Franklin Covey Co. Q4 FY2025 earnings call

• Paul Walker noted that fiscal '25 full year revenue and adjusted EBITDA were in line with expectations. The company is in a period of execution and return to growth, with a strong start in Q1 2026, especially in Enterprise North America with acceleration in invoice growth, new logo growth, and services booking pace. • Focus on two key priorities: being the leader in combining world-class content, technology, and services for client breakthrough impact, and transforming the go-to-market approach to win more strategic clients and expand with existing ones. • Investments in go-to-market transformation, leveraging AI in offerings, and rebuilding the business model for long-term client partnerships. Education business showed continued strength despite challenges, with deferred revenue increasing and new school additions.

For fiscal 2025, the Enterprise Division generated $188.1 million in revenue, accounting for 70% of the company's overall revenue. The Education Division had revenue of $74.6 million, making up 28% of the company's revenue. In the fourth quarter of fiscal 2025, Enterprise Division revenue was $45.7 million, down 22% year-over-year, while Education Division revenue was $24.4 million, flat compared to the prior year.

• Fiscal '26 revenue is expected to be in the range of $265 million to $275 million. • Fiscal '26 adjusted EBITDA is anticipated to be in the range of $28 million to $33 million, with growth weighted towards the back half of the year. The company expects invoiced amounts to grow in fiscal '26, with reported revenue growth translating to stronger growth in fiscal '27 in terms of adjusted EBITDA and free cash flow.

• Macroeconomic conditions posing challenges to client spending and decision-making. • Government actions and geopolitical tensions affecting contracts and business environment uncertainty. • Disruption in the education sector due to factors like Department of Education actions and expiration of COVID relief funds impacting school purchases.

Q: How has the decision-making environment evolved, and how has the sales transformation performed in the past quarter?

A: The decision-making environment had turbulence last fiscal year due to new administration policies, but now clients are moving to keep businesses forward. The sales transformation in Enterprise North America shows strong indicators of invoiced growth in Q1, with new logos up and services booking pace double digits year-over-year.

Q: What about client renewals? Are clients renewing at similar size contracts, contracting, or expanding?

A: Client retention percentage has remained consistent. While some clients rescoped contract sizes, overall client retention is strong. The company expects expansion to outweigh contraction in revenue retention over time.

Q: Can you give Q1 revenue and EBITDA expectations?

A: Specific guidance for Q1 isn't provided, but revenue and EBITDA are expected to be weighted towards the back half of fiscal '26, with normal seasonality affecting Q1 to Q2 trends.

Q: How to view fiscal 2026 in Education?

A: Fiscal 2026 in Education is expected to be better than 2025 due to expiration of COVID relief funds last year and Department of Education issues being less impactful, with strong deferred revenue and large district/state opportunities driving growth.