Core Insights - FranklinCovey has launched a new initiative titled "Disrupt Everything: Innovate for Impact," which is based on a bestselling book by James Patterson and Patrick Leddin [1] Company Overview - The initiative aims to encourage organizations to embrace innovation and disruption as a means to achieve significant impact [1] - This launch aligns with FranklinCovey's mission to help organizations improve their performance through effective leadership and strategic innovation [1] Industry Context - The concept of disruption is increasingly relevant in today's fast-paced business environment, where companies must adapt to rapid changes and evolving market demands [1] - The initiative reflects a broader trend in the industry towards prioritizing innovation as a key driver of success [1]

Core Viewpoint - Firm Capital Mortgage Investment Corporation has announced a bought deal offering of $20 million in 5.50% convertible unsecured subordinated debentures, with potential total proceeds of $23 million if the over-allotment option is fully exercised [1][2]. Group 1: Offering Details - The offering consists of $20 million aggregate principal amount of debentures priced at $1,000 each, with an over-allotment option for an additional $3 million [1]. - The expected closing date for the offering is around October 14, 2025, pending necessary regulatory approvals [2]. - The debentures will bear interest at a rate of 5.50% per annum, payable semi-annually, and will mature on December 31, 2032 [3]. Group 2: Conversion and Redemption - Holders of the debentures can convert them into common shares at a conversion price of $14.06 per share before the maturity date [3]. - The debentures are not redeemable before December 31, 2028, and can be redeemed at the Corporation's option under specific conditions thereafter [4]. - The Corporation has the right to repay the principal amount of the debentures through the issuance of shares upon maturity or redemption [6]. Group 3: Corporate Structure and Purpose - The debentures will be direct, unsecured obligations of the Corporation, subordinated to senior indebtedness [5]. - The net proceeds from the offering will be utilized for debt repayment and general corporate purposes [2]. - Firm Capital Mortgage Investment Corporation operates as a non-bank lender, focusing on residential and commercial short-term financing [11].

Company Overview - Franklin Covey (FC) shares increased by 5.7% to close at $20.19, following a period of weakness where the stock had lost 3% over the past four weeks, indicating a potential technical bounce [1] - The company is expected to report quarterly earnings of $0.43 per share, reflecting a year-over-year decline of 51.7%, with revenues projected at $70.97 million, down 15.6% from the previous year [2] Earnings and Stock Performance - The consensus EPS estimate for Franklin Covey has remained unchanged over the last 30 days, suggesting that stock price movements may not sustain without trends in earnings estimate revisions [3] - The stock currently holds a Zacks Rank of 3 (Hold), indicating a neutral outlook [4] Industry Context - Franklin Covey operates within the Zacks Consulting Services industry, which includes other companies like Exponent (EXPO), that closed 0.3% higher at $69.5, but has seen a -4% return over the past month [4] - Exponent's consensus EPS estimate has also remained unchanged at $0.5, showing no year-over-year change, and it currently holds a Zacks Rank of 2 (Buy) [5]

Core Insights - Allogene Therapeutics has selected standard fludarabine and cyclophosphamide (FC) as the lymphodepletion regimen for its ALPHA3 study evaluating cemacabtagene ansegedleucel (cema-cel) in first-line consolidation for large B-cell lymphoma (LBCL) [1][6] - The ALPHA3 trial has shifted to a randomized study design comparing cema-cel after standard FC lymphodepletion to observation, with a futility analysis expected in the first half of 2026 [4][6] Company Developments - The decision to close the arm testing FC plus ALLO-647 was made due to a Grade 5 adverse event attributed to ALLO-647, leading to a review of trial data and a shift in clinical strategy [2][3] - Allogene is advancing next-generation AlloCAR T product candidates using the proprietary Dagger® Platform Technology, which aims to minimize or eliminate the need for standard lymphodepletion [3][6] Clinical Trial Details - The ALPHA3 study is designed to treat over 60,000 patients annually for LBCL in the US, EU, and UK, with cema-cel positioned as a potential standard "7th cycle" treatment following initial chemotherapy [8] - The trial has over 50 clinical sites activated across the US and Canada, including community cancer centers and major academic institutions [4][6] Product Information - Cemacabtagene ansegedleucel (cema-cel) is an investigational anti-CD19 AlloCAR T™ product for LBCL, with oncology rights held by Allogene in the US, EU, and UK, and options for rights in China and Japan [7][9]

[FORM 10-Q General Information](index=1&type=section&id=FORM%2010-Q%20General%20Information) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides fundamental details about Franklin Covey Co., including its legal name, jurisdiction of incorporation, principal executive offices, and contact information, identifying it as an Accelerated Filer with 12,641,822 shares of common stock outstanding as of June 30, 2025 - Franklin Covey Co. is an **Accelerated Filer**, indicating it meets certain market capitalization and public float requirements for expedited SEC reporting[5](index=5&type=chunk) - As of June 30, 2025, the company had **12,641,822 shares** of common stock, $0.05 par value per share, outstanding[6](index=6&type=chunk) Title of Each Class | Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, $0.05 Par Value | FC | New York Stock Exchange | [Financial Statements](index=3&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from $261.5 million at August 31, 2024, to $218.3 million at May 31, 2025, primarily driven by a reduction in current assets, notably cash and accounts receivable, with total liabilities and shareholders' equity also declining - Current assets decreased by **$49.25 million**, primarily due to a **$14.96 million** decrease in cash and cash equivalents and a **$36.16 million** decrease in accounts receivable[8](index=8&type=chunk) - Total shareholders' equity decreased by **$17.56 million**, largely influenced by a **$14.72 million** increase in treasury stock at cost[8](index=8&type=chunk) Condensed Consolidated Balance Sheets (in thousands) | ASSETS | May 31, 2025 | August 31, 2024 | | :------------------------------------------------ | :----------- | :-------------- | | Cash and cash equivalents | $33,707 | $48,663 | | Accounts receivable, net | 49,843 | 86,002 | | Total current assets | 111,003 | 160,253 | | Total assets | $218,284 | $261,539 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Deferred subscription revenue (current) | 83,488 | 101,218 | | Total current liabilities | 132,307 | 162,453 | | Total liabilities | 152,705 | 178,404 | | Total shareholders' equity | 65,579 | 83,135 | | Total liabilities and shareholders' equity | $218,284 | $261,539 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) For the quarter ended May 31, 2025, the company reported a net loss of $(1.4) million, a significant decline from a net income of $5.7 million in the prior year, primarily due to decreased revenue and increased restructuring costs, with similar year-to-date trends - Revenue decreased by **8.5%** for the quarter and **3.6%** for the three quarters ended May 31, 2025, compared to the prior year periods[12](index=12&type=chunk) - Restructuring costs significantly increased to **$4.7 million** for the quarter and **$6.7 million** for the three quarters ended May 31, 2025, up from **$0.7 million** and **$3.0 million** respectively in the prior year[12](index=12&type=chunk) Condensed Consolidated Statements of Operations (in thousands, except per-share amounts) | Metric | Quarter Ended May 31, 2025 | Quarter Ended May 31, 2024 | Three Quarters Ended May 31, 2025 | Three Quarters Ended May 31, 2024 | | :-------------------------------- | :------------------------- | :------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $67,121 | $73,373 | $195,819 | $203,109 | | Gross profit | $51,322 | $56,206 | $149,779 | $155,336 | | Income (loss) from operations | $(2,203) | $8,343 | $(2,183) | $15,114 | | Net income (loss) | $(1,409) | $5,721 | $(1,304) | $11,446 | | Basic EPS | $(0.11) | $0.43 | $(0.10) | $0.87 | | Diluted EPS | $(0.11) | $0.43 | $(0.10) | $0.85 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased significantly to $19.0 million for the three quarters ended May 31, 2025, from $38.4 million in the prior year, primarily due to lower operating income and a decrease in taxes payable, while cash used for investing and financing activities saw smaller changes - The decrease in cash from operating activities was primarily due to lower operating income and an **$8.3 million** decrease in taxes payable[109](index=109&type=chunk) - Purchases of common stock for treasury amounted to **$22.99 million** in the first three quarters of fiscal 2025, compared to **$25.84 million** in the prior year[14](index=14&type=chunk) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Category | Three Quarters Ended May 31, 2025 | Three Quarters Ended May 31, 2024 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $19,039 | $38,385 | | Net cash used for investing activities | $(8,469) | $(7,813) | | Net cash used for financing activities | $(25,613) | $(31,970) | | Net decrease in cash and cash equivalents | $(14,956) | $(1,656) | | Cash and cash equivalents at end of period | $33,707 | $36,574 | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity decreased from $83.1 million at August 31, 2024, to $65.6 million at May 31, 2025, primarily driven by net losses incurred during the period and significant purchases of common shares for treasury, partially offset by stock-based compensation - Net losses for the three quarters ended May 31, 2025, totaled **$(1.3) million**, contributing to the decrease in retained earnings[12](index=12&type=chunk) - Purchases of common shares for treasury amounted to **$22.99 million** for the first three quarters of fiscal 2025, increasing the treasury stock balance[114](index=114&type=chunk) Changes in Shareholders' Equity (in thousands) | Item | Balance at Aug 31, 2024 | Balance at May 31, 2025 | | :-------------------------------- | :---------------------- | :---------------------- | | Common Stock Amount | $1,353 | $1,353 | | Additional Paid-In Capital | $231,813 | $230,375 | | Retained Earnings | $123,204 | $121,900 | | Accumulated Other Comprehensive Loss | $(768) | $(863) | | Treasury Stock Amount | $(272,467) | $(287,186) | | Total Shareholders' Equity | $83,135 | $65,579 | [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=8&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) - Franklin Covey Co. is a global company focused on organizational performance improvement, offering content and solutions through various delivery options like **All Access Pass (AAP)** subscriptions, **The Leader in Me** membership, digital online learning, and onsite training[23](index=23&type=chunk) - The company's internal reporting is organized around two divisions: **Enterprise** (North America, International Direct Office, International Licensee segments) and **Education** (Education practice)[23](index=23&type=chunk) - New accounting pronouncements, **ASU 2024-03** (Disaggregation of Income Statement Expenses) and **ASU 2023-09** (Improvements to Income Tax Disclosures), are expected to significantly impact future financial statement disclosures, while **ASU 2023-07** (Segment Reporting) is not expected to have a material impact[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [NOTE 1 – BASIS OF PRESENTATION](index=8&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note outlines the company's business, mission, and content delivery options, emphasizing its focus on organizational performance improvement through behavioral change, detailing the basis of financial statement preparation, and discussing recently issued accounting pronouncements [Company Overview and Offerings](index=8&type=section&id=Company%20Overview%20and%20Offerings) - The company's mission is to '**enable greatness in people and organizations everywhere**,' focusing on sustained superior performance through changes in human behavior[23](index=23&type=chunk) - Key offerings include the **All Access Pass (AAP)** subscription, **The Leader in Me** membership, and content based on best-selling books like '**The 7 Habits of Highly Effective People**'[23](index=23&type=chunk)[24](index=24&type=chunk) [Accounting Policies and Estimates](index=8&type=section&id=Accounting%20Policies%20and%20Estimates) - Financial statements are prepared in accordance with **GAAP**, requiring management to make estimates and assumptions that affect reported amounts[26](index=26&type=chunk) - Inventories are stated at the lower of cost or net realizable value, using the **first-in, first-out (FIFO)** method, and consist solely of finished goods[28](index=28&type=chunk) [Accounting Pronouncements Issued and Not Adopted](index=8&type=section&id=Accounting%20Pronouncements%20Issued%20and%20Not%20Adopted) - **ASU 2024-03** (Disaggregation of Income Statement Expenses) is effective for fiscal years beginning after December 15, 2026, and is anticipated to have a significant impact on consolidated financial statement disclosures[29](index=29&type=chunk)[30](index=30&type=chunk) - **ASU 2023-07** (Segment Reporting) is effective for fiscal years beginning after December 15, 2023, and is not expected to materially impact consolidated financial statements as it only affects disclosures[31](index=31&type=chunk) - **ASU 2023-09** (Improvements to Income Tax Disclosures) is effective for annual periods beginning after December 15, 2024, and the company is currently assessing its anticipated impact[32](index=32&type=chunk) [NOTE 2 – PURCHASES OF COMMON STOCK](index=9&type=section&id=NOTE%202%20%E2%80%93%20PURCHASES%20OF%20COMMON%20STOCK) The company purchased $22.99 million of common stock during the first three quarters of fiscal 2025, comprising open market purchases and shares withheld for income taxes on stock-based compensation, with a new $50.0 million share repurchase plan approved in April 2024, leaving $27.9 million authorized as of May 31, 2025 - A new plan to purchase up to **$50.0 million** of outstanding common stock was approved on April 18, 2024, replacing the previous plan and having no expiration date[33](index=33&type=chunk) - As of May 31, 2025, **$27.9 million** remained authorized under the current common share purchase plan[116](index=116&type=chunk) Common Stock Purchases (in thousands) – Three Quarters Ended May 31, 2025 | Type of Purchase | Shares | Cost | | :------------------------------------------ | :----- | :----- | | Shares withheld for taxes on stock-based compensation awards | 146 | $5,954 | | Open market purchases | 623 | $17,037 | | Total | 769 | $22,991 | [NOTE 3 – REVENUE](index=9&type=section&id=NOTE%203%20%E2%80%93%20REVENUE) Deferred subscription revenue decreased from $107.9 million at August 31, 2024, to $89.3 million at May 31, 2025, with $108.8 million of previously deferred revenue recognized during the three quarters ended May 31, 2025, and $151.4 million in remaining performance obligations as of May 31, 2025 - Deferred subscription revenue decreased from **$107.9 million** at August 31, 2024, to **$89.3 million** at May 31, 2025[34](index=34&type=chunk) - During the three quarters ended May 31, 2025, **$108.8 million** of previously deferred subscription revenue was recognized[34](index=34&type=chunk) - As of May 31, 2025, remaining performance obligations totaled **$151.4 million**, including deferred subscription revenue, representing future recognized revenue from non-cancellable contracts[37](index=37&type=chunk) [Contract Balances](index=9&type=section&id=Contract%20Balances) - Deferred subscription revenue primarily consists of billings or payments received in advance for subscription services, recognized as revenue when criteria are met[35](index=35&type=chunk) - **The Leader in Me** membership revenue is bifurcated into portal membership (recognized over contract term) and coaching delivery (recognized as services are performed)[36](index=36&type=chunk) [Remaining Performance Obligations](index=10&type=section&id=Remaining%20Performance%20Obligations) - Remaining performance obligations represent contracted revenue not yet recognized, including unearned and unbilled amounts, influenced by contract length and ability to secure multi-year non-cancellable contracts[37](index=37&type=chunk) - Customer deposits are excluded from remaining performance obligations as they are generally refundable prior to obligation satisfaction[37](index=37&type=chunk) [NOTE 4 – STOCK-BASED COMPENSATION](index=10&type=section&id=NOTE%204%20%E2%80%93%20STOCK-BASED%20COMPENSATION) Stock-based compensation expense for the three quarters ended May 31, 2025, was $5.7 million, a decrease from $7.1 million in the prior year, primarily due to revisions in estimates for performance-based awards, with the company issuing 426,114 shares under various stock-based compensation arrangements - During the second quarter of fiscal 2025, revisions to estimates for performance-based long-term incentive plan awards reduced stock-based compensation by **$1.0 million**[40](index=40&type=chunk) - The company issued **426,114 shares** of common stock under various stock-based compensation arrangements during the three quarters ended May 31, 2025[39](index=39&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | Quarter Ended May 31, 2025 | Quarter Ended May 31, 2024 | Three Quarters Ended May 31, 2025 | Three Quarters Ended May 31, 2024 | | :-------------------------- | :------------------------- | :------------------------- | :-------------------------------- | :-------------------------------- | | Long-term incentive awards | $1,741 | $2,355 | $4,270 | $5,707 | | Strive acquisition compensation | $160 | $165 | $525 | $550 | | Unvested stock awards | $240 | $240 | $720 | $640 | | Employee stock purchase plan | $76 | $68 | $215 | $195 | | Total | $2,217 | $2,828 | $5,730 | $7,092 | [NOTE 5 – RESTRUCTURING COSTS](index=11&type=section&id=NOTE%205%20%E2%80%93%20RESTRUCTURING%20COSTS) Restructuring costs for the first three quarters of fiscal 2025 totaled $6.7 million, primarily for severance and related personnel expenses, as the company continued to implement its new Enterprise Division go-to-market strategy and reduce operating expenses, impacting approximately 80 associates across various segments - Fiscal 2025 restructuring costs totaled **$6.7 million** through May 31, 2025, primarily for severance and related personnel expenses[44](index=44&type=chunk) - A **$4.7 million** expense was incurred in the third quarter of fiscal 2025 for severance to approximately **45 associates**, mainly in the North America segment (**$3.8 million**)[45](index=45&type=chunk) - An additional **$2.0 million** expense was incurred in the first quarter of fiscal 2025 for severance to approximately **35 associates**, primarily in the North America segment (**$1.6 million**)[46](index=46&type=chunk) [NOTE 6 – EARNINGS (LOSS) PER SHARE](index=12&type=section&id=NOTE%206%20%E2%80%93%20EARNINGS%20%28LOSS%29%20PER%20SHARE) For the quarter and three quarters ended May 31, 2025, the company reported a basic and diluted net loss per share of $(0.11) and $(0.10) respectively, compared to net income per share of $0.43 and $0.87 in the prior year periods, with dilutive securities excluded due to the net loss - Due to a net loss for the quarter and three quarters ended May 31, 2025, no potentially dilutive securities were included in the EPS calculation as their inclusion would be anti-dilutive[48](index=48&type=chunk) - Approximately **116,000** dilutive stock-based compensation awards would have been included if there was net income[48](index=48&type=chunk) Net Income (Loss) Per Share (in thousands, except per-share amounts) | Metric | Quarter Ended May 31, 2025 | Quarter Ended May 31, 2024 | Three Quarters Ended May 31, 2025 | Three Quarters Ended May 31, 2024 | | :-------------------------------- | :------------------------- | :------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $(1,409) | $5,721 | $(1,304) | $11,446 | | Basic weighted average shares outstanding | 12,891 | 13,160 | 13,028 | 13,222 | | Diluted weighted average shares outstanding | 12,891 | 13,378 | 13,028 | 13,499 | | Basic EPS | $(0.11) | $0.43 | $(0.10) | $0.87 | | Diluted EPS | $(0.11) | $0.43 | $(0.10) | $0.85 | [NOTE 7 – SEGMENT INFORMATION](index=12&type=section&id=NOTE%207%20%E2%80%93%20SEGMENT%20INFORMATION) The company operates through five reportable segments, with performance evaluated using Adjusted EBITDA, reporting consolidated revenue of $67.1 million and Adjusted EBITDA of $7.3 million for the quarter ended May 31, 2025, with the Enterprise Division contributing $47.3 million and the Education Practice $18.6 million - The company's operations are structured into five reportable segments: **North America**, **International Direct Offices**, **International Licensees**, **Education Practice**, and **Corporate and Other**[50](index=50&type=chunk) - **Adjusted EBITDA** is the primary measurement tool for business unit performance, defined as net income or loss excluding interest, income taxes, intangible asset amortization, depreciation, stock-based compensation, and certain other charges[51](index=51&type=chunk) Consolidated Revenue and Adjusted EBITDA (in thousands) | Metric | Quarter Ended May 31, 2025 | Quarter Ended May 31, 2024 | Three Quarters Ended May 31, 2025 | Three Quarters Ended May 31, 2024 | | :-------------------- | :------------------------- | :------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $67,121 | $73,373 | $195,819 | $203,109 | | Adjusted EBITDA | $7,307 | $13,924 | $17,041 | $32,340 | [Segment Descriptions](index=13&type=section&id=Segment%20Descriptions) - **North America** segment focuses on leadership, productivity, execution, trust, and sales performance solutions in the U.S. and Canada[50](index=50&type=chunk) - **International Direct Offices** serve countries like Australia, Japan, and the UK, providing similar offerings as North America[50](index=50&type=chunk) - **Education Practice**, centered on '**The Leader in Me**', targets educational institutions globally to improve student performance and school culture[53](index=53&type=chunk) [Segment Financial Performance](index=14&type=section&id=Segment%20Financial%20Performance) - Consolidated Adjusted EBITDA decreased from **$13.9 million** in Q3 2024 to **$7.3 million** in Q3 2025, and from **$32.3 million** to **$17.0 million** year-to-date, primarily due to lower operating income and increased restructuring costs[55](index=55&type=chunk)[57](index=57&type=chunk) Segment Revenue and Adjusted EBITDA (Quarter Ended May 31, 2025, in thousands) | Segment | Revenue From External Customers | Adjusted EBITDA | | :------------------------ | :------------------------------ | :-------------- | | North America | $37,054 | $6,201 | | International direct offices | $7,496 | $313 | | International licensees | $2,716 | $1,349 | | Education practice | $18,640 | $2,053 | | Corporate and eliminations | $1,215 | $(2,609) | | Consolidated | $67,121 | $7,307 | Segment Revenue and Adjusted EBITDA (Three Quarters Ended May 31, 2025, in thousands) | Segment | Revenue From External Customers | Adjusted EBITDA | | :------------------------ | :------------------------------ | :-------------- | | North America | $111,711 | $19,788 | | International direct offices | $21,936 | $(884) | | International licensees | $8,749 | $4,449 | | Education practice | $50,169 | $2,006 | | Corporate and eliminations | $3,254 | $(8,318) | | Consolidated | $195,819 | $17,041 | [Disaggregated Revenue](index=15&type=section&id=Disaggregated%20Revenue) - Subscription revenue remains a significant component, totaling **$36.78 million** for the quarter and **$108.81 million** for the three quarters ended May 31, 2025[61](index=61&type=chunk) Revenue by Geographic Region (in thousands) | Region | Quarter Ended May 31, 2025 | Quarter Ended May 31, 2024 | Three Quarters Ended May 31, 2025 | Three Quarters Ended May 31, 2024 | | :---------------------- | :------------------------- | :------------------------- | :-------------------------------- | :-------------------------------- | | Americas | $57,011 | $62,084 | $165,469 | $169,840 | | Asia Pacific | $5,609 | $6,460 | $17,209 | $19,438 | | Europe/Middle East/Africa | $4,501 | $4,829 | $13,141 | $13,831 | | Total | $67,121 | $73,373 | $195,819 | $203,109 | Revenue by Type of Service (Quarter Ended May 31, 2025, in thousands) | Segment | Services and Products | Subscriptions | Royalties | Leases and Other | Consolidated | | :------------------------ | :-------------------- | :------------ | :-------- | :--------------- | :----------- | | Enterprise Division | $19,485 | $25,009 | $2,772 | - | $47,266 | | Education practice | $6,214 | $11,774 | $652 | - | $18,640 | | Corporate and eliminations | - | - | $298 | $917 | $1,215 | | Consolidated | $25,699 | $36,783 | $3,722 | $917 | $67,121 | [NOTE 8 – CORPORATE HEADQUARTERS LEASE](index=16&type=section&id=NOTE%208%20%E2%80%93%20CORPORATE%20HEADQUARTERS%20LEASE) The company signed a new 130-month lease for its corporate headquarters in Draper, Utah, with an initial annual base rent of approximately $0.8 million, resulting in the recognition of $6.4 million in right-of-use assets and $6.3 million in lease liabilities, while the master lease on the previous headquarters expires in June 2025 - A new **130-month** lease for corporate headquarters in Draper, Utah, was signed on December 20, 2024, with an initial annual base rent of approximately **$0.8 million**[62](index=62&type=chunk) - The new lease resulted in the addition of **$6.4 million** in right-of-use assets and **$6.3 million** in lease liabilities on the balance sheet at May 31, 2025[62](index=62&type=chunk) - The master lease on the current headquarters expires in June 2025, and the **$1.3 million** long-term financing obligation will be written off[63](index=63&type=chunk) [MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=17&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) [Non-GAAP Measures](index=17&type=section&id=Non-GAAP%20Measures) This section defines Adjusted EBITDA as a non-GAAP financial measure used by management for internal comparisons and to provide investors with greater transparency into operational activities and financial results, excluding interest, income taxes, intangible asset amortization, depreciation, stock-based compensation, and certain other items - **Adjusted EBITDA** is a non-GAAP financial measure defined as net income or loss excluding interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items such as restructuring and headquarters moving costs[65](index=65&type=chunk) - This measure is used for consistent internal comparisons and to provide investors with greater transparency into operational activities and financial results[65](index=65&type=chunk) [Results of Operations - Overview](index=17&type=section&id=Results%20of%20Operations%20-%20Overview) Franklin Covey Co. experienced a decline in consolidated revenue for the third quarter of fiscal 2025 to $67.1 million, down from $73.4 million in the prior year, primarily due to macroeconomic factors, government spending reductions, and geopolitical tensions, despite strong client renewals for All Access Pass subscriptions and Leader in Me memberships - Consolidated revenue for the third quarter ended May 31, 2025, was **$67.1 million**, a decrease from **$73.4 million** in the prior year, impacted by macroeconomic factors, U.S. federal government spending reductions, and geopolitical tensions[69](index=69&type=chunk) - Client renewals for **All Access Pass (AAP)** subscriptions and **Leader in Me** memberships remained strong despite economic uncertainties[67](index=67&type=chunk) - The company's new go-to-market strategy, in its second quarter of operation, is designed to systematically drive growth in client relationships[67](index=67&type=chunk) [Quarter Ended May 31, 2025 Compared with the Quarter Ended May 31, 2024](index=19&type=section&id=Quarter%20Ended%20May%2031%2C%202025%20Compared%20with%20May%2031%2C%202024) The third quarter of fiscal 2025 saw a consolidated net loss of $(1.4) million and Adjusted EBITDA of $7.3 million, both significantly lower than the prior year, primarily due to decreased revenue across segments and increased restructuring costs, with North America, International Direct Offices, and Education Division experiencing revenue declines - Consolidated net loss for Q3 fiscal 2025 was **$(1.4) million**, or **$(0.11)** per share, compared to net income of **$5.7 million**, or **$0.43** per diluted share, in Q3 fiscal 2024[74](index=74&type=chunk) - Consolidated Adjusted EBITDA for Q3 fiscal 2025 was **$7.3 million**, down from **$13.9 million** in Q3 fiscal 2024[74](index=74&type=chunk) - Operating expenses increased by **$5.7 million**, primarily due to a **$4.0 million** increase in restructuring charges and a **$1.6 million** increase in SG&A expenses[70](index=70&type=chunk) [Enterprise Division - North America Segment](index=19&type=section&id=Enterprise%20Division%20-%20North%20America%20Segment) - North America segment revenue decreased by **$3.5 million** to **$37.1 million** in Q3 fiscal 2025, impacted by macroeconomic uncertainty and canceled government contracts[72](index=72&type=chunk) - Adjusted EBITDA for North America decreased by **$4.6 million** to **$6.2 million**[72](index=72&type=chunk) - SG&A expenses increased due to associate costs for new sales and sales support personnel related to the new go-to-market strategy and sales force restructuring[75](index=75&type=chunk) [Enterprise Division - International Direct Offices](index=20&type=section&id=Enterprise%20Division%20-%20International%20Direct%20Offices) - International Direct Office revenues decreased by **$1.0 million** to **$7.5 million** in Q3 fiscal 2025, affected by economic uncertainty and geopolitical tensions, with significant declines in Japan, UK, and China[76](index=76&type=chunk) - Adjusted EBITDA for International Direct Offices decreased by **$1.0 million** to **$0.3 million**[76](index=76&type=chunk) - Gross margin decreased to **73.2%** from **77.6%** due to a shift in the mix of services delivered and products sold[77](index=77&type=chunk) [Enterprise Division - International Licensees Segment](index=20&type=section&id=Enterprise%20Division%20-%20International%20Licensees%20Segment) - International Licensees' revenue was essentially flat at **$2.7 million** in Q3 fiscal 2025, still unfavorably impacted by difficult macroeconomic conditions[79](index=79&type=chunk) - Adjusted EBITDA for International Licensees was also relatively flat at **$1.3 million**[79](index=79&type=chunk) - Gross margin decreased from **89.7%** to **87.6%** due to changes in product mix[80](index=80&type=chunk)[81](index=81&type=chunk) [Education Division](index=21&type=section&id=Education%20Division) - Education Division revenue decreased by **$1.6 million** to **$18.6 million** in Q3 fiscal 2025, primarily due to a **$2.2 million** decrease in training materials revenue[82](index=82&type=chunk) - The decrease in materials revenue was partially offset by increased coaching and consulting revenue and membership subscription revenues[82](index=82&type=chunk) - Adjusted EBITDA for the Education Division decreased by **$1.1 million** to **$2.1 million**[82](index=82&type=chunk) [Other Operating Expense Items (Quarterly)](index=21&type=section&id=Other%20Operating%20Expense%20Items%20%28Quarterly%29) - Interest expense decreased by **$0.1 million** to **$0.1 million** in Q3 fiscal 2025 due to decreased term loan and financing obligation liabilities[85](index=85&type=chunk) [Income Taxes (Quarterly)](index=19&type=section&id=Income%20Taxes%20%28Quarterly%29) - Income tax benefit for Q3 fiscal 2025 was **$0.7 million** on a pre-tax loss of **$(2.1) million**, resulting in an effective benefit rate of **33.8%**[74](index=74&type=chunk)[86](index=86&type=chunk) - In Q3 fiscal 2024, the income tax provision was **$2.6 million** on pre-tax income of **$8.4 million**, with an effective rate of **31.6%**[74](index=74&type=chunk)[86](index=86&type=chunk) [Net Income (Loss) and Adjusted EBITDA (Quarterly)](index=19&type=section&id=Net%20Income%20%28Loss%29%20and%20Adjusted%20EBITDA%20%28Quarterly%29) - Net loss for Q3 fiscal 2025 was **$(1.4) million**, or **$(0.11)** per share, compared to net income of **$5.7 million**, or **$0.43** per diluted share, in Q3 fiscal 2024[74](index=74&type=chunk) - Adjusted EBITDA for Q3 fiscal 2025 was **$7.3 million**, compared to **$13.9 million** in Q3 fiscal 2024[74](index=74&type=chunk) - Foreign exchange rates had a **$0.5 million** favorable impact on Adjusted EBITDA for Q3 fiscal 2025[74](index=74&type=chunk) [Liquidity and Financial Position (Quarterly)](index=19&type=section&id=Liquidity%20and%20Financial%20Position%20%28Quarterly%29) - As of May 31, 2025, the company had over **$95 million** of available liquidity, consisting of **$33.7 million** in cash and a full undrawn **$62.5 million** line of credit[74](index=74&type=chunk) - The company purchased **$23.0 million** of common stock during the first three quarters of fiscal 2025[74](index=74&type=chunk) [Three Quarters Ended May 31, 2025 Compared with the Three Quarters Ended May 31, 2024](index=22&type=section&id=Three%20Quarters%20Ended%20May%2031%2C%202025%20Compared%20with%20May%2031%2C%202024) For the first three quarters of fiscal 2025, consolidated revenue decreased to $195.8 million from $203.1 million in the prior year, resulting in a net loss of $(1.3) million and Adjusted EBITDA of $17.0 million, both significantly lower than the prior year, primarily due to macroeconomic headwinds, restructuring efforts, and increased operating expenses - Consolidated revenue for the first three quarters of fiscal 2025 was **$195.8 million**, a decrease from **$203.1 million** in the prior year[12](index=12&type=chunk) - Consolidated net loss for the first three quarters of fiscal 2025 was **$(1.3) million**, compared to net income of **$11.4 million** in the prior year[12](index=12&type=chunk) - Consolidated Adjusted EBITDA for the first three quarters of fiscal 2025 was **$17.0 million**, down from **$32.3 million** in the prior year[55](index=55&type=chunk) [Enterprise Division - North America Segment (YTD)](index=22&type=section&id=Enterprise%20Division%20-%20North%20America%20Segment%20%28YTD%29) - North America segment revenue decreased by **$4.7 million** to **$111.7 million** for the first three quarters of fiscal 2025, impacted by business uncertainties and canceled government contracts[87](index=87&type=chunk) - Adjusted EBITDA for North America decreased by **$10.6 million** to **$19.8 million**[87](index=87&type=chunk) - SG&A expenses increased due to new sales and support personnel, compensation increases, and increased advertising for the refreshed '**The 7 Habits**' offering[89](index=89&type=chunk) [Enterprise Division - International Direct Offices (YTD)](index=22&type=section&id=Enterprise%20Division%20-%20International%20Direct%20Offices%20%28YTD%29) - International Direct Office revenues decreased by **$2.6 million** to **$21.9 million** for the first three quarters of fiscal 2025, affected by economic uncertainty and geopolitical tensions, with declines in China, Japan, and the UK[90](index=90&type=chunk) - Adjusted EBITDA for International Direct Offices turned negative, reporting **$(0.9) million**, down from **$2.3 million** in the prior year[90](index=90&type=chunk) - SG&A expenses increased due to higher bad debt expense and advertising for the new '**The 7 Habits**' offering[92](index=92&type=chunk) [Enterprise Division - International Licensees Segment (YTD)](index=23&type=section&id=Enterprise%20Division%20-%20International%20Licensees%20Segment%20%28YTD%29) - International Licensees' revenue decreased by **$0.2 million** to **$8.7 million** for the first three quarters of fiscal 2025, primarily due to decreases in services revenue and AAP revenue share[93](index=93&type=chunk) - Adjusted EBITDA for International Licensees decreased by **$0.2 million** to **$4.4 million**[93](index=93&type=chunk) - SG&A expenses decreased due to cost-cutting efforts in response to decreased revenue[94](index=94&type=chunk) [Education Division (YTD)](index=23&type=section&id=Education%20Division%20%28YTD%29) - Education Division revenue increased by **1%** to **$50.2 million** for the first three quarters of fiscal 2025, driven by increased coaching, consulting, and membership subscription revenue[95](index=95&type=chunk) - Growth was partially offset by decreased sales of classroom and training materials, which had large orders in the prior year that did not repeat[95](index=95&type=chunk) - Adjusted EBITDA for the Education Division decreased by **$0.8 million** to **$2.0 million**[95](index=95&type=chunk) [Other Operating Expense Items (Year-to-Date)](index=24&type=section&id=Other%20Operating%20Expense%20Items%20%28Year-to-Date%29) - Depreciation expense remained consistent at **$3.0 million** for both periods, with an expectation of approximately **$4 million** for fiscal 2025[98](index=98&type=chunk) - Amortization expense slightly increased to **$3.3 million** due to the reacquisition of license rights for France operations, with an expectation of approximately **$4.5 million** for fiscal 2025[99](index=99&type=chunk) - Interest expense decreased by **$0.4 million** to **$0.5 million** due to reduced term loan and financing obligation liabilities[100](index=100&type=chunk) [Income Taxes (Year-to-Date)](index=24&type=section&id=Income%20Taxes%20%28Year-to-Date%29) - For the first three quarters of fiscal 2025, the company recognized an income tax benefit of **$0.6 million** on a pre-tax loss of **$(1.9) million**, resulting in an effective tax benefit rate of **30.9%**[101](index=101&type=chunk) - The effective tax rate for fiscal 2025 is expected to be approximately **39%**, exceeding the statutory rate primarily due to non-deductible executive compensation[102](index=102&type=chunk) - Cash paid for income taxes during the first three quarters of fiscal 2025 was **$7.1 million**, mostly related to the fiscal 2024 income tax liability[103](index=103&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) As of May 31, 2025, Franklin Covey Co. maintained strong liquidity with over $95 million available, comprising $33.7 million in cash and a fully undrawn $62.5 million revolving credit facility, expecting to meet its obligations through existing cash, operating cash flows, and available credit, while continuing strategic investments and share repurchases - As of May 31, 2025, the company had over **$95 million** of available liquidity, including **$33.7 million** in cash and a **$62.5 million** undrawn revolving credit facility[104](index=104&type=chunk) - The **2023 Credit Agreement** provides up to **$70.0 million** in total credit, maturing on March 27, 2028, and the company was in compliance with its covenants at May 31, 2025[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Primary uses of liquidity include operating activities, opportunistic common stock purchases, working capital expansion, capital expenditures (including curriculum development), and debt/lease payments[104](index=104&type=chunk) [Introduction (Liquidity)](index=24&type=section&id=Introduction%20%28Liquidity%29) - The company's primary sources of liquidity are cash flows from sales of services and products and available proceeds from its credit facility[104](index=104&type=chunk) - Of the **$33.7 million** cash at May 31, 2025, **$13.4 million** was held by foreign subsidiaries, which is routinely repatriated[104](index=104&type=chunk) [Cash Flows Provided By Operating Activities](index=25&type=section&id=Cash%20Flows%20Provided%20By%20Operating%20Activities) - Cash provided by operating activities decreased to **$19.0 million** for the first three quarters of fiscal 2025, from **$38.4 million** in the prior year[109](index=109&type=chunk) - The decrease was primarily due to lower operating income and an **$8.3 million** decrease in taxes payable[109](index=109&type=chunk) [Cash Flows Used For Investing Activities and Capital Expenditures](index=25&type=section&id=Cash%20Flows%20Used%20For%20Investing%20Activities%20and%20Capital%20Expenditures) - Cash used for investing activities totaled **$8.5 million**, primarily for curriculum development (**$4.1 million**) and purchases of property and equipment (**$4.1 million**)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) - Capital spending for curriculum development is expected to be **$7 million to $9 million** in fiscal 2025, and property and equipment purchases are anticipated to be **$10 million to $12 million**[111](index=111&type=chunk)[112](index=112&type=chunk) - The company reacquired license rights for France operations for **$0.3 million** in cash and **$0.2 million** of forgiven receivables[113](index=113&type=chunk) [Cash Flows Used For Financing Activities](index=25&type=section&id=Cash%20Flows%20Used%20For%20Financing%20Activities) - Net cash used for financing activities totaled **$25.6 million** for the first three quarters of fiscal 2025[114](index=114&type=chunk) - Primary uses included **$23.0 million** for common stock purchases and **$3.7 million** for principal payments on financing obligations and notes payable[114](index=114&type=chunk) - Partially offsetting these uses were **$1.1 million** in proceeds from ESPP participants[115](index=115&type=chunk) [Sources of Liquidity](index=26&type=section&id=Sources%20of%20Liquidity) - The company expects to meet future liabilities and capital expenditures from current cash balances, future operating cash flows, and available credit facilities[118](index=118&type=chunk) - Additional potential sources of liquidity include factoring receivables, issuing additional equity, or issuing debt[118](index=118&type=chunk) - Management believes existing cash, operating cash flows, and external funds will be sufficient for operations for at least the next **12 months**[119](index=119&type=chunk) [Material Uses of Cash and Contractual Obligations](index=26&type=section&id=Material%20Uses%20of%20Cash%20and%20Contractual%20Obligations) - Material cash requirements include associate and consultant compensation, information technology expenditures, content development costs, income taxes, and other contractual obligations[121](index=121&type=chunk) - No material changes to expected uses of cash or contractual obligations occurred during the quarter and three quarters ended May 31, 2025, except for the new corporate headquarters lease[120](index=120&type=chunk)[122](index=122&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=27&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) The company's consolidated financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions that impact reported amounts, which are regularly evaluated based on historical experience and reasonable factors, with no significant changes to previously disclosed critical accounting estimates or policies - Financial statements require management to make estimates and assumptions that affect reported asset and liability amounts, and revenue and expense recognition[26](index=26&type=chunk)[124](index=124&type=chunk) - Estimates are based on historical experience and factors believed to be reasonable, but actual results may differ due to economic conditions and other uncontrollable circumstances[124](index=124&type=chunk) - There have been no significant changes to the company's previously disclosed critical accounting estimates or policies[123](index=123&type=chunk) [NEW ACCOUNTING PRONOUNCEMENTS](index=27&type=section&id=NEW%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to Note 1 of the condensed consolidated financial statements for a description of new accounting pronouncements that may impact the company, including ASU 2024-03, ASU 2023-07, and ASU 2023-09, which primarily affect disclosures related to income statement expenses, segment reporting, and income taxes - New accounting pronouncements, including **ASU 2024-03**, **ASU 2023-07**, and **ASU 2023-09**, are discussed in Note 1[125](index=125&type=chunk) - **ASU 2024-03** requires disaggregation of income statement expenses, **ASU 2023-07** improves segment reporting disclosures, and **ASU 2023-09** enhances income tax disclosures[29](index=29&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995](index=27&type=section&id=SAFE%20HARBOR%20STATEMENT%20UNDER%20THE%20PRIVATE%20SECURITIES%20LITIGATION%20REFORM%20ACT%20OF%201995) This statement clarifies that the report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from expectations, including macroeconomic factors, cybersecurity, litigation, competition, and changes in government spending, cautioning investors not to rely on these statements as predictions of actual results - The report contains forward-looking statements regarding future revenue, financial results, strategic plans, capital expenditures, and other expectations[126](index=126&type=chunk) - These statements are subject to risks and uncertainties, including cybersecurity, inflation, litigation, competition, foreign exchange rates, and government actions, which may cause actual results to differ materially[126](index=126&type=chunk)[127](index=127&type=chunk) - Investors should not rely on forward-looking statements as predictions of actual results, and the company does not undertake to update them except as required by law[128](index=128&type=chunk)[130](index=130&type=chunk) [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=28&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's interest rate sensitivity is primarily influenced by its variable-rate 2023 Credit Agreement, which had an effective interest rate of 6.0% at May 31, 2025, while other long-term obligations have fixed interest rates, with no material changes to market risk information previously reported or use of derivative instruments - The company's interest rate sensitivity is primarily influenced by the variable interest rate on its **2023 Credit Agreement**, which was **6.0%** at May 31, 2025[131](index=131&type=chunk) - Other long-term obligations, including the corporate headquarters financing obligation, have fixed interest rates (e.g., **7.7%** for the financing obligation)[131](index=131&type=chunk) - No foreign currency or interest rate derivative instruments were utilized during the quarter or three quarters ended May 31, 2025[132](index=132&type=chunk) [CONTROLS AND PROCEDURES](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 31, 2025, providing reasonable assurance that required information is recorded, processed, and reported timely, with no material changes in internal controls over financial reporting during the most recently completed fiscal quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of May 31, 2025[134](index=134&type=chunk) - Disclosure controls are designed to ensure timely recording, processing, summarizing, and reporting of information required in Exchange Act reports[133](index=133&type=chunk) - No material changes in internal controls over financial reporting occurred during the most recently completed fiscal quarter[135](index=135&type=chunk) [PART II. OTHER INFORMATION](index=30&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. LEGAL PROCEEDINGS](index=30&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) Franklin Saltlake LLC, the landlord of the company's former corporate offices, filed a lawsuit alleging breach of lease for failure to make certain repairs, seeking approximately $3.8 million in damages, which the company denies and intends to vigorously defend, though the outcome remains uncertain - A lawsuit was filed by the former landlord, **Franklin Saltlake LLC**, on December 20, 2024, alleging breach of lease for failure to make equipment repairs[136](index=136&type=chunk) - The landlord's damage claim increased to approximately **$3.8 million** in April 2025[136](index=136&type=chunk) - The company denies all material allegations, contends the premises are in sound operating condition, and intends to vigorously defend the suit, though the outcome is uncertain[136](index=136&type=chunk) [Item 1A. RISK FACTORS](index=30&type=section&id=Item%201A.%20RISK%20FACTORS) Key risk factors include the potential loss of governmental funding (like ESSER) and charitable contributions for the Education Division, inherent risks in government contracting (e.g., funding changes, audits, political factors), and the adverse resolution of litigation, such as the ongoing landlord lawsuit, which highlights financial and reputational risks - The Education Division's growth is at risk from the loss or reduction of governmental funding (e.g., **ESSER program**) and charitable contributions[138](index=138&type=chunk) - Working with governmental clients exposes the company to risks such as project termination due to funding changes, audits of contract costs, and potential civil/criminal penalties for improper activities[139](index=139&type=chunk) - Adverse resolution of litigation, including the ongoing landlord lawsuit, could materially harm the company's operating results, financial condition, management focus, and reputation[141](index=141&type=chunk)[142](index=142&type=chunk) [Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=31&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the quarter ended May 31, 2025, the company purchased 372,627 shares of its common stock at an average price of $22.36 per share, totaling $8.33 million, as part of the $50.0 million common share purchase plan approved in April 2024, with $27.9 million remaining authorized - The purchases were made under a **$50.0 million** common share purchase plan approved on April 18, 2024, which has no expiration date[143](index=143&type=chunk) - As of May 31, 2025, **$27.9 million** remained authorized for future common stock purchases under the plan[143](index=143&type=chunk) Common Stock Purchases (Quarter Ended May 31, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :-------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------------------------------------------- | | March 1, 2025 to March 31, 2025 | - | $ - | - | $36,206 | | April 1, 2025 to April 30, 2025 | 126,355 | $20.27 | 126,355 | $33,644 | | May 1, 2025 to May 31, 2025 | 246,272 | $23.43 | 246,272 | $27,873 | | Total Common Shares | 372,627 | $22.36 | 372,627 | $27,873 | [Item 5. OTHER INFORMATION](index=32&type=section&id=Item%205.%20OTHER%20INFORMATION) The company entered into indemnification agreements with its directors and executive officers on July 7, 2025, to indemnify them to the fullest extent permitted by Utah law and advance certain expenses, with no directors or executive officers adopting or terminating any Rule 10b5-1 trading arrangements during the quarter ended May 31, 2025 - Indemnification agreements were entered into with directors and executive officers on July 7, 2025, requiring the company to indemnify them to the fullest extent permitted by **Utah law** and advance certain expenses[145](index=145&type=chunk) - No directors or executive officers adopted or terminated any **Rule 10b5-1** trading arrangements during the quarter ended May 31, 2025[147](index=147&type=chunk) [Item 6. EXHIBITS](index=32&type=section&id=Item%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including the form of Indemnification Agreement, Rule 13a-14(a) Certifications from the CEO and CFO, Section 1350 Certifications, and various XBRL documents for interactive data filing - Exhibits include the Form of Indemnification Agreement (**10.1**), Rule 13a-14(a) Certifications (**31.1**, **31.2**), and Section 1350 Certifications (**32**)[149](index=149&type=chunk) - **XBRL** (eXtensible Business Reporting Language) documents are furnished for interactive data filing, including the Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase[149](index=149&type=chunk)

Core Insights - The article highlights that Franklin Covey Co. is experiencing a near-term earnings challenge as indicated in its Q3 financial report, but the company's strategic shift towards a subscription-based, data-rich learning ecosystem is expected to enhance its market position [1] Company Strategy - Franklin Covey Co. is realigning its sales strategy to support its transition to a subscription-driven model, which is anticipated to provide a more sustainable revenue stream and improve customer engagement [1] Market Position - The shift towards a data-rich learning ecosystem positions Franklin Covey Co. favorably in the market, potentially attracting more investors and customers who are looking for innovative learning solutions [1]

Financial Performance - Q3 FY25 - Revenue for Q3 FY25 was $67.1 million, within the guided range of $67 million to $71 million[9] - Adjusted EBITDA for Q3 FY25 was $7.3 million, beating the constant currency guidance by $0.3 million[9] - Q3 FY25 Adjusted EBITDA was $7.3 million, a decrease of 47.5% compared to $13.9 million in Q3 FY24[15, 27] - Q3 FY25 revenue was $67.1 million, a decrease of 8.5% compared to $73.4 million in Q3 FY24[15, 27] Financial Performance - YTD Q3 FY25 - Revenue for YTD Q3 FY25 was $195.8 million, a decrease of 3.6% compared to $203.1 million in YTD Q3 FY24[15, 27] - Adjusted EBITDA for YTD Q3 FY25 was $17.0 million, a decrease of 47.3% compared to $32.3 million in YTD Q3 FY24[15, 27] - YTD Q3 FY25 Free Cash Flows were $10.6 million, compared to $30.6 million in Q3 FY24 YTD[15] Guidance Update for FY25 - Updated revenue guidance for FY25 is $265 million to $275 million, a decrease of $10 million from the previous guidance[9] - EBITDA guidance for FY25 is $28 million to $33 million, a decrease of $2 million at the low end from the previous guidance[9] Enterprise Division - North America - Billed Deferred subscription Revenue Balance was $45.0 million, compared to $47.2 million in Q3 FY24[16] - Subscription Revenue was $20.9 million, compared to $22.0 million in Q3 FY24[16] - Revenue was $37.1 million, compared to $40.6 million in Q3 FY24[16] - Unbilled Deferred Revenue Balance was $56.4 million, compared to $64.4 million in Q3 FY24[16] - Subscription & Subscription Services Revenue was $33.7 million, compared to $35.9 million in Q3 FY24[16] Education Division - Invoiced Amounts were $15.0 million, compared to $19.0 million in Q3 FY24[23] - Subscription & Subscription Service Revenue was $17.8 million, compared to $18.2 million in Q3 FY24[23] - Revenue was $18.6 million, compared to $20.2 million in Q3 FY24[23] - Deferred Subscription Revenue Balance was $34.1 million, compared to $28.2 million in Q3 FY24[23] - Subscription revenue increased 13% and Deferred Revenue balance grew 21% in Q3[14]

Executive Summary Franklin Covey's Q3 FY2025 saw $67.1 million revenue, $7.3 million Adjusted EBITDA, and a $1.4 million net loss, with deferred subscription revenue up 7% [Q3 FY2025 Key Highlights](index=1&type=section&id=Q3%20FY2025%20Key%20Highlights) Franklin Covey reported Q3 FY2025 consolidated revenue of $67.1 million, within guidance, and Adjusted EBITDA of $7.3 million, exceeding guidance. The company recorded a net loss of $1.4 million, impacted by restructuring costs, while deferred subscription revenue increased 7% year-over-year Q3 FY2025 Key Financial Metrics | Metric | Q3 FY2025 Value | | :----------------------------- | :-------------- | | Consolidated Revenue | $67.1 million | | Adjusted EBITDA | $7.3 million | | Net Loss | $(1.4) million | | Deferred Subscription Revenue | $89.3 million | | Cash and Cash Equivalents | $33.7 million | | Common Stock Repurchases (Q3) | $8.3 million | - Adjusted EBITDA of **$7.3 million** **exceeded guidance**, despite a net loss of **$1.4 million** after **$4.7 million** in restructuring costs[1](index=1&type=chunk) - Deferred subscription revenue grew **7% year-over-year** to **$89.3 million**, indicating **strong recurring revenue streams**[1](index=1&type=chunk) Third Quarter Fiscal 2025 Financial Results The company's Q3 FY2025 financial results reflect a decline in consolidated revenue and a net loss, primarily due to restructuring charges and increased SG&A expenses [Consolidated Financial Overview](index=1&type=section&id=Consolidated%20Financial%20Overview) Consolidated revenue for Q3 FY2025 decreased to $67.1 million from $73.4 million in Q3 FY2024, leading to a net loss of $(1.4) million, or $(0.11) per share, compared to net income of $5.7 million, or $0.43 per diluted share, in the prior year. This net loss included $4.7 million in restructuring charges and a $1.6 million year-over-year increase in SG&A expenses Consolidated Financial Performance | Metric | Q3 FY2025 | Q3 FY2024 | Change (YoY) | | :-------------------------------- | :-------- | :-------- | :----------- | | Consolidated Revenue | $67.1 million | $73.4 million | -8.58% | | Net Income (Loss) | $(1.4) million | $5.7 million | -124.56% | | Net Income (Loss) per Diluted Share | $(0.11) | $0.43 | -125.58% | - The net loss of **$(1.4) million** in Q3 FY2025 included **$4.7 million** in restructuring charges related to optimizing go-to-market transformation investments and cost reductions[3](index=3&type=chunk)[4](index=4&type=chunk) - Selling, general, and administrative expenses **increased by $1.6 million** year-over-year due to the implementation of the Company's go-to-market strategy[4](index=4&type=chunk)[5](index=5&type=chunk) [Divisional Performance](index=1&type=section&id=Divisional%20Performance) Both the Enterprise and Education Divisions experienced revenue declines in Q3 FY2025 compared to the prior year, primarily due to macroeconomic factors, geopolitical tensions, and specific contract changes [Enterprise Division](index=1&type=section&id=Enterprise%20Division) Enterprise Division revenue decreased to $47.3 million in Q3 FY2025 from $51.9 million in the prior year, primarily due to a $3.5 million decrease in North America and a $1.0 million decrease in International Direct Office revenue, attributed to macroeconomic uncertainties, geopolitical trade tensions, and canceled U.S. federal government contracts Enterprise Division Revenue | Metric | Q3 FY2025 | Q3 FY2024 | Change (YoY) | | :------------------- | :-------- | :-------- | :----------- | | Enterprise Revenue | $47.3 million | $51.9 million | -8.7% | - North America segment revenue **decreased by $3.5 million**, and International Direct Office revenue **decreased by $1.0 million**, impacted by ongoing macroeconomic uncertainties, geopolitical trade tensions, and canceled U.S. federal government contracts[3](index=3&type=chunk) [Education Division](index=1&type=section&id=Education%20Division) Education Division revenue was $18.6 million in Q3 FY2025, down from $20.2 million in Q3 FY2024. This decrease was mainly due to lower materials revenue, as the prior year included a significant state-wide initiative, though partially offset by increased training, coaching, and membership subscription revenue Education Division Revenue | Metric | Q3 FY2025 | Q3 FY2024 | Change (YoY) | | :--------------- | :-------- | :-------- | :----------- | | Education Revenue | $18.6 million | $20.2 million | -7.9% | - The **decrease in Education Division revenue** was **primarily due to** less materials revenue compared to Q3 FY2024, which had benefited from a new state-wide initiative[3](index=3&type=chunk) - Increased training and coaching revenue and membership subscription revenue **partially offset the decline** in materials revenue[3](index=3&type=chunk) [Key Financial Metrics & Balance Sheet Items](index=3&type=section&id=Key%20Financial%20Metrics%20%26%20Balance%20Sheet%20Items) Adjusted EBITDA for Q3 FY2025 was $7.3 million, a significant decrease from $13.9 million in the prior year. Consolidated deferred subscription revenue increased 7% year-over-year to $89.3 million, with multi-year contracts representing 62% of contracted amounts. Cash provided by operating activities and free cash flow for the first three quarters of fiscal 2025 also saw substantial declines Key Financial Metrics and Balance Sheet Summary | Metric | Q3 FY2025 | Q3 FY2024 | Change (YoY) | | :------------------------------------ | :-------- | :-------- | :----------- | | Adjusted EBITDA | $7.3 million | $13.9 million | -47.5% | | Consolidated Deferred Subscription Revenue (May 31) | $89.3 million | $83.8 million | +6.6% | | Cash Provided by Operating Activities (YTD) | $19.0 million | $38.4 million | -50.5% | | Free Cash Flow (YTD) | $10.6 million | $30.6 million | -65.3% | | Cash and Cash Equivalents (May 31) | $33.7 million | $40.4 million (Feb 28) | -16.6% | - The percentage of AAP contracts in North America for at least two years **increased to 58%** at May 31, 2025, from **55%** in the prior year, and multi-year contracts represented **62%** of contracted amounts, **up from 60%**[9](index=9&type=chunk) - The company repurchased approximately **372,000 shares** of common stock for **$8.3 million** in Q3 FY2025, bringing the fiscal year total to **769,000 shares** for **$23.0 million**[9](index=9&type=chunk) [Management Commentary](index=3&type=section&id=Management%20Commentary) CEO Paul Walker expressed satisfaction with Q3 revenue and Adjusted EBITDA performance, highlighting confidence in the ongoing sales transformation despite market uncertainties. He noted an increase in new clients, robust client expansion, strong retention, and a high Enterprise Division attachment rate. CFO Jessi Betjemann emphasized the company's commitment to driving growth and creating long-term shareholder value through its high-margin recurring revenue model - CEO Paul Walker noted that the company landed more new clients and achieved robust expansion across a significant portion of its client base in Q3, with client retention remaining **strong**[6](index=6&type=chunk) - The Enterprise Division attachment rate **remained high at 60%**, and the percentage of subscription revenue from multi-year periods **increased to 62%** in Q3[6](index=6&type=chunk) - Management anticipates **accelerated future revenue growth** and **significant growth** in Adjusted EBITDA and Free Cash Flow in fiscal 2026 and beyond, with the Education business expected to achieve **full-year top and bottom-line growth**[6](index=6&type=chunk) Fiscal 2025 and 2026 Guidance The company has updated its FY2025 guidance due to market uncertainties and expects meaningful growth in Adjusted EBITDA and free cash flow for FY2026 [Updated FY2025 Guidance](index=3&type=section&id=Updated%20FY2025%20Guidance) Franklin Covey updated its FY2025 guidance, revising total revenue to a range of $265 million to $275 million and Adjusted EBITDA to $28 million to $33 million. This revision is attributed to continued uncertainty impacting client decision-making and timing risks for service delivery Updated FY2025 Guidance Ranges | Metric | Updated FY2025 Guidance Range | | :------------- | :---------------------------- | | Total Revenue | $265 million to $275 million | | Adjusted EBITDA | $28 million to $33 million | - The guidance revision is **due to continued uncertainty** impacting clients' decision-making and the timing risk for delivery of services, which could slip into the first quarter of the next fiscal year[7](index=7&type=chunk) [FY2026 Outlook](index=3&type=section&id=FY2026%20Outlook) The company expects to generate a meaningful increase in Adjusted EBITDA and free cash flow in FY2026, partly due to recent cost reduction actions. Updated guidance for FY2026 will be shared at year-end in November - The Company expects to generate a **meaningful increase** in Adjusted EBITDA and free cash flow in FY2026, partly due to recent cost reduction actions[8](index=8&type=chunk) - Updated guidance for FY2026 will be provided when the company reports at year-end in November[8](index=8&type=chunk) Additional Company Information This section provides details on the earnings call, forward-looking statements, non-GAAP financial measures, and an overview of Franklin Covey Co [Earnings Conference Call](index=5&type=section&id=Earnings%20Conference%20Call) Franklin Covey will host a conference

Group 1 - Franklin Covey Co. is set to release its third-quarter earnings results on July 2, with analysts expecting earnings of 13 cents per share, a decrease from 46 cents per share in the same period last year [1] - The company is projected to report quarterly revenue of $67.49 million, down from $73.37 million a year earlier [1] - Dariusz Paczuski has been appointed as the Chief Marketing Officer of Franklin Covey as of June 10 [1] Group 2 - Franklin Covey shares increased by 0.3%, closing at $23.38 [2] - Barrington Research analyst Alexander Paris has maintained an Outperform rating with a price target of $35, while Roth MKM analyst Jeff Martin reiterated a Buy rating with a price target of $50 [4]

Financial Performance - For the three months ended March 31, 2025, net income increased by 16.4% to $9,973,265 compared to $8,569,784 for the same period in 2024 [2] - Basic weighted average earnings per share for the same period was $0.271, up from $0.248 per share reported for the three months ended March 31, 2024 [3] - The Corporation reported income in excess of distributions by approximately $1.4 million, or $0.04 per share [3] Investment Portfolio - The investment portfolio decreased by 3.4% to $631.9 million as of March 31, 2025, from $653.8 million as of December 31, 2024 [4][7] - New investment funding for the quarter was $70.2 million, compared to $47.7 million in the same period of 2024, while repayments were $92.2 million, up from $32.6 million in 2024 [4] - The average gross investment size was approximately $2.3 million, with 17 investments individually exceeding $7.5 million [4] Credit Losses and Fair Value Adjustments - The allowance for expected credit losses and fair value adjustment as of March 31, 2025, was $31.6 million, an increase from $29.6 million as of December 31, 2024 [5] - This allowance includes $25.1 million representing the estimated shortfall between investment balances and recoverable amounts, and $4.7 million for fair value adjustments [5] Dividend Information - The Corporation declared dividends on its common shares totaling $8,595,950 or $0.234 per share for the three months ended March 31, 2025, compared to $8,070,602 or $0.234 per share for the same period in 2024 [10] - A monthly cash dividend of $0.078 per common share has been declared, payable on specified dates [8] Shareholder Plans - The Corporation has a Dividend Reinvestment Plan (DRIP) allowing shareholders to reinvest dividends in additional shares at a discounted price [9] - Participants in the Share Purchase Plan can purchase additional shares with no commission costs, subject to certain limits [9]