Franklin Covey is a Cyclical Operator in the corporate training industry where the core debate pits a severe, self-inflicted collapse in profitability against the potential for a cyclical mean reversion; our analysis concludes that the market is extrapolating trough earnings indefinitely, creating an attractive entry point at a valuation that is backstopped by a strong net-cash balance sheet and aggressive, counter-cyclical share repurchases.
The Investment Rationale: The rationale for a long position is based on a significant dislocation between the market price, which reflects trough earnings, and a conservatively estimated mid-cycle intrinsic value, creating a compelling margin of safety and an asymmetric risk/reward profile.
Our Core Variant Perception: Our variant perception is that the market is extrapolating current trough earnings into perpetuity, incorrectly pricing the stock as a broken business following a poorly timed strategic investment. In contrast, our analysis of the company's resilient balance sheet, counter-cyclical capital allocation, and historical performance suggests a cyclical inflection is probable, creating a classic mean-reversion opportunity.
The Nature of the Bet: This is a mid-term, cyclical trade designed to capture the upside from a trough valuation to a mid-cycle normalization, not a long-term compounder investment.
| Metric | Score | Justification |
|---|---|---|
| Industry Attractiveness | 2/4 | The industry is structurally challenging and highly competitive, evidenced by the Tier 1 and Tier 2 Peer Median Operating Margin of -10.5% (TTM). While the target company maintains a high Gross Margin (76.2%), the competitive environment is destructive for most players, forcing a focus on market share over profitability, as demonstrated by the rapid collapse in the target's own Operating Margin from 11.5% in FY2024 to 2.1% TTM. |
| Capital Cycle | 2/4 | The industry is approaching the "Peak" phase, characterized by aggressive capacity expansion into a cyclical demand slowdown. The target company's CapEx/Depreciation ratio is 125.0%, significantly above the Peer Median of 86.1%, and its CapEx/Revenue (6.3%) is more than double the peer median (2.9%). This aggressive investment in growth (e.g., the $16M sales force restructuring) is occurring despite macroeconomic headwinds and declining revenue, signaling a potential supply glut. |
| Moat Durability (Cyclical Operator Lens) | 2/4 | The company possesses a structurally Wide moat based on Intangible Assets (Proprietary IP), confirmed by its superior TTM Gross Margin of 76.2% compared to the Peer Median of 59.7%. However, the moat is Eroding, as evidenced by the severe cyclical stress: the target's TTM Operating Margin collapsed from 11.5% in FY2024 to 2.1% TTM, and management is forced to deploy a $16 million incremental investment in sales restructuring to defend market share and accelerate growth, confirming that external competitive pressure is forcing a defensive investment cycle. |
Part A: The Company & Its Competitive Environment
Core Business Model & Strategy: Franklin Covey is a global company that provides organizational performance improvement services, including training and consulting in leadership, execution, and sales. The company generates revenue primarily through a subscription model, centered on its All Access Pass for corporate clients and Leader in Me memberships for educational institutions, which grant access to a portfolio of proprietary content and services. Management's stated strategy is to accelerate growth by transforming its sales force to more effectively win new enterprise clients and expand relationships with existing ones, leveraging its strong intellectual property and digital delivery platforms.
Key Products & Assets: The company's most significant asset is its portfolio of intangible intellectual property, headlined by world-renowned brands such as The 7 Habits of Highly Effective People and The 4 Disciplines of Execution. These assets are delivered through its proprietary digital Impact Platform and supported by a global network of consultants and licensee partners. The operational leverage of this IP-driven, subscription-based model is substantial; a 31.0% increase in revenue over the last four years resulted in a 160.0% increase in Adjusted EBITDA, demonstrating high flow-through when the business is scaling.
Competitive Landscape: The corporate training industry is highly fragmented and intensely competitive. Key publicly traded competitors include online learning platforms like Udemy (UDMY), Skillsoft (SKIL), and Coursera (COUR), as well as professional consulting firms like Resources Connection (RGP). Competition is fierce, leading to a structurally unprofitable environment for many players, as evidenced by the peer median TTM operating margin of -10.5%. In this landscape, Franklin Covey's proprietary content provides a degree of differentiation, allowing it to maintain superior gross margins of 76.2% versus the peer median of 59.7%. However, it remains a smaller player susceptible to the industry's intense pricing pressure and cyclical demand shifts.
Part B: The Historical Situation
Franklin Covey's recent history is a story of a well-executed strategic transition followed by a severe, self-inflicted cyclical misstep. After successfully pivoting its business to a high-margin subscription model, the company enjoyed several years of strong growth. However, in late 2024, management initiated an aggressive, front-loaded $16 million investment to restructure its sales force, aiming to accelerate growth to double-digit levels. This strategic bet was poorly timed, colliding directly with a sharp cyclical downturn driven by macroeconomic uncertainty and cuts in U.S. government spending.
The result in fiscal year 2025 was a financial collapse: revenue declined 7.0% to $267.1 million, and the combination of lower revenue and higher investment spending caused operating margins to plummet from a healthy 11.5% in 2024 to just 2.1%. The market has punished this operational failure severely, sending the stock down over 70% from its 3-year peak to its current level near a 2-year low. This has created the current situation: a company with a strong balance sheet and valuable IP trading at a trough valuation due to a cyclical downturn exacerbated by a major strategic error.
| Metric | Score | Justification |
|---|---|---|
| Management Narrative Credibility | 2/4 | Management's credibility is moderate. While they accurately cited external factors like government spending cuts and macroeconomic uncertainties, they failed to anticipate the magnitude of the impact, leading to a 7.0% revenue decline and a sharp profitability collapse (Operating Margin 11.5% to 2.1%) in FY2025. They have since adjusted the narrative, pushing the expected acceleration to FY2027, which is a realistic but delayed outlook. |
| Analyst & Sell-Side Conviction | 1/4 | Conviction is low, evidenced by the near-total lack of active coverage. Only one analyst (Barrington) has provided a recent target ($22.00, published 2025-11-06). Analyst questions on the recent earnings call were consistently skeptical, focusing on the delayed timeline and execution risk of the $16 million sales transformation rather than anticipating a cyclical upturn. |
| Management's Own Conviction (Say vs. Do) | 3/4 | Conviction is high based on corporate actions. The company is executing aggressive, cash-funded share repurchases, resulting in an 8.7% TTM Net Buyback Yield, which is a strong counter-cyclical signal near the 2-year low of $14.04. However, this is slightly offset by the net insider selling of $102,788.00 over the last 12 months. |
| Buy-Side & Institutional Conviction | 3/4 | Conviction is improving, driven by high-signal accumulation. Institutions were net buyers of 45,616 shares in the last quarter (based on 13F filings available as of 2025-09-30). This flow was led by AllianceBernstein L.P., which increased its position by 70.4%, and Millennium Management LLC, which increased its position by 886.1%, signaling that sophisticated funds are accumulating near the recent price lows. |
| Overall Market Conviction | 1/4 | Overall market conviction is low and bearish. The stock is in a defined downtrend, trading below both its 50-day ($17.56) and 200-day ($22.02) simple moving averages, and has severely underperformed the Russell 2000 (IWM) by -58.78% over the last 12 months. |
Bull vs. Bear Case Summary
Bull Case Summary:
The stock is trading at a trough valuation, pricing in a permanent impairment while ignoring historical cyclicality.
A strong net-cash balance sheet provides survivability and flexibility through the downturn.
Aggressive, counter-cyclical share repurchases (8.7% TTM yield) are highly accretive at current prices.
Bear Case Summary:
The recent collapse in profitability (operating margin from 11.5% to 2.1%) is a sign of a broken business, not a cyclical trough.
Management has a poor track record of capital allocation, and the failed $16M investment signals continued value destruction.
The company's moat is eroding in a highly competitive industry, requiring margin-compressing investments to defend share.
Narrative Argument
The Prevailing Market Narrative: The market currently views Franklin Covey as a broken growth story. This pessimistic narrative is driven by the disastrous financial results of fiscal 2025, where a major strategic investment failed to deliver growth and instead wiped out nearly all operating profit. The stock's dramatic underperformance (-58.8% vs. the Russell 2000 over 12 months) and high short interest (12.0% of float) reflect a consensus belief that the company's business model is structurally impaired and that management cannot execute a recovery.
Macro & Industry Context: The company is operating against a challenging industry backdrop that is a net headwind to the thesis. Our analysis of the capital cycle shows the industry is approaching a peak, characterized by aggressive capacity expansion (FC's CapEx/Depreciation is 125.0%) into a period of weakening demand. Franklin Covey's recent 7.0% revenue decline confirms it is highly exposed to these cyclical pressures. This environment of over-investment and slowing demand creates a high-risk setting for all industry participants.
Our Differentiated View: While we agree with the market's assessment of the severe operational misstep, our differentiated view is that the market is extrapolating trough conditions indefinitely and ignoring the company's powerful financial resilience. Our analysis shows the stock is trading at a trough EV/Sales multiple of 0.6x, a level not seen since the depths of the recent downturn. Critically, unlike a distressed company, Franklin Covey has a fortress balance sheet with a net cash position of $30.9 million. Management is deploying this strength counter-cyclically, executing an aggressive 8.7% TTM net buyback yield funded entirely by internal cash flow. This corporate action provides a strong signal of intrinsic value and a clear mechanism for per-share value accretion that the market, focused on the P&L, is overlooking.
Conclusion on the Debate: Therefore, while the market's concerns about the recent operational failure are valid, our analysis concludes that the company's financial strength and counter-cyclical capital allocation provide a durable bridge to a cyclical recovery. The market is pricing the company for a prolonged downturn, but the combination of a trough valuation, a net-cash balance sheet, and aggressive buybacks creates a favorable asymmetric risk/reward profile for investors willing to look through the current earnings trough to a normalized mid-cycle valuation.
Our Analytical Edge: Our analytical edge is a more granular analysis of industry supply-side discipline and the company's through-cycle financial characteristics, which suggests the market is overly focused on a single year of poor performance and is underestimating the company's capacity to survive the downturn and generate significant shareholder value upon recovery.
| Metric | Score | Justification |
|---|---|---|
| Capital Allocation Skill | 1/4 | Capital allocation has been pro-cyclical and value-destructive. A major strategic investment in FY2025 coincided with a cyclical downturn, resulting in a TTM Return on Invested Capital of -28.9%. Share repurchases were concentrated at high valuations in FY2022-2024, with average prices in the high $30s and $40s, prior to the stock's decline. |
| Incentive & Ownership Alignment | 1/4 | Incentives are severely misaligned with the needs of a cyclical operator. Both short-term and long-term bonuses are tied to "Qualified Adjusted EBITDA," a single-year, peak-cycle metric. The long-term plan specifically rewards the highest rolling four-quarter performance, encouraging maximum risk-taking at the top of the cycle rather than prudent, through-cycle value creation. |
| External Track Record & Experience | 2/4 | The current CEO, Paul S. Walker, is a long-tenured insider promoted to the role in September 2021. Public records do not indicate prior public company CEO or CFO experience, nor a verifiable track record of successfully navigating a full industry cycle as a top leader. The CFO also lacks a documented external track record. |
| Board Oversight & Governance | 4/4 | The board is a key strength, composed of veterans with deep experience in cyclical industries. This includes the former 21-year CEO Robert Whitman as Chairman, former Paychex CFO Efrain Rivera (who oversaw growth from $2B to $5B), and former JetBlue Chairman Joel C. Peterson, who has extensive experience in the highly cyclical airline industry. |
Part A: Leadership Assessment
Leadership Track Record: The current CEO, Paul S. Walker, is a long-tenured insider promoted to the role in September 2021. Our external diligence confirms he has no prior public company CEO or CFO experience, and there is no verifiable track record of him successfully navigating a full industry cycle as a top leader.
Capital Allocation Skill: Our forensic review of capital allocation reveals a pro-cyclical and value-destructive strategy. The most significant recent decision was the $16 million sales force investment in fiscal 2025, which coincided with a cyclical downturn and resulted in a deeply negative TTM Return on Invested Capital of -28.9%. Share repurchase timing has also been poor; significant buybacks were executed in fiscal 2023 and 2024 at average prices in the high $30s and $40s, when EV/EBITDA multiples were as high as 15.6x, representing substantial negative returns given the subsequent price decline.
Credibility & Communication: Our analysis of recent earnings call transcripts suggests management communicates with a reasonable degree of candor. They have been transparent in discussing the external headwinds from government spending cuts and macroeconomic uncertainty, and have openly acknowledged the delayed timeline for their strategic initiatives, pushing the expected growth acceleration out to fiscal 2027 rather than obscuring the challenges.
Part B: Governance & Alignment Scorecard
Board Independence: 66.7% (6 of 9 directors)
Chairman/CEO Roles: Separate
Chairman Tenure: 27 years
Insider Ownership: 16.31% (All Execs & Directors, estimated current)
Shareholder Rights: Declassified Board, Plurality Voting
Part C: Final Stewardship Verdict
Part A: Final Method Marks Table
| Method | Implied Value / Share | Weight | Contribution ($/sh) | vs. Current |
|---|---|---|---|---|
| DCF (PWER) | $33.48 | 25.0% | $8.37 | +116.4% (Upside) |
| Comps | $10.04 | 20.0% | $2.01 | -35.1% (Downside) |
| Historicals | $26.16 | 40.0% | $10.46 | +69.1% (Upside) |
| NLV | $0.00 | 10.0% | $0.00 | -100.0% (Downside) |
| Price Targets | $22.00 | 5.0% | $1.10 | +42.2% (Upside) |
| Weighted Implied Value | $21.94 | 100.0% | $21.94 | +41.8% (Upside) |
Part B: Valuation & Weighting Justification
DCF (PWER)
Weight Justification: The DCF is assigned a moderate weight. The methodology detailed in the DCF Valuation Calculation is robust, employing a Probability-Weighted (PWER) approach that explicitly models a cyclical recovery (Base), a prolonged downturn (Bear), and a super-cycle (Bull). This is superior to a single linear forecast for a cyclical business. However, confidence in the projections is tempered by severe execution risk. The company's recent major strategic investment yielded a TTM Return on Invested Capital of -28.9%, and operating margins collapsed from 11.5% to 2.1%. This poor track record of capital deployment reduces confidence in management's ability to achieve the forecasted cash flows. Furthermore, the terminal value contributes a high 78.8% to the enterprise value, making the valuation highly sensitive to exit assumptions.
Valuation Context: Based on PWER-weighted scenarios, but penalized for high execution risk and terminal value dependency.
Comps
Weight Justification: Comps are assigned a moderate weight. The Qualitatively-Adjusted Multiples Valuation report correctly identified that earnings-based multiples were unusable due to peer unprofitability and selected P/B as the sole valuation metric. While this is a common approach for cyclicals, its reliability is significantly reduced in this specific case. The company has a history of recurring asset write-downs and impairments, contributing to a destructive 5-year Book Value per Share CAGR of -10.9%. This indicates that the book value of equity is not a stable or reliable anchor of value. The weight is therefore limited to reflect the high risk associated with relying on a single, questionable balance sheet metric.
Valuation Context: Based on a qualitatively-adjusted peer median P/B multiple of 1.9x; weight limited by reliance on a single, unstable metric.
Historicals
Weight Justification: Historical Multiples are assigned the highest weight, consistent with the framework for a Cyclical Operator. The methodology is the most rigorous of the available options. The Qualitatively-Adjusted Multiples Valuation report correctly applied a blend of historical multiples to normalized metrics, including a 5-year average EBITDA. This "through-the-cycle" approach is the most appropriate way to value a cyclical business, as it smooths out the extreme volatility of the current trough earnings. The company has not undergone a structural break that would render its history irrelevant, making this the most reliable valuation method.
Valuation Context: Anchored on a "through-the-cycle" approach using normalized 5-year average EBITDA.
NLV
Weight Justification: NLV is assigned a low but non-zero weight. As a Cyclical Operator in an industry described as "Approaching Peak," the risk of a downturn is material, making a liquidation floor a relevant data point. The Liquidation Value Analysis indicates a negative value, meaning liabilities exceed the orderly liquidation value of assets. While equity cannot trade below zero, including this method with a small weight serves to anchor the final valuation, reflecting the complete lack of an asset-based margin of safety and the significant downside risk if the business fails to generate going-concern value.
Valuation Context: Represents a zero-value anchor, reflecting a lack of asset-based margin of safety.
Price Targets
Weight Justification: Analyst targets are given a very low weight. The Price Targets Appendix shows only one analyst has published a target in the last six months; this does not constitute a reliable consensus. Furthermore, the company's annual EPS hit rate is a poor 40%, suggesting low forecast reliability. For cyclical companies, sell-side targets are often pro-cyclical and backward-looking, making them less reliable than valuation methods that explicitly account for a full business cycle. The lack of broad analyst coverage further diminishes the credibility of this data point.
Valuation Context: Based on a single analyst target; weight is minimal due to lack of consensus and poor forecast reliability.
Part C: Defining the Margin of Safety
Valuation Floor: $14.04
Justification: The valuation floor is derived from the 2-year technical low. In a cyclical downturn, this level represents a point of significant, demonstrated market support where buyers have previously stepped in, providing a more reliable floor than a negative Net Liquidation Value or a volatile trough book multiple.
Part D: Defining the Range of Outcomes (Scenario Analysis)
Base Case Narrative & Assumptions: Our Base Case models a "Repair" phase where revenue growth is flat in Year 1 before gradually recovering to a normalized 4.0% by Year 5. Operating margins are projected to recover sharply from the current 2.1% to 6.7% in Year 1, driven by $8 million in confirmed annualized cost savings, before normalizing at 11.5% by Year 5.
Bull Case Narrative & Assumptions ("Blue-Sky Potential"): Our Bull Case models a "Super-Cycle" where a rapid economic recovery and successful sales force execution drive revenue growth to a peak of 10.0% in Year 3. Operating margins expand beyond their prior peak to 14.0% by Year 5 due to strong operating leverage. This scenario implies a potential 'blue-sky' valuation of $57.22 per share.
Bear Case Narrative & Assumptions (The Floor Value): Our Bear Case DCF models a "Deep Trough" with a further 5.0% revenue decline in Year 1 and stagnating margins that fail to expand beyond 6.0%. Under this scenario, our analysis confirms the company's net-cash balance sheet prevents a credit event. As the Net Liquidation Value is negative, the ultimate floor is determined by the Bear Case DCF, which implies a value of $11.86 per share.
Part A: Key Catalysts
Catalyst #1: Cyclical Recovery in Corporate & Government Spending. A stabilization or recovery in the macroeconomic environment would directly translate to renewed corporate training budgets and government contract awards, driving revenue re-acceleration and validating the thesis that the current downturn is cyclical, not structural.
Impact: Critical
Likelihood: Medium
Timing: Mid-Term (6-18 months)
Supporting Evidence: Management commentary on the Q4 2025 earnings call noted that while the decision-making environment is still uncertain, clients are beginning to shift from "paralysis to needing to move their businesses forward," suggesting the early stages of a demand recovery.
Catalyst #2: Evidence of Positive ROI from Sales Transformation. Tangible proof that the $16 million sales force investment is working, such as a sustained increase in new logo contract value or a meaningful improvement in operating margin, would directly refute the market's narrative of a failed, value-destructive strategy.
Impact: High
Likelihood: Medium
Timing: Mid-Term (6-18 months)
Supporting Evidence: Management has cited strong early results from the transformation, including a strong start to Q1 contracting, new logo growth pacing above the prior year, and double-digit growth in services bookings in Enterprise North America in the first two months of fiscal 2026.
Catalyst #3: Continued Aggressive & Accretive Share Repurchases. The continuation of the company's counter-cyclical buyback program would provide a direct, mechanical lift to per-share value and signal management's ongoing conviction that the stock is undervalued at trough levels.
Impact: Moderate
Likelihood: High
Timing: Near-Term (0-6 months)
Supporting Evidence: The company executed an 8.7% TTM net buyback yield. On the Q3 2024 earnings call, management announced a new $50 million share repurchase authorization, confirming a continued commitment to returning capital.
Part B: Context for Timeliness
Risk #1: Prolonged "Lower-for-Longer" Cyclical Downturn. The most significant risk is that the current cyclical downturn is deeper and longer than anticipated. A prolonged recession would further depress corporate training budgets, rendering the sales force transformation ineffective and potentially leading to sustained negative cash flow, which would erode the company's balance sheet strength and invalidate the mean-reversion thesis.
Supporting Factors: Our industry analysis confirms the sector is "Approaching Peak" with aggressive capacity additions into weakening demand. The company's revenue has already declined 7.0% YoY, and operating margin has collapsed to 2.1%, demonstrating its high sensitivity to a downturn.
Existing Mitigants: The primary mitigant is the company's pristine, net-cash balance sheet ($30.9 million net cash), which provides a substantial cushion to withstand a prolonged period of weak profitability without facing a liquidity crisis.
Residual Concern: High
Risk #2: Failed Execution & Continued Value-Destructive Capital Allocation. A key risk is that management, which our analysis shows has a history of poor capital allocation, will fail to generate a positive return on its $16 million sales force investment. Continued operational missteps could lead to a "melting ice cube" scenario where the company's cash balance is deployed into low-return initiatives, permanently impairing shareholder value.
Supporting Factors: The recent $16 million investment has so far yielded a deeply negative TTM Return on Invested Capital of -28.9%. Historical share repurchases were executed at pro-cyclically high valuations, demonstrating poor timing.
Existing Mitigants: The board of directors is a key strength, composed of veterans with deep experience in cyclical industries, including the former CEO of Franklin Covey, the former CFO of Paychex, and the former Chairman of JetBlue. Their oversight may provide a check on poor executive decisions.
Residual Concern: High
Part A: Implementation Parameters
Suggested Entry Target (USD): 14.04
Entry Target Rationale: The stock is currently trading above our desired margin of safety. This entry target represents the 2-year technical low, providing a more attractive entry point for the position.
Stop-Loss Target (USD): 13.50
Stop-Loss Rationale: A weekly close below the 2-year technical low of $14.04 would signal a definitive breakdown of support and indicate the market anticipates a structurally worse downturn than our thesis allows, thus invalidating our cyclical recovery thesis.
Recommended Position Size: Starter
Position Sizing Rationale: Given the 'Medium' conviction and the significant execution risk associated with the sales force turnaround, a 'Starter' position is warranted. While the potential return is high, the risk of a prolonged cyclical downturn prevents a larger allocation until tangible signs of operational improvement emerge.
Recommended Time Horizon: Transitional (12-24 Months)
Time Horizon Rationale: A 12-24 month horizon is required to allow for the macroeconomic cycle to stabilize and for the company's significant sales force investments to translate into measurable revenue acceleration and margin recovery.
Part B: Thesis Monitoring Plan
Key Monitoring Factors:
1. Sales Transformation KPIs: Monitor quarterly reports for specific metrics on new logo acquisition, expansion rates within existing clients, and the services attachment rate to validate the ROI of the $16 million investment.
2. Margin Recovery: Track quarterly operating margin to ensure the company is on a path to recover from the current 2.1% trough, driven by cost savings and operating leverage.
3. Capital Allocation: Monitor the pace and price of share repurchases to confirm management is continuing its counter-cyclical capital return strategy.
Thesis Invalidation ("Thesis Killer"): The core thesis would be invalidated by another significant downward revision to revenue or EBITDA guidance in the next two fiscal quarters. Such an event would signal that the sales transformation has failed, the cyclical trough is deepening rather than bottoming, and management's credibility is fully impaired.
Price Targets: Last 6M ending 2025-11-25
Latest per analyst within window.
| Analyst | Published | Price @ Post | Price Target | % PT vs Price @ Post |
|---|---|---|---|---|
| Barrington | 2025-11-06 | $15.75 | $22.00 | +39.7% |
Guidance Hit Rate (Annual)
Hit defined as Actual ≥ Estimate.
| FYE Date | Rev Est (M USD) | Rev Actual (M USD) | % Diff | EPS Est | EPS Actual | Diff ($) | Rev Hit | EPS Hit |
|---|---|---|---|---|---|---|---|---|
| 2025-08-31 | 267 | 267 | +0.1% | 0.34 | 0.24 | -0.10 | Yes | No |
| 2024-08-31 | 283 | 287 | +1.3% | 1.68 | 1.78 | +0.10 | Yes | Yes |
| 2023-08-31 | 280 | 281 | +0.3% | 1.33 | 1.30 | -0.03 | Yes | No |
| 2022-08-31 | 349 | 263 | -24.7% | 0.78 | 1.30 | +0.52 | No | Yes |
| 2021-08-31 | 219 | 224 | +2.5% | 0.98 | 0.97 | -0.01 | Yes | No |
Guidance Hit Rate (Quarterly)
Hit defined as Actual ≥ Estimate.
| Report Date | Rev Est (K USD) | Rev Actual (K USD) | % Diff | EPS Est | EPS Actual | Diff ($) | Rev Hit | EPS Hit |
|---|---|---|---|---|---|---|---|---|
| 2025-11-05 | 67,400 | 71,248 | +5.7% | 0.43 | 0.34 | -0.09 | Yes | No |
| 2025-07-02 | 71,106 | 67,121 | -5.6% | -0.08 | 0.18 | +0.26 | No | Yes |
| 2025-04-02 | 62,650 | 59,612 | -4.8% | -0.11 | -0.08 | +0.03 | No | Yes |
| 2025-01-08 | 64,126 | 69,086 | +7.7% | 0.22 | 0.09 | -0.13 | Yes | No |
| 2024-11-06 | 80,380 | 84,124 | +4.7% | 0.82 | 0.89 | +0.07 | Yes | Yes |
| 2024-06-26 | 80,380 | 73,373 | -8.7% | 0.39 | 0.43 | +0.04 | No | Yes |
| 2024-03-27 | 62,020 | 61,336 | -1.1% | 0.05 | 0.06 | +0.01 | No | Yes |
| 2024-01-04 | 65,870 | 68,399 | +3.8% | 0.19 | 0.36 | +0.17 | Yes | Yes |
| 2023-11-01 | 81,600 | 77,955 | -4.5% | 0.49 | 0.49 | 0.00 | No | Yes |
| 2023-06-28 | 82,100 | 71,441 | -13.0% | 0.22 | 0.32 | +0.10 | No | Yes |
| 2023-03-29 | 62,400 | 61,756 | -1.0% | 0.13 | 0.12 | -0.01 | No | No |
| 2023-01-05 | 68,325 | 69,369 | +1.5% | 0.28 | 0.32 | +0.04 | Yes | Yes |
| 2022-11-02 | 73,850 | 78,806 | +6.7% | 0.27 | 0.39 | +0.12 | Yes | Yes |
| 2022-06-29 | 64,267 | 66,176 | +3.0% | 0.18 | 0.26 | +0.08 | Yes | Yes |
| 2022-03-30 | 57,100 | 56,599 | -0.9% | 0.06 | 0.13 | +0.07 | No | Yes |
| 2022-01-06 | 57,100 | 61,259 | +7.3% | 0.03 | 0.27 | +0.24 | Yes | Yes |
| 2021-11-09 | 63,450 | 68,945 | +8.7% | 0.14 | 0.13 | -0.01 | Yes | No |
| 2021-06-30 | 51,600 | 58,736 | +13.8% | -0.07 | 0.18 | +0.25 | Yes | Yes |
Appendix: Financial Statements - FC
TTM and Latest (Q) Data as of: 2025-08-31
Income Statement
All figures in Millions of USD unless otherwise noted.
| Item | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Revenue | 267.1 | 267.1 | 287.2 | 280.5 | 262.8 | 224.2 |
| Cost of Revenue | 63.5 | 63.5 | 66.2 | 67.0 | 60.9 | 51.3 |
| Gross Profit | 203.6 | 203.6 | 221.1 | 213.5 | 201.9 | 172.9 |
| SG&A | 182.7 | 182.7 | 175.9 | 178.5 | 159.8 | 145.0 |
| R&D | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Operating Expenses | 197.9 | 197.9 | 188.0 | 187.1 | 178.2 | 164.8 |
| Operating Income | 5.7 | 5.7 | 33.0 | 26.4 | 23.7 | 8.1 |
| EBITDA | 20.1 | 20.1 | 46.2 | 40.0 | 38.2 | 23.8 |
| EBIT | 6.6 | 6.6 | 34.2 | 27.5 | 23.7 | 8.2 |
| Interest Expense | 0.6 | 0.6 | 1.1 | 1.6 | 1.7 | 2.1 |
| Tax Expense | 3.0 | 3.0 | 9.6 | 8.1 | 3.6 | -7.5 |
| Net Income (Cmn) | 3.1 | 3.1 | 23.4 | 17.8 | 18.4 | 13.6 |
| Net Income | 3.1 | 3.1 | 23.4 | 17.8 | 18.4 | 13.6 |
| EPS | $0.34 | $0.24 | $1.78 | $1.30 | $1.30 | $0.97 |
| EPS Diluted | $0.34 | $0.24 | $1.74 | $1.24 | $1.27 | $0.96 |
| Shares (WA) | 12.6M | 12.9M | 13.2M | 13.6M | 14.1M | 14.1M |
| Shares (Diluted) | 13.1M | 13.1M | 13.5M | 14.3M | 14.6M | 14.1M |
| DPS | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
Income Statement - Supplemental
| Item | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Revenue YoY | -7.0% | -7.0% | 2.4% | 6.7% | 17.3% | - |
| Gross Margin | 76.2% | 76.2% | 77.0% | 76.1% | 76.8% | 77.1% |
| SG&A Margin | 68.4% | 68.4% | 61.3% | 63.6% | 60.8% | 64.7% |
| R&D Margin | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Operating Margin | 2.1% | 2.1% | 11.5% | 9.4% | 9.0% | 3.6% |
| Net Margin | 1.1% | 1.1% | 8.1% | 6.3% | 7.0% | 6.1% |
Balance Sheet
All figures in Millions of USD unless otherwise noted.
| Item | Latest (Q) | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Cash & Equivalents | 31.7 | 31.7 | 48.7 | 38.2 | 60.5 | 47.4 |
| Receivables | 68.4 | 68.4 | 86.0 | 81.9 | 72.6 | 70.7 |
| Inventory | 5.2 | 5.2 | 4.0 | 4.2 | 3.5 | 2.5 |
| Current Assets | 129.5 | 129.5 | 160.3 | 145.0 | 155.9 | 136.7 |
| PP&E (Net) | 14.3 | 14.3 | 8.7 | 10.0 | 9.8 | 11.5 |
| Intangibles | 65.8 | 65.8 | 69.0 | 71.7 | 76.1 | 81.3 |
| Non-Current Assets | 113.4 | 113.4 | 101.3 | 100.9 | 103.3 | 112.9 |
| Total Assets | 242.9 | 242.9 | 261.5 | 245.9 | 259.2 | 249.7 |
| Payables | 8.8 | 8.8 | 7.9 | 6.5 | 10.9 | 6.9 |
| Current Liabilities | 157.3 | 157.3 | 162.5 | 151.6 | 153.8 | 136.5 |
| Non-Current Liabilities | 18.7 | 18.7 | 16.0 | 15.6 | 22.5 | 33.3 |
| Total Liabilities | 176.0 | 176.0 | 178.4 | 167.3 | 176.3 | 169.8 |
| Debt | 0.8 | 0.8 | 6.0 | 15.3 | 24.3 | 32.9 |
| Equity | 66.9 | 66.9 | 83.1 | 78.7 | 82.8 | 79.9 |
Balance Sheet - Supplemental
| Item | Latest (Q) | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Tangible Book | 1.1 | 1.1 | 14.1 | 6.9 | 6.8 | -1.5 |
| Net Debt | -30.9 | -30.9 | -42.6 | -22.9 | -36.3 | -14.6 |
| Debt/Equity | 1.2% | 1.2% | 7.3% | 19.5% | 29.3% | 41.1% |
| Debt/Assets | 0.3% | 0.3% | 2.3% | 6.2% | 9.4% | 13.2% |
Cash Flow Statement
All figures in Millions of USD unless otherwise noted.
| Item | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Net Cash from Ops | 29.0 | 29.0 | 60.3 | 35.7 | 52.3 | 46.2 |
| Depreciation & Amort. | 13.5 | 13.5 | 12.1 | 12.5 | 14.4 | 15.6 |
| CapEx | -16.9 | -16.9 | -10.6 | -13.6 | -5.3 | -4.1 |
| Investing Cash Flow | -16.9 | -16.9 | -11.3 | -13.6 | -5.3 | -14.3 |
| Financing Cash Flow | -28.8 | -28.8 | -38.7 | -44.2 | -32.7 | -11.5 |
| Net Cash Flow | -17.0 | -17.0 | 10.4 | -22.3 | 13.1 | 20.3 |
Cash Flow Statement - Supplemental
| Item | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Free Cash Flow | 45.9 | 45.9 | 70.8 | 49.3 | 57.6 | 50.3 |
| FCF Margin | 17.2% | 17.2% | 24.7% | 17.6% | 21.9% | 22.4% |
Historical Ratios & Multiples - FC
Historical data as of Fiscal Year End. TTM Market Data as of 2025-11-26; TTM Financial Data as of 2025-08-31.
Valuation
Comparative Analysis
| Metric | TTM | 3Y Avg | % Chg vs 3Y | 5Y Avg | % Chg vs 5Y |
|---|---|---|---|---|---|
| Market Cap | $189.9M | $400.0M | -52.5% | $518.6M | -63.4% |
| Enterprise Value | $159.0M | $367.9M | -56.8% | $489.2M | -67.5% |
| EV/Sales | 0.6x | 1.3x | -54.5% | 1.9x | -68.6% |
| EV/EBIT | 24.0x | 18.1x | +32.5% | 33.5x | -28.4% |
| EV/EBITDA | 7.9x | 9.9x | -20.5% | 15.2x | -48.1% |
| EV/FCF | 13.2x | 14.5x | -9.4% | 14.8x | -11.0% |
| Price/Sales | 0.7x | 1.4x | -51.2% | 2.0x | -65.3% |
| P/E | 61.9x | 36.7x | +68.8% | 39.9x | +55.2% |
| P/FCF | 15.7x | 16.0x | -1.8% | 15.9x | -1.1% |
| P/B | 2.8x | 5.1x | -45.5% | 6.5x | -56.9% |
| P/Tangible Book | 1.1x | 89.9x | -98.8% | -25.0x | nmf |
| Graham Number | 5.29 | 11.39 | -53.6% | 11.68 | -54.7% |
Historical Data
| Metric | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Market Cap | $189.9M | $184.2M | $522.9M | $492.9M | $674.1M | $719.0M |
| Enterprise Value | $159.0M | $153.3M | $480.3M | $470.0M | $637.8M | $704.4M |
| EV/Sales | 0.6x | 0.6x | 1.7x | 1.7x | 2.4x | 3.1x |
| EV/EBIT | 24.0x | 23.1x | 14.1x | 17.1x | 26.9x | 86.2x |
| EV/EBITDA | 7.9x | 7.6x | 10.4x | 11.8x | 16.7x | 29.6x |
| EV/FCF | 13.2x | 12.7x | 9.7x | 21.2x | 13.6x | 16.7x |
| Price/Sales | 0.7x | 0.7x | 1.8x | 1.8x | 2.6x | 3.2x |
| P/E | 61.9x | 60.0x | 22.3x | 27.7x | 36.6x | 52.8x |
| P/FCF | 15.7x | 15.2x | 10.5x | 22.2x | 14.4x | 17.1x |
| P/B | 2.8x | 2.8x | 6.3x | 6.3x | 8.1x | 9.0x |
| P/Tangible Book | 1.1x | 161.6x | 37.0x | 71.2x | 99.7x | -494.5x |
| Graham Number | 5.29 | 5.29 | 15.90 | 12.99 | 13.09 | 11.12 |
Growth
Comparative Analysis
| Metric | TTM | 3Y Avg | Delta vs 3Y | 5Y Avg | Delta vs 5Y |
|---|---|---|---|---|---|
| Revenue YoY | -7.0% | 0.7% | -7.7% | 6.5% | -13.5% |
| FCF YoY | -75.7% | -1.5% | -74.2% | 27.4% | -103.1% |
| Equity YoY | -19.5% | -6.3% | -13.2% | 3.8% | -23.4% |
Historical Data
| Metric | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Revenue YoY | -7.0% | -7.0% | 2.4% | 6.7% | 17.3% | 13.0% |
| FCF YoY | -75.7% | -75.7% | 124.0% | -52.7% | 11.5% | 129.9% |
| Equity YoY | -19.5% | -19.5% | 5.7% | -5.0% | 3.7% | 34.3% |
Profitability & Quality
Comparative Analysis
| Metric | TTM | 3Y Avg | Delta vs 3Y | 5Y Avg | Delta vs 5Y |
|---|---|---|---|---|---|
| Gross Margin | 76.2% | 76.4% | -0.2% | 76.6% | -0.4% |
| Operating Margin | 2.1% | 76.4% | -74.3% | 76.6% | -74.5% |
| EBIT Margin | 2.5% | 8.1% | -5.6% | 7.4% | -4.9% |
| Pretax Margin | 2.3% | 7.7% | -5.4% | 6.8% | -4.5% |
| Net Margin | 1.1% | 5.2% | -4.1% | 5.7% | -4.6% |
| Effective Tax Rate | 49.4% | 36.6% | +12.8% | 0.4% | +49.0% |
| Operating CF Margin | 10.9% | 14.9% | -4.0% | 17.0% | -6.2% |
| FCF Yield | 6.4% | 6.9% | -0.5% | 6.7% | -0.3% |
| ROA | 1.3% | 6.3% | -5.0% | 6.6% | -5.3% |
| ROCE | 7.3% | 23.3% | -16.0% | 19.9% | -12.6% |
| ROE | 4.3% | 19.1% | -14.8% | 20.0% | -15.7% |
| Return on Tangible Assets | 1.7% | 8.0% | -6.3% | 8.5% | -6.7% |
| ROIC | -44.4% | -663.4% | +619.0% | -7.3% | -37.1% |
Historical Data
| Metric | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Gross Margin | 76.2% | 76.2% | 77.0% | 76.1% | 76.8% | 77.1% |
| Operating Margin | 2.1% | 76.2% | 77.0% | 76.1% | 76.8% | 77.1% |
| EBIT Margin | 2.5% | 2.5% | 11.9% | 9.8% | 9.0% | 3.6% |
| Pretax Margin | 2.3% | 2.3% | 11.5% | 9.2% | 8.4% | 2.7% |
| Net Margin | 1.1% | 1.1% | 8.1% | 6.3% | 7.0% | 6.1% |
| Effective Tax Rate | 49.4% | 49.4% | 29.2% | 31.3% | 16.5% | -124.2% |
| Operating CF Margin | 10.9% | 10.9% | 21.0% | 12.7% | 19.9% | 20.6% |
| FCF Yield | 6.4% | 6.6% | 9.5% | 4.5% | 7.0% | 5.9% |
| ROA | 1.3% | 1.3% | 10.1% | 7.6% | 7.7% | 6.4% |
| ROCE | 7.3% | 7.2% | 35.3% | 27.5% | 21.7% | 7.6% |
| ROE | 4.3% | 4.3% | 31.6% | 21.3% | 22.6% | 20.0% |
| Return on Tangible Assets | 1.7% | 1.7% | 12.2% | 10.2% | 10.1% | 8.1% |
| ROIC | -44.4% | -44.4% | -275.1% | -1,670.6% | 1,918.3% | 35.3% |
Capital Structure & Liquidity
Comparative Analysis
| Metric | TTM | 3Y Avg | % Chg vs 3Y | 5Y Avg | % Chg vs 5Y |
|---|---|---|---|---|---|
| Cash Flow Coverage | 35.21 | 15.84 | +122.3% | 10.22 | +244.6% |
| Cash Ratio | 0.20 | 0.25 | -19.7% | 0.30 | -32.6% |
| Current Ratio | 0.82 | 0.92 | -10.7% | 0.96 | -13.9% |
| Quick Ratio | 0.79 | 0.89 | -11.6% | 0.93 | -15.1% |
| Debt/Assets | 0.72 | 0.70 | +4.2% | 0.69 | +5.1% |
| Debt/Equity | 2.63 | 2.30 | +14.3% | 2.23 | +17.9% |
| Intangibles / Total Assets | 27.1% | 27.5% | -0.5% | 28.9% | -1.8% |
| Interest Coverage | 11.74 | 19.87 | -40.9% | 15.54 | -24.4% |
| Net Debt/EBITDA | -1.5x | -1.0x | nmf | -0.9x | nmf |
Historical Data
| Metric | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Cash Flow Coverage | 35.21 | 35.21 | 9.99 | 2.33 | 2.15 | 1.41 |
| Cash Ratio | 0.20 | 0.20 | 0.30 | 0.25 | 0.39 | 0.35 |
| Current Ratio | 0.82 | 0.82 | 0.99 | 0.96 | 1.01 | 1.00 |
| Quick Ratio | 0.79 | 0.79 | 0.96 | 0.93 | 0.99 | 0.98 |
| Debt/Assets | 0.72 | 0.72 | 0.68 | 0.68 | 0.68 | 0.68 |
| Debt/Equity | 2.63 | 2.63 | 2.15 | 2.13 | 2.13 | 2.13 |
| Intangibles / Total Assets | 27.1% | 27.1% | 26.4% | 29.2% | 29.3% | 32.6% |
| Interest Coverage | 11.74 | 11.74 | 30.53 | 17.34 | 14.17 | 3.89 |
| Net Debt/EBITDA | -1.5x | -1.5x | -0.9x | -0.6x | -0.9x | -0.6x |
Efficiency & Turnover
Comparative Analysis
| Metric | TTM | 3Y Avg | % Chg vs 3Y | 5Y Avg | % Chg vs 5Y |
|---|---|---|---|---|---|
| Asset Turnover | 1.16 | 1.20 | -3.6% | 1.15 | +0.6% |
| Receivables Turnover | 4.19 | 3.50 | +19.5% | 3.54 | +18.2% |
| Fixed Asset Turnover | 26.07 | 27.35 | -4.7% | 24.63 | +5.9% |
| Payables Turnover | 8.91 | 8.19 | +8.8% | 7.91 | +12.6% |
Historical Data
| Metric | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Asset Turnover | 1.16 | 1.16 | 1.24 | 1.20 | 1.10 | 1.05 |
| Receivables Turnover | 4.19 | 3.46 | 3.42 | 3.63 | 3.67 | 3.53 |
| Fixed Asset Turnover | 26.07 | 23.16 | 30.60 | 28.28 | 24.65 | 16.45 |
| Payables Turnover | 8.91 | 7.63 | 9.21 | 7.72 | 6.84 | 8.16 |
Capital Allocation
Comparative Analysis
| Metric | TTM | 3Y Avg | Delta vs 3Y | 5Y Avg | Delta vs 5Y |
|---|---|---|---|---|---|
| Dividend Yield | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Payout Ratio | 0.00 | 0.00 | 0.0% | 0.00 | 0.0% |
| CapEx / Revenue | 6.3% | 4.9% | +1.4% | 3.7% | +2.6% |
| CapEx / Depreciation | 125.0% | 106.8% | +18.2% | 76.7% | +48.3% |
Historical Data
| Metric | TTM | FY 2025 | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|---|---|
| Dividend Yield | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Payout Ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| CapEx / Revenue | 6.3% | 6.3% | 3.7% | 4.8% | 2.0% | 1.8% |
| CapEx / Depreciation | 125.0% | 125.0% | 87.4% | 108.1% | 36.9% | 26.2% |
Comparable Companies - FC
As of 2025-11-25; Current Price: $15.47
Peer Average/Median exclude target.
Selection based on Dual-Axis Scoring: Product Fit vs. Financial Fit (1-5 Scale).
Averages and Medians exclude extreme outliers (Growth > 1,000% or < -100%) and metrics with mixed signs.
Peer Selection Rationale
UDMY (Tier 1: Direct Rival | Prod: 5/5, Fin: 4/5): Direct substitute in the corporate training and EdTech space. Selected despite the Growth delta (2.5% vs -7.0%) because the size (3.83x) and low/negative margin profile (-1.5% vs 2.1%) provide a strong financial comparison for a subscription-based learning model.
SKIL (Tier 1: Direct Rival | Prod: 5/5, Fin: 4/5): Direct rival in skills training and development. Selected due to strong business overlap. The financial profile is a strong match for a small, unprofitable company (Size 0.48x, Margin -10.8% vs 2.1%), aligning with FC's current economic state.
COUR (Tier 1: Direct Rival | Prod: 5/5, Fin: 3/5): Direct competitor in the online education and training market. Selected despite the significant Growth mismatch (8.1% vs -7.0%). The size (6.96x) and negative margin (-10.2% vs 2.1%) provide an acceptable basis for comparison, prioritizing rivalry over financial alignment.
RGP (Tier 2: Sector Peer | Prod: 4/5, Fin: 5/5): A close peer in professional consulting and project services. This is an Economic Twin (B=5). The size (0.85x), negative growth (-10.8% vs -7.0%), and highly negative margin (-36.3% vs 2.1%) and ROIC profile perfectly match FC's current distressed financial DNA.
Valuation
Comparative Analysis
| Metric | FC | Median | % vs Med | Average | % vs Avg |
|---|---|---|---|---|---|
| Market Cap | $189.9M | $444.1M | -57.2% | $575.1M | -67.0% |
| Enterprise Value | $159.0M | $513.4M | -69.0% | $425.4M | -62.6% |
| EV/Sales | 0.6x | 0.7x | -11.1% | 0.7x | -9.2% |
| EV/EBIT | 24.0x | nmf | nmf | nmf | nmf |
| EV/EBITDA | 7.9x | nmf | nmf | nmf | nmf |
| EV/FCF | 13.2x | 6.9x | +90.9% | 11.5x | +14.2% |
| Price/Sales | 0.7x | 0.6x | +16.7% | 0.8x | -12.5% |
| P/E | 61.9x | -14.8x | nmf | -56.4x | nmf |
| P/FCF | 15.7x | 9.5x | +66.2% | 9.6x | +64.0% |
| P/B | 2.8x | 2.1x | +33.3% | 2.1x | +34.9% |
| P/Tangible Book | 1.1x | 1.0x | +10.9% | 0.9x | +18.3% |
| Graham Number | 5.29 | n/a | nmf | n/a | nmf |
Peer Data (TTM)
| Metric | FC | UDMY | SKIL | COUR | RGP |
|---|---|---|---|---|---|
| Market Cap | $189.9M | $727.5M | $91.1M | $1.32B | $160.6M |
| Enterprise Value | $159.0M | $503.3M | $566.3M | $523.5M | $108.4M |
| EV/Sales | 0.6x | 0.6x | 1.1x | 0.7x | 0.2x |
| EV/EBIT | 24.0x | 5,655.1x | -9.5x | -11.6x | -0.6x |
| EV/EBITDA | 7.9x | 17.4x | 44.6x | -31.0x | -0.6x |
| EV/FCF | 13.2x | 7.8x | 27.2x | 6.0x | 5.1x |
| Price/Sales | 0.7x | 0.9x | 0.2x | 1.8x | 0.3x |
| P/E | 61.9x | -195.1x | -0.8x | -28.8x | -0.9x |
| P/FCF | 15.7x | 11.3x | 4.4x | 15.0x | 7.6x |
| P/B | 2.8x | 3.3x | 2.1x | 2.1x | 0.8x |
| P/Tangible Book | 1.1x | 1.3x | 0.3x | 1.4x | 0.7x |
| Graham Number | 5.29 | nmf | nmf | nmf | nmf |
Growth
Comparative Analysis
| Metric | FC | Median | Delta vs Med | Average | Delta vs Avg |
|---|---|---|---|---|---|
| Revenue YoY | -7.0% | 5.3% | -12.3% | 7.8% | -14.8% |
| FCF YoY | -75.7% | 52.7% | -128.3% | 81.2% | -156.9% |
| Equity YoY | -19.5% | -20.8% | +1.3% | -24.6% | +5.1% |
Peer Data (TTM)
| Metric | FC | UDMY | SKIL | COUR | RGP |
|---|---|---|---|---|---|
| Revenue YoY | -7.0% | 2.5% | 31.3% | 8.1% | -10.8% |
| FCF YoY | -75.7% | 199.1% | nmf | 52.7% | -8.0% |
| Equity YoY | -19.5% | 13.0% | -70.0% | 7.8% | -49.3% |
Profitability & Quality
Comparative Analysis
| Metric | FC | Median | Delta vs Med | Average | Delta vs Avg |
|---|---|---|---|---|---|
| Gross Margin | 76.2% | 59.7% | +16.5% | 58.1% | +18.1% |
| Operating Margin | 2.1% | -10.5% | +12.6% | -14.7% | +16.8% |
| EBIT Margin | 2.5% | -8.7% | -128.4% | -13.4% | -118.5% |
| Pretax Margin | 2.3% | -14.5% | +16.7% | -16.2% | +18.5% |
| Net Margin | 1.1% | -14.2% | +15.3% | -16.1% | +17.2% |
| Effective Tax Rate | 49.4% | 2.6% | +46.8% | 110.1% | -60.6% |
| Operating CF Margin | 10.9% | 8.9% | +1.9% | 9.1% | +1.7% |
| FCF Yield | 6.4% | 11.0% | -4.6% | 12.9% | -6.5% |
| ROA | 1.3% | -8.0% | +9.3% | -17.7% | +19.0% |
| ROCE | 7.3% | -7.7% | +15.0% | -19.5% | +26.8% |
| ROE | 4.3% | -40.8% | +45.0% | -57.3% | +61.6% |
| Return on Tangible Assets | 1.7% | -23.3% | +25.1% | -31.4% | +33.1% |
| ROIC | -44.4% | -6.7% | -37.7% | -33.1% | -11.2% |
Peer Data (TTM)
| Metric | FC | UDMY | SKIL | COUR | RGP |
|---|---|---|---|---|---|
| Gross Margin | 76.2% | 65.0% | 74.6% | 54.4% | 38.3% |
| Operating Margin | 2.1% | -1.5% | -10.8% | -10.2% | -36.3% |
| EBIT Margin | 2.5% | 0.0% | -11.4% | -6.1% | -36.3% |
| Pretax Margin | 2.3% | 0.1% | -22.9% | -6.1% | -36.2% |
| Net Margin | 1.1% | -0.5% | -22.2% | -6.2% | -35.3% |
| Effective Tax Rate | 49.4% | 436.8% | 2.7% | -1.7% | 2.5% |
| Operating CF Margin | 10.9% | 10.3% | 7.6% | 16.5% | 2.1% |
| FCF Yield | 6.4% | 8.8% | 22.9% | 6.7% | 13.2% |
| ROA | 1.3% | -0.6% | -11.2% | -4.8% | -54.1% |
| ROCE | 7.3% | 0.0% | -8.2% | -7.3% | -62.6% |
| ROE | 4.3% | -1.7% | -145.9% | -7.4% | -74.1% |
| Return on Tangible Assets | 1.7% | -0.6% | -42.0% | -4.7% | -78.3% |
| ROIC | -44.4% | -0.4% | -13.0% | 28.0% | -147.2% |
Capital Structure & Liquidity
Comparative Analysis
| Metric | FC | Median | % vs Med | Average | % vs Avg |
|---|---|---|---|---|---|
| Cash Flow Coverage | 35.21 | 0.45 | +7746.8% | 2.45 | +1337.8% |
| Cash Ratio | 0.20 | 0.96 | -79.1% | 1.14 | -82.3% |
| Current Ratio | 0.82 | 1.96 | -57.9% | 1.99 | -58.7% |
| Quick Ratio | 0.79 | 1.96 | -59.6% | 1.99 | -60.4% |
| Debt/Assets | 0.72 | 0.50 | +45.0% | 0.56 | +29.6% |
| Debt/Equity | 2.63 | 1.17 | +124.2% | 6.14 | -57.2% |
| Intangibles / Total Assets | 27.1% | 11.7% | +131.3% | 24.3% | +11.3% |
| Interest Coverage | 11.74 | n/a | nmf | n/a | nmf |
| Net Debt/EBITDA | -1.5x | nmf | nmf | nmf | nmf |
Peer Data (TTM)
| Metric | FC | UDMY | SKIL | COUR | RGP |
|---|---|---|---|---|---|
| Cash Flow Coverage | 35.21 | 6.83 | 0.07 | n/a | 0.45 |
| Cash Ratio | 0.20 | 0.61 | 0.35 | 2.28 | 1.32 |
| Current Ratio | 0.82 | 1.35 | 0.85 | 2.57 | 3.21 |
| Quick Ratio | 0.79 | 1.35 | 0.85 | 2.57 | 3.21 |
| Debt/Assets | 0.72 | 0.64 | 0.96 | 0.36 | 0.28 |
| Debt/Equity | 2.63 | 1.79 | 21.84 | 0.56 | 0.39 |
| Intangibles / Total Assets | 27.1% | 7.2% | 71.4% | 2.6% | 16.2% |
| Interest Coverage | 11.74 | n/a | -0.99 | n/a | n/a |
| Net Debt/EBITDA | -1.5x | -7.8x | 37.5x | 47.3x | 0.3x |
Efficiency & Turnover
Comparative Analysis
| Metric | FC | Median | % vs Med | Average | % vs Avg |
|---|---|---|---|---|---|
| Asset Turnover | 1.16 | 1.02 | +13.8% | 1.02 | +13.6% |
| Receivables Turnover | 4.19 | 7.14 | -41.4% | 7.85 | -46.6% |
| Fixed Asset Turnover | 26.07 | 34.31 | -24.0% | 49.97 | -47.8% |
| Payables Turnover | 8.91 | 6.89 | +29.4% | 10.61 | -16.0% |
Peer Data (TTM)
| Metric | FC | UDMY | SKIL | COUR | RGP |
|---|---|---|---|---|---|
| Asset Turnover | 1.16 | 1.27 | 0.51 | 0.77 | 1.54 |
| Receivables Turnover | 4.19 | 9.01 | 4.48 | 12.62 | 5.27 |
| Fixed Asset Turnover | 26.07 | 49.23 | 112.99 | 18.28 | 19.39 |
| Payables Turnover | 8.91 | 6.86 | 6.91 | 4.08 | 24.57 |
Capital Allocation
Comparative Analysis
| Metric | FC | Median | Delta vs Med | Average | Delta vs Avg |
|---|---|---|---|---|---|
| Dividend Yield | 0.0% | 0.0% | 0.0% | 2.1% | -2.1% |
| Payout Ratio | 0.00 | 0.00 | 0.0% | -0.02 | -100.0% |
| CapEx / Revenue | 6.3% | 2.9% | +117.2% | 3.1% | +106.1% |
| CapEx / Depreciation | 125.0% | 86.1% | +45.2% | 80.1% | +56.2% |
Peer Data (TTM)
| Metric | FC | UDMY | SKIL | COUR | RGP |
|---|---|---|---|---|---|
| Dividend Yield | 0.0% | 0.0% | 0.0% | 0.0% | 8.5% |
| Payout Ratio | 0.00 | 0.00 | 0.00 | 0.00 | -0.07 |
| CapEx / Revenue | 6.3% | 2.2% | 3.6% | 4.6% | 1.8% |
| CapEx / Depreciation | 125.0% | 60.4% | 26.4% | 121.6% | 111.9% |
Buyback Timing Analysis - FC (Ref Price: $15.62 | 5Y Avg Price: $37.15)
| Period | Buybacks ($K) | Net Share Δ | Avg Price | Tranche ROI | vs 5Y Avg | EV/EBITDA | vs 5Y | P/TB | vs 5Y | Timing Score |
|---|---|---|---|---|---|---|---|---|---|---|
| 2025-08-31 | 2,946.0 | 0.2M | $20.87 | -25.1% | -43.8% | 8.3x | -45.7% | 174.5x | nmf | 55.3% |
| 2025-05-31 | 7,905.0 | -0.2M | $24.44 | -36.1% | -34.2% | 8.5x | -44.5% | -214.3x | nmf | 82.7% |
| 2025-02-28 | 8,349.0 | -0.2M | $35.59 | -56.1% | -4.2% | 5.6x | -63.3% | 49.3x | nmf | 53.5% |
| 2024-11-30 | 5,634.0 | -0.1M | $39.51 | -60.5% | +6.4% | 8.7x | -43.5% | 33.8x | nmf | 48.9% |
| 2024-08-31 | 4,515.0 | 0.013M | $38.61 | -59.5% | +3.9% | 10.6x | -31.3% | 37.5x | nmf | 49.7% |
| 2024-05-31 | 7,038.0 | -0.1M | $38.74 | -59.7% | +4.3% | 12.6x | -18.1% | 243.8x | nmf | 32.5% |
| 2024-02-29 | 1,777.0 | -0.2M | $40.39 | -61.3% | +8.7% | 12.9x | -15.9% | 415.3x | nmf | 19.8% |
| 2023-11-30 | 15,952.0 | -0.2M | $40.05 | -61.0% | +7.8% | 13.2x | -14.2% | -3296.2x | nmf | 68.4% |
| 2023-08-31 | 5,506.0 | -0.4M | $42.69 | -63.4% | +14.9% | 12.2x | -20.8% | 73.6x | nmf | 31.2% |
| 2023-05-31 | 24,584.0 | -0.3M | $39.92 | -60.9% | +7.5% | 15.6x | +1.6% | 363.2x | nmf | 23.9% |
| 2023-02-28 | 3,458.0 | 0.026M | $47.18 | -66.9% | +27.0% | 13.6x | -11.5% | 31.4x | nmf | 34.7% |
| 2022-11-30 | 468.0 | -0.9M | $48.52 | -67.8% | +30.6% | 15.6x | +1.6% | 43.7x | nmf | 24.9% |
| 2022-05-31 | 19,977.0 | -0.2M | $42.16 | -63.0% | +13.5% | 19.5x | +27.2% | -307.6x | nmf | 58.3% |
| 2021-11-30 | 3,144.0 | 0.1M | $43.07 | -63.7% | +15.9% | 24.0x | +56.4% | 337.2x | nmf | 18.6% |
| 2021-02-28 | 1,233.0 | 0.1M | $24.50 | -36.2% | -34.0% | 20.1x | +30.7% | -41.8x | nmf | 77.9% |
| 2020-11-30 | 1,274.0 | 0.1M | $19.30 | -19.1% | -48.1% | 18.5x | +20.1% | -30.6x | nmf | 81.3% |
Execution Details
2025-08-31
Action: Repurchased 2,946.0K at Avg Price $20.87 (Tranche ROI: -25.1%). Net shares change: 0.2M.
Valuation: EV/EBITDA 8.3x (vs 5Y: 15.4x / -45.7%); P/TB 174.5x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -1.5x; FCF Margin 4.5%; Qtr Buyback Yield 1.5%.
2025-05-31
Action: Repurchased 7,905.0K at Avg Price $24.44 (Tranche ROI: -36.1%). Net shares change: -0.2M.
Valuation: EV/EBITDA 8.5x (vs 5Y: 15.4x / -44.5%); P/TB -214.3x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -1.1x; FCF Margin 10.3%; Qtr Buyback Yield 2.9%.
2025-02-28
Action: Repurchased 8,349.0K at Avg Price $35.59 (Tranche ROI: -56.1%). Net shares change: -0.2M.
Valuation: EV/EBITDA 5.6x (vs 5Y: 15.4x / -63.3%); P/TB 49.3x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.9x; FCF Margin 11.1%; Qtr Buyback Yield 3.2%.
2024-11-30
Action: Repurchased 5,634.0K at Avg Price $39.51 (Tranche ROI: -60.5%). Net shares change: -0.1M.
Valuation: EV/EBITDA 8.7x (vs 5Y: 15.4x / -43.5%); P/TB 33.8x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -1.1x; FCF Margin 16.1%; Qtr Buyback Yield 1.4%.
2024-08-31
Action: Repurchased 4,515.0K at Avg Price $38.61 (Tranche ROI: -59.5%). Net shares change: 0.013M.
Valuation: EV/EBITDA 10.6x (vs 5Y: 15.4x / -31.3%); P/TB 37.5x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.9x; FCF Margin 17.3%; Qtr Buyback Yield 0.9%.
2024-05-31
Action: Repurchased 7,038.0K at Avg Price $38.74 (Tranche ROI: -59.7%). Net shares change: -0.1M.
Valuation: EV/EBITDA 12.6x (vs 5Y: 15.4x / -18.1%); P/TB 243.8x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.7x; FCF Margin 12.6%; Qtr Buyback Yield 1.4%.
2024-02-29
Action: Repurchased 1,777.0K at Avg Price $40.39 (Tranche ROI: -61.3%). Net shares change: -0.2M.
Valuation: EV/EBITDA 12.9x (vs 5Y: 15.4x / -15.9%); P/TB 415.3x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.8x; FCF Margin 15.1%; Qtr Buyback Yield 0.3%.
2023-11-30
Action: Repurchased 15,952.0K at Avg Price $40.05 (Tranche ROI: -61.0%). Net shares change: -0.2M.
Valuation: EV/EBITDA 13.2x (vs 5Y: 15.4x / -14.2%); P/TB -3296.2x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.5x; FCF Margin 13.2%; Qtr Buyback Yield 3.0%.
2023-08-31
Action: Repurchased 5,506.0K at Avg Price $42.69 (Tranche ROI: -63.4%). Net shares change: -0.4M.
Valuation: EV/EBITDA 12.2x (vs 5Y: 15.4x / -20.8%); P/TB 73.6x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.6x; FCF Margin 7.9%; Qtr Buyback Yield 1.1%.
2023-05-31
Action: Repurchased 24,584.0K at Avg Price $39.92 (Tranche ROI: -60.9%). Net shares change: -0.3M.
Valuation: EV/EBITDA 15.6x (vs 5Y: 15.4x / +1.6%); P/TB 363.2x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.6x; FCF Margin 11.3%; Qtr Buyback Yield 4.0%.
2023-02-28
Action: Repurchased 3,458.0K at Avg Price $47.18 (Tranche ROI: -66.9%). Net shares change: 0.026M.
Valuation: EV/EBITDA 13.6x (vs 5Y: 15.4x / -11.5%); P/TB 31.4x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.9x; FCF Margin 12.1%; Qtr Buyback Yield 0.6%.
2022-11-30
Action: Repurchased 468.0K at Avg Price $48.52 (Tranche ROI: -67.8%). Net shares change: -0.9M.
Valuation: EV/EBITDA 15.6x (vs 5Y: 15.4x / +1.6%); P/TB 43.7x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.9x; FCF Margin 14.4%; Qtr Buyback Yield 0.1%.
2022-05-31
Action: Repurchased 19,977.0K at Avg Price $42.16 (Tranche ROI: -63.0%). Net shares change: -0.2M.
Valuation: EV/EBITDA 19.5x (vs 5Y: 15.4x / +27.2%); P/TB -307.6x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.8x; FCF Margin 19.7%; Qtr Buyback Yield 2.9%.
2021-11-30
Action: Repurchased 3,144.0K at Avg Price $43.07 (Tranche ROI: -63.7%). Net shares change: 0.1M.
Valuation: EV/EBITDA 24.0x (vs 5Y: 15.4x / +56.4%); P/TB 337.2x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.7x; FCF Margin 17.3%; Qtr Buyback Yield 0.4%.
2021-02-28
Action: Repurchased 1,233.0K at Avg Price $24.50 (Tranche ROI: -36.2%). Net shares change: 0.1M.
Valuation: EV/EBITDA 20.1x (vs 5Y: 15.4x / +30.7%); P/TB -41.8x (vs 5Y: -122.2x / nmf).
Context: Net Leverage -0.4x; FCF Margin 13.4%; Qtr Buyback Yield 0.3%.
2020-11-30
Action: Repurchased 1,274.0K at Avg Price $19.30 (Tranche ROI: -19.1%). Net shares change: 0.1M.
Valuation: EV/EBITDA 18.5x (vs 5Y: 15.4x / +20.1%); P/TB -30.6x (vs 5Y: -122.2x / nmf).
Context: Net Leverage 0.0x; FCF Margin 12.5%; Qtr Buyback Yield 0.4%.
Capital Allocation Profile (TTM)
Buyback Quality: Timing Score 55.3% (Higher=Better); Net Yield 8.7%; SBC Offset 2.5%.
Return on Invested Capital: ROIC -28.9%; Stability (5Y) 5.41; Incremental (1Y) 200.0%.
Working Capital Efficiency: DSO 93.50; DIO 29.69; DPO 50.47; CCC 72.72 days.
Growth Decomposition (5Y): Share Reduction 1.1% (CAGR); EPS Operating Growth - vs Accretion 1.1%.
Balance Sheet: Net Leverage -1.5x; Interest Coverage 11.7x; Effective Int Rate 18.2%.
Capital Deployment: Reinvestment Rate 58.3%; Div Yield -; M&A Spend $0.0M.
Metric Definitions
Timing Score: Percentile rank of the Purchase Valuation (Price & P/TB) relative to the 5-Year range. Higher (>50%) implies buying at the bottom of the 5-year cycle.
SBC Offset: Stock-Based Comp Expense / Buyback Spend. >100% means buybacks didn't fully offset dilution.
Net Yield: (Buybacks - Share Issuance) / Market Cap.
Reinvestment Rate: (CapEx + M&A) / Operating Cash Flow (TTM).
ROIC Stability: Standard Deviation of ROIC over 20 quarters (lower is more stable).
Incremental ROIC: Change in NOPAT / Change in Invested Capital (1Y). Return on new capital deployed.
Growth Decomposition:
Operating: CAGR of Net Income (Growth from business performance).
Accretion: Negative CAGR of Share Count (Growth from shrinking denominator).
Tranche ROI: % Return on the specific buyback quarter based on current stock price. (Current Price / Avg Buyback Price - 1). Measures outcome of capital deployment.
DCF Valuation & Sensitivity Analysis: Franklin Covey Co. - FC
| Item | Value |
|---|---|
| Discount Rate | 10.0% |
| Latest Net Debt | -30.9 M USD |
| Diluted Shares Outstanding | 13,128,000 |
| Current Share Price | $14.81 (as of 2025-11-24) |
| Base Case Exit Multiple | 11.0x |
All figures in Millions of USD unless otherwise noted
| Metric | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Revenue | 267.3 | 277.9 | 291.8 | 304.9 | 317.1 |
| Revenue Growth (%) | 0.1% | 4.0% | 5.0% | 4.5% | 4.0% |
| R&D (% of Revenue) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| SG&A (% of Revenue) | 65.4% | 64.0% | 63.5% | 63.0% | 63.0% |
| EBITDA | 31.8 | 39.4 | 45.4 | 49.3 | 52.4 |
| EBIT | 17.8 | 24.9 | 30.4 | 33.8 | 36.4 |
| Operating Margin (%) | 6.7% | 9.0% | 10.4% | 11.1% | 11.5% |
| EBIAT | 17.8 | 24.9 | 30.4 | 33.8 | 36.4 |
| D&A | 14.0 | 14.5 | 15.0 | 15.5 | 16.0 |
| CapEx | -16.0 | -16.7 | -17.5 | -16.8 | -15.9 |
| Change in NWC | 1.0 | -1.1 | -1.4 | -1.3 | -1.2 |
| Projected FCFF | 16.8 | 21.6 | 26.5 | 31.2 | 35.3 |
2.1 Base Case Valuation Bridge
| Metric | Value |
|---|---|
| (+) Sum of PV of FCFFs | 96.3 M USD |
| (+) PV of Terminal Value | 358 M USD |
| (=) Enterprise Value (EV) | 454 M USD |
| (-) Net Debt | (-30.9 M USD) |
| (=) Equity Value | 485 M USD |
| Implied Value per Share | $36.95 |
| % Upside vs. Current | +149.5% |
| Item | Bear Case | Base Case | Bull Case |
|---|---|---|---|
| Enterprise Value | 125 M | 454 M | 720 M |
| Implied Value / Share | $11.86 | $36.95 | $57.22 |
| % Upside vs. Current | -19.9% | +149.5% | +286.4% |
3.1 Probability-Weighted Implied Value
| Case | Implied Value / Share | Assigned Probability | Weighted Value |
|---|---|---|---|
| Bear Case | $11.86 | 30.0% | $3.56 |
| Base Case | $36.95 | 50.0% | $18.47 |
| Bull Case | $57.22 | 20.0% | $11.44 |
Probability-Weighted Implied Value: $33.48
% vs. Current Price: +126.0%
Methodology: The Exit Multiple Method will be used, based on EV/EBITDA.
Justification & Data-Driven Weighting:
Base Case:
Step A: Assess Data Quality & Establish a Weighted Anchor. The raw 5-year historical average EV/EBITDA multiple is 15.2x. However, this includes the FY2021 multiple of 29.6x, which is an outlier driven by post-COVID recovery dynamics. Excluding this outlier, the normalized 4-year average is 11.6x. The peer set quality is weak, as the median EV/EBITDA is not meaningful due to peer unprofitability. Therefore, the normalized historical average is a strong anchor. We establish a quantitative anchor of 11.6x, giving 100% weight to the normalized historical average.
Step B: Apply Qualitative Adjustment & Mid-Cycle Normalization. The current TTM multiple is 7.4x, which reflects trough earnings. The "Cycle Rule" dictates that the terminal multiple must be adjusted upward to reflect a normalized, mid-cycle valuation. The company's 5-year average operating margin of 7.1% is superior to the peer median of -5.9%, and its net-cash balance sheet is stronger than peers. However, management's capital allocation skill has been poor (pro-cyclical buybacks). We apply a -0.6x qualitative adjustment to the 11.6x anchor to account for poor capital allocation, arriving at a mid-cycle multiple.
Step C: State the Final Multiple. The final Base Case exit multiple is 11.0x.
Bull Case:
Step A: Establish Anchor. The anchor remains 11.6x.
Step B: Apply Qualitative Adjustment. In this scenario, the company successfully executes its turnaround, proving its ability to generate superior returns. This would justify a premium multiple reflecting higher growth and profitability. We apply a +1.4x qualitative adjustment to the anchor.
Step C: State the Final Multiple. The final Bull Case exit multiple is 13.0x.
Bear Case:
Step A: Establish Anchor. The anchor remains 11.6x.
Step B: Apply Qualitative Adjustment. In this scenario, the company fails to recover, demonstrating a permanent impairment to its earnings power and poor management execution. This justifies a multiple at the low end of its historical range, closer to the current trough multiple. We apply a -3.6x qualitative adjustment to the anchor.
Step C: State the Final Multiple. The final Bear Case exit multiple is 8.0x.
This section varies the Discount Rate (columns) and Exit Multiple (rows) around the Base Case assumptions; FCFF path is Base Case.
Valuation Sensitivity Matrix ($ / Share)
| Exit Multiple \ Discount Rate | 8.0% | 9.0% | 10.0% | 11.0% | 12.0% |
|---|---|---|---|---|---|
| 9.0x | $34.58 | $33.25 | $31.99 | $30.80 | $29.66 |
| 10.0x | $37.29 | $35.84 | $34.47 | $33.16 | $31.93 |
| 11.0x | $40.01 | $38.44 | $36.95 | $35.53 | $34.19 |
| 12.0x | $42.73 | $41.03 | $39.43 | $37.90 | $36.46 |
| 13.0x | $45.44 | $43.63 | $41.90 | $40.27 | $38.72 |
Upside Sensitivity Matrix (%)
| Exit Multiple \ Discount Rate | 8.0% | 9.0% | 10.0% | 11.0% | 12.0% |
|---|---|---|---|---|---|
| 9.0x | +133.5% | +124.5% | +116.0% | +107.9% | +100.3% |
| 10.0x | +151.8% | +142.0% | +132.7% | +123.9% | +115.6% |
| 11.0x | +170.1% | +159.5% | +149.5% | +139.9% | +130.9% |
| 12.0x | +188.5% | +177.0% | +166.2% | +155.9% | +146.2% |
| 13.0x | +206.8% | +194.6% | +182.9% | +171.9% | +161.5% |
Prob Wtd. Value - Discount Rate
| Discount Rate | 8.0% | 9.0% | 10.0% | 11.0% | 12.0% |
|---|---|---|---|---|---|
| PWER ($/sh) | $36.24 | $34.82 | $33.48 | $32.20 | $30.99 |
Prob Wtd. Value - Multiples
| Base Case Multiple | 9.0x | 10.0x | 11.0x | 12.0x | 13.0x |
|---|---|---|---|---|---|
| PWER ($/sh) | $29.11 | $31.29 | $33.48 | $35.66 | $37.85 |
Coverage: November 26, 2020 - November 26, 2025
Tier legend: Tier 1 = material; Tier 2 = secondary context.
Event Date: November 05, 2025
Price Move Date: November 06, 2025
Close Price: $15.90
IWM Return: -1.77%
XLI Return: -0.40%
Primary Event: Franklin Covey Co. reported Q4 and fiscal year 2025 financial results.
Core Event: Franklin Covey Co. reported Q4 and fiscal year 2025 financial results. Key Details:
Fiscal year ended August 31, 2025
Earnings release furnished as Exhibit 99.1
Conference call held November 5, 2025, at 5:00 p.m. ET
Webcast at https://edge.media-server.com/mmc/p/t37iqwa5
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
Firm: Barrington Analyst: Alexander Paris Price Target: $22.00 Price When Posted: $15.75 Implied Upside: +39.7% Source: https://thefly.com/permalinks/entry.php/id4233267/8729286394/FC-Franklin-Covey-price-target-lowered-by--at-Barrington-heres-why
EPS Beat/Miss: -20.9%
Actual: $0.34
Estimated: $0.43 Revenue Beat/Miss: +5.7%
Actual: $71,248,000
Estimated: $67,400,000
Date: October 22, 2025
Close Price: $18.17
IWM Return: -1.48%
XLI Return: -1.30%
Primary Event: Franklin Covey Co. announced a conference call to discuss Q4 and fiscal year 2025 financial results.
Core Event: Franklin Covey Co. announced a conference call to discuss Q4 and fiscal year 2025 financial results. Key Details:
Call scheduled for November 5, 2025, at 5:00 p.m. ET
Results to be released after market close on November 5, 2025
Webcast at https://edge.media-server.com/mmc/p/t37iqwa5
Telephone registration required via provided link
Replay archived for 30 days Financial Impact: Unavailable Actions/Next Steps: Unavailable
Event Date: July 02, 2025
Price Move Date: July 03, 2025
Close Price: $22.10
IWM Return: +0.93%
XLI Return: +0.85%
Primary Event: Franklin Covey Co. reported Q3 fiscal 2025 financial results.
Core Event: Franklin Covey Co. reported Q3 fiscal 2025 financial results. Key Details:
Quarter ended May 31, 2025
Earnings release furnished as Exhibit 99.1
Conference call held July 2, 2025, at 5:00 p.m. ET
Webcast at https://edge.media-server.com/mmc/p/e3nwc8xy
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: -325.0%
Actual: $0.18
Estimated: $-0.08 Revenue Beat/Miss: -5.6%
Actual: $67,121,000
Estimated: $71,105,750
Event Date: April 02, 2025
Price Move Date: April 03, 2025
Close Price: $20.51
IWM Return: -6.42%
XLI Return: -5.41%
Primary Event: Franklin Covey Co. reported Q2 fiscal 2025 financial results.
Core Event: Franklin Covey Co. reported Q2 fiscal 2025 financial results. Key Details:
Quarter ended February 28, 2025
Earnings release furnished as Exhibit 99.1
Conference call held April 2, 2025, at 5:00 p.m. ET
Webcast at https://edge.media-server.com/mmc/p/zq4jny5e
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: -27.3%
Actual: $-0.08
Estimated: $-0.11 Revenue Beat/Miss: -4.8%
Actual: $59,612,000
Estimated: $62,650,000
Event Date: January 08, 2025
Price Move Date: January 09, 2025
Close Price: $31.25
IWM Return: -2.20%
XLI Return: -1.12%
Primary Event: Franklin Covey Co. reported Q1 fiscal 2025 financial results.
Core Event: Franklin Covey Co. reported Q1 fiscal 2025 financial results. Key Details:
Quarter ended November 30, 2024
Earnings release furnished as Exhibit 99.1
Conference call held January 8, 2025, at 5:00 p.m. ET
Webcast at https://edge.media-server.com/mmc/p/gk9ap76y
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: -59.1%
Actual: $0.09
Estimated: $0.22 Revenue Beat/Miss: +7.7%
Actual: $69,086,000
Estimated: $64,125,750
Event Date: November 06, 2024
Price Move Date: November 07, 2024
Close Price: $37.55
IWM Return: -0.35%
XLI Return: -0.60%
Primary Event: Franklin Covey Co. reported Q4 and fiscal year 2024 financial results.
Core Event: Franklin Covey Co. reported Q4 and fiscal year 2024 financial results. Key Details:
Fiscal year ended August 31, 2024
Earnings release furnished as Exhibit 99.1
Conference call held November 6, 2024, at 5:00 p.m. ET
Webcast at https://edge.media-server.com/mmc/p/djbumumn
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: +8.5%
Actual: $0.89
Estimated: $0.82 Revenue Beat/Miss: +4.7%
Actual: $84,124,000
Estimated: $80,380,000
Event Date: June 26, 2024
Price Move Date: June 27, 2024
Close Price: $36.74
IWM Return: +1.01%
XLI Return: +0.11%
Primary Event: Franklin Covey Co. reported Q3 fiscal 2024 financial results.
Core Event: Franklin Covey Co. reported Q3 fiscal 2024 financial results. Key Details:
Quarter ended May 31, 2024
Earnings release furnished as Exhibit 99.1
Conference call held June 26, 2024, at 5:00 p.m. ET
Webcast at https://edge.media-server.com/mmc/p/ydczbpt5
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: +10.3%
Actual: $0.43
Estimated: $0.39 Revenue Beat/Miss: -8.7%
Actual: $73,373,000
Estimated: $80,380,000
Event Date: November 01, 2023
Price Move Date: November 02, 2023
Close Price: $35.08
IWM Return: +2.67%
XLI Return: +2.06%
Primary Event: Franklin Covey Co. reported Q4 and full fiscal 2023 financial results.
Core Event: Franklin Covey Co. reported Q4 and full fiscal 2023 financial results. Key Details:
Fiscal year ended August 31, 2023
Earnings release furnished as Exhibit 99.1
Conference call held November 1, 2023, at 5:00 p.m. ET
Webcast at https://edge.media-server.com/mmc/p/3s4ixmry
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: +0.0%
Actual: $0.49
Estimated: $0.49 Revenue Beat/Miss: -4.5%
Actual: $77,955,000
Estimated: $81,600,000
Event Date: June 28, 2023
Price Move Date: June 29, 2023
Close Price: $45.12
IWM Return: +1.15%
XLI Return: +0.97%
Primary Event: Franklin Covey Co. reported Q3 fiscal 2023 financial results.
Core Event: Franklin Covey Co. reported Q3 fiscal 2023 financial results. Key Details:
Quarter ended May 31, 2023
Earnings release furnished as Exhibit 99.1
Conference call held June 28, 2023, at 5:00 p.m. ET
Webcast at https://edge.media-server.com/mmc/p/3tpokmnp
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
Core Event: Robert Whitman transitioned from Executive Chairman to Chairman, and Paul Walker appointed to Board. Key Details:
Effective September 1, 2023 (Whitman transition)
Whitman's annual compensation reduced to $190,000 cash retainer
Paul Walker appointed to Board effective July 1, 2023
Walker to serve on Growth and Innovations Committee Financial Impact: Whitman's compensation reduced to board retainer structure Actions/Next Steps: Board changes effective July-September 2023
EPS Beat/Miss: +45.5%
Actual: $0.32
Estimated: $0.22 Revenue Beat/Miss: -13.0%
Actual: $71,441,000
Estimated: $82,100,000
Event Date: March 29, 2023
Price Move Date: March 30, 2023
Close Price: $36.24
IWM Return: -0.14%
XLI Return: +0.21%
Primary Event: Franklin Covey Co. reported Q2 fiscal 2023 financial results.
Core Event: Franklin Covey Co. reported Q2 fiscal 2023 financial results. Key Details:
Quarter ended February 28, 2023
Earnings release furnished as Exhibit 99.1
Conference call held March 29, 2023, at 5:00 p.m. ET
Webcast at https://ir.franklincovey.com
Telephone registration required via provided link Financial Impact: Unavailable Actions/Next Steps: Unavailable
Core Event: Franklin Covey entered into a new $70 million credit agreement with KeyBank. Key Details:
$7.5 million term loan; $62.5 million revolving credit line
Matures March 27, 2028
Interest rate: SOFR + 1.50% to 2.75% (tiered based on leverage)
Requires Leverage Ratio <3.00 and Fixed Charge Coverage Ratio >1.15 Financial Impact: $70 million total credit facility established Actions/Next Steps: Quarterly term loan payments of $1.25 million begin
Firm: Barrington Analyst: Alexander Paris Price Target: $55.00 Price When Posted: $36.51 Implied Upside: +50.7% Source: https://www.benzinga.com/news/earnings/23/03/31591117/franklin-covey-gets-price-targets-cuts-by-analysts-after-downbeat-q2-results-shares-plunge
EPS Beat/Miss: -7.7%
Actual: $0.12
Estimated: $0.13 Revenue Beat/Miss: -1.0%
Actual: $61,756,000
Estimated: $62,400,000
Event Date: June 29, 2022
Price Move Date: June 30, 2022
Close Price: $46.18
IWM Return: -0.78%
XLI Return: +0.31%
Primary Event: Franklin Covey Co. reported Q3 fiscal 2022 financial results.
Core Event: Franklin Covey Co. reported Q3 fiscal 2022 financial results. Key Details:
Quarter ended May 31, 2022
Earnings release furnished as Exhibit 99.1
Conference call held June 29, 2022, at 5:00 p.m. ET
Dial-in: (866) 374-5140 or (404) 400-0571, code 88618956
Webcast replay available until July 13, 2022 Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: +44.4%
Actual: $0.26
Estimated: $0.18 Revenue Beat/Miss: +3.0%
Actual: $66,176,000
Estimated: $64,266,667
Event Date: March 30, 2022
Price Move Date: March 31, 2022
Close Price: $45.22
IWM Return: -1.06%
XLI Return: -1.54%
Primary Event: Franklin Covey Co. reported Q2 fiscal 2022 financial results.
Core Event: Franklin Covey Co. reported Q2 fiscal 2022 financial results. Key Details:
Quarter ended February 28, 2022
Earnings release furnished as Exhibit 99.1
Conference call held March 30, 2022, at 5:00 p.m. ET
Dial-in: (800) 708-4540 or (847) 619-6397, code 50246862
Webcast replay available until April 13, 2022 Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: +116.7%
Actual: $0.13
Estimated: $0.06 Revenue Beat/Miss: -0.9%
Actual: $56,599,000
Estimated: $57,100,000
Date: March 16, 2022
Close Price: $45.92
IWM Return: +3.15%
XLI Return: +1.32%
Primary Event: Franklin Covey Co. announced a conference call to discuss Q2 fiscal 2022 financial results.
Core Event: Franklin Covey Co. announced a conference call to discuss Q2 fiscal 2022 financial results. Key Details:
Call scheduled for March 30, 2022, at 5:00 p.m. ET
Results to be released after market close on March 30, 2022
Dial-in: (800) 708-4540 or (847) 619-6397 (international), code 50246862
Webcast available at https://edge.media-server.com/mmc/p/m6b2dz4g
Replay accessible until April 13, 2022 Financial Impact: Unavailable Actions/Next Steps: Unavailable
Event Date: January 06, 2022
Price Move Date: January 07, 2022
Close Price: $50.66
IWM Return: -1.16%
XLI Return: -0.03%
Primary Event: Franklin Covey Co. reported Q1 fiscal 2022 financial results.
Core Event: Franklin Covey Co. reported Q1 fiscal 2022 financial results. Key Details:
Quarter ended November 30, 2021
Earnings release furnished as Exhibit 99.1
Conference call held January 6, 2022, at 5:00 p.m. ET
Dial-in: (800) 708-4540 or (847) 619-6397, code 50246856
Webcast replay available until January 20, 2022 Financial Impact: Unavailable Actions/Next Steps: Unavailable
EPS Beat/Miss: +710.1%
Actual: $0.27
Estimated: $0.03 Revenue Beat/Miss: +7.3%
Actual: $61,259,000
Estimated: $57,100,000
Event Date: June 30, 2021
Price Move Date: July 01, 2021
Close Price: $36.00
IWM Return: +0.88%
XLI Return: +0.71%
Primary Event: Franklin Covey Co. reported Q3 fiscal 2021 financial results.
Core Event: Franklin Covey Co. reported Q3 fiscal 2021 financial results. Key Details:
Quarter ended May 31, 2021
Earnings release furnished as Exhibit 99.1
Conference call held June 30, 2021, at 5:00 p.m. ET
Dial-in: (800) 708-4539 or (847) 619-6396, code 50186480
Webcast replay available until July 14, 2021 Financial Impact: Unavailable Actions/Next Steps: Unavailable
Core Event: Leadership transition with Robert Whitman becoming Executive Chairman and Paul Walker appointed CEO. Key Details:
Effective September 1, 2021
Whitman to focus on strategy, innovations, and board liaison
Paul Walker promoted from President/COO to CEO
Walker has 21 years of company experience Financial Impact: Unavailable Actions/Next Steps: CEO transition effective September 1, 2021
EPS Beat/Miss: -357.1%
Actual: $0.18
Estimated: $-0.07 Revenue Beat/Miss: +13.8%
Actual: $58,736,000
Estimated: $51,600,000
Earnings Call Transcript Summary: FC
This report is a summary of 12 available earnings call transcripts for the period spanning January 2023 to November 2025.
Part 1: Individual Transcript Summaries
FY2025 Q4 Earnings Call Summary (Date: 2025-11-06)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Fiscal Year 2025 revenue ($267.1 M) and Adjusted EBITDA ($28.8 M) were in line with guidance provided in Q3. FY25 was characterized as a period of transition and transformation. Q4 marks a return to execution and growth. Consolidated subscription revenue recognized was flat YoY at $147.9 M. Deferred revenue increased 3.0% YoY to $111.7 M. Cash flow from operating activities was $29 M (down from $60.3 M PY). Free cash flow was $12.1 M (down from $48.9 M PY). Gross margin for FY25 was 76.2%.
Strategic Narrative & Initiatives: The core objective is to be the partner of choice for leaders pursuing breakthrough results, focusing on strengthening collective behavior and execution. Two key priorities: 1) Leading in combining world-class content, technology, and services (embedding AI for real-time coaching and reinforcement, high NPS scores in the 70s and 80s). 2) Transforming the go-to-market approach to win more strategic new logos and expand existing relationships. The sales transformation is complete and delivering strong early results: strong Q1 contracting, new logo growth pacing above prior year, and services bookings in Enterprise North America up double digits.
Business Segment Performance: Enterprise Division revenue declined 10.0% YoY to $188.1 M, primarily due to government actions, macroeconomic uncertainty, and a non-repeating $6.2 M IP contract in Q4 FY24. The core subscription-related business declined 5.0%. International Direct Operations saw a revenue decline and an Adjusted EBITDA loss of $0.4 M. Education Division revenue grew 1.0% YoY to $74.6 M. Education subscription revenue grew 10.0% for the full year, and deferred revenue increased 13.0%, establishing a strong foundation for FY26 growth. School retention remained high at 84.0%.
Macro & Industry Environment: FY25 was adversely impacted by external factors including threatened tariffs, U.S. federal government spending cuts (DOGE related), geopolitical tensions, and general economic weakening, leading to delayed client decision-making. Management views AI not as a threat but as an enabler, making human capabilities like trust, alignment, and collaboration more critical than ever.
Guidance & Outlook: Fiscal Year 2026 Revenue is expected in the range of $265 M to $275 M. Adjusted EBITDA is anticipated in the range of $28 M to $33 M. Management expects solid growth in invoiced amounts in FY26, but reported revenue growth will be constrained by the conversion lag (lower deferred revenue generated in FY25). Revenue is expected to be weighted toward the back half (H1: 45.0% to 50.0% of revenue; H1: 30.0% to 35.0% of Adjusted EBITDA). FY26 is positioned as a year of execution and return to growth, with acceleration expected in FY27.
Question & Answer (QA) Summary:
Key Analyst Themes: The effectiveness and traction of the sales transformation (new logos, services attachment), the current macroeconomic decision-making environment, and the expected sequential trajectory of Q1/Q2 FY26 results.
Challenging Questions & Management Response: An analyst questioned if the reported growth in invoiced subscription bookings for the first two months of FY26 was merely an "easy compare" against the prior year's weak start. Management responded that confidence is based on structural changes; large multi-million dollar deals are being won through processes (like rapid RFP turnaround) implemented as part of the transformation that would not have been possible previously, indicating a sustainable trend.
Notable Insights & Clarifications: The decision-making environment is still uncertain, but clients are shifting from paralysis to needing to move their businesses forward. Client count retention remains highly consistent with historical rates, although revenue retention was slightly lower in FY25 due to some clients reducing the size of their covered population amid uncertainty. Services attachment remains strong, and new logo wins are attaching a greater amount of services upfront. Management confirmed that Q2 revenue and EBITDA are expected to be slightly lower than Q1, following normal seasonality due to reduced services delivery days during the December holiday period. AI is viewed as a powerful "third leg of the stool," providing real-time coaching and reinforcement, complementing FC's content and human services.
FY2025 Q3 Earnings Call Summary (Date: 2025-07-03)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q3 revenue was $67.1 M, in line with expectations. Q3 Adjusted EBITDA was $7.3 M, exceeding the expected range of $4 M to $6.5 M, primarily due to prudent cost reduction actions taken in the quarter. Year-to-date Free Cash Flow was $10.6 M, down from $30.6 M in the prior year, driven by lower net income and higher cash taxes paid. Deferred subscription revenue increased 7.0% YoY to $89.3 M. Gross margin remained strong at 76.5%.
Strategic Narrative & Initiatives: Management expressed confidence based on three factors: 1) Solutions address mission-critical client challenges. 2) Strong traction in the Enterprise North America go-to-market transformation (180 days in). 3) Ongoing strength in the Education business. The sales force separation into "land" (new clients) and "expand" (existing clients) is complete. Key indicators of progress include more new logo wins in Q3 YoY, a 15-point increase in off-cycle client expansion, and winning back a large client that had previously churned in FY23 Q2.
Business Segment Performance: Enterprise Division revenue was $47.3 M (down 9.0% YoY), heavily affected by government contract cancellations and macroeconomic uncertainty. North America subscription and services revenue was down 4.0% YTD. Multi-year contracts increased to 58.0% of contracts and 62.0% of subscription revenue. Services attachment rate remained high at 60.0%. Education Division Q3 revenue was $18.6 M (down 8.0% YoY) due to timing of large contracts, but subscription revenue grew 13.0%, and deferred revenue increased 21.0% to $34.1 M.
Macro & Industry Environment: The external environment continues to be uncertain, leading organizations to scrutinize costs and delay investment decisions. Government actions (DOGE, Department of Ed uncertainty, ESSER fund expiration) continue to exert direct and indirect pressure on revenue.
Guidance & Outlook: FY25 Revenue guidance was revised to $265 M to $275 M, reflecting continued uncertainty and timing risk for service delivery in Q4. Adjusted EBITDA guidance was widened to $28 M to $33 M. The midpoint and top end of the EBITDA range were maintained due to cost reduction actions taken in Q3, which are expected to result in $8 M in annualized run rate savings for FY26. Management expects meaningful increases in Adjusted EBITDA and FCF in FY26.
Question & Answer (QA) Summary:
Key Analyst Themes: Reconciliation of declining invoiced subscription revenue against positive land/expand metrics, the outlook and resilience of the Education division, and the specific composition of the revised FY25 revenue guidance reduction.
Challenging Questions & Management Response: An analyst questioned how invoiced subscription revenue could be down 8.0% YoY while new logo wins and expansion rates were strong. Management explained that the decline was due to three offsetting factors: 1) Some clients downsized their subscription population size upon renewal. 2) Expansion dollars are smaller in the current uncertain environment. 3) A large corporate client converted their subscription to an IP agreement, creating a non-renewal drag of a couple of hundred basis points.
Notable Insights & Clarifications: The bulk of the revenue guidance revision was attributed to timing risk in Q4 for service delivery in both Enterprise (e.g., a $2.3 M contract with $1.7 M in services) and Education, where decisions are being made later in the quarter. The Education business is expected to meet or exceed FY24 new school additions (728) and retention rates, driven by strong demand related to improving test scores, teacher retention, and mental wellness. The cost reduction actions taken in Q3 yielded $3 M in savings, with $4 M expected in Q4, totaling $7 M in FY25, which allowed the company to maintain its EBITDA guidance despite the revenue reduction.
FY2025 Q2 Earnings Call Summary (Date: 2025-04-02)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q2 revenue was $59.6 M ($60.1 M CC), slightly below Q2 PY ($61.3 M) due to government-related cancellations. Q2 Adjusted EBITDA was $2.1 M ($2.6 M CC), hitting the top end of expectations. Unbilled deferred revenue increased 10.0% YoY for both Q2 and the first half. 61.0% of subscription revenue is under multi-year contracts.
Strategic Narrative & Initiatives: The business model remains strong and durable. The go-to-market transformation in Enterprise North America is tracking ahead of expectations, aiming to accelerate overall growth to double digits in the coming years. The new organizational structure is fully staffed (44 new logo salespeople in place ahead of schedule) and working effectively.
Business Segment Performance: Enterprise North America saw significant traction in the new model (90 days in). New logo wins in Q2 were the highest in five quarters, exceeding plan by 50.0%. The company is pacing for 40.0% growth in new logo sales for the year. Expansion targets were beat by 8.0%. Services booking rate (excluding government) increased 5.0% YTD. Education Division revenue grew 3.0% in Q2 and 7.0% YTD. Invoiced amounts were up 13.0% YTD. The division serves 7,800 Leader in Me schools globally.
Macro & Industry Environment: The external environment is turbulent. Direct and indirect impacts are being felt from federal government actions (DOGE) and trade tensions. This impact is the primary reason for the downward revision of FY25 guidance.
Guidance & Outlook: FY25 Revenue guidance was revised down to $275 M to $285 M (a $15 M reduction from the low end of original guidance). FY25 Adjusted EBITDA guidance was revised to $30 M to $33 M. The $15 M revenue impact breakdown: $5 M in cancelled/postponed government revenue, $4 M international impact (tariffs/tensions), $3 M potential Education timing impact, and $3 M additional U.S. commercial headwinds. Management expects a one-year step back, with FY26 Adjusted EBITDA approaching original FY25 expectations due to cost reductions and full flow-through of growth investments. Q3 Guidance: Revenue $67 M to $71 M; Adjusted EBITDA $4 M to $6.5 M.
Question & Answer (QA) Summary:
Key Analyst Themes: The specific components of the $15 M revenue reduction, the sustainability of the land/expand momentum, and the company's resilience in a potential recessionary environment.
Challenging Questions & Management Response: An analyst questioned the potential impact of the Department of Education being cut, given FC does not sell directly to the agency. Management clarified that while long-term funding is expected to be reallocated to states, the short-term uncertainty might cause decision-making delays in Q3/Q4 for schools, hence the $3 M potential impact.
Notable Insights & Clarifications: The $5 M government loss is realized business; the remaining $10 M of the reduction is anticipated headwind. The $16 M incremental investment in the sales transformation is protected and on schedule, given the strong early traction (new logo pipeline exceeded plan by 30.0%, conversion rates 300 basis points above target). The subscription model provides durability in a recession, with 61.0% of revenue being multi-year. The company is directing sales efforts toward mission-critical solutions (e.g., 4DX) that help clients drive efficiency during uncertain times. Q2 FCF was negative due to $6 M in tax payments (out of NOLs) and lumpy customer deposits, but positive FCF is expected for the full fiscal year.
FY2025 Q1 Earnings Call Summary (Date: 2025-01-08)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q1 revenue grew 1.0% to $69.1 M compared to $68.4 M in the prior year. Adjusted EBITDA was $7.7 M ($8.1 M in constant currency), down from $11 M last year, primarily reflecting the initial share of the $16 M total increase in growth investments planned for the year. Deferred subscription revenue increased 10.0% from Q1 last year to $95.7 M.
Strategic Narrative & Initiatives: The core focus is the transformation of the North American enterprise sales force into two specialized groups: Project Expand (focused on increasing penetration and retention within existing clients) and Project Land (focused exclusively on winning new logos/hunters). These investments are expected to accelerate revenue growth from single-digit to consistent double-digit levels.
Business Segment Performance: Education Division revenue grew a significant 11.0%, with the number of contracted Leader in Me schools increasing 58.0%. Success was noted in securing contracts at the district and state levels (e.g., a new statewide contract including over 100 initial schools). Enterprise sales were flat, which was expected due to the sales force transition. International Enterprise revenue was down 2.0%, primarily due to challenging business conditions in Asia.
Macro & Industry Environment: Management noted the sales transition was undertaken in line with expectations. The market opportunity (TAM) remains massive, with current clients only penetrated approximately 10.0% on average.
Guidance & Outlook: Reaffirmed full-year FY2025 guidance: Revenue $295 M to $305 M (constant currency); Adjusted EBITDA $40 M to $44 M (constant currency). Q2 FY2025 guidance: Revenue $61.5 M to $63 M; Adjusted EBITDA $1.5 M to $2.5 M (reflecting the increased portion of the $16 M investment). Management expects growth to accelerate in the back half of the year.
Question & Answer (QA) Summary:
Key Analyst Themes: The timing and magnitude of the $16 M growth investments; early returns and KPIs from the Project Land/Expand initiatives; the impact of new hires and product launches (7 Habits 5.0).
Challenging Questions & Management Response: Analysts questioned the low Q2 Adjusted EBITDA guidance ($1.5 M to $2.5 M). Management clarified that $3 M of the $16 M investment was spent in Q1, and over $4 M is expected in Q2, causing the significant year-over-year drop. The investment is heavily front-loaded.
Notable Insights & Clarifications: The sales force transition was fully completed on December 1 (the start of Q2). 95.0% of the new logo hunting client partners (target 44) are already in place, ahead of the March 1 target, attracting high-quality talent from companies like LinkedIn and Zoom. An early win attributed to the new structure was a $350,000 new logo contract with a major U.S. bank, 8x to 9x the historical average size. Subscription invoice decline in Enterprise Q1 was attributed primarily to timing issues on 5 large contracts, 4 of which are expected to renew this year.
FY2024 Q4 Earnings Call Summary (Date: 2024-11-07)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q4 revenue grew 8.0%. Full year FY2024 revenue reached $287.2 M. Q4 Adjusted EBITDA grew 39.0% to $22.9 M. Full year Adjusted EBITDA was $55.3 M (up 15.0% year-over-year). Free cash flow grew 121.0% to $48.9 M for the year. Deferred revenue increased 9.0% to $107.9 M.
Strategic Narrative & Initiatives: Having completed the transition to subscription and major investments in content/technology, the company is now making $16 M of incremental net growth investments to shift ongoing revenue growth from mid-to-high single digits to consistent double-digit growth. This investment is focused on Project Expand (increasing penetration within existing clients, currently 10.0% penetrated) and Project Land (winning significantly increased numbers of new logos).
Business Segment Performance: Enterprise Division revenue grew 8.0% in Q4 (2.0% for the year). North America Enterprise Q4 revenue increased 17.0%. International direct operations revenue decreased $2.1 M for the year, primarily due to challenging business conditions in China (down $2.5 M). Education Division grew 5.0% for the year (flat Q4).
Macro & Industry Environment: Management views the macro environment as steady but acknowledges the need for accelerated growth to capture the large TAM.
Guidance & Outlook: FY2025 Revenue guidance $295 M to $305 M (4.5% growth at midpoint), noting that new subscription sales will largely be deferred. FY2025 Adjusted EBITDA guidance $40 M to $44 M, reflecting the $16 M investment. Long-term targets project revenue growth accelerating to 10.0% in FY2026, 12.0% in FY2027, and 14.0% in FY2028, with Adjusted EBITDA reaching $75 M by FY2028.
Question & Answer (QA) Summary:
Key Analyst Themes: Rationale for the timing and magnitude of the $16 M investment; expected ROIC and long-term growth trajectory; impact of the new sales structure on client partner ramp time; new product launches (7 Habits 5.0).
Challenging Questions & Management Response: Analysts questioned why the company chose a "big bullet" investment now instead of gradual growth. Management stated the previous structure (asking one salesperson to both hunt and expand) was sub-optimized, and a full split (Expand/Land) was necessary to fundamentally change the growth trajectory.
Notable Insights & Clarifications: The $16 M investment is front-end loaded, with $2 M to $3 M expected in Q1 FY2025, and the largest incremental expense increase expected in Q2. The new sales structure is expected to significantly reduce the ramp time for client partners because their roles are now narrower and more specialized (either 100.0% hunting or 100.0% expanding). The 7 Habits 5.0 refresh launched the week prior to the call, targeting modern workers and applying principles to contemporary issues like agility and innovation.
FY2024 Q3 Earnings Call Summary (Date: 2024-06-26)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q3 revenue $73.4 M (stronger than expected). Adjusted EBITDA $13.9 M (above the $12 M to $13 M expected range). Free cash flow $30.6 M YTD (up 96.0% year-over-year). Deferred revenue increased 15.0% to $83.8 M.
Strategic Narrative & Initiatives: The business remains resilient despite a challenging macro environment, reflecting the mission-critical nature of its solutions (leadership, culture, execution). The business model delivers high flow-through: 31.0% revenue growth over the last four years resulted in 160.0% Adjusted EBITDA growth. Progress continues on three growth projects: Project Penetrate, Project Speed to Ramp, and Project Impact (content/technology).
Business Segment Performance: Enterprise North America achieved its highest ever All Access Pass logo retention percentage for a third quarter. International direct operations revenue was down 7.0%, entirely attributed to geopolitical issues related to China. Education revenue grew 18.0% in Q3, driven by the earlier-than-anticipated launch of a large statewide contract.
Macro & Industry Environment: Management noted continued resiliency in the business despite reports of companies holding off on capital expenditures. The services booking pace accelerated meaningfully in Q3 and continued through June.
Guidance & Outlook: Reaffirmed FY2024 Revenue guidance of approximately $284 M (constant currency). Q4 revenue expected to be $80.5 M, reflecting a modest shift to Q3 due to Education contract timing. Reaffirmed Adjusted EBITDA guidance at the low end of the $54.5 M to $58 M range.
Question & Answer (QA) Summary:
Key Analyst Themes: Education division performance and the impact of ESSER funds; status of restructuring charges; deferred revenue metrics; content refresh schedule and impact.
Challenging Questions & Management Response: Analysts asked about the impact of the ESSER (COVID stimulus) funds ending in September. Management acknowledged some impact but expects to "grow right through it" due to strong retention, success in winning grants ($3 M to $5 M expected this year), and a large foundation partnership funding hundreds of schools.
Notable Insights & Clarifications: Education is pacing ahead of last year's record 791 new schools. Restructuring charges related to client partner refinement are complete, with no further charges expected in Q4. New content launches (Speed of Trust refresh, Navigating Difficult Conversations) are driving increased services and retention, with the full impact expected in FY2025. A new $50 M stock repurchase authorization was approved.
FY2024 Q2 Earnings Call Summary (Date: 2024-03-27)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q2 revenue $61.3 M (in line with expectations). Adjusted EBITDA $7.4 M (slightly stronger). Free cash flow $24.7 M YTD (stronger than expected). Subscription revenue reached an all-time high for Q2 in both Enterprise (up 9.0% to $26.3 M) and Education (up 7.0% to $9.5 M).
Strategic Narrative & Initiatives: Management expressed disappointment that the services sales rebound was slower than anticipated, muting reported revenue growth (Q3 1.0%, Q4 6.0%). However, subscription sales volume is growing faster, building deferred balances. Three key growth accelerators were detailed: Project Penetration (increasing client penetration via specialized Impact Pods), Project Speed to Ramp (accelerating new client acquisition), and Project Impact (ongoing content/technology investment, including AI coaching).
Business Segment Performance: Enterprise logo retention was one of the best quarters ever. Multiyear contracts increased to a historic high of 56.0% (up from 50.0%). Education invoiced amounts grew 23.0% in Q2.
Macro & Industry Environment: Decision-making by companies was extended longer than normal in the late summer/early fall due to spiking interest rates, creating a difficult selling environment in H1 FY2024. Services attach rate moderated from the pandemic high of 60.0% back toward the pre-pandemic 55.0%.
Guidance & Outlook: FY2024 revenue expectations lowered due to services timing. FY2024 Adjusted EBITDA maintained at the low end of the $54.5 M to $58 M range. Q3 Adjusted EBITDA expected $12 M to $13 M. Management expects accelerated growth in FY2025 driven by the new projects.
Question & Answer (QA) Summary:
Key Analyst Themes: The timing of the services rebound; the rationale for the separation of 24 client partners; the performance metrics of the Impact Pod test group; M&A strategy.
Challenging Questions & Management Response: Management addressed the separation of 24 client partners (8.0% of the force), resulting in a restructuring charge. This was necessary to refine the field deployment structure and enable greater segmentation (Project Penetration/Speed to Ramp) before accelerating hiring in FY2025.
Notable Insights & Clarifications: The Impact Pod test group achieved significantly higher metrics: 67.0% service attach rate (vs. 50.0% for traditional partners) and $132,000 average revenue per client (vs. $63,000). New content launches (Speed of Trust, Navigating Difficult Conversations) are driving high consumption, with the new on-demand Trust module seeing 10x more usage than the previous version. M&A is being actively considered, potentially playing a larger role in the future as competitor valuations become more attractive.
FY2024 Q1 Earnings Call Summary (Date: 2024-01-04)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q1 results were essentially flat year-over-year but stronger than forecasted for both revenue and adjusted EBITDA. Total revenue was $68.4 M. Adjusted EBITDA was $11.0 M. Latest 12-month (LTM) revenue grew 3.0% to $279.6 M, and LTM Adjusted EBITDA grew 9.0% to $47.6 M. Subscription and subscription services sales reached $54.8 M, up 4.0% year-over-year. The balance of billed and unbilled deferred revenue increased 12.0% year-over-year to $169.7 M.
Strategic Narrative & Initiatives: Management emphasized three key strengths: 1) Unique strategic position focused on driving collective action and results for organizations; 2) The power of the revenue-generating engine (reflected in strong two-year growth, growth vs. pre-pandemic highs, and growth in deferred revenue); and 3) A powerful business model characterized by increasing revenue per client, high retention (All Access Pass retention > 90.0% in North America), high contribution margins, upfront invoicing, and low capital intensity. Key initiatives driving future growth include the launch of 3.0 and 5.0 versions of The Speed of Trust and 7 Habits solutions, and a new Difficult Conversations solution, expected to boost the services attach rate.
Business Segment Performance: North America Enterprise revenue was flat year-over-year, following 16.0% growth in the prior year's Q1. International operations revenue decreased 7.0% primarily due to declining legacy (non-All Access Pass) sales. International licensee partner sales increased 3.0%. Education Division sales grew 3.0%, following 23.0% growth in the prior year's Q1. Education subscription and services sales were flat but deferred revenue increased 29.0%. The Education Division has transformed, with approximately 90.0% of revenue now subscription-based.
Macro & Industry Environment: Management noted that clients have their budgets and plans, and the uncertainty reported in Q2 of the prior year has largely subsided. They believe the current environment drives demand for their solutions (leadership capability, culture, execution) as companies seek to execute strategies effectively in challenging times.
Guidance & Outlook: Management reaffirmed FY2024 Adjusted EBITDA guidance of between $54.5 M and $58.0 M (17.0% increase at the midpoint). This growth is expected to be back-half loaded, driven by the $18.0 M increase in deferred revenue, accelerating invoice subscription revenue growth, and the expected return of the subscription services attach rate to its historic 66.5% average in Q3 and Q4. Q2 Adjusted EBITDA is guided between $6.2 M and $7.2 M, lower than the prior year due to a lower expected service attach rate and increased growth investments. Q2 revenue is expected to be flat or slightly above prior year.
Question & Answer (QA) Summary:
Key Analyst Themes: 1) Macroeconomic environment and client spending behavior; 2) Free cash flow generation and its relationship to Adjusted EBITDA; 3) The expected rebound in the subscription services attach rate; and 4) Education funding (ESSER) status.
Challenging Questions & Management Response: An analyst questioned the 23.6% year-over-year decline in total contract signed value ($51.6 M). Management clarified this was not macro-related but due to comping against a single, large, multi-year $10 M contract signed in Q1 of the prior year. The underlying base of contracts signed in the current quarter was consistent with normal Q1 expectations. Another question probed the expected free cash flow (FCF) to Adjusted EBITDA relationship for FY2024, noting historical FCF often exceeded EBITDA. Management stated that FCF is expected to be significantly higher than FY2023 but would likely be modeled slightly lower than Adjusted EBITDA in FY2024 and beyond, primarily due to non-cash items like amortization of capitalized content development (CAPD) and CapEx.
Notable Insights & Clarifications: The expected improvement in the services attach rate in Q3/Q4 is driven by: a) Delivery of services to new schools signed late in Q4 of the prior year; and b) The launch of new solutions (Speed of Trust 3.0/5.0, 7 Habits 5.0, and Difficult Conversations). The recent softness in the attach rate (61.5%) was partially attributed to decreased demand for the Unconscious Bias solution, reflecting a substantial change in the U.S. environment around DEI initiatives. Invoice subscription revenue growth accelerated significantly, moving from flat in Q2/Q3 of the prior year to up 8.0% in Q4 and up 13.0% in Q1. Management expects this acceleration to continue in Q2. ESSER funding (COVID relief) still has about one-third remaining and expires at the end of calendar year 2024. Future Education funding will rely on traditional Title I/Title II grants and a large foundation dedicated to sponsoring Leader in Me schools.
FY2023 Q4 Earnings Call Summary (Date: 2023-11-01)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: FY2023 was a strong year. Revenue grew to $280.5 M, 25.0% higher than the pre-pandemic high of $225.4 M (FY2019). Adjusted EBITDA increased significantly to $48.1 M ($49.5 M in constant currency), exceeding the high end of guidance ($47.0 M to $49.0 M). Subscription and subscription services sales reached $222.8 M, up 80.0% compared to FY2019. The balance of billed and unbilled deferred revenue increased 22.0% or $33.0 M to $186.4 M. The company repurchased 885,000 shares for $35.6 M during the year.
Strategic Narrative & Initiatives: The company focused on three priorities: 1) Being the partner of choice for mission-critical challenges requiring collective action (resulting in record new logos, high retention, and increasing multi-year contracts); 2) Maintaining a strong, profitable business model (high gross margins, decreasing operating SG&A as a percent of sales, and increasing Adjusted EBITDA margins to 17.1%); and 3) Reinvesting profits for high returns. Strategic initiatives for FY2024 include major content launches (re-imagined Speed of Trust and 7 Habits 5.0, new Difficult Conversations solution, revamped sales performance solution) designed for scaling and collective behavior change. The company plans to add approximately 40 net new client-facing professionals (Client Partners, Implementation Strategists, Leader in Me Coaches) in FY2024.
Business Segment Performance: Enterprise Division revenue was $205.7 M, up 5.8% for the year, achieving its highest revenue ever. North America Enterprise sales grew 6.0% for the year. International operations revenue increased 6.0%, driven primarily by improved results in China. Education Division achieved its highest revenue ever, increasing 13.0% to $69.7 M. The division added a record 791 new Leader in Me schools. However, late sign-ups meant some services and materials revenue expected in Q4 shifted into FY2024, contributing to the total company revenue shortfall of $3.5 M versus updated guidance.
Macro & Industry Environment: Management noted the strong results were achieved despite challenging post-pandemic accelerated comps in the prior year. The focus on mission-critical challenges (leadership, culture, execution) provides durability, as these issues remain paramount for CEOs regardless of the economic climate.
Guidance & Outlook: FY2024 Adjusted EBITDA is guided to increase by approximately 17.0% to between $54.5 M and $58.0 M (in constant currency). FY2025 Adjusted EBITDA target is $66.0 M (additional 17.0% increase). FY2026 is expected to be well into the $70.0 M+ range. Q1 FY2024 Adjusted EBITDA is guided between $8.5 M and $9.5 M, lower than the prior year's record $11.5 M, primarily reflecting a lower service attachment rate compared to the prior year's record Q1 (which benefited from a handful of clients purchasing extra launch services).
Question & Answer (QA) Summary:
Key Analyst Themes: 1) Service attachment rate trends; 2) Sales conversion and new logo acquisition strength; 3) Timeline for new client partner ramp; and 4) Capital allocation strategy, particularly regarding M&A and share repurchases.
Challenging Questions & Management Response: Analysts probed the sustainability of the service attach rate, given the tough Q1 FY2024 guidance. Management confirmed the Q4 FY2023 attach rate was strong at 60.0% (above the historic mid-50s average) and expects the rate to remain high, though Q1 FY2024 comps are difficult due to specific large service purchases in the prior year. They reiterated that the dollar value of services is expected to continue increasing, even if the percentage rate fluctuates, due to the increasing subscription base and the need for collective action solutions.
Notable Insights & Clarifications: FY2023 saw the highest number of new logo additions in company history for both Enterprise (All Access Pass) and Education (Leader in Me schools). The sales environment is strong, with good demand for solutions like execution and trust. New client partners typically ramp over several years, with cohorts now showing revenue potential moving towards $2.0 M (up from the pre-subscription high of $1.3 M) due to high retention and expansion. The 40 new client-facing professionals planned for FY2024 will be added primarily in the middle and back half of the year. The Education Division's Q4 revenue shortfall due to late school sign-ups means those onboarding services will be delivered in FY2024, potentially leading to a "doubling up" of onboarding activities in the coming summer. The Impact Platform has launched in all core languages (about 25 total) and is driving value by making deployment and scaling easier, and providing better metrics for behavior change.
FY2023 Q3 Earnings Call Summary (Date: 2023-06-28)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q3 revenue grew 8.0% (9.0% in constant currency) to $67.5 M, building on strong prior year growth. Year-to-date (YTD) revenue grew 10.0% (12.0% in constant currency). Subscription and subscription services revenue grew 9.0% in Q3 and 15.0% YTD. Adjusted EBITDA grew to $11.9 M (higher than expected), or $12.3 M in constant currency. LTM Adjusted EBITDA reached $44.9 M. The balance of deferred subscription sales (billed and unbilled) increased 21.0% to $140.9 M. Multi-year contracts (at least two years) now represent 52.0% of All Access Pass clients and 57.0% of invoiced contract amounts in North America, up significantly from the prior year.
Strategic Narrative & Initiatives: Management reaffirmed the three fundamental priorities: 1) Being the partner of choice (driving high retention and growing lifetime customer value); 2) Operating with a strong, profitable business model (high gross margins, declining operating SG&A as a percent of sales); and 3) Reinvesting profits for high returns (including $50.0 M in share repurchases over the last five quarters). The business model results in a 37.0% flow-through of the $83.0 M revenue increase since FY2020 to Adjusted EBITDA.
Business Segment Performance: North America Enterprise revenue grew 3.0% in Q3, following 20.0% growth in the prior year. International operations revenue increased 23.0%, primarily driven by improved results in China. International licensee partner sales increased 9.0%. Education Division sales grew 18.0% in Q3, with subscription and services sales up 19.0%. Leader in Me school retention remained high at approximately 90.0%.
Macro & Industry Environment: Management acknowledged the "deeper snow" metaphor from Q2 but noted that revenue retention strengthened meaningfully in Q3 compared to Q2, and Q4 is expected to be even stronger, returning to historic high levels. They emphasized that their solutions address mission-critical, durable challenges (collective action, behavior change) that persist regardless of the external environment. New logo growth remains strong.
Guidance & Outlook: FY2023 Adjusted EBITDA guidance was reaffirmed at between $47.0 M and $49.0 M in constant currency. FY2024 Adjusted EBITDA outlook was reaffirmed at approximately $57.0 M, and FY2025 at approximately $67.0 M (in constant currency). Q4 Adjusted EBITDA is expected to be between $14.1 M and $16.1 M in constant currency. Full-year revenue is expected to be approximately $284.0 M.
Question & Answer (QA) Summary:
Key Analyst Themes: 1) Sequential improvement in revenue retention and the impact of macro uncertainty; 2) Growth acceleration needed for FY2024 targets; 3) Update on the Impact Platform rollout; and 4) Education Division summer renewal season outlook.
Challenging Questions & Management Response: An analyst questioned the gap between North American Enterprise subscription/services revenue growth (3.0% in Q3) and deferred revenue growth (high teens/low 20s). Management attributed the low percentage growth to comping against a very significant growth percentage in the prior year (29.0%). They stated that the absolute dollar level of subscription-related services is strong and clients are not pushing out projects, evidenced by the increasing rate of multi-year contracts.
Notable Insights & Clarifications: The revenue retention dip in Q2 was due to a handful of larger clients not renewing due to internal uncertainty (the "deeper snow"), not a widespread trend. Management is actively working to win these clients back. Multi-year contracts are significantly more valuable: clients renewing after a multi-year term are 50.0% more likely to expand their contract value compared to single-year contract peers. The Impact Platform has launched for the vast majority of English-speaking clients and is rolling out to core languages (targeting 24 total) by early fall/winter, enhancing the ability to deploy and measure collective behavior change at scale. The Education Division is focused on district-wide sales (expected to double the number of districts added this year), which brings on larger clumps of schools and is supported by strong retention rates and favorable macro trends (mental wellness, teacher retention).
FY2023 Q2 Earnings Call Summary (Date: 2023-03-29)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q2 revenue was $61.8 M, up 9.0% (11.0% in constant currency), despite lower-than-anticipated sales in China and lost rental income. Adjusted EBITDA was $8.2 M ($8.4 M in constant currency). YTD revenue grew 11.0% (14.0% in constant currency). Total subscription and subscription services revenue grew 15.0% in Q2, 18.0% YTD, and 22.0% LTM. The balance of billed and unbilled deferred revenue increased 22.0% to $145.8 M, with unbilled deferred revenue growing 42.0% ($20.7 M). Multi-year contracts (at least two years) increased to 55.0% of North America All Access Pass contract value, up from 47.0% in the prior year.
Strategic Narrative & Initiatives: Management emphasized the resilience of the business model in an uncertain economic environment ("hiking in deeper snow"). Five key elements provide strength: 1) Focus on mission-critical, durable challenges (collective action); 2) Effective solutions driving client loyalty (high retention, multi-year contracts); 3) Client diversity (no single client > 2.0% revenue); 4) Strong subscription model driving high flow-through to EBITDA; and 5) Significant liquidity ($55.1 M cash, $62.5 M undrawn credit facility) for accelerated growth and share repurchases. The Board increased the stock repurchase authorization to $50.0 M.
Business Segment Performance: North America Enterprise revenue grew 8.0% in Q2, tempered by an 11.0% softening in government revenue. Subscription and subscription services revenue grew 7.0% in Q2, comping against 29.0% growth in the prior year. International revenue declined 17.0% in Q2 due to COVID-related lockdowns in China and slow recovery in Japan, though these pressures are expected to ease in the back half. Education Division revenue grew 28.0% in Q2, with subscription and services revenue up 30.0%. Leader in Me school retention remained high at approximately 90.0%.
Macro & Industry Environment: The environment is increasingly uncertain ("deeper snow"). While new logo revenue remains strong and many clients are reinvesting in leadership and culture, the growth rate of invoiced amounts slowed (up 4.0% in Q2 vs. 25.0% in prior year Q2). This deceleration was attributed to comping against a high prior-year watermark and the non-renewal of a few larger clients facing their own headwinds.
Guidance & Outlook: FY2023 Adjusted EBITDA guidance was reaffirmed at between $47.0 M and $49.0 M in constant currency. FY2024 and FY2025 Adjusted EBITDA targets remain unchanged at approximately $57.0 M and $67.0 M, respectively. Full-year revenue guidance was revised down to approximately $284.0 M (from $294.0 M), reflecting a $3.5 M FX impact, a $2.5 M slower recovery in China/Japan, and a $4.0 M impact from the "deeper snow" environment. Q3 Adjusted EBITDA is guided between $9.5 M and $10.5 M in constant currency.
Question & Answer (QA) Summary:
Key Analyst Themes: 1) Deceleration in bookings/invoicing growth; 2) Impact of macro environment ("deeper snow") on client renewals; 3) Capital allocation strategy, particularly the new $62.5 M credit facility; and 4) Sustainability of SG&A leverage.
Challenging Questions & Management Response: Analysts questioned the significant deceleration in bookings (up 2.0% in Q2 vs. mid-teens previously). Management explained that while the number of clients renewing/expanding increased, this was offset by a few larger clients who were "not able to renew" due to their own economic headwinds, disproportionately impacting the total invoiced amount. They expressed confidence in winning these clients back. The high growth in unbilled deferred revenue (42.0%) confirms that longer-term, multi-year contracts are outpacing shorter-term renewals.
Notable Insights & Clarifications: The SG&A leverage is driven by fixed costs growing slower than revenue, particularly in non-client-facing central overhead. Client-facing costs are expected to grow in line with revenue to support acceleration. The cost to acquire a customer (CAC) remains less than the first-year contract value, allowing for simultaneous growth in revenue and profitability. The new $62.5 M credit facility was secured to provide flexibility for strategic tuck-in M&A and expanded share repurchases, without intending to fully utilize the capacity for a major acquisition. The new credit agreement provides greater flexibility for share repurchases compared to the previous facility, as long as the leverage ratio remains below 2.0x. Management reiterated that the business is still on track for low-teens, mid-teens, and eventually high-teens revenue growth, though the current environment may slightly elongate the timing.
FY2023 Q1 Earnings Call Summary (Date: 2023-01-05)
Prepared Remarks (PR) Summary:
Overall Performance & Key Metrics: Q1 results were strong and exceeded expectations. Revenue grew 13.2% to $69.4 M (16.6% in constant currency). LTM revenue grew 14.3% (16.2% in constant currency). Total subscription and subscription services revenue grew 21.0% in Q1 and 26.0% LTM. Adjusted EBITDA grew 16.0% to $11.5 M (23.0% or $12.2 M in constant currency). The balance of deferred subscription revenue (billed and unbilled) increased 25.0% to $151.6 M. Multi-year contracts (at least two years) now represent 62.0% of All Access Pass invoiced revenue, up from 55.0% in the prior year.
Strategic Narrative & Initiatives: Performance is driven by five factors: 1) Addressing mission-critical challenges; 2) Effective solutions leading to high and increasing lifetime customer value (LTCV); 3) Subscription growth accelerating overall company growth; 4) Strong business model driving high flow-through (19.0% flow-through in Q1); and 5) Significant headroom for growth supported by investment (e.g., net 40+ sales force growth planned for FY2023). The average annual All Access Pass client spend is $77,000, nearly double the initial $40,000 first-year spend.
Business Segment Performance: North America Enterprise revenue grew 16.0% in Q1, with subscription and services revenue up 19.0%. International revenue was impacted by ongoing COVID lockdowns in China and slow post-COVID recovery in Japan, declining 8.0% LTM. International licensee partner revenue increased 9.0%. Education Division revenue grew 23.0% in Q1, with subscription and services revenue up 24.0%.
Macro & Industry Environment: Management acknowledged hearing and feeling economic headwinds (e.g., budget allocation, workforce sizing) but noted that the business is navigating well. Leading indicators like marketing event attendance are up 20.0%, and pipelines remain strong. The mission-critical nature of their solutions provides resilience.
Guidance & Outlook: FY2023 Adjusted EBITDA guidance was reaffirmed at between $47.0 M and $49.0 M in constant currency. FY2024 and FY2025 Adjusted EBITDA targets were reaffirmed at approximately $57.0 M and $67.0 M, respectively. Q2 Adjusted EBITDA is guided between $8.0 M and $9.0 M, reflecting the smallest revenue quarter and continued investment in growth. Q2 reported revenue growth is expected to be approximately 11.0%.
Question & Answer (QA) Summary:
Key Analyst Themes: 1) Impact of the macro environment (recession, inflation) on new logos and renewals; 2) Pricing strategy; 3) Update on the Impact Platform rollout; and 4) Capital allocation and share repurchases.
Challenging Questions & Management Response: An analyst asked why management did not raise guidance given the robust Q1 results and strong leading indicators. Management stated that company policy is to address guidance at the end of Q2, closer to the large back-half (Q4) of the fiscal year, when more visibility is available.
Notable Insights & Clarifications: The company implemented a price increase on September 1, FY2023. The list price increased 10.0%, but the weighted average price increase was approximately 3.0% due to discounts offered in exchange for multi-year contract commitments. The Impact Platform, launched in North America in October, is receiving positive feedback, particularly for its ability to scale deployment and administration, which addresses a major challenge for clients with limited L&D staff. Global rollout to English-speaking direct offices has begun, with other languages anticipated for an April rollout. The services attach rate continues to increase due to two main factors: 1) The complex, mission-critical nature of the problems addressed (requiring expert facilitation/coaching); and 2) The company's ability to deliver high-impact, live online training in convenient 90-minute chunks, a capability that gained acceptance during the pandemic. The company repurchased approximately 800,000 shares in Q1 related to the net exercise of long-term incentive plan shares, with $20.0 M remaining on the current authorization. China's business is expected to be slow for a good part of FY2023 due to the widespread impact of the shift away from the "no-COVID" policy. Japan's recovery is slow but is being muted by the ongoing conversion of its business model to subscription.
Part 2: Narrative Evolution Overview (Cross-Transcript Synthesis)
Evolution of Strategic Priorities:
The foundational strategic priority remained consistent across all quarters: maximizing Lifetime Customer Value (LTCV) by being the partner of choice for mission-critical challenges (leadership, culture, execution) and driving high retention (consistently 84.0% to 90.0%).
The major strategic pivot occurred between FY2024 Q4 and FY2025 Q1, shifting from general growth acceleration projects (Project Penetrate, Project Speed to Ramp) to a highly specialized, front-loaded sales force transformation. This involved a $16 M incremental investment to split the sales team into Project Land (new logo hunters) and Project Expand (existing client penetration), explicitly targeting an acceleration from mid-single-digit growth to consistent double-digit revenue growth by FY2026/FY2027.
As external pressures intensified in FY2025, a new, reactive priority emerged: protecting profitability. Management executed prudent cost reduction actions in Q3 FY2025, resulting in $8 M in annualized run rate savings for FY2026, specifically to maintain the Adjusted EBITDA guidance midpoint despite significant revenue headwinds.
Technology focus evolved from the rollout of the Impact Platform (FY2023) and content refreshes (FY2024) to strategically embedding AI in FY2025, viewing it as a powerful "third leg of the stool" for real-time coaching and reinforcement, rather than a competitive threat.
Recurring Themes & KPIs:
Subscription Strength: Consistent growth in deferred revenue (billed and unbilled), frequently increasing 10.0% to 25.0% YoY, confirming the durability of the subscription model.
Contract Quality: The increasing percentage of multi-year contracts, rising from 47.0% in FY2023 Q2 to 62.0% of invoiced revenue by FY2025 Q3, was a persistent metric cited to demonstrate client loyalty and future revenue visibility.
Macroeconomic Headwinds: The external environment was a constant theme, evolving from "hiking in deeper snow" (FY2023 Q2) to "turbulent" (FY2025 Q2), characterized by delayed client decision-making, cost scrutiny, and specific government actions (DOGE, ESSER fund uncertainty, tariffs).
Services Attachment Rate: The fluctuation and expected rebound of the services attach rate (aiming for the historic 66.5% average, often reported around 60.0%) was a recurring operational theme, tied directly to reported revenue timing and new product launches.
Education Division Resilience: The Education division's strong performance, high school retention (around 90.0%), and ability to "grow right through" the expiration of ESSER funds were consistently highlighted as a counter-balance to Enterprise volatility.
Evolution of Guidance:
Initial Stability (FY2023): FY2023 EBITDA guidance ($47.0 M to $49.0 M) and long-term targets for FY2024 ($57.0 M) and FY2025 ($67.0 M) were consistently reaffirmed, despite early signs of macro uncertainty.
Aggressive Investment Outlook (FY2024 Q4/FY2025 Q1): Initial FY2025 guidance was set high ($295 M to $305 M Revenue; $40 M to $44 M EBITDA), reflecting the expected acceleration from the $16 M sales investment.
Significant Downward Revisions (FY2025 Q2/Q3): Guidance was sharply revised downward twice in FY2025. The Q2 revision cut the low end of revenue by $15 M (to $275 M to $285 M) due to government cancellations and commercial headwinds. The Q3 revision maintained the revenue range but lowered the midpoint, while the EBITDA range ($28 M to $33 M) was protected only by $8 M in annualized cost reduction actions.
Delayed Acceleration (FY2025 Q4): FY2026 guidance was set flat to FY2025 ($265 M to $275 M Revenue; $28 M to $33 M EBITDA), constrained by the conversion lag resulting from lower deferred revenue generated in the difficult FY2025. The expected return to double-digit growth was explicitly pushed out to FY2027.
Persistent Analyst Concerns:
Sales Transformation Effectiveness: Analysts consistently questioned the Return on Investment (ROI) and sustainability of the Project Land/Expand initiative, particularly in FY2025, asking if reported early traction (new logo wins) was merely an "easy compare" against prior weak periods or if it represented structural, sustainable change.
Bookings Deceleration vs. Internal Metrics: A recurring challenge was reconciling management's claims of strong client retention and new logo acquisition with the reported decline or significant deceleration in invoiced subscription revenue and total contract value signed, suggesting analysts believed the macro environment was having a greater impact on client downsizing than management initially admitted.
Government/Education Funding Risk: Analysts repeatedly probed the specific financial impact of federal government actions (DOGE) and the expiration timeline and mitigation strategy for ESSER funds in the Education division, indicating persistent concern over reliance on public sector spending.
Cash Flow Quality: Early in the period (FY2023 Q1/Q2), analysts questioned the expected moderation of Free Cash Flow relative to Adjusted EBITDA, seeking clarity on the impact of increased tax payments (moving out of NOLs) and amortization of capitalized content development (CAPD).
Part 3: Limitations of Summary
This report is a summary of management's self-reported narrative from earnings calls and is not an independent verification of facts or an investment analysis. The scope is strictly limited to the provided transcript documents.
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