Franklin Covey Company · NYSE:FC
Franklin Covey — Q3 FY2018 Earnings Presentation
25 slides from Franklin Covey's earnings presentation, June 2018
Slide 1: Investor Update 3rd Quarter Fiscal Year 2018
Investor Update 3rd 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: Strong momentum
Strong momentum Revenue Subscription and Gross margin Lifetime growth was related business expanded customer value strong was very strong increased 3
Slide 4: Strong momentum
Strong momentum (unaudited) Subscription and Revenue growth related business was Gross margin was strong very strong expanded 15.3% 43% 69.2% (increase of 670 bps) 15.3% YTD 47% YTD 69.4% YTD (increase of 520 bps) In Enterprise 66% 78% YTD 4
Slide 5: Q3 FY18 results highlights
Q3 FY18 results highlights (unaudited) +15.3% +43% +66 % 78% YTD +46% 15.3 % YTD 47% YTD Deferred Revenue Subscription and Growth of subscription & (billed) growth Revenue growth subscription-related subscription-related revenue growth revenue in Enterprise Division +90% Deferred Revenue 69.2% Gross
Slide 6: Strong third quarter results: Q3 revenue growth YOY
Strong third quarter results Q3 revenue growth YOY (unaudited) Total Revenue Total Subscription and Subscription and Subscription- Subscription-Related Revenue Related Growth in Enterprise Division +15.3% +43% +66% +15.3% YTD +47% YTD +78% YTD FY17 Q3 $43.8M FY17 Q3 $16.4M FY17 Q3 $9.7M FY18 Q3 $50.
Slide 7: Subscription momentum is accelerating
Subscription momentum is accelerating Significant purchases of All Access Pass related add-on services drove revenue growth (unaudited) Last 12 months +50% From $10.9M To $16.3M 7
Slide 8: Total paying subscribers continues to rise
Subscription momentum is accelerating Total paying subscribers continues to rise 600,000 500,000 540,000 400,000 300,000 200,000 100,000 +37% Up from Q3 2017 0 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 FY 18 Q2 FY 18 Q3 8
Slide 9: Subscriber growth: Enterprise Division
Subscription momentum is accelerating Subscriber growth: Enterprise Division 400,000 350,000 377,000 300,000 250,000 200,000 +45% 150,000 100,000 Up from Q3 2017 50,000 0 FY 16 Q2 FY 16 Q3 FY 16 Q4 FY 17 Q1 FY 17 Q2 FY 17 Q3 FY 17 Q4 FY 18 Q1 FY 18 Q2 FY 18 Q3 9
Slide 10: Subscriber growth: Education Division
Subscription momentum is accelerating Subscriber growth: Education Division 200,000 180,000 160,000 161,000 140,000 120,000 100,000 +20% 80,000 60,000 40,000 Up from Q3 2017 20,000 0 FY 16 Q2 FY 16 Q3 FY 16 Q4 FY 17 Q1 FY 17 Q2 FY 17 Q3 FY 17 Q4 FY 18 Q1 FY 18 Q2 FY 18 Q3 10
Slide 11: Increase in deferred revenue balances
Strong third quarter results Increase in deferred revenue balances (unaudited) Total Q3 Balance of Deferred Revenue* Billed Unbilled (billed and unbilled) +90% +46% +508% FY17 Q3 FY18 Q3 FY17 Q3 $23.6M FY17 Q3 $2.5M $26.1M $49.6M FY18 Q3 $34.5M FY18 Q3 $15.1M *Note: Deferred Revenue (billed and unbi
Slide 12: Gross margin improvement offset growth investments
Strong third quarter results Gross margin improvement offset growth investments (unaudited) Gross Margin* Adjusted EBITDA* FY17 Q3 $27.3M (62.5%) FY17 Q3 FY18 Q3 FY18 Q3 $34.9M (69.2%) YoY Change $7.6M $0.0M $0.6M Operating SG&A FY17 Q3 $29.2M FY18 Q3 YoY Change $5.2M $34.3M $0.6M YOY change *Note:
Slide 13: Division Summary – Q3 FY18
Division Summary – Q3 FY18 Current Quarter Enterprise Division Education Division Corporate Total Company FY18 FY17 Chang % FY18 FY17 Chang % FY18 FY17 Chang FY18 FY17 Chang % Sales 39.9 33.9 6.0 18% 9.2 8.6 0.6 7% 1.4 1.3 0.1 50.5 43.8 6.7 15% Cost of Sales 10.7 12.3 (1.6) -13% 3.7 3.4 0.3 10% 1.1
Slide 14: Inflection driven by interplay of key factors
Inflection driven by interplay of key factors The scale, in the figures below, is directional only and doesn’t represent growth or guidance FIGURE A FIGURE B Subscription Growth vs. Legacy Decline Revenue Growth vs. Growth in Central & Support Costs 2017 2018 2019 2020 2017 2018 2019 2020 Adjusted S
Slide 15: Appendix
Appendix 15
Slide 16: 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 17: Other information
Other information Other Income Statement Information: • Depreciation: $3.9M in FY2017, expected to total approximately $5.2M 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 $2.4
Slide 18: Enterprise Division revenue
Enterprise Division revenue (Unaudited) Q3 YTD through Q3 FY18 FY17 Change % FY18 FY17 Change % Reported Net Sales 39,874 33,897 5,977 17.6% 113,711 96,786 16,925 17.5% Change in Deferred Revenue 1,197 3,663 (2,466) 2,675 10,114 (7,439) Invoiced Amounts 41,071 37,560 3,511 9.3% 116,386 106,900 9,486
Slide 19: Education Division revenue
Education Division revenue (Unaudited) Q3 YTD through Q3 FY18 FY17 Change % FY18 FY17 Change % Reported Net Sales 9,235 8,596 639 7.4% 27,418 25,187 2,231 8.9% Change in Deferred Revenue 1,264 1,779 (515) (5,194) (1,903) (3,291) Invoiced Amounts 10,499 10,375 124 1.2% 22,224 23,284 (1,060) -4.6% Cha
Slide 20: Sales information
Sales information (Unaudited) FY16 Information FY17 Information FY18 Information Q1 Q2 Q3 Q4 Yr Total Q1 Q2 Q3 Q4 Yr Total Q1 Q2 Q3 Q4 YTD Total Sales Reported Net Sales 45,218 45,269 44,738 64,830 200,055 39,787 42,196 43,751 59,522 185,256 47,932 46,549 50,461 - 144,942 Change in Deferred Sales (B
Slide 21: Additional financial information
Additional financial information Reconciliation of Net Loss to Adjusted EBITDA (in thousands and unaudited) Quarter Ended Three Quarters Ended May 31, May 31, May 31, May 31, 2018 2017 2018 2017 Reconciliation of net loss to Adjusted EBITDA: Net loss $ (2,534) $ (4,541) $ (7,666) $ (11,831) Adjustme
Slide 22: Additional financial information
Additional financial information Condensed Consolidated Balance Sheets (in thousands and unaudited) May 31, August 31, May 31, August 31, 2018 2017 2018 2017 Assets Liabilities and Shareholders' Equity Current assets: Current liabilities: Cash $ 11,774 $ 8,924 Current portion of financing obligation
Slide 23: Additional financial information
Additional financial information Condensed Consolidated Statements of Operations (in thousands, except per-share amounts, and unaudited) Quarter Ended Three Quarters Ended May 31, May 31, May 31, May 31, 2018 2017 2018 2017 Net sales $ 50,461 $ 43,751 $ 144,939 $ 125,734 Cost of sales 15,545 16,410
Slide 24: Definitions
Definitions • “Deferred Revenue” primarily consists of billings or payments received in advance of revenue recognition from subscription services and is recognized as the revenue recognition criteria are met. The Company generally invoices customers in annual installments. The deferred revenue balan
Slide 25: Non-GAAP financial information
Non-GAAP financial information A reconciliation of a non-GAAP financial measure, “Adjusted EBITDA,” to consolidated net income (loss), the most comparable GAAP financial measure is provided within this presentation. The Company defines Adjusted EBITDA as net income or loss from operations excluding
Franklin Covey Company — Q3 FY2018 Earnings Presentation on 6ix