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Franklin Covey(FC) - 2025 Q2 - Earnings Call Transcript
FCFranklin Covey(FC)2025-04-02 21:00
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Financial Data and Key Metrics Changes - The company reported second quarter revenue of 59.6million,slightlybelowthe59.6 million, slightly below the 61.3 million achieved in the same quarter last year, primarily due to government-related cancellations [44][60][65] - Adjusted EBITDA for the quarter was 2.1million,landingatthetopendofexpectationsdespitedisruptions[44][45]−Thecompanyexpectsrevenueforthefiscalyeartobebetween2.1 million, landing at the top end of expectations despite disruptions [44][45] - The company expects revenue for the fiscal year to be between 275 million and 285million,whichis285 million, which is 7 million or 2.5% lower than last year [21][53] Business Line Data and Key Metrics Changes - The North America enterprise business is experiencing significant traction from a go-to-market transformation, with new logo sales exceeding plans by more than 50% in the second quarter [30][31] - Education revenue grew 3% in the second quarter and is up 7% year-to-date, with invoiced amounts in education up 13% [40][49] Market Data and Key Metrics Changes - The company is experiencing direct and indirect impacts from government actions and economic uncertainty, particularly in its government business, which constitutes roughly 6% of total revenue [12][13] - International revenues are expected to decline by as much as 4millionduetotradetensionsandgovernmentactions[14][18]CompanyStrategyandDevelopmentDirection−Thecompanyiscommittedtoitsgo−to−markettransformation,whichisexpectedtodrivesignificantrevenuegrowth,movingfromsingle−digittodouble−digitgrowthinthecomingyears[19][20]−Thefocusremainsonenhancingclientrelationshipsandexpandingserviceofferings,withastrongemphasisonmulti−yearcontracts[26][46]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgestheturbulentexternaleconomicenvironmentbutremainsconfidentinthebusinessmodelandtheimportanceoftheservicesoffered[8][9]−Thecompanyanticipatesaone−yearstepbackinperformanceduetogovernment−relatedimpactsbutexpectstoreturntopreviousadjustedEBITDAlevelsinthefollowingyear[23][88]OtherImportantInformation−Thecompanyhasover4 million due to trade tensions and government actions [14][18] Company Strategy and Development Direction - The company is committed to its go-to-market transformation, which is expected to drive significant revenue growth, moving from single-digit to double-digit growth in the coming years [19][20] - The focus remains on enhancing client relationships and expanding service offerings, with a strong emphasis on multi-year contracts [26][46] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the turbulent external economic environment but remains confident in the business model and the importance of the services offered [8][9] - The company anticipates a one-year step back in performance due to government-related impacts but expects to return to previous adjusted EBITDA levels in the following year [23][88] Other Important Information - The company has over 100 million in liquidity and has invested approximately 105 million in share repurchases since 2022 [51][52] - The company is focused on maintaining its growth investments despite the current challenges [128] Q&A Session Summary Question: Impact of government actions on revenue - Management confirmed that the 17 million in government-related revenue is primarily from federal agencies, with expectations of not recovering this revenue in the current year [60][69] Question: Education revenue and funding sources - Management clarified that the Department of Education is not a direct client, and funding is expected to continue flowing from state governments despite potential federal cuts [74][76] Question: Guidance and future expectations - Management indicated that the guidance reflects a one-year step back, with expectations to update long-term revenue and EBITDA projections in November [85][88] Question: New logo sales and project starts - Management reported strong new logo sales and confirmed that project starts have not been delayed despite external uncertainties [108][110] Question: Adjusted EBITDA expectations for Q4 - Management discussed that Q4 EBITDA could be influenced by service delivery and education days, with potential for exceeding guidance if disruptions do not materialize [116][118]