Franklin Covey Company · NYSE:FC
Franklin Covey — Q1 2018 Earnings Presentation
32 slides from Franklin Covey's earnings presentation, January 2018
Slide 1: Investor Update First Quarter Fiscal Year 2018
Investor Update First Quarter Fiscal Year 2018
Slide 2: Forward-looking Statements / Non-GAAP
Forward-looking Statements / Non-GAAP • This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management’s current expectations and are subject to various risks and uncertainties inc
Slide 3: 5 key takeaways
5 key takeaways Q1 results Enhanced Growth is being Significant Increasing indicative of visibility and driven by success inflection point upside for inflection in foundation for of subscription behind us, paving shareholders, as revenue and accelerated business, whose the way for strong SaaS value
Slide 4: Q1 FY18 results highlights
Q1 FY18 results highlights +20.5%Revenue +59% Subscription and +138% Growth of subscription +23% Deferred Revenue growth subscription-related and subscription-related (billed) growth revenue growth revenue in Enterprise Division +52% Total Deferred +$3.4M Growth in Adjusted +$5.2M YOY growth in Net
Slide 5: Strong first quarter results: significant Q1 revenue growth YOY
1 Strong first quarter results Significant Q1 revenue growth YOY Total Revenue Total SaaS and SaaS- Related Revenue SaaS growth in Enterprise Division +59% +138% +20.5% FY17 Q1 $39.8M FY17 Q1 $12.9M FY17 Q1 $5.3M FY18 Q1 $47.9M FY18 Q1 $20.5M FY18 Q1 $12.7M 5
Slide 6: Strong first quarter results: deferred revenue up vs. last year
1 Strong first quarter results Deferred revenue up vs. last year Total Deferred Revenue (billed and unbilled) Deferred Revenue (billed) +52% +23% FY17 Q1 $6.6M FY18 Q1 $8.2M Deferred Revenue (unbilled) FY17 Q1 $0M FY18 Q1 $1.9M FY17 Q1 $6.6M FY18 Q1 $10.1M *Note: The Sum of subscription and subscrip
Slide 7: Strong first quarter results: strong Adjusted EBITDA growth
1 Strong first quarter results Strong Adjusted EBITDA growth FY17 Q1 Gross Margin $25.3M (63.6%) Adjusted EBITDA* FY17 Q1 FY18 Q1 FY18 Q1 YoY Change $7.6M $32.9M (68.6%) -$2.8M $0.6M SG&A FY17 Q1 $28.1M +$3.4M FY18 Q1 $32.3M YOY change YoY Change $4.2M *Note: Adjusted EBITDA is a non-GAAP financial
Slide 8: Strong first quarter results: substantial increase in operating cash flow
1 Strong first quarter results Substantial increase in operating cash flow Net cash provided by operating activities +5.2M compared to FY17 Q1 FY17 Q1 FY18 Q1 -$2.9M $2.3M 8
Slide 9: Strong first quarter results: paying subscribers up significantly
1 Strong first quarter results Paying subscribers up significantly 500,000 400,000 >475,000 Active paying subscribers 300,000 +44% 200,000 100,000 Up from Q1 2017 0 FY 15 Q4 FY 16 Q1 FY 16 Q2 FY 16 Q3 FY 16 Q4 FY 17 Q1 FY 17 Q2 FY 17 Q3 FY 17 Q4 FY 18 Q1 9
Slide 10: Significant increase in deferred revenue balances
2 Enhanced visibility and foundation for accelerated growth Significant increase in deferred revenue balances Total Balance of Deferred Revenue (Q1) Billed Unbilled +164% +97.5% +705% FY17 Q1 FY18 Q1 $16.1M $2.0M $18.1M $47.7M FY17 Q1 FY17 Q1 FY18 Q1 $31.8M FY18 Q1 $15.9M *Note: The Sum of subscript
Slide 11: Instrumental historical business shifts
3 Particular success within subscription business Instrumental historical business shifts Shift 1 Expansion beyond planner sales into Shift 2 Significant growth of salesforce Shift 3 Delivery of integrated solutions vs. Share price ($) content modular $25 $20 $15 $10 $5 FY02 FY03 FY04 FY05 FY06 FY07
Slide 12: A cross-industry shift toward SaaS business models
Particular success within subscription business An cross-industry shift toward SaaS business models MarTech SMB HR Finance Security Customer IT Education Organizational Service Performance Improvement 12
Slide 13: Invoiced amount plus change in deferred revenue
3 Particular success within subscription business Invoiced amount plus change in deferred revenue (billed and unbilled) FY 15 +54% FY 16 Compared to same +$37.4M FY 17 trailing four quarter period last year ended Nov. 30 0 20 40 60 80 100 120 (Millions) *Note: The Sum of subscription and subscriptio
Slide 14: Total paying subscribers continues to rise
3 Particular success within subscription business Total paying subscribers continues to rise 500,000 475,000 400,000 300,000 +44% 200,000 100,000 Up from Q1 2017 0 FY 15 Q4 FY 16 Q1 FY 16 Q2 FY 16 Q3 FY 16 Q4 FY 17 Q1 FY 17 Q2 FY 17 Q3 FY 17 Q4 FY 18 Q1 14
Slide 15: Subscriber growth: Enterprise division
3 Particular success within subscription business Subscriber growth: Enterprise division 350,000 300,000 330,000 250,000 200,000 +61% 150,000 100,000 50,000 Up from Q1 2017 0 FY 15 Q4 FY 16 Q1 FY 16 Q2 FY 16 Q3 FY 16 Q4 FY 17 Q1 FY 17 Q2 FY 17 Q3 FY 17 Q4 FY 18 Q1 15
Slide 16: Subscriber growth: Education division
3 Particular success within subscription business Subscriber growth: Education division 160,000 140,000 150,000 120,000 100,000 80,000 +15% 60,000 40,000 Up from Q1 2017 20,000 0 FY 15 Q4 FY 16 Q1 FY 16 Q2 FY 16 Q3 FY 16 Q4 FY 17 Q1 FY 17 Q2 FY 17 Q3 FY 17 Q4 FY 18 Q1 16
Slide 17: Significant purchases of add-on services drove revenue growth
3 Particular success within subscription business Significant purchases of add-on services drove revenue growth Q1 Last 12 months +71% +292% From $2.1M From $3.8M To $3.6M To $14.9M 17
Slide 18: Key indicators of best-in-class SaaS businesses
Particular success within subscription business Key indicators of best-in-class SaaS businesses Best-in-class criteria Large Cap $10B+ YoY revenue growth 25%+ (FY17-18) Mid Cap $1-10B+ 70%+ Gross margin Small cap Growth efficiency 30%+ (Growth - burn) <$1b 18
Slide 19: Based on these metrics, our SaaS business is best-in-class
3 Particular success within subscription business Based on these metrics, our SaaS business is best-in-class Subscription Gross Growth growth rate margin efficiency 19
Slide 20: Accelerating growth through increasing client lifetime value
3 Particular success within subscription business Accelerating growth through increasing client lifetime value Significantly higher Traditional All Access initial sales Facilitator Pass Initial Sale $15K vs. $28K Add on > 90% purchases of revenue retention implementation services 3 Yr. Revenue $32K
Slide 21: Shifting to a SaaS business model: temporary drag on financials
4 Significant economic inflection point behind us Shifting to a SaaS business model: temporary drag on financials, but significant upside over time SaaS model transition challenges Benefits of SaaS model Portion of total contract value that can be recognized upfront decreased, while almost $47.7M* a
Slide 22: Strong revenue growth and increasing gross margins expected
4 Significant economic inflection point behind us Strong revenue growth and increasing gross margins and flow- through to adjusted EBITDA and cash flow expected To date, impact of growth in SaaS on overall results has been muted by Scenario 1: Growth slows Scenario 2: Growth at 15% to 7% per year th
Slide 23: 5 key takeaways
5 key takeaways Q1 results Enhanced Growth is being Significant Increasing indicative of visibility and driven by success inflection point upside for inflection in foundation for of subscription behind us, paving shareholders, as revenue and accelerated business, whose the way for strong SaaS value
Slide 24: Appendix
Appendix 24
Slide 25: All Access Pass value proposition
All Access Pass value proposition • Provides the passholder population with unlimited • Offers an array of affordable add-on services access to Franklin Covey’s entire collection of best- (including, now, coaching) to help ensure that in-class content. customers can execute on their key jobs-to-be-d
Slide 26: Other information
Other information Other Income Statement Information: • Depreciation: $3.9M in FY2017, expected to total approximately $5.5M in FY2018 • Amortization: $3.6M in FY2017, expected to total approximately $5.4M in FY2018 • Net Interest and Discount: $2.0M in FY2017, expected to total approximately $2.2M
Slide 27: Additional financial information (1 of 6)
Reported Sales & $12.5 Adjusted EBITDA Reported Sales FY17A FY18G FY19 FY20 FY21 FY22 Additional financial Sales Growth Rate 5% 7% 10% 185.3 185.3 185.3 212.0 212.0 212.0 222.6 226.8 233.2 233.7 242.7 256.5 245.4 259.7 282.2 257.7 277.9 310.4 information (1 of 6) % of EBITDA Contribution 15% 185.3 1
Slide 28: Additional financial information (2 of 6): Contracted Amounts Q1
Additional financial information (2 of 6) Contracted Amounts Q1 Enterprise Division - Q1 FY18 FY17 Change Reported Sales 37,516 29,815 7,701 Change in Deferred Sales (2,226) 2,385 (4,611) Change in Unbilled Sales (942) - (942) Contracts Signed 34,348 32,200 2,148 Education Division - Q1 FY18 FY17 Ch
Slide 29: Additional financial information (3 of 6): Division summary
Additional financial information (3 of 6) Division summary Enterprise Division Education Division Corporate Total Company FY18 FY17 Chng % FY18 FY17 Chng % FY18 FY17 Chng FY18 FY17 Chng % Sales 37.5 29.8 7.7 26% 9.2 8.7 0.4 5% 1.2 1.2 0.0 47.9 39.8 8.1 20% Cost of Sales 10.5 10.2 0.2 2% 3.7 3.7 0.0
Slide 30: Additional financial information (4 of 6)
Additional financial information (4 of 6) Reconciliation of Net Loss to Adjusted EBITDA Additional Sales Information (in thousands and unaudited) (in thousands and unaudited) Quarter Ended Quarter Ended November 30, November 26, November 30, November 26, 2017 2016 2017 2016 Reconciliation of net los
Slide 31: Additional financial information (5 of 6)
Additional financial information (5 of 6) Condensed Consolidated Balance Sheets (in thousands and unaudited) November 30, August 31, November 30, August 31, 2017 2017 2017 2017 Assets Liabilities and Shareholders' Equity Current assets: Current liabilities: Cash $8,087 $8,924 Current portion of fina
Slide 32: Additional financial information (6 of 6)
Additional financial information (6 of 6) Condensed Consolidated Statements of Operations (in thousands, except per-share amounts, and unaudited) Quarter Ended November 30, November 26, 2017 2016 Net sales $47,932 $39,787 Cost of sales 15,064 14,479 Gross profit 32,868 25,308 Selling, general, and a
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