Franklin Covey(US:FC)2020-07-10 05:51Financial Data and Key Metrics Changes - Revenue for Q3 2020 was $37.1 million, down $18.9 million from $56 million in Q3 2019, primarily due to the need to reschedule coaching and training engagements [14][20] - Adjusted EBITDA declined by $6.7 million in Q3, reflecting a $12.8 million decline in gross profit, which was partially offset by a decline in operating SG&A [19][20] - Cash flow from operating activities remained strong at $18.7 million during the quarter [19] Business Line Data and Key Metrics Changes - Subscription and related revenue grew by 18% in Q3, with All Access Pass revenue increasing by 19% and Leader in Me revenue growing by 14% [52][54] - The gross margin increased by 146 basis points to 72.3% in Q3, reflecting a higher share of revenue from subscription sales [17] Market Data and Key Metrics Changes - The majority of revenue decline occurred in international operations, particularly in China and Japan, where strict stay-at-home orders were in place [15][41] - U.S. and Canadian operations accounted for only $1.4 million of reduced contribution, highlighting the strength of the subscription model in these markets [41] Company Strategy and Development Direction - The company expects to resume high EBITDA growth and cash flow as it moves beyond the current challenges, leveraging its strong operational and strategic foundations [7][27] - The shift to Live-Online delivery has been a significant competitive advantage, allowing the company to adapt quickly to changing market conditions [30][81] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery trajectory, noting that the booking pace for coaching and training services has regained levels seen in the previous year [23][42] - The company anticipates that the subscription business will continue to show resilience, with strong revenue retention rates despite the pandemic [57][60] Other Important Information - The company has developed strong Live-Online delivery capabilities over the past decade, which has allowed it to pivot effectively during the pandemic [28][80] - The All Access Pass subscription business is expected to be a key driver of future growth, with a significant portion of revenue being deferred to future periods [48][95] Q&A Session Summary Question: Clarification on revenue tied to on-site training - Management confirmed that approximately $20 million of previously estimated $30 million in revenue tied to on-site training was postponed, with expectations that about 70% of this will ultimately be recognized [106][109] Question: Impact of current environment on client preferences for virtual vs. on-site content - Management indicated that while some clients may return to on-site preferences, a significant shift towards virtual delivery is expected to remain, as clients have found Live-Online delivery effective [113][115]