Franklin Covey (FC) Q1 2026 Earnings Transcript

Core Insights - The company anticipates strong growth in invoiced sales, particularly in Enterprise North America, which is expected to drive overall growth for fiscal year 2026 [4][10][25] - The growth in invoiced amounts is expected to translate into significant increases in reported revenue, adjusted EBITDA, and free cash flow in fiscal year 2027 [3][10][48] Financial Performance - Total first quarter reported revenue was $64 million, down 7% from the prior year, primarily due to an 8% decline in the Enterprise division and a 2% decrease in the Education division [27][32] - Invoiced amounts in the Enterprise North America segment grew 7% to $34.9 million, with a notable 13% growth when excluding government contracts [11][32] - The company reported a 5% year-over-year increase in consolidated deferred revenue balance to $100.2 million, which will be recognized as revenue in upcoming quarters [28] Growth Drivers - The growth in invoiced amounts is driven by a strong pipeline and significant year-over-year increases in advanced bookings of services [2][12] - New logo subscription invoiced amounts grew 25% year-over-year, indicating strong demand for the company's solutions [12][72] - The company has seen a consistent client retention rate and an increase in the percentage of revenue contracted for multiyear periods to 61% [12][38] Education Division Insights - The Education Division is expected to achieve strong growth in both invoiced and reported sales in fiscal year 2026, despite previous uncertainties regarding school funding [5][44] - Invoiced amounts in the Education Division for the first quarter were $6.6 million, a decline of $5.6 million from the prior year, primarily due to the absence of a large statewide deal that impacted last year's results [41][43] - The company expects a pattern of invoiced amounts and recognized revenue similar to prior years, with significant growth anticipated in the second half of the fiscal year [9][44] International Operations - International invoiced amounts and reported revenue are expected to grow modestly, with first quarter revenue slightly down due to challenges in China [9][39] - Excluding China, revenue from the International segment increased by 4%, indicating resilience in other markets [39] Strategic Initiatives - The company is focused on being the partner of choice for organizations seeking to achieve breakthrough results, emphasizing the importance of human capabilities alongside AI integration [14][15] - Recent investments in go-to-market strategies have begun to yield positive results, with a restructured sales team focused on landing new strategic clients and expanding existing relationships [22][76] - The company has launched new AI-driven solutions to assist clients in adopting AI effectively, enhancing their operational efficiency [16][18]