Franklin Covey(US:FC)2022-06-30 04:30Financial Data and Key Metrics Changes - Revenue growth for Q3 2022 was strong, increasing by 13%, and 19% when excluding the impact of COVID-related lockdowns in China and Japan [7][18] - Subscription and subscription services revenue grew 31% in Q3 2022, with All Access Pass revenue reaching $136.2 million, a growth of 32% [8][39] - Adjusted EBITDA increased by 27% to $10.9 million for the quarter, with year-to-date adjusted EBITDA growth of 66% [11][15] Business Line Data and Key Metrics Changes - North America Enterprise operations saw revenue growth of 20% in Q3, with subscription services revenue growing 27% [19][20] - Education business revenue grew 21% in Q3 and 33% year-to-date, with subscription services revenue growing 28% [21][22] - International operations were impacted by COVID, with revenue in China and Japan declining 46% in Q3, but showing signs of recovery [23][24] Market Data and Key Metrics Changes - Deferred revenue increased by 21% to $116.5 million, indicating strong future revenue visibility [9][40] - The percentage of multiyear contracts for All Access Pass increased to 42%, with 58% of total subscription revenue coming from these contracts [9][40] Company Strategy and Development Direction - The company is focused on expanding its presence in large, fragmented markets, including Enterprise learning and Education, which are expected to grow significantly [27][30] - The strength of the subscription model is a key driver for growth, providing predictability and durability in revenue [37][39] - Investments in technology and sales force are ongoing to support growth, with plans to increase client partners from 30 to 40 in fiscal 2023 [48][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating potential economic downturns, citing the enduring nature of the problems they help clients solve [76][78] - The company expects to increase revenue growth guidance to the low teens for fiscal 2023 and beyond, driven by strong subscription growth [13][61] - Adjusted EBITDA guidance for fiscal 2022 has been raised to between $40 million and $41.5 million, reflecting strong performance [15][57] Other Important Information - The company returned $20.3 million to shareholders through share repurchases, ending the quarter with $67.1 million in liquidity [12][26] - The company is actively exploring acquisition opportunities to enhance capabilities and expand its service offerings [71][73] Q&A Session Summary Question: Can you elaborate on client partner hirings and the shift from net 30 to net 40? - Management confirmed that the support staff is in place to support the increase to net 40 client partners in fiscal 2023, with ambitions to go beyond that in the following years [64][67] Question: What is the status of All Access Pass implementation in China and Japan? - Significant progress has been made in Japan, with 45% of their business being All Access Pass related, while China is also seeing growth despite recent downturns due to COVID restrictions [68][69] Question: Can you provide an update on the acquisition landscape? - The company is focused on acquiring capabilities and content that complement their existing offerings, with ongoing discussions about potential targets [70][72] Question: How is the company preparing for potential macroeconomic challenges? - Management expressed confidence in their preparedness, highlighting the importance of their subscription model and strong cash flow as key advantages during economic uncertainty [76][80]