITDA | $7,448 | $8,187 | $18,418 | $19,659 | Segment Sales (in thousands $) | Segment | Q2 2024 Sales (in thousands $) | Q2 2023 Sales (in thousands $) | YTD 2024 Sales (in thousands $) | YTD 2023 Sales (in thousands $) | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------------ | :------------------------------ | | Direct Offices | $42,960 | $43,646 | $92,175 | $93,812 | | International Licensees | $2,748 | $2,935 | $6,126 | $6,213 | | Education Practice | $14,579 | $14,198 | $29,323 | $28,549 | Revenue by Type of Service (in thousands $) - YTD | Item | Services and Products (in thousands $) | Subscriptions (in thousands $) | Royalties (in thousands $) | Leases and Other (in thousands $) | Consolidated (in thousands $) | | :-------------------------------- | :----------------------------- | :--------------------------- | :----------------------- | :-------------------------- | :---------------------------- | | YTD Feb 29, 2024 | $46,696 | $72,353 | $9,201 | $1,486 | $129,736 | | YTD Feb 28, 2023 | $54,099 | $65,940 | $9,159 | $1,927 | $131,125 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on financial condition, operations, liquidity, capital resources, and critical accounting estimates Non-GAAP Measures This subsection defines Adjusted EBITDA as a non-GAAP measure used for internal comparisons and investor transparency into operational results - Adjusted EBITDA is defined as net income excluding interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items like restructuring and impaired asset costs60 RESULTS OF OPERATIONS This section analyzes the company's financial performance, comparing current quarter and year-to-date results by business divisions and key metrics Overview This overview summarizes the company's mission, business structure, and key consolidated financial highlights for Q2 fiscal 2024 - Consolidated sales for Q2 fiscal 2024 were $61.3 million, slightly down from $61.8 million in Q2 fiscal 2023, but in line with expectations62 - Subscription and subscription services sales increased 5% to $50.3 million in Q2 fiscal 2024, reaching a record $227.3 million for the rolling four quarters66 - Deferred subscription revenue on the balance sheet increased 13% to $86.1 million at February 29, 2024, compared to February 28, 2023, and the sum of billed and unbilled deferred subscription revenue grew 9% to $158.8 million6466 Quarter Ended February 29, 2024 Compared with the Quarter Ended February 28, 2023 This section provides a detailed comparative analysis of Q2 fiscal 2024 financial results by segment and expense categories Enterprise Division - Direct Offices Segment Direct Offices segment saw slight revenue decrease, strong AAP growth offset by legacy declines, with improved gross margin from service mix Direct Offices Segment Performance (in thousands $) | Item | Q2 2024 (in thousands $) | Q2 2023 (in thousands $) | Change (in thousands $) | | :---------------- | :----------------------- | :----------------------- | :---------------------- | | Sales | $42,960 | $43,646 | $(686) | | Gross profit | $35,514 | $35,854 | $(340) | | Adjusted EBITDA | $9,122 | $9,641 | $(519) | - Direct Office AAP subscription sales grew 9% in Q2 fiscal 2024, and AAP subscription and subscription services grew 6% to $37.5 million, with retention levels greater than 90%68 - Gross margin for Direct Offices improved to 82.7% of sales in Q2 fiscal 2024, up from 82.1% in the prior year, primarily due to the mix of services and products sold69 Enterprise Division - International Licensees Segment International Licensees segment revenue decreased due to lower royalties and reduced AAP share, impacted by economic challenges International Licensees Segment Performance (in thousands $) | Item | Q2 2024 (in thousands $) | Q2 2023 (in thousands $) | Change (in thousands $) | | :---------------- | :----------------------- | :----------------------- | :---------------------- | | Sales | $2,748 | $2,935 | $(187) | | Gross profit | $2,374 | $2,659 | $(285) | | Adjusted EBITDA | $1,342 | $1,541 | $(199) | - International licensee revenue decreased 6% in Q2 fiscal 2024, driven by an 8% decrease in royalty revenues and a 7% decrease in AAP revenue share, partially offset by increased licensee support revenues71 Education Division Education Division achieved sales growth from increased membership subscriptions and classroom materials, with strong training delivery Education Division Performance (in thousands $) | Item | Q2 2024 (in thousands $) | Q2 2023 (in thousands $) | Change (in thousands $) | | :---------------- | :----------------------- | :----------------------- | :---------------------- | | Sales | $14,579 | $14,198 | $381 | | Gross profit | $8,597 | $8,392 | $205 | | Adjusted EBITDA | $(529) | $(622) | $93 | - Education Division sales increased 3% in Q2 fiscal 2024, driven by increased membership subscription revenues and sales of classroom and training materials, with a 4% increase in subscription and subscription services revenue73 - The Education Division delivered nearly 100 more training and coaching days in Q2 fiscal 2024 than the prior year, contributing to sales recognition73 Other Operating Expense Items This section details Q2 changes in depreciation, amortization, and interest expense, noting decreases from asset depreciation and reduced debt - Depreciation expense decreased to $0.9 million in Q2 fiscal 2024 from $1.0 million in Q2 fiscal 2023, primarily due to the full depreciation of certain assets75 - Interest expense decreased by $0.1 million in Q2 fiscal 2024 compared to the prior year, mainly due to decreased term loan and financing obligation liabilities77 Operating Income, Net Income, and Adjusted EBITDA Consolidated operating income, net income, and Adjusted EBITDA decreased in Q2 fiscal 2024, impacted by restructuring and asset impairment Consolidated Financial Performance (in thousands $, except per-share amounts) | Item | Q2 2024 (in thousands $) | Q2 2023 (in thousands $) | | :-------------------------------- | :----------------------- | :----------------------- | | Income from operations | $1,442 | $2,828 | | Net income | $874 | $1,739 | | Diluted net income per share | $0.06 | $0.12 | | Adjusted EBITDA | $7,448 | $8,187 | - Operating expenses increased by $1.0 million in Q2 fiscal 2024, primarily due to $1.7 million in restructuring expenses and a $0.9 million impaired asset charge, partially offset by a $1.6 million decrease in stock-based compensation67 Cash Flows Operating cash flows significantly increased in the first two quarters of fiscal 2024, driven by favorable working capital changes - Cash flows from operating activities increased to $30.2 million in the first two quarters of fiscal 2024, up from $11.2 million in the prior year, primarily due to strong collections of accounts receivable and reduced payments for accounts payable and accrued liabilities67 Purchases of Common Stock The company purchased significant common stock for treasury in the first two quarters of fiscal 2024, including tax-withheld shares - The company purchased 460,609 shares of common stock for $18.4 million during the first two quarters of fiscal 2024, including shares withheld for income taxes on stock-based compensation awards and open market purchases67 Liquidity and Financial Position Despite common stock purchases, the company maintained a strong liquidity position with substantial cash and available credit - At February 29, 2024, the company had over $103 million of available liquidity, consisting of $40.9 million in cash and an undrawn $62.5 million line of credit67 Two Quarters Ended February 29, 2024 Compared with the Two Quarters Ended February 28, 2023 This section provides a detailed comparative analysis of year-to-date fiscal 2024 financial results by segment and expense categories Enterprise Division - Direct Offices Segment Direct Offices segment saw slight year-to-date revenue decline, with strong AAP growth offset by decreased legacy services Direct Offices Segment Performance (in thousands $) | Item | YTD Feb 29, 2024 (in thousands $) | YTD Feb 28, 2023 (in thousands $) | Change (in thousands $) | | :---------------- | :-------------------------------- | :-------------------------------- | :---------------------- | | Sales | $92,175 | $93,812 | $(1,637) | | Gross profit | $75,015 | $75,775 | $(760) | | Adjusted EBITDA | $20,809 | $20,890 | $(81) | - Direct Office AAP subscription sales grew 11% to $53.1 million in the first two quarters of fiscal 2024, and AAP subscription and subscription services grew 5% compared to the prior year, with retention levels greater than 90%79 Enterprise Division - International Licensees Segment International Licensees segment experienced minor year-to-date revenue decrease, mainly from lower royalties, partially offset by support revenue International Licensees Segment Performance (in thousands $) | Item | YTD Feb 29, 2024 (in thousands $) | YTD Feb 28, 2023 (in thousands $) | Change (in thousands $) | | :---------------- | :-------------------------------- | :-------------------------------- | :---------------------- | | Sales | $6,126 | $6,213 | $(87) | | Gross profit | $5,426 | $5,635 | $(209) | | Adjusted EBITDA | $3,238 | $3,372 | $(134) | - International licensee revenue decreased 1% in the first two quarters of fiscal 2024, primarily due to a 3% decrease in royalty revenues, partially offset by increased licensee support revenues82 Education Division Education Division achieved year-to-date sales growth from increased membership subscriptions and international royalties Education Division Performance (in thousands $) | Item | YTD Feb 29, 2024 (in thousands $) | YTD Feb 28, 2023 (in thousands $) | Change (in thousands $) | | :---------------- | :-------------------------------- | :-------------------------------- | :---------------------- | | Sales | $29,323 | $28,549 | $774 | | Gross profit | $17,977 | $17,568 | $409 | | Adjusted EBITDA | $(487) | $(341) | $(146) | - Education Division sales increased 3% in the first two quarters of fiscal 2024, primarily due to increased membership subscription revenues and higher international royalties, with a 2% increase in subscription and subscription services revenue85 - The Education Division delivered nearly 300 more training and coaching days in the first two quarters of fiscal 2024 than the prior year85 Other Operating Expense Items This section details year-to-date changes in depreciation, amortization, interest income, and interest expense, noting expense decreases - Depreciation expense decreased to $2.0 million in the first two quarters of fiscal 2024 from $2.2 million in the prior year, due to the full depreciation of certain assets87 - Interest income increased by $0.1 million in the first two quarters of fiscal 2024 due to increased interest rates on cash balances, while interest expense decreased by $0.2 million due to reduced debt liabilities8889 Income Taxes The effective tax rate for the first two quarters of fiscal 2024 was significantly lower due to a tax benefit from stock-based compensation - The effective tax rate for the first two quarters of fiscal 2024 was 14.4% (on $6.7 million pre-tax income), significantly lower than 27.6% in the prior year, primarily due to a $3.2 million tax benefit from stock-based compensation deductions9091 - The company anticipates a full fiscal 2024 effective income tax rate of approximately 30%, including a net benefit of 2% for stock-based compensation92 LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's liquidity, capital structure, and cash flow management, including sources, uses, and debt obligations Introduction This introduction outlines the company's cash position, available credit, and liquidity sources and uses, including credit agreement details - As of February 29, 2024, the company had $40.9 million in cash and cash equivalents and no borrowings on its $62.5 million revolving credit facility94 - The 2023 Credit Agreement provides up to $70.0 million in total credit, with a $62.5 million revolving line of credit, maturing on March 27, 2028, and requires maintaining specific Leverage and Fixed Charge Coverage Ratios9597 Cash Flows Provided By Operating Activities Operating cash flows significantly increased in the first half of fiscal 2024 due to favorable working capital and strong collections - Cash provided by operating activities increased by $19.0 million to $30.2 million in the first half of fiscal 2024, driven by strong accounts receivable collections and less cash used for accounts payable and accrued liabilities99 Cash Flows Used For Investing Activities and Capital Expenditures Cash used for investing activities funded curriculum development and property purchases, with continued investment expected - Cash used for investing activities totaled $5.5 million in the first two quarters of fiscal 2024, including $3.8 million for curriculum development and purchases of property and equipment100101 - The company expects capital spending for curriculum development to total $7.1 million and property and equipment purchases up to $8.0 million in fiscal 2024, with the latter dependent on leasehold improvements101102 Cash Flows Used For Financing Activities Net cash used for financing activities primarily funded common stock repurchases and debt payments, partially offset by ESPP proceeds - Net cash used for financing activities totaled $22.0 million in the first two quarters of fiscal 2024, primarily for $18.4 million in common stock purchases and $4.2 million in debt payments103104 - As of February 29, 2024, $7.7 million remained on the board-approved $50.0 million common stock purchase plan105 Sources of Liquidity The company expects to meet obligations through existing cash, operating cash flows, and available credit, considering other financing - The company believes existing cash, operating cash flows, and available external funds will be sufficient to maintain operations for at least the next 12 months108 - Potential additional liquidity sources include factoring receivables, issuing additional equity, or issuing debt to public or private sources107 Material Uses of Cash and Contractual Obligations Material cash requirements include compensation, IT, content development, income taxes, and contractual obligations, with no material changes - Material cash requirements include associate and consultant compensation, information technology expenditures, content development costs, income taxes, and contractual obligations110 - There have been no material changes to expected uses of cash and contractual obligations from those discussed in the Annual Report on Form 10-K for the fiscal year ended August 31, 2023109 CRITICAL ACCOUNTING ESTIMATES This section refers to critical accounting estimates from the Annual Report on Form 10-K, noting no significant changes for the period - There have been no significant changes to the company's previously disclosed critical accounting estimates or policies112 NEW ACCOUNTING PRONOUNCEMENTS This section directs readers to Note 1 for a description of new accounting pronouncements that may impact the company - New accounting pronouncements are described in Note 1 to the condensed consolidated financial statements114 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This statement provides a cautionary note on forward-looking statements, outlining risks and uncertainties that could impact actual results - Forward-looking statements are subject to risks and uncertainties, including cybersecurity, inflation, macroeconomic risks, unanticipated costs, competition, foreign exchange rates, and customer order changes, which may cause actual results to differ materially115 - The market price of the company's common stock has been and may remain volatile, influenced by factors such as quarterly variations in revenues and earnings, and its low market capitalization118 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses the company's exposure to market risks, primarily focusing on interest rate sensitivity of variable-rate debt Interest Rate Sensitivity The company's interest rate sensitivity is influenced by variable-rate debt, with a 1% increase having an immaterial impact - The effective interest rate on the company's variable-rate term loans and line of credit facility was 6.9% at February 29, 2024120 - A 1% increase in the effective interest rate on the unpaid term loan balance at February 29, 2024, would result in an immaterial amount of additional interest expense over the next 12 months120 ITEM 4. CONTROLS AND PROCEDURES This section details the company's disclosure controls and internal controls over financial reporting, confirming effectiveness Evaluation of Disclosure Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the reporting period - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of February 29, 2024123 Changes in Internal Control Over Financial Reporting No material changes in internal controls over financial reporting occurred during the most recently completed fiscal quarter - No changes in internal controls over financial reporting occurred during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting124 PART II. OTHER INFORMATION This section provides other information, including risk factors, equity sales, and exhibits, supplementing the financial statements Item 1A. RISK FACTORS This section refers to significant risk factors from the Annual Report on Form 10-K, noting no material changes for the period - There have been no significant changes to the company's risk factors during the first two quarters of fiscal 2024, as detailed in Item 1A of the Form 10-K for the fiscal year ended August 31, 2023125 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section summarizes the company's common stock purchases during the fiscal quarter under its board-approved repurchase plan Common Stock Purchases (Fiscal Quarter Ended February 29, 2024) | Period | Total Shares Purchased | Average Price Per Share ($) | Shares Purchased Under Plans | Max Value Remaining Under Plans (in thousands $) | | :-------------------------------- | :----------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------------------------------------------- | | December 1, 2023 to December 31, 2023 | - | $ - | - | $9,765 | | January 1, 2024 to January 31, 2024 | 52,013 | $40.47 | 52,013 | $7,660 | | February 1, 2024 to February 29, 2024 | - | $ - | - | $7,660 | | Total Common Shares | 52,013 | $40.47 | 52,013 | $7,660 | - As of February 29, 2024, $7.7 million remained available under the board-approved common stock purchase plan, which has no expiration date126 Item 5. OTHER INFORMATION This section states that no directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements - No directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended February 29, 2024127 Item 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL-related documents - Exhibits filed include Rule 13a-14(a) Certifications of the CEO and CFO, Section 1350 Certifications, and various Inline XBRL documents133 SIGNATURES This section contains the required signatures of the company's authorized officers, certifying the filing of the report - The report is signed by Paul S. Walker, President and Chief Executive Officer, and Stephen D. Young, Chief Financial Officer, on April 5, 2024134