Franklin Covey Q1 Earnings Call Highlights

Core Insights - The company reported a 7% year-over-year growth in invoiced amounts for Enterprise North America in Q1, with a 13% growth when excluding government business disruptions [1][6] - Management anticipates strong growth in invoiced amounts for fiscal 2026, particularly in Enterprise North America, while reported revenue growth is expected to be more modest due to revenue recognition timing [2][3] - Fiscal 2026 is viewed as a transition year, with expectations for a rebound in invoiced amounts and a return to growth following a challenging fiscal 2025 [3][6] Financial Performance - Q1 revenue was reported at $64.0 million, down 7% year-over-year, with adjusted EBITDA at $3.7 million, a decrease from $7.7 million in the prior year [5][12] - Consolidated deferred revenue increased by 5% to $100.2 million, indicating future revenue recognition potential [5][13] - Free cash flow was negative $3.7 million, compared to positive $11.4 million in the previous year, but management expects improvement in the latter half of the year [15] Strategic Initiatives - The company is focusing on large multi-year client contracts and has reorganized its sales and client success teams to enhance market engagement [4][8] - New AI offerings, including an AI Sales Coach and other solutions aimed at improving leadership and productivity, are being integrated into the company's product suite [9][10] - Management highlighted significant contract wins, including a $6 million deal with a global agriculture company, which is expected to contribute to future revenue [8] Segment Performance - The Enterprise segment accounted for 74% of Q1 revenue, with invoiced amounts growing 4% to $45.5 million, despite a decline in reported revenue [16] - North America segment revenue was $36.3 million, down from the previous year, attributed to lower recognized services and subscription revenue [17] - International revenue was slightly down, primarily due to challenges in China, but showed growth excluding that market [19] Guidance and Capital Allocation - Management reaffirmed full-year fiscal 2026 guidance, maintaining revenue expectations of $265 million to $275 million and adjusted EBITDA of $28 million to $33 million [21] - The company has $80 million in liquidity, including $17.5 million in cash, and has repurchased approximately 582,000 shares for $10.4 million [22]