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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Franklin Covey Co | NYSE:FC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 36.48 | 0 | 01:00:00 |
Consolidated Sales Exceed Expectations and Total $68.4 Million For the First Quarter of Fiscal 2024
Subscription and Subscription Services Sales Total a First Quarter Record $54.8 Million and a Record $224.7 Million for the Rolling Four Quarters Ended November 30, 2023
Sum of Billed and Unbilled Deferred Subscription Revenue Increases 12% to $169.7 Million Compared with $151.6 Million at November 30, 2022
First Quarter Cash Flows From Operating Activities Increase to $17.4 Million From $3.0 Million in the Prior Year’s First Quarter
Company Purchases 408,596 Shares of its Common Stock for $16.3 Million During the First Quarter of Fiscal 2024 with $51.0 Million purchased over the Previous Four Quarters
Liquidity Remains Strong at over $96 Million, with $34.0 Million of Cash and No Drawdowns on the Company’s $62.5 Million Credit Facility
Company Affirms Earnings Guidance for Fiscal 2024
Franklin Covey Co. (NYSE: FC), a leader in organizational performance improvement that creates, and on a subscription basis, distributes world-class content, training, processes, and tools that organizations and individuals use to achieve systemic changes in human behavior to transform their results, today announced financial results for its first quarter of fiscal 2024, which ended on November 30, 2023.
Introduction
The Company’s consolidated sales for the quarter ended November 30, 2023 exceeded expectations and totaled $68.4 million compared with $69.4 million in the first quarter of fiscal 2023. Revenue for the rolling four quarters ended November 30, 2023 grew $8.6 million, or 3%, to $279.6 million on top of the $33.8 million of revenue growth for the rolling four quarters ended November 30, 2022. Rolling two-year growth was a very strong $42.4 million, or an 18% increase. The Company’s sales and related performance in the first quarter included the following:
Paul Walker, President and Chief Executive Officer, commented, “Although our results were essentially even with last year’s first quarter, we are pleased that both revenue and Adjusted EBITDA came in stronger than forecasted. While we also expect second quarter revenue to be about even with the prior year, there are several key factors we expect will significantly strengthen in the back half of the year. These include a high flow-through of revenue, which will drive the growth in Adjusted EBITDA to our fiscal 2024 target of between $54.5 million and $58 million.”
Walker stated, “The factors that we expect will drive strong growth in the second half of fiscal 2024 include the following: First, the sum of our billed and unbilled deferred subscription revenue on the balance sheet has increased significantly and continues to grow. At the end of our first quarter, the sum of our billed and unbilled subscription revenue was $169.7 million, a level $18 million higher than at the end of the first quarter of fiscal 2023. A meaningful portion of this deferred revenue will flow into revenue during the second half of fiscal 2024. Second, our invoiced subscription revenue is increasing. After essentially flat All Access Pass invoiced subscription growth in the second and third quarters of fiscal 2023, our invoiced subscription revenue grew significantly in the fourth quarter and again in the first quarter of fiscal 2024. We expect this growth will continue in the second quarter and for the remainder of the fiscal year, resulting in additional amounts of deferred revenue going on the balance sheet and being recognized in the remainder of fiscal 2024 and beyond. Third, we expect our subscription services attachment rate, which declined to 61.5% in the back half of last year and through the first quarter of fiscal 2024, to return to our historic rate of 66.5% in the third and fourth quarters of fiscal 2024.”
Walker added, “We expect the improvement in services revenue to be driven by the combination of services delivered to new schools which were contracted late in the fourth quarter of fiscal 2023, by the launches of the refreshed ‘The 7 Habits of Highly Effective People’ and ‘Speed of Trust’ offerings, which are two of our historic blockbuster programs, strengthened further by the launch of our new solution on ‘Difficult Conversations.’ ”
Walker concluded, “Our first quarter results are reflective of the three key strengths we have been building for years. First, is the strength of our strategic position in the marketplace which we believe is unique. We focus on the most important, strategic, and durable position in our industry, specifically, that of helping organizations achieve results that require the collective action of their people, and we do it with a combination of best-in-class content, delivered through a broad range of delivery modalities, and world class coaching and facilitation that is very difficult to replicate. Our second key strength is the power of our revenue generating engine. Our subscription offerings and services continue to show their strength and durability in the marketplace and are key to helping our clients achieve meaningful change within their organizations. The third key strength is that of our powerful business model – a model where the combination of: increasing revenue per client; high revenue and client retention; high operating margins; upfront invoicing; low capital intensity and disciplined reinvestment for growth drives significant amounts of both Adjusted EBITDA and free cash flow. We believe these strengths position us well for a strong fiscal 2024 and for further growth into the future.”
First Quarter 2024 Financial Overview
The following is a summary of the Company’s financial results for the quarter ended November 30, 2023:
Fiscal 2024 Guidance and Outlook
Driven by the continued strength and strategic durability of its All Access Pass and Leader in Me membership subscriptions, first quarter results that were better-than-expectations, and the expectation of a strong second half of the year, the Company affirms its guidance for fiscal 2024 that Adjusted EBITDA will increase to between $54.5 million and $58.0 million in constant currency, compared with the $48.1 million of Adjusted EBITDA achieved in fiscal 2023. The Company expects to achieve this growth while continuing to make additional growth investments. While the Company is alert to potential macroeconomic disruptions that could adversely impact its future operating results, the Company remains confident in the strength of its subscription offerings, which have driven Franklin Covey’s growth across recent years and are expected to drive the Company’s continued growth in fiscal 2024 and future years.
Earnings Conference Call
On Thursday, January 4, 2024, at 5:00 p.m. Eastern (3:00 p.m. Mountain) Franklin Covey will host a conference call to review its fiscal 2024 first quarter financial results. Interested persons may access a live audio webcast at https://edge.media-server.com/mmc/p/r2a3rane or may participate via telephone by registering at https://register.vevent.com/register/BI4da7714a312d4847a54f00840f328fd4. Once registered, participants will have the option of: 1) dialing into the call from their phone (via a personalized PIN); or 2) clicking the “Call Me” option to receive an automated call directly to their phone. For either option, registration will be required to access the call. A replay of the conference call webcast will be archived on the Company’s website for at least 30 days.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including those statements related to the Company’s future results and profitability and other goals relating to the growth and operations of the Company. Forward-looking statements are based upon management’s current expectations and are subject to various risks and uncertainties including, but not limited to: general macroeconomic conditions; renewals of subscription contracts; growth in and client demand for add-on services; the impact of deferred revenues on future financial results; impacts from geopolitical conflicts; market acceptance of new products or services, including new AAP portal upgrades and content launches; inflation; the ability to achieve sustainable growth in future periods; and other factors identified and discussed in the Company’s most recent Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond the Company’s control or influence, any one of which may cause future results to differ materially from the Company’s current expectations, and there can be no assurance that the Company’s actual future performance will meet management’s expectations. These forward-looking statements are based on management’s current expectations and the Company undertakes no obligation to update or revise these forward-looking statements to reflect events or circumstances subsequent to this press release.
Non-GAAP Financial Information
This earnings release includes the concept of Adjusted EBITDA, which is a non-GAAP measure. The Company defines Adjusted EBITDA as net income excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other infrequently occurring items such as restructuring costs. The Company references this non-GAAP financial measure in its decision making because it provides supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods and the Company believes it provides investors with greater transparency to evaluate operational activities and financial results. Refer to the attached table for the reconciliation of the non-GAAP financial measure, Adjusted EBITDA, to consolidated net income, a related GAAP financial measure.
The Company is unable to provide a reconciliation of the above forward-looking estimate of non-GAAP Adjusted EBITDA to GAAP measures because certain information needed to make a reasonable forward-looking estimate is difficult to obtain and dependent on future events which may be uncertain, or out of the Company’s control, including the amount of AAP contracts invoiced, the number of AAP contracts that are renewed, necessary costs to deliver the Company’s offerings, such as unanticipated curriculum development costs, and other potential variables. Accordingly, a reconciliation is not available without unreasonable effort.
About Franklin Covey Co.
Franklin Covey Co. (NYSE: FC) is a global leadership company with directly owned and licensee partner offices providing professional services in over 160 countries and territories. The Company transforms organizations by partnering with its clients to build leaders, teams, and cultures that achieve breakthrough results through collective action, which leads to a more engaging work experience for their people. Available through the Franklin Covey All Access Pass, the Company’s best-in-class content and solutions, experts, technology, and metrics seamlessly integrate to ensure lasting behavioral change at scale. Solutions are available in multiple delivery modalities in more than 20 languages.
This approach to leadership and organizational change has been tested and refined by working with tens of thousands of teams and organizations over the past 30 years. Clients have included organizations in the Fortune 100, Fortune 500, and thousands of small- and mid-sized businesses, numerous governmental entities, and educational institutions. To learn more, visit www.franklincovey.com, and enjoy exclusive content from Franklin Covey’s social media channels at: LinkedIn, Facebook, Twitter, Instagram, and YouTube.
FRANKLIN COVEY CO. Condensed Consolidated Income Statements (in thousands, except per-share amounts, and unaudited) Quarter Ended November 30, November 30,
2023
2022
Net sales
$
68,399
$
69,369
Cost of sales
16,122
16,627
Gross profit
52,277
52,742
Selling, general, and administrative
44,786
44,012
Depreciation
1,091
1,246
Amortization
1,071
1,092
Income from operations
5,329
6,392
Interest expense, net
(53
)
(329
)
Income before income taxes
5,276
6,063
Income tax provision
(425
)
(1,396
)
Net income$
4,851
$
4,667
Net income per share: Basic
$
0.37
$
0.34
Diluted
0.36
0.32
Weighted average common shares: Basic
13,244
13,877
Diluted
13,636
14,507
Other data: Adjusted EBITDA(1)
$
10,969
$
11,472
(1)
Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, stock-based compensation, and certain other items) is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results. For a reconciliation of this non-GAAP measure to a comparable GAAP measure, refer to the Reconciliation of Net Income to Adjusted EBITDA as shown below.
FRANKLIN COVEY CO. Reconciliation of Net Income to Adjusted EBITDA (in thousands and unaudited) Quarter Ended November 30, November 30,
2023
2022
Reconciliation of net income to Adjusted EBITDA: Net income
$
4,851
$
4,667
Adjustments: Interest expense, net
53
329
Income tax provision
425
1,396
Amortization
1,071
1,092
Depreciation
1,091
1,246
Stock-based compensation
2,897
2,735
Restructuring costs
581
-
Increase in the fair value of contingent consideration liabilities
-
7
Adjusted EBITDA
$
10,969
$
11,472
Adjusted EBITDA margin
16.0
%
16.5
%
FRANKLIN COVEY CO. Additional Financial Information (in thousands and unaudited) Quarter Ended November 30, November 30,
2023
2022
Sales by Division/Segment: Enterprise Division: Direct offices
$
49,215
$
50,167
International licensees
3,378
3,278
52,593
53,445
Education Division
14,744
14,350
Corporate and other
1,062
1,574
Consolidated
$
68,399
$
69,369
Gross Profit by Division/Segment: Enterprise Division: Direct offices
$
39,501
$
39,921
International licensees
3,052
2,977
42,553
42,898
Education Division
9,380
9,175
Corporate and other
344
669
Consolidated
$
52,277
$
52,742
Adjusted EBITDA by Division/Segment: Enterprise Division: Direct offices
$
11,687
$
11,250
International licensees
1,896
1,831
13,583
13,081
Education Division
42
281
Corporate and other
(2,656
)
(1,890
)
Consolidated$
10,969
$
11,472
FRANKLIN COVEY CO. Condensed Consolidated Balance Sheets (in thousands and unaudited) November 30, August 31,
2023
2023
Assets Current assets: Cash and cash equivalents
$
33,959
$
38,230
Accounts receivable, less allowance for doubtful accounts of $3,753 and $3,790
59,860
81,935
Inventories
4,117
4,213
Prepaid expenses and other current assets
19,306
20,639
Total current assets
117,242
145,017
Property and equipment, net
9,517
10,039
Intangible assets, net
39,443
40,511
Goodwill
31,220
31,220
Deferred income tax assets
1,679
1,661
Other long-term assets
19,721
17,471
$
218,822
$
245,919
Liabilities and Shareholders' Equity Current liabilities: Current portion of notes payable
$
4,585
$
5,835
Current portion of financing obligation
3,627
3,538
Accounts payable
5,667
6,501
Deferred subscription revenue
83,484
95,386
Other deferred revenue
16,023
12,137
Accrued liabilities
21,300
28,252
Total current liabilities
134,686
151,649
Notes payable, less current portion
1,556
1,535
Financing obligation, less current portion
3,478
4,424
Other liabilities
7,590
7,617
Deferred income tax liabilities
1,011
2,040
Total liabilities
148,321
167,265
Shareholders' equity: Common stock
1,353
1,353
Additional paid-in capital
224,701
232,373
Retained earnings
104,653
99,802
Accumulated other comprehensive loss
(936
)
(987
)
Treasury stock at cost, 13,782 and 13,974 shares
(259,270
)
(253,887
)
Total shareholders' equity
70,501
78,654
$
218,822
$
245,919
View source version on businesswire.com: https://www.businesswire.com/news/home/20240104493693/en/
Investor Contact: Franklin Covey Boyd Roberts 801-817-5127 investor.relations@franklincovey.com
Media Contact: Franklin Covey Debra Lund 801-817-6440 Debra.Lund@franklincovey.com
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