Franklin Covey(US:FC)2025-11-05 23:00Financial Data and Key Metrics Changes - FranklinCovey reported total revenue of $267.1 million for fiscal 2025, reflecting a 7% decline from the prior year due to a 10% decrease in the enterprise division, partially offset by a 1% increase in the education division [25][30] - Adjusted EBITDA for fiscal 2025 was $28.8 million, in line with guidance, and down from $46.6 million in the previous year [28][32] - Free cash flow decreased to $12.1 million from $48.9 million in fiscal 2024, driven by lower revenues and increased spending [30] Business Line Data and Key Metrics Changes - The enterprise division generated 70% of total revenue, with revenue of $188.1 million, down from $208.1 million in the prior year [30][31] - The education division's revenue was $74.6 million, a 1% increase year-over-year, with education subscription revenue growing 10% to $45.9 million [35][36] - Subscription services attachment in enterprise was strong at 53% for fiscal 2025, with North America at 56% [18][19] Market Data and Key Metrics Changes - North America segment revenue was $147.6 million, a 10% decrease from the prior year, with fourth-quarter revenue down 22% [31][32] - International direct operations revenue decreased to $29.3 million from $33.3 million, impacted by geopolitical and trade tensions [33] - Education subscription revenue growth was supported by the addition of 624 new schools, maintaining a high retention rate of 84% [20][36] Company Strategy and Development Direction - The company aims to be the partner of choice for leaders pursuing breakthrough results, focusing on combining content, technology, and services [8][10] - Strategic priorities include enhancing solutions for clients and transforming the go-to-market approach to win larger, more strategic clients [10][16] - The company is embedding AI across offerings to provide real-time coaching and feedback, enhancing client outcomes [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to growth in fiscal 2026, with expectations for strong invoiced amounts and revenue growth in fiscal 2027 [6][42] - The operating environment remains uncertain, but there are signs of improved client decision-making and budget availability [46][47] - The company anticipates fiscal 2026 revenue in the range of $265-$275 million, with adjusted EBITDA expected between $28-$33 million [40][41] Other Important Information - The company maintained strong liquidity with over $94 million at the end of the fourth quarter, and no drawdowns on its credit facility [38] - The board approved a replenishment of the stock buyback plan, with approximately 791,000 shares purchased in the fiscal year [39] Q&A Session Summary Question: How has the decision-making environment evolved recently? - Management noted that while uncertainty remains, clients are beginning to free up budgets and move forward with business [46][47] Question: What is the status of the sales transformation? - Evidence of traction in the sales transformation includes strong invoiced growth and an increase in new logos and service bookings [48] Question: How are client renewals performing? - Client retention rates have remained consistent, with some clients expanding their contracts while others have downsized due to uncertainty [49][50] Question: What are the expectations for Q1 revenue and EBITDA? - Specific guidance for Q1 was not provided, but management indicated a typical seasonal pattern with revenue and EBITDA expected to be weighted towards the second half of the year [53][64] Question: Can you provide insights on the sales force structure? - The sales force remains stable, with no turnover reported, and future growth is expected in the hunting side of the sales force [65]