Franklin Covey Company · NYSE:FC
Franklin Covey — Q3 2023 Earnings Presentation
46 slides from Franklin Covey's earnings presentation, Jun 28, 2023
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
Slide 2: Investor Update Third Quarter Fiscal Year 2023
Investor Update Third Quarter Fiscal Year 2023 Janita Anderson © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL Strategic Partnerships, Education Division
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 incl
Slide 4: Strength & Durability: Subscription & Subscription Related Sales
Strength & Durability (in millions and unaudited) Subscription & Subscription Related Sales © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 4
Slide 5: Strength & Durability: Sales
Strength & Durability (in millions and unaudited) Sales Subscription & Subscription Related Sales © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 5
Slide 6: Strength & Durability: Total Sales
Strength & Durability (in millions and unaudited) Total Sales Period Revenue 1 Yr. Change 2 Yr. Change 2 Yr. Change % LTM Q3FY17 190.6 LTM Q3FY18 204.5 13.9 LTM Q3FY19 225.0 20.5 34.4 18% LTM Q3FY20 214.6 -10.4 10.2 5% LTM Q3FY21 204.2 -10.4 -20.8 -9% LTM Q3FY22 253.0 48.8 38.4 18% LTM Q3FY23 281.4
Slide 7: Strength & Durability: Subscription & Subscription Services
Strength & Durability (in millions and unaudited) Subscription & Subscription Services Period Revenue 1 Yr. Change 2 Yr. Change 2 Yr. Change % LTM Q3FY17 66.8 LTM Q3FY18 91.6 24.8 LTM Q3FY19 116.9 25.2 50.0 75% LTM Q3FY20 135.6 18.8 44.0 48% LTM Q3FY21 139.5 3.9 22.6 19% LTM Q3FY22 190.2 50.7 54.6 4
Slide 8: Strength & Durability: Deferred Revenue and Multi-Year Contracts
Strength & Durability (in millions and unaudited) Billed & Unbilled Deferred Revenue Deferred & Unbilled Deferred Revenue Percent Revenue in Multi -Yr. Contracts* Percent Logos in Multi -Yr. Contracts* *In Enterprise North America © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL
Slide 9: Strength & Durability: Gross Margin and SG&A
Strength & Durability (in millions and unaudited) Gross Margin Percent Gross Margin Percent Operating SG&A Percent © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 9
Slide 10: Strength & Durability: Adjusted EBITDA
Strength & Durability (in millions and unaudited) Adjusted EBITDA © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 10
Slide 11: Fundamental Priorities
Fundamental Priorities 3. Reinvest 1. Partner of Profits & Cash Choice for Our Flow at High Clients in Rates of Return Addressing Creating More Challenges Value That Matter 2. Accomplishing Priority 1 with Strong & Profitable Business Model © FranklinCovey Co. All rights reserved. PROPRIETARY AND CO
Slide 12: Fundamental Priorities 1: Partner of Choice for Our Clients
Fundamental Priorities- 1 Partner of Choice for Our Clients in Addressing Challenges That Matter: Consistently winning new “logos” or clients. Having subscription and subscription services revenue continue to increase as percent of total Company revenue. Retaining substantially all our subscri
Slide 13: Fundamental Priorities 1: Partner of Choice for Our Clients
Fundamental Priorities- 1 Partner of Choice for Our Clients in Addressing Challenges That Matter: Consistently winning new “logos” or clients. Having subscription and subscription services revenue continue to increase as percent of total Company revenue. Retaining substantially all our subscri
Slide 14: Fundamental Priorities 1: Subscription Share of Sales
Fundamental Priorities- 1 (in m illio n s a n d un a ud ite d ) Partner of Choice for Our Clients in Addressing Challenges That Matter Su b s c rip tio n & Su b s c rip tio n Se rvic e a s Pe rc e n t o f To ta l Sa le s *In North America as of FY22 Su b s c rip tio n Se rvic e Sa le s Pe rc e n t o
Slide 15: Fundamental Priorities 2: Strong, Profitable Business Model
Fundamental Priorities- 2 Accomplishing Priority 1 with Strong, Profitable Business Model: Achieving strong gross margins. Having a CAC (cost of acquiring a customer) that is less than the revenue generated even in the first year of a subscription contract. Having Operating SG&A decrease as a
Slide 16: Fundamental Priorities 2: Strong, Profitable Business Model
Fundamental Priorities- 2 Accomplishing Priority 1 with Strong, Profitable Business Model: Achieving strong gross margins. Having a CAC (cost of acquiring a customer) that is less than the revenue generated even in the first year of a subscription contract. Having Operating SG&A decrease as a
Slide 17: Fundamental Priorities 2: Margins and Adjusted EBITDA
Fundamental Priorities- 2 (in millions and unaudited) Accomplishing Priority 1 with Strong, Profitable Business Model Gross Margin Percent Adjusted EBITDA Operating SG&A Percent © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 17
Slide 18: Fundamental Priorities 3: Reinvest Profits & Free Cash Flow
Fundamental Priorities- 3 Reinvest Profits & Free Cash Flow at High Rates of Return: Investing capital in the business at high rates of return. Returning substantial amounts of excess cash to shareholders in the form of stock buybacks. © FranklinCovey Co. All rights reserved. PROPRIETARY AND CON
Slide 19: Fundamental Priorities 3: Reinvest Profits & Free Cash Flow
Fundamental Priorities- 3 Reinvest Profits & Free Cash Flow at High Rates of Return: Investing capital in the business at high rates of return. Returning substantial amounts of excess cash to shareholders in the form of stock buybacks. © FranklinCovey Co. All rights reserved. PROPRIETARY AND CON
Slide 20: Investing Free Cash Flow at High Rates of Return
Fundamental Priorities- 3 (unaudited) Investing Free Cash Flow at High Rates of Return $25M $50M Repurchasing 664K Shares in 3 rd Repurchasing 1.26M Shares in Quarter Last 5 Quarters © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 20
Slide 21: Enterprise Division - North America Headlines
Enterprise Division - North America Headlines Third Quarter, Unaudited +3% Revenue Growth +3% Subscription & Subscription Services Revenue 9% YTD 11% LTM 23% L2Y 9% YTD 12% LTM 32% L2Y +19% 57% AAP Contracted Revenue Balance Deferred Revenue (Billed & Unbilled) Represented by Multiyear Q3FY23 vs Q3F
Slide 22: Enterprise Division - International Headlines
Enterprise Division - International Headlines Third Quarter, Unaudited 23% Revenue – International Direct +9% International Licensee Partner Revenue Growth 5% YTD 4% LTM 10% YTD 16% LTM © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 22
Slide 23: Education Division - Headlines
Education Division - Headlines Third Quarter, Unaudited +18% +19% Subscription & Revenue Growth Subscription Services Revenue 23% YTD 21% LTM 24% YTD 22% LTM +15% Balance Deferred Revenue 90% School Retention (Billed & Unbilled) (as of August 31, 2022) Q3FY23 vs Q3FY22 © FranklinCovey Co. All rights
Slide 24: Cash Flows from Operating Activities
Cash Flows from Operating Activities (in thousands) Three Quarters Ended May 31, May 31, 2023 2022 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 10,969 $ 12,852 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,401 7,792
Slide 25: Guidance & Outlook
Guidance & Outlook Guidance & Outlook Adjusted EBITDA Guidance $47M-$49M FY24 - FY25 Outlook for Adjusted FY24: $57M EBITDA Growth FY25: $67M Note: Guidance and Outlook is given in constant currency. © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 25
Slide 26: Appendix
James Williams Managing Client Partner Appendix © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 26
Slide 27: Other Information
Other Information OTHER I NCOME STATEMENT I NFORMATION : • Depreciation: $4.9M in FY2022, expected to total approximately $4.1M in FY2023. • Amortization: $5.3M in FY2022, expected to total approximately $4.3M in FY2023. • Net Interest and Discount: $1.6M in FY2022, expected to total approximately $
Slide 28: FranklinCovey Financial Headlines
FranklinCovey Financial Headlines (in millions and unaudited) Q3 FY 23 Q3 FY 22 Chg % YTD Q3FY23 YTD Q3FY22 Chg % LTM Q3 FY23 LTM Q3 FY 22 Chg % Sales $ 71.4 $ 66.2 $ 5.3 8.0% $ 202.6 $ 184.0 $ 18.5 10.1% $ 281.4 $ 253.0 $ 28.4 11.2% Cost of Sales 17.2 15.0 2.2 14.4% 48.4 41.2 7.2 17.5% 68.1 56.9 11
Slide 29: FranklinCovey Financial Summary
FranklinCovey Financial Summary (in millions and unaudited) Sales Subscription & Subscription Services Invoiced Deferred & Unbilled Deferred Revenue © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 29
Slide 30: Trends in the Business
Trends in the Business (in millions and unaudited) AAP & Other Subscription Revenue Subscription Revenue Education Subscription Revenue © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 30
Slide 31: Contracted
Contracted (in millions and unaudited) Contracted © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 31
Slide 32: Sales Information
Sales Information (in millions and unaudited) FY 2021 FY 2022 FY 2023 FY2018 FY2019 FY2020 Q1 Q2 Q3 Q4 FY2021 Q1 Q2 Q3 Q4 FY2022 Q1 Q2 Q3 Sales Reported Net Sales 209.8 225.4 198.5 48.3 48.2 58.7 68.9 224.2 61.3 56.6 66.2 78.8 262.8 69.4 61.8 71.4 Change in Deferred Revenue 11.4 8.3 2.4 (3.6) 1.6 (3
Slide 33: FranklinCovey Contracts Signed
FranklinCovey Contracts Signed (in millions and unaudited) Enterprise Division Education Division Corporate Total Company Third Quarter FY23 FY22 Change % FY23 FY22 Change % FY23 FY22 Change FY23 FY22 Change % Sales 53.2 50.0 3.2 6.4% 17.1 14.4 2.6 18.3% 1.1 1.7 (0.6) 71.4 66.2 5.3 8.0% Change in De
Slide 34: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA (in thousands and unaudited) Quarter Ended Three Quarters Ended May 31, May 31, May 31, May 31, 2023 2022 2023 2022 Reconciliation of net income to Adjusted EBITDA: Net income $ 4,563 $ 7,162 $ 10,969 $ 12,852 Adjustments: Interest expense (income), ne
Slide 35: Additional Financial Information
Additional Financial Information (in thousands and unaudited) Quarter Ended Three Quarters Ended May 31, May 31, May 31, May 31, 2023 2022 2023 2022 Sales by Division/Segment: Enterprise Division: Direct offices $ 50,382 $ 47,416 $ 144,194 $ 134,037 International licensees 2,835 2,610 9,048 8,196 53
Slide 36: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (in thousands and unaudited) May 31, August 31, May 31, August 31, 2023 2022 2023 2022 Assets Liabilities and Shareholders' Equity Current assets: Current liabilities: Cash and cash equivalents $ 39,329 $ 60,517 Current portion of notes payable $ 5,835 $ 5,835 A
Slide 37: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements (in thousands, except per -share amounts, and unaudited) Quarter Ended Three Quarters Ended May 31, May 31, May 31, May 31, 2023 2022 2023 2022 Net sales $ 71,441 $ 66,176 $ 202,565 $ 184,035 Cost of sales 17,208 15,044 48,380 41,190 Gross profit 54,233 51,13
Slide 38: Free Cash Flow
Free Cash Flow (in thousands) Three Quarters Ended May 31, May 31, 2023 2022 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 10,969 $ 12,852 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,401 7,792 Amortization of capit
Slide 39: Enterprise Division Financial Summary
Enterprise Division Financial Summary (in millions and unaudited) Q3 FY 23 Q3 FY 22 Chg % YTD Q3FY23 YTD Q3FY22 Chg % LTM Q3 FY23 LTM Q3 FY 22 Chg % Sales $ 53.2 $ 50.0 $ 3.2 6.4% $ 153.2 $ 142.2 $ 11.0 7.7% $ 205.4 $ 188.3 $ 17.1 9.1% Cost of Sales 10.2 9.5 0.7 7.3% 28.9 26.6 2.3 8.5% 39.2 35.1 4.1
Slide 40: Enterprise Division Financial Summary
Enterprise Division Financial Summary (in millions and unaudited) Sales AAP Subscription & Subscription Services Invoiced Deferred & Unbilled Deferred Revenue © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 40
Slide 41: Enterprise Division AAP & Related Revenue
Enterprise Division AAP & Related Revenue (in millions and unaudited) LTM Q3FY23 LTM Q3FY22 LTM Q3FY21 Q3FY23 Q2FY23 Q1FY23 Q4FY22 Q3FY22 AAP Sales $98.5 $84.1 $69.8 $25.4 $24.1 $23.8 $25.2 $22.4 AAP Add on Sales* 58.1 52.1 33.4 16.0 11.3 15.8 15.1 16.6 Total AAP and Related 156.6 136.2 103.2 41.3 3
Slide 42: Education Division Financial Summary
Education Division Financial Summary (in millions and unaudited) Q3 FY 23 Q3 FY 22 Chg % YTD Q3FY23 YTD Q3FY22 Chg % LTM Q3 FY23 LTM Q3 FY 22 Chg % Sales $ 17.1 $ 14.4 $ 2.6 18.3% $ 45.6 $ 37.2 $ 8.4 22.7% $ 70.3 $ 58.2 $ 12.1 20.7% Cost of Sales 6.2 4.6 1.5 32.4% 17.1 12.5 4.7 37.6% 25.3 18.2 7.1 3
Slide 43: Education Division Financial Summary
Education Division Financial Summary (in millions and unaudited) Sales Education Subscription & Subscription Services Invoiced Deferred & Unbilled Deferred Revenue © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 43
Slide 44: 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
Slide 45: Definitions
Definitions • “Adjusted EBITDA” (earnings before interest, income taxes, depreciation, amortization, stock -based compensation, and certain oth er items) is a non -GAAP financial measure that the Company believes is useful to investors in evaluating its results. A reconciliation of “Adjusted EBITDA,
Slide 46: Thank You
Leena Rinne VP, Consulting Strategy & Operations Thank You © FranklinCovey Co. All rights reserved. PROPRIETARY AND CONFIDENTIAL 46
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