SALT LAKE CITY--(BUSINESS WIRE)--Jan 5, 2023--
Franklin Covey Co. (NYSE: FC), a leader in organizational performance improvement that creates, and on a subscription basis, distributes world-class content, training, processes, and tools that organizations and individuals use to achieve systemic changes in human behavior to transform their results, today announced financial results for its first quarter of fiscal 2023, which ended on November 30, 2022.
Introduction
The Company’s strong start to fiscal 2023 was highlighted by the following key metrics:
Paul Walker, President and Chief Executive Officer, commented, “We are very pleased with our strong start to fiscal 2023, which was driven by continued strong revenue growth, gross margins, and operational efficiency, which contributed to increased net income and Adjusted EBITDA. Our first quarter results featured a 13% increase in sales, a 76.0% gross margin, a 22% increase in net income, and a 16% increase in Adjusted EBITDA to $11.5 million. We achieved these outstanding results despite continued international operating issues, including the impact of $2.0 million of unfavorable foreign exchange on our first quarter sales and continued operating challenges in China and Japan.”
Walker continued, “Three key factors are continuing to drive and enable our strong business model. First, the importance of the must-win opportunities that we help our clients address. The must-win challenges and opportunities that we help our clients address all require the collective action of large numbers of people. These challenges and opportunities are very durable in both good and more difficult times. Second, is the effectiveness of our solutions in helping clients successfully address these challenges. Our offerings include best-in-class content, effective technology which enables us to deliver our content with impact and at scale, and metrics that our clients can use to evaluate the impact of our solutions in moving behavior. Third, the strength and reach of our worldwide client-facing organization in acquiring, serving, retaining, and expanding client relationships. We believe these factors were key to our strong first quarter and latest twelve months’ performance, and will continue to be important to our growth during the remainder of fiscal 2023 and in future periods.”
First Quarter Financial Overview
The following is a summary of financial results for the first quarter of fiscal 2023:
Fiscal 2023 Guidance
Driven by the continued strength and strategic durability of its All Access Pass and Leader in Me membership subscriptions, which have driven accelerated growth over the past years, and continuing strong performance through the first quarter of fiscal 2023, the Company affirms its previous guidance that Adjusted EBITDA for fiscal 2023 will increase to between $47 million and $49 million in constant currency, compared with the $42.2 million in Adjusted EBITDA achieved in fiscal 2022. The Company expects to achieve this growth even after continuing to make: 1) increased investments to add new client partners, other personnel, and investments in the Company’s delivery portals and content; 2) absorbing potentially challenging macroeconomic circumstances; and 3) the potential for ongoing disruptions in China and Japan resulting from the COVID-19 pandemic and economic conditions in these countries. The Company’s current outlook is that its Adjusted EBITDA will then increase to approximately $57 million in fiscal 2024, and to approximately $67 million in fiscal 2025. The Company remains confident in the strength of the All Access Pass and Leader in Me membership subscriptions, which have driven Franklin Covey’s growth across recent years and which are expected to drive continued growth in fiscal 2023 and subsequent years.
Earnings Conference Call
On Thursday, January 5, 2023, at 5:00 p.m. Eastern (3:00 p.m. Mountain) Franklin Covey will host a conference call to review its financial results for the first quarter of fiscal 2023. Interested persons may access a live audio webcast on the Company’s website at https://ir.franklincovey.com, or may participate via telephone by registering at https://register.vevent.com/register/BI1670588cb173490e85da5a3871f3e033. Once registered, participants will have the option of: 1) dialing into the call from their phone (via a personalized PIN); or 2) clicking the “Call Me” option to receive an automated call directly to their phone. For either option, registration will be required to access the call. A replay of the conference call webcast will be archived on the Company’s website for at least 30 days.
Investor Event
Franklin Covey will be hosting an investor event on February 1-2, 2023. During this event, the Company will explore the client impact journey offered through its two divisions, introduce the FranklinCovey Impact Platform, and provide an opportunity to dive into the fundamentals of the Company’s subscription business and future strategy with its Executive Team. To register for the investor event, or to receive further information, please contact Boyd Roberts at 801-817-5127 or via email at investor.relations@franklincovey.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including those statements related to the Company’s future results and profitability and other goals relating to the growth and operations of the Company. Forward-looking statements are based upon management’s current expectations and are subject to various risks and uncertainties including, but not limited to: general economic conditions; the severity and duration of global business disruptions from the COVID-19 outbreak; expectations regarding the economic recovery from the pandemic; renewals of subscription contracts; the impact of deferred revenues on future financial results; impacts from global economic and supply chain disruptions; market acceptance of new products or services, including new AAP portal upgrades; inflation; the ability to achieve sustainable growth in future periods; and other factors identified and discussed in the Company’s most recent Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond the Company’s control or influence, any one of which may cause future results to differ materially from the Company’s current expectations, and there can be no assurance that the Company’s actual future performance will meet management’s expectations. These forward-looking statements are based on management’s current expectations and the Company undertakes no obligation to update or revise these forward-looking statements to reflect events or circumstances subsequent to this press release.
Non-GAAP Financial Information
This earnings release includes the concepts of adjusted earnings before interest, income taxes, depreciation, and amortization (Adjusted EBITDA) and “constant currency,” which are non-GAAP measures. The Company defines Adjusted EBITDA as net income excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items such as adjustments to the fair value of expected contingent consideration liabilities arising from business acquisitions. Constant currency is a non-GAAP financial measure that removes the impact of fluctuations in foreign currency exchange rates and is calculated by translating the current period’s financial results at the same average exchange rates in effect during the prior year and then comparing this amount to the prior year. The Company references these non-GAAP financial measures in its decision making because they provide supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods and the Company believes they provide investors with greater transparency to evaluate operational activities and financial results. Refer to the attached table for the reconciliation of the non-GAAP financial measure, Adjusted EBITDA, to consolidated net income, a related GAAP financial measure.
The Company is unable to provide a reconciliation of the above forward-looking estimate of non-GAAP Adjusted EBITDA to GAAP measures because certain information needed to make a reasonable forward-looking estimate is difficult to obtain and dependent on future events which may be uncertain, or out of the Company’s control, including the amount of AAP contracts invoiced, the number of AAP contracts that are renewed, necessary costs to deliver the Company’s offerings, such as unanticipated curriculum development costs, and other potential variables. Accordingly, a reconciliation is not available without unreasonable effort.
About Franklin Covey Co.
Franklin Covey Co. (NYSE: FC) is a global leadership company with directly owned and licensee partner offices providing professional services in over 160 countries and territories. The Company transforms organizations by partnering with its clients to build leaders, teams, and cultures that achieve breakthrough results through collective action, which leads to a more engaging work experience for their people. Available through the Franklin Covey All Access Pass, the Company’s best-in-class content and solutions, experts, technology, and metrics seamlessly integrate to ensure lasting behavioral change at scale. Solutions are available in multiple delivery modalities in more than 20 languages.
This approach to leadership and organizational change has been tested and refined by working with tens of thousands of teams and organizations over the past 30 years. Clients have included organizations in the Fortune 100, Fortune 500, and thousands of small- and mid-sized businesses, numerous governmental entities, and educational institutions. To learn more, visit www.franklincovey.com, and enjoy exclusive content from Franklin Covey’s social media channels at: LinkedIn, Facebook, Twitter, Instagram, and YouTube.
| FRANKLIN COVEY CO. | |||||||
| Condensed Consolidated Income Statements | |||||||
| (in thousands, except per-share amounts, and unaudited) | |||||||
| Quarter Ended | |||||||
November 30, |
| November 30, | |||||
| 2022 |
|
|
| 2021 |
| |
| Net sales | $ | 69,369 |
| $ | 61,259 |
| |
| Cost of sales |
| 16,627 |
|
| 13,661 |
| |
| Gross profit |
| 52,742 |
|
| 47,598 |
| |
| Selling, general, and administrative |
| 44,012 |
|
| 39,343 |
| |
| Depreciation |
| 1,246 |
|
| 1,279 |
| |
| Amortization |
| 1,092 |
|
| 1,431 |
| |
| Income from operations |
| 6,392 |
|
| 5,545 |
| |
| Interest expense, net |
| (329 | ) |
| (431 | ) | |
| Income before income taxes |
| 6,063 |
|
| 5,114 |
| |
| Income tax provision |
| (1,396 | ) |
| (1,302 | ) | |
| Net income | $ | 4,667 |
| $ | 3,812 |
| |
| Net income per share: | |||||||
| Basic | $ | 0.34 |
| $ | 0.27 |
| |
| Diluted |
| 0.32 |
|
| 0.27 |
| |
| Weighted average common shares: | |||||||
| Basic |
| 13,877 |
|
| 14,246 |
| |
| Diluted |
| 14,507 |
|
| 14,312 |
| |
| Other data: | |||||||
| Adjusted EBITDA (1) | $ | 11,472 |
| $ | 9,932 |
|
| (1) | Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, stock-based compensation, and certain other items) is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results. For a reconciliation of this non-GAAP measure to a comparable GAAP measure, refer to the Reconciliation of Net Income to Adjusted EBITDA as shown below. | |
| FRANKLIN COVEY CO. | |||||||
| Reconciliation of Net Income to Adjusted EBITDA | |||||||
| (in thousands and unaudited) | |||||||
| Quarter Ended | |||||||
| November 30, | November 30, | ||||||
| 2022 |
|
| 2021 |
| ||
| Reconciliation of net income to Adjusted EBITDA: | |||||||
| Net income | $ | 4,667 |
| $ | 3,812 |
| |
| Adjustments: | |||||||
| Interest expense, net |
| 329 |
|
| 431 |
| |
| Income tax provision |
| 1,396 |
|
| 1,302 |
| |
| Amortization |
| 1,092 |
|
| 1,431 |
| |
| Depreciation |
| 1,246 |
|
| 1,279 |
| |
| Stock-based compensation |
| 2,735 |
|
| 1,649 |
| |
| Increase in the fair value of contingent consideration liabilities |
| 7 |
|
| 28 |
| |
| Adjusted EBITDA | $ | 11,472 |
| $ | 9,932 |
| |
| Adjusted EBITDA margin |
| 16.5 | % |
| 16.2 | % | |
| FRANKLIN COVEY CO. | |||||||
| Additional Financial Information | |||||||
| (in thousands and unaudited) | |||||||
| Quarter Ended | |||||||
November 30, |
| November 30, | |||||
| 2022 |
|
|
| 2021 |
| |
| Sales by Division/Segment: | |||||||
| Enterprise Division: | |||||||
| Direct offices | $ | 50,167 |
| $ | 45,119 |
| |
| International licensees |
| 3,278 |
|
| 2,997 |
| |
| 53,445 |
|
| 48,116 |
| ||
| Education Division |
| 14,350 |
|
| 11,697 |
| |
| Corporate and other |
| 1,574 |
|
| 1,446 |
| |
| Consolidated | $ | 69,369 |
| $ | 61,259 |
| |
| Gross Profit by Division/Segment: | |||||||
| Enterprise Division: | |||||||
| Direct offices | $ | 39,921 |
| $ | 36,202 |
| |
| International licensees |
| 2,977 |
|
| 2,701 |
| |
| 42,898 |
|
| 38,903 |
| ||
| Education Division |
| 9,175 |
|
| 7,860 |
| |
| Corporate and other |
| 669 |
|
| 835 |
| |
| Consolidated | $ | 52,742 |
| $ | 47,598 |
| |
| Adjusted EBITDA by Division/Segment: | |||||||
| Enterprise Division: | |||||||
| Direct offices | $ | 11,250 |
| $ | 9,954 |
| |
| International licensees |
| 1,831 |
|
| 1,671 |
| |
| 13,081 |
|
| 11,625 |
| ||
| Education Division |
| 281 |
|
| 235 |
| |
| Corporate and other |
| (1,890 | ) |
| (1,928 | ) | |
| Consolidated | $ | 11,472 |
| $ | 9,932 |
| |
| FRANKLIN COVEY CO. | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (in thousands and unaudited) | |||||||
November 30, |
| August 31, | |||||
| 2022 |
|
|
| 2022 |
| |
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 58,152 |
| $ | 60,517 |
| |
| Accounts receivable, less allowance for doubtful accounts of $4,427 and $4,492 |
| 57,352 |
|
| 72,561 |
| |
| Inventories |
| 3,477 |
|
| 3,527 |
| |
| Prepaid expenses and other current assets |
| 17,364 |
|
| 19,278 |
| |
| Total current assets |
| 136,345 |
|
| 155,883 |
| |
| Property and equipment, net |
| 9,465 |
|
| 9,798 |
| |
| Intangible assets, net |
| 43,742 |
|
| 44,833 |
| |
| Goodwill |
| 31,220 |
|
| 31,220 |
| |
| Deferred income tax assets |
| 4,279 |
|
| 4,686 |
| |
| Other long-term assets |
| 12,378 |
|
| 12,735 |
| |
$ | 237,429 |
| $ | 259,155 |
| ||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Current portion of notes payable | $ | 5,835 |
| $ | 5,835 |
| |
| Current portion of financing obligation |
| 3,281 |
|
| 3,199 |
| |
| Accounts payable |
| 6,878 |
|
| 10,864 |
| |
| Deferred subscription revenue |
| 74,394 |
|
| 85,543 |
| |
| Other deferred revenue |
| 13,906 |
|
| 14,150 |
| |
| Accrued liabilities |
| 23,380 |
|
| 34,205 |
| |
| Total current liabilities |
| 127,674 |
|
| 153,796 |
| |
| Notes payable, less current portion |
| 6,045 |
|
| 7,268 |
| |
| Financing obligation, less current portion |
| 7,105 |
|
| 7,962 |
| |
| Other liabilities |
| 6,788 |
|
| 7,116 |
| |
| Deferred income tax liabilities |
| 199 |
|
| 199 |
| |
| Total liabilities |
| 147,811 |
|
| 176,341 |
| |
| Shareholders' equity: | |||||||
| Common stock |
| 1,353 |
|
| 1,353 |
| |
| Additional paid-in capital |
| 222,413 |
|
| 220,246 |
| |
| Retained earnings |
| 86,688 |
|
| 82,021 |
| |
| Accumulated other comprehensive loss |
| (672 | ) |
| (542 | ) | |
| Treasury stock at cost, 13,165 and 13,203 shares |
| (220,164 | ) |
| (220,264 | ) | |
| Total shareholders' equity |
| 89,618 |
|
| 82,814 |
| |
$ | 237,429 |
| $ | 259,155 |
|
View source version on businesswire.com:https://www.businesswire.com/news/home/20230105005851/en/
CONTACT: Investor Contact:
Franklin Covey
Boyd Roberts
801-817-5127
investor.relations@franklincovey.comMedia Contact:
Franklin Covey
Debra Lund
801-817-6440
Debra.Lund@franklincovey.com
KEYWORD: UNITED STATES NORTH AMERICA UTAH
INDUSTRY KEYWORD: CONSULTING PROFESSIONAL SERVICES HUMAN RESOURCES FINANCE
SOURCE: Franklin Covey Co.
Copyright Business Wire 2023.
PUB: 01/05/2023 04:05 PM/DISC: 01/05/2023 04:05 PM
http://www.businesswire.com/news/home/20230105005851/en