Franklin Covey Company · NYSE:FC

Franklin Covey — Q1 2024 Earnings Presentation

41 slides from Franklin Covey's earnings presentation, Jan 4, 2024

  1. Slide 1: Greatness Starts Here

    Greatness Starts Here We transform organizations by building exceptional leaders, teams, and cultures that get results. © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL

  2. Slide 2: Investor Update First Quarter Fiscal Year 2024

    Investor Update First Quarter Fiscal Year 2024 © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL

  3. Slide 3: 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 includi

  4. Slide 4: FranklinCovey Highlights

    FranklinCovey Highlights (in millions and unaudited) SALES ADJUSTED EBITDA SUBSCRIPTION & SUBSCRIPTION SERVICES DEFERRED & UNBILLED DEFERRED SUBSCRIPTION REVENUE Note: Adjusted EBITDA and Operating SG&A are non-GAAP financial measures; please see Appendix for additional information. Amounts may not

  5. Slide 5: Three Key Strengths

    Three Key Strengths STRENGTH 1 STRENGTH 2 STRENGTH 3 Strong & Strategic Strong Revenue Powerful Market Position Generating Engine Business Model © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 5

  6. Slide 6: Three Key Strengths

    Three Key Strengths STRENGTH 1 STRENGTH 2 STRENGTH 3 Strong & Strategic Strong Revenue Powerful Market Position Generating Engine Business Model © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 6

  7. Slide 7: Strategic Market Position

    Strategic Market Position MCKINSEY Culture CONFERENCE BOARD Developing Customers Developing Leaders Execution ADVISORY Achieving Strategic GARTNER BOARD Breakthroughs © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 7

  8. Slide 8: Client's Partner of Choice

    Client’s Partner of Choice Consistently winning new “logos” or clients. Achieving the strong attachment of subscription services to help clients achieve performance breakthroughs. Retaining substantially all our subscription revenue. Increasing our average subscription contract size. Increasing the

  9. Slide 9: AAP Multi-Year Contracts

    AAP Multi-Year Contracts Enterprise North America © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 9

  10. Slide 10: Three Key Strengths

    Three Key Strengths STRENGTH 1 STRENGTH 2 STRENGTH 3 Strong & Strategic Strong Revenue Powerful Market Position Generating Engine Business Model © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 10

  11. Slide 11: Power of Revenue Generating Engine

    Power of Revenue Generating Engine (in millions and unaudited) +42.4M +54.2M +100M +81.5M © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 11

  12. Slide 12: Three Key Strengths

    Three Key Strengths STRENGTH 1 STRENGTH 2 STRENGTH 3 Strong & Strategic Strong Revenue Powerful Market Position Generating Engine Business Model © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 12

  13. Slide 13: Business Model

    Business Model Increasing Revenue High Revenue High Contribution per Client Retention Margins Upfront Low Capital Disciplined Invoicing Intensity Reinvestment for Growth © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 13

  14. Slide 14: Increasing Revenue per AAP Client

    Increasing Revenue per AAP Client Enterprise North America © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 14

  15. Slide 15: Increasing Adjusted EBITDA Margins

    Increasing Adjusted EBITDA Margins Note: Adjusted EBITDA and Operating SG&A are non-GAAP financial measures; please see Appendix for additional information. Amounts may not total due to rounding. © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 15

  16. Slide 16: Business Model

    Business Model Increasing Revenue High Revenue High Contribution per Client Retention Margins Upfront Low Capital Disciplined Invoicing Intensity Reinvestment for Growth Share Free Cash Tuck-in Repurchases Flow M&A $143.5M* $204.3M* $32.7M* *From FY2016 – Q1FY2024 © FranklinCovey Co. All rights rese

  17. Slide 17: Enterprise Division - North America

    Enterprise Division - North America First Quarter and LTM First Quarter FY24 Unaudited -1% Revenue +0% Subscription & Subscription Services Revenue 2% LTM 19% L2Y 4% LTM 29% L2Y +7% 60% AAP Invoiced Represented by Balance Deferred Revenue (Billed & Unbilled) Multiyear Contracts © FranklinCovey Co. A

  18. Slide 18: Enterprise Division - International

    Enterprise Division - International First Quarter and LTM First Quarter FY24 Unaudited -7% Revenue – International Direct +3% International Licensee Partner Revenue Growth 4% LTM 2% L2Y 8% LTM 24% L2Y © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 18

  19. Slide 19: Education Division

    Education Division First Quarter and LTM First Quarter FY24 Unaudited +3% -1% Subscription & Revenue Growth Subscription Services Revenue 9% LTM 32% L2Y 8% LTM 34% L2Y +29% Balance Deferred Revenue ~85% School Retention (Billed & Unbilled) (as of August 31, 2023) © FranklinCovey Co. All rights reser

  20. Slide 20: Education Division +$70M

    Education Division +$70M ~90% Subscription & Revenue Growth Subscription Services Revenue © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 20

  21. Slide 21: Cash Flow from Operating Activities & Free Cash Flow

    Cash Flow from Operating Activities & Free Cash Flow (in thousands) Quarter Ended November 30, November 30, 2023 2022 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,851 $ 4,667 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortiz

  22. Slide 22: Appendix

    Appendix © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 22

  23. Slide 23: Other Information

    Other Information OTHER INCOME STATEMENT INFORMATION: • Depreciation: $4.3M in FY2023, expected to total approximately $5.8M in FY2024. • Amortization: $4.3M in FY2023, expected to total approximately $4.2M in FY2024. • Net Interest Expense: $.5M in FY2023, expected to total approximately $.5M in FY

  24. Slide 24: FranklinCovey Financial Headlines

    FranklinCovey Financial Headlines (in millions and unaudited) Q1 FY 24 Q1 FY 23 C hg % L TM Q1 FY 24 L TM Q1 FY 23 C hg % Sales $ 68.4 $ 69.4 ($1.0) -1.4% $ 279.6 $ 271.0 $ 8.6 3.2% C ost of Sales 16.1 16.6 (0.5) -3.0% 66.5 63.9 2.6 4.1% Gross Profit 52.3 52.7 (0.5) -0.9% 213.0 207.1 6.0 2.9% Gross

  25. Slide 25: FranklinCovey Highlights

    FranklinCovey Highlights (in millions and unaudited) SALES ADJUSTED EBITDA * * *$281.5M in constant currency *$48.2M in constant currency SUBSCRIPTION & SUBSCRIPTION SERVICES DEFERRED & UNBILLED DEFERRED SUBSCRIPTION REVENUE Note: Adjusted EBITDA and Operating SG&A are non-GAAP financial measures; p

  26. Slide 26: Trends in the Business

    Trends in the Business (in millions and unaudited) © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 26

  27. Slide 27: Sales Information

    Sales Information (in millions and unaudited) FY 2022 FY 2023 FY 2024 Q1 Q2 Q3 Q4 FY2022 Q1 Q2 Q3 Q4 FY2023 Q1 Sales Reported Net Sales 61.3 56.6 66.2 78.8 262.8 69.4 61.8 71.4 78.0 280.5 68.4 Change in Deferred Revenue (9.3) 2.6 (1.8) 19.5 11.0 (11.4) (0.6) (3.4) 26.3 11.0 (11.9) Invoiced Amount 52

  28. Slide 28: FranklinCovey Contracts Signed

    FranklinCovey Contracts Signed (in millions and unaudited) E nterprise Division E ducation Division C orporate Total C ompany First Quarter FY 24 FY 23 C hange % FY 24 FY 23 C hange % FY 24 FY 23 C hange FY 24 FY 23 C hange % Sales 52.6 53.4 (0.9) -1.6% 14.7 14.4 0.4 2.7% 1.1 1.6 (0.5) 68.4 69.4 (1.

  29. Slide 29: Reconciliation of Net Income to Adjusted EBITDA

    Reconciliation of Net Income to Adjusted EBITDA (in thousands and unaudited) Quarter Ended November 30, November 30, 2023 2022 Reconciliation of net income to Adjusted EBITDA: Net income $ 4,851 $ 4,667 Adjustments: Interest expense, net 53 329 Income tax provision 425 1,396 Amortization 1,071 1,092

  30. Slide 30: Additional Financial Information

    Additional Financial Information (in thousands and unaudited) Quarter Ended November 30, November 30, 2023 2022 Sales by Division/Segment: Enterprise Division: Direct offices $ 49,215 $ 50,167 International licensees 3,378 3,278 52,593 53,445 Education Division 14,744 14,350 Corporate and other 1,06

  31. Slide 31: Condensed Consolidated Balance Sheets

    Condensed Consolidated Balance Sheets (in thousands and unaudited) November 30, August 31, November 30, August 31, 2023 2023 2023 2023 Liabilities and Shareholders' Equity Assets Current liabilities: Current assets: Current portion of notes payable $ 4,585 $ 5,835 Cash and cash equivalents $ 33,959

  32. Slide 32: Condensed Consolidated Income Statements

    Condensed Consolidated Income Statements (in thousands, except per-share amounts, and unaudited) Quarter Ended November 30, November 30, 2023 2022 Net sales $ 68,399 $ 69,369 Cost of sales 16,122 16,627 Gross profit 52,277 52,742 Selling, general, and administrative 44,786 44,012 Depreciation 1,091

  33. Slide 33: Free Cash Flow

    Free Cash Flow (in thousands) Quarter Ended November 30, November 30, 2023 2022 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,851 $ 4,667 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,162 2,338 Amortization of capi

  34. Slide 34: Enterprise Division Financial Summary

    Enterprise Division Financial Summary (in millions and unaudited) Q1 FY 24 Q1 FY 23 C hg % L TM Q1 FY 24 L TM Q1 FY 23 C hg % Sales $ 52.6 $ 53.4 ($0.9) -1.6% $ 204.8 $ 199.7 $ 5.1 2.5% C ost of Sales 10.0 10.5 (0.5) -4.8% 37.7 38.3 (0.6) -1.5% Gross Profit 42.6 42.9 (0.3) -0.8% 167.1 161.4 5.6 3.5%

  35. Slide 35: Enterprise Division Financial Summary

    Enterprise Division Financial Summary (in millions and unaudited) © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 35

  36. Slide 36: Enterprise Division AAP & Related Revenue

    Enterprise Division AAP & Related Revenue (in millions and unaudited) LTM Q1FY24 LTM Q1FY23 LTM Q1FY22 Q1FY24 Q4FY23 Q3FY23 Q2FY23 Q1FY23 AAP S ales $102.3 $92.4 $77.5 $26.8 $26.1 $25.4 $24.1 $23.8 AAP Add on S ales * 57.7 58.6 42.1 14.8 15.6 16.0 11.3 15.8 Total AAP and Related 160.0 151.0 119.7 41

  37. Slide 37: Education Division Financial Summary

    Education Division Financial Summary (in millions and unaudited) Q1 FY 24 Q1 FY 23 C hg % L TM Q1 FY 24 L TM Q1 FY 23 C hg % Sales $ 14.7 $ 14.4 $ 0.4 2.7% $ 70.1 $ 64.5 $ 5.6 8.7% C ost of Sales 5.4 5.2 0.2 3.6% 25.5 22.0 3.5 16.0% Gross Profit 9.4 9.2 0.2 2.2% 44.6 42.5 2.1 4.9% Gross Profit % 63.

  38. Slide 38: Education Division Financial Summary

    Education Division Financial Summary (in millions and unaudited) © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 38

  39. Slide 39: Definitions

    Definitions • “Deferred Subscription Revenue” primarily consists of billings or payments received in advance of revenue being recognized from subscription services. Deferred revenue is recognized as sales as the revenue recognition criteria are met. The Company generally invoices customers in annual

  40. Slide 40: Definitions

    Definitions • “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. A reconciliation of “Adjusted EBITDA,” t

  41. Slide 41: franklincovey.com

    franklincovey.com © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL

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