Franklin Covey(US:FC)2022-03-30 22:40Financial Data and Key Metrics Changes - Subscription and subscription services revenue grew 31% in Q2 and 32% year-to-date, driving overall company revenue growth of 18% in Q2 and 22% year-to-date [6][27] - Deferred revenue, both billed and unbilled, grew 24%, with gross margin reaching 77.9% for the quarter, an increase of 41 basis points year-over-year [7][30] - Adjusted EBITDA for Q2 increased 57% to $8 million and 103% to $18 million year-to-date, with net cash flow from operating activities increasing to $23.2 million [9][38] Business Line Data and Key Metrics Changes - The All Access Pass subscription and subscription services revenue grew 29% to $32 million in Q2 and 28% to $65.2 million year-to-date [26] - The average All Access Pass contract value in the US-Canada business increased from $31,000 in fiscal 2016 to $46,000 [21] - The annual revenue retention rate for All Access Pass has exceeded 90% every quarter since its inception [22] Market Data and Key Metrics Changes - The balance of deferred revenue grew to $70.4 million, a 20% increase compared to the same period last year, with unbilled deferred revenue growing 31% to $49 million [30] - The Education Division's Leader in Me subscription offering is in over 5,000 schools worldwide, achieving greater than 90% revenue retention [41] Company Strategy and Development Direction - The company aims to transition virtually all sales to subscription and subscription services within the next three years, expecting revenue growth to move from high single digits to low double digits and eventually to mid-teens and beyond [43][45] - The strategy includes significant investments in content, technology, and client partner hiring to enhance growth and client engagement [60][75] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the All Access Pass subscription and subscription services sales, which are expected to drive future revenue recognition from deferred revenue [50] - The company anticipates challenges in China and Japan due to pandemic-related issues but remains optimistic about growth in North America and the Education Division [52][56] Other Important Information - The company has raised its full-year guidance for FY 2022, expecting adjusted EBITDA to be between $38 million and $39 million, reflecting a 38% increase compared to the previous year [48] - The company has a strong liquidity position with $76.1 million in liquidity and no net debt, allowing for continued investments and potential share repurchases [38][95] Q&A Session Summary Question: Update on client partner hiring - Management indicated plans to hire 30 new client partners this year, with a focus on ramping up hiring in Q4 [62][64] Question: Outlook for fiscal years 2023 and 2024 - Management remains confident in achieving adjusted EBITDA targets of $45 million for FY 2023 and $55 million for FY 2024, with updates expected after Q4 results [57][68] Question: Update on Strive rollout - The Strive platform is on track for a full launch at the start of the new fiscal year, following successful pilot testing [73][74] Question: Cash buildup on the balance sheet - Management discussed using excess cash for business growth, acquisitions, and share repurchases, maintaining a focus on strategic investments [93][95] Question: Sustainability of service attach rate to All Access Pass - Management noted that the attach rate is currently in the high-50s and believes there is still room for growth, driven by client needs for higher-level services [84][88]