Earnings call transcript Q3 2023

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Operator

Good day and thank you for standing by. Welcome to the Third Quarter 2023 Franklin Covey Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

to Hatch, conference Corporate like speaker to now Derek today, Controller. would hand over the your I Please go ahead.

Derek Hatch

to fiscal Thank you, I you Covey, behalf of third Victor. Good afternoon, want everyone. to earnings call. XXXX On Franklin our quarter welcome

like Act this presentation that of statements the XXXX. would forward-looking Private the remind meaning everyone Before we of I Securities to begin within afternoon, this contains Litigation Reform

the to, our subject Securities in All market company's and the the marketplace, the in the new changes are in company offerings, of market Forward-looking company's of of acceptance spending the general other Pass but of management's of Me to policies of productive in are market Exchange and periodic hire and identified various the in reports or services discussed upon and and professionals, strategies, including acceptance the risks sales and share, targeted based to Annual subscription statements Leader not company including expectations other limited the ability to with client Form most the training the clients changes changes grow ability marketing competition memberships, in recent filed the overall of and and company's Report other for company's factors conditions, Commission. uncertainties, the on facing offerings Access and economic size products, current the revenues, the company's rates XX-K and renewal

no assurance future the and update based current meet of and there cause expectations Many obligation revise company's after expectations from results be materially of today’s forward-looking circumstances any except reflect events no forward-looking to upon statements the these or by influence, date one are required law. we of these management's to expectations. statements to presentation, are as future These or the which performance or management's undertake may control conditions beyond actual our current will company's can differ

way, Paul like time Executive I'd over the out that to to the Mr. Chief our Paul? Walker, of With turn Officer.

Paul Walker

Thanks joining today. everyone. you, for us Hello, Thank Derek.

We are chance have talk to you today. to the glad to

the other on of Colosimo, We're happy me our our and Sean our our Division members Young, us Whitman, CFO; to Jennifer Joining have with our team. the Covey, of of Chairman are also. President Enterprise Education also Executive executive and Bob President call of Division; Board Steve Chairman

we're of date start-off in expressing with months by million I'd durability to strength the growth pleased and to to reaffirm and and and million XX XXXX This that model. currency. our to guidance, are evident durability, are constant like and continued our XX third EBITDA we our how latest of pleased results, the achieve strength, business XX business fiscal quarter and expect year adjusted between we in

few sharing headlines by a to I'd briefly the today quarter. like begin from

growth be continued First, to strong. our revenue

As see more subscription million. in in model X, fiscal the by you $XXX $XXX.X XXXX, and grown shown our since business subscription sales can have Slide services to subscription conversion million our than of

our subscription in XX We're and be month of continued revenue quarter subscription revenue date both to and and year and the business, overall strength that latest subscription pleased periods. strong our the growth services third by for continued growth to our driven the

pandemic million X% XX% impacted X, in last the growth For quarter, quarter revenue in as on against year's on or the in prior you overall the of can A company which achieved see benefited company currency, strong from grew top constant third revenue, in quarter. Slide X% total year. third the comping $X.X quarter third or

and XX% the year constant respectively latest XX% a to currency. periods, to and grew For and XX% month date in XX year date revenue latest the XX% for XX months or strong

year. the considering services subscription and growth our revenue pandemic was even particularly of stronger, comp subscription last Growth enhanced

the year's in total top quarter. growth services X, subscription in of Slide strong grew and last on or third XX% on revenue achieved $X.X third the shown subscription quarter, million X% our As

the a to For and XX% year and respectively. subscription grew strong revenue date XX%, and latest period, subscription services XX month

additional over on I'd to its and provide revenue our several year-over-year briefly past to comparison the growth context like years. growth

from For company shown was $XX.X revenue the Slide XXXX impacted latest in and X, the period periods of growth month the total for years million. comping as this very through magnitude total XX noted, third quarter, pandemic month XXXX. reflected significant as latest fiscal XXXX's partially Again, fiscal revenue, in growth XX our benefiting against a

through was for period In comparison the with this quarter that significant percentage XX third growth latest lower. revenue month year's our growth,

on $XX.X the you latest growth as through was the quarter revenue XX of third achieved year's period basis, see However, month strong. can million an we this absolute very in dollar

fact, highest the you past growth $XX.X years. the in XX-month period of six latest in In growth quarter as amount the second dollar year's see, million this represents period the for any through comparable any can third of of

as also in XXXXs the to which comparison benefited only noted benefited exceeded shown And last is was growth, against comparison X. for a period. pandemic It by year's Slide pandemic normalize from

absolute $XX.X percent growth. years over of model exceeded a growth both last our any of more growth dollars of the on than that two conversion, other since two-year business Our million rolling and basis in terms period two-year of

last first growth XXXX apples-to-apples comparison revenue growth to million months were subscription and more fiscal And XX% end the the we in From of the next the return of lap year. we out played in we our that fall, revenue. approximately in of year-over-year a services that same quarter second itself months, by XX will pattern growth to has more difficult the would achieve same the This in a in comps. comparisons did $XX.X expect to basis. influenced level coming represent if beginning subscription revenue this quarter the XX percentage standpoint, strong the Importantly, growth of COVID

impacted subscription $XX.X Again quarter, subscription revenue can you latest was an period in strong third latest fiscal for XXXX. our the Again, grew lower. As in growth benefiting shown growth, and services XXXX fiscal our pandemic in and see with month from through periods against period very million. XX that comparison for by large month XXXX's X, Slide XX percentage extremely revenue comping the

an was $XX third revenue and period. on over amount past as of we've comparison years its However, strong, to months highest year's impacted services XX by a six benefited very only quarter dollar pandemic million growth, through dollar subscription this the XXXX's noted for subscription from growth representing absolute basis our months latest which the XX second the exceeded

two-year year's that two-year of of percent our subscription the both and growth. terms our in period And to business far any last basis, pandemic again, model benefited and of million for services period of since exceeded on dollars other of $XX.X growth subscription growth rolling for last two-year normalize a absolute comparison conversion revenue

to The subscription future our to and is extent continues second our sales the growth to sales in visibility our of our Since business durability to XXXX, note our I’d like unbilled of that sales both conversion and billed into also balance rapidly. subscription thing of and the deferred increase expand. continues consistently has fiscal model grown

through million, in from unbilled X, to million strongly sales third to the subscription grown $XXX.X As quarter. last sales growth up the billed shown $XXX.X deferred and have increasing Slide continued million or year's our of XX deferred quarter in third XXXX for this fiscal to And in months million latest balances $XX.X from $XX.X quarter. subscription third year's in this grow $XXX.X in million strong XX%

sales the strong as achieve Adding dimension subscription continued durability that in balance all contracts subscription this of to Achieving years. provides in strong are ability coming to of foundation is recognized growth balance subscription our increasing. of our differed future same an increasing another significant the growth our balances sales this average third extremely increasing, the our deferred sales of also deferred quarters quarter for our and at revenue the the is duration in time sales is

value percentage increasing by of of is represented result a at of that contract least As the Access two-years. Pass All contract multi-year our significantly

at multi-year shown at also percent year's XX those the invoiced years, contract latest of our from we quarter, X, XX%, year. years from the XX% North at two up to least third the amounts And the fiscal the two Slide third end contracts American by represented XX%, end by of have last in of third at Access XX% contracts the quarter our to contracts As of represented operations, XXXX. in All enterprise multi-year through least months total increased up the Pass of percentage for of increased quarter this

gross remain extremely third The and to SG&A percent attractive. point is I'd sales operating of that make as like our margin

months our quarter. from in XX.X% As XXXX gross latest years the to for the year's Slide increased improving through X, shown margin over this steadily has XX.X% in fiscal third XX percent

was third the months. to XX.X% gross margin XX.X% shown also a X, As and our strong and percent quarter latest the was in XX.X% date for in XX Slide year

and points respectively. continued and XX.X% to growth basis as points XXX Fourth, strong. to improved SG&A XX.X% We're basis percent also And in operating the XX SG&A further third as to last EBITDA year compared date to basis of month a sales points XX.X% the in that XX.X%, of XXX periods, a quarter quarter. percent year's pleased third latest to for sales to operating XXX improved adjusted be that to

margins has percent The a growth, significant increases operating resulted sales combination – of and strong in has gross declining EBITDA. increased adjusted significant revenue as of SG&A in

from adjusted flow that beginning impact a sales increased the EBITDA during since through $XX.X XXXX, than pandemic's more XX% reflecting million the increase $XX fiscal period, for XX, Slide million $XX.X month million in latest XX in period. shown the As of to XXXX the same of million in $XX has in

in the to or currency in year's higher XX% In in quarter. third Year-to-date adjusted $XX.X And pleased million million $XX.X $XX.X We're third third currency. in last increased through EBITDA than EBITDA the representing million, $XX.X expected the growth constant continued to XX%. million flow the $X.X increasing of compared million, XX this EBITDA quarter, period, adjusted robust million adjusted third the for to million. in that month to constant X% quarter through EBITDA was $XX.X increased quarter adjusted or $XX.X a latest

increase XXXX fiscal currency $XX million $XX XXXX million then XXXX EBITDA fiscal reaffirm we expect each to as million and that $XX between in continue strength year constant this to adjusted We increase to approximately EBITDA million in to achieve on then pleased our and previously, we're and and currency. guidance to thereafter. Building constant expect to in aggressively adjusted and approximately I $XX mentioned to fiscal

third to it make XXX,XXX of business, purchase the as stock continuing to relates shares. million to $XX invested after in the we investments during purchase Finally, the growth quarter

at stock were of Over five as pleased X.X% purchase total the invested we shares the amount period. to company's of million to total what or X.XX the the at We're we've to million such that quarter shares past compelling a able value. significant have purchase beginning of $XX five a outstanding a view quarters, a significant of been

these continued The of reflects ongoing three power strength outcomes fundamental of the priorities. our focus on

them. that clients' being of addressing to the choice First, our really challenges partner for matter

business Second, And create high first strong with mode. rates reinvesting a these even for at more accomplishing priority cash and value flow that profits shareholders. profitable return to in of third,

our first of addressing XX, high to and customer really revenue lifetime Slide our the in priority shown As and value. client for and being large that translates into challenges revenue clients' in retention. an matter increasingly growing partner them choice growth Strong

increases of second EBITDA priority with through flow. profitable significant cash and results strong the flowing portion adjusted Our revenue accomplishing and in growth our the first priority, business a a model in

value of same value earn grow. Importantly, time compounding profits high returns cash the can our substantial more shareholders these priority, their significant shareholder cash to investment rates of on this create cash continue the to third And at of reinvesting into and return translates means additional creation at even their flow on value. they the see that investment,

briefly and in an the for Shareholders strong of clients of owning XX expected mission quarter three and entire really our it. our priorities progress in each partner continued the benefit share of for report challenges opportunities both of them in from months. being of addressing company helping and To like of the I'd to year-to-date and third latest the accomplish these that their increasing the we've in partner company the the address our being prospect increase on organized our them, the choice matter of priority, choice that challenges. our critical first clients value around

customers. our This for This We significant turn want lifetime the Slide can loyalty value become so in they our effective to see the this doing of in as durability growth high into life. as be clients outcomes and in reflected translates you following revenue at shown in XX: is of

all a percent sales Consistently winning subscription clients. to value. retaining percent contracts. as new considerable and of our help the clients to company achieve average contract amount subscription to substantially performance high services a sales, achieving increase their or and have purchase And subscription increasing subscription size, our logos them a and breakthroughs. of growing customer Continuing of Increasing Having multi-year services total logos lifetime continue revenue. of

We're remained has and strong Slide key can the see in XX for the in pleased year that months. as outcomes third and these you to date of quarter XX each latest the for

XX, outcomes. of on these Slide you additional information some fact, as In see, can provides

approximately As fiscal shown, services subscription end the latest XXXX. XX% account company subscription AAP subscription we Average when to revenues and for and launched $XX,XXX $XX,XXX sales of now XX increased services total of subscription from months for to sales. the

contracts amount to a contract considerable our moment continues a now continues a services. solution As and to invoice are strategic important multi-year represented part of Services who increase. our by those of of which are of And dollar percent noted finally, to percentage unique clients ago, in and increase the the the we of differentiation. amounts continue purchase of contracts an point multi-year clients

and brief of priority a doing a that one in percent flows growth so, to significant sales on with priority, adjusted flow. our model. which accomplish EBITDA to and business through such our strong profitable And Just increases is report a second cash

in of that the Slide the business outcomes: of acquiring a margins; to First, shown strong following sales a cost continuing reflected less models strength in As our the even achieve is generated Second, gross XX, contract; than even having year we a decrease cash grow significant operating flow. has grow; our finally adjusted Third, first as SG&A as sales And subscription in increases of to the percent EBITDA, which continuing to of a customer free having

– progress in made of As Slide also you we're we can XX, quarter. see that third outcomes on each strong areas in pleased these these the

and high achieving very revenue XX, incremental absorbing Slide EBITDA strong travel remains on-site specific adjusted decline percent and related as growth relatively in due strong increased these we’re margin education contribution cost gross a are revenue and even division, delivery. growth outcomes Operating and after to fixed continues and margin of shown expenses, flow-through As to as levels. our of to follows: symposium structure SG&A of

at to our priority reinvest And report and rates high return more brief finally, to on of profits a third even value. flow these create cash

business form excess outcomes, returning substantial As of successfully this shown Slide rates in capital XX, at the return, in in high following in investing achieving of stock shareholders priority reflected to is and buybacks. the cash of the amounts

$XX Slide in outcomes third met shown investments five we've by over mentioned, we're pleased Slide As purchasing returned $XX shares shares. million And repurchase the XX, XXX,XXX the total million our I of that shown or to approximately X.X% And quarter, than to quarters, time. over have each during million the shareholders of on company's invested last key shares. more X.XX as as XX we these

growth our strengthen a Steadily special A us advancing and simultaneously in and to is and rates expand and seeks the investing EBITDA and markets most on these important that each shareholders and company cash placing in generate value. lucrative category to by cash flow, in third, consistently cash mode our strategic additional adjusted generates that high space cash company companies. create of that a outsized returns priorities long-term of in of chosen for

XX already in XX growth in we we'll to fourth quarter. adjusted our EBITDA discuss pleased this, third we for expect Consistent latest million reaffirm between that I and the range a XXXX. adjusted minute, XX further currency achieve low-end that fiscal million months to to in the adjusted of that our and as guidance the said, EBITDA the EBITDA expect through quarter, pleased with is constant we're We're in for close as

adjusted in fiscal million constant to expect approximately then currency approximately XX increase in and continue XX thereafter. year increase to XXXX EBITDA to to XXXX We to then each in million fiscal and meaningfully

detail. now time some Steve? to and like turn quarter more the a year-to-date to our for and little I'd in results quarter to discuss Steve

Steve Young

key of everyone. today. the afternoon, to like on provide factors to briefly you, with underlying It's strong company. Thank be in this our on Good the performance three detail a areas Paul. results more pleasure focusing I'd you

business primarily and and our enterprise partner our enterprise internationally international licensee our in business, both which The North America. in operations North Specifically offices in is direct America. education business

growth year third XX% date record XX of our months. and total quarter. America grew As in strong in business in results year-to-date shown to division third the latest sales last enterprise which Slide XX top of XX% in quarter XX% North X% the in in account be in Reported enterprise for XX, on quarter in to sales and year's X% continued the months. North third America, latest

the with America past business XX% two-years. enterprise an North we've We the are growth over pleased achieved in

first the COVID prior is Paul benefited year year result. noted impacted of The from which, as comping to

As of we return America our services quarter subscription Subscription months. year-over-year for noted, year's FY to be latest the on XX% last services third will date grew X% comparisons for XXXX, an North of quarter. and sales XX% year subscription basis. growth QX in the expect in top apples-to-apples beginning and the X% Subscription in XX increased and sales to

We're is pleased impacted light business quarters. America, rates fact achieved over in the growth North growth of particularly the with in we've pandemic in comping the this enterprise

next Our quarter to compared year's a America last grew third billed in growth. balance XX%, balance, unbilled sales year's strong of and North establishing base deferred for

months XX mentioned, were represented up latest the for percent contracts periods that this the the XX% in And last to from XX% increased Access And All last the Pass from by for of percentage ended XX% North multi-year latest America's multi-year of year year. invoiced the months as for months XX contracts, increased sales XX latest from year. XX%

approximately quarter, in total Enterprise primarily Division China. revenue in results improved our which Slide operations, in As million increased driven or accounts shown XX% XX, the our by X.X XX% for international of in revenue

As international to sales pleased these XX, impact also XX% partner quarter, with shown results, increased in latest a of the months. the XX challenging X% date, the environment. Slide and licensee geopolitical in We're our in adverse considering year XX% FX third and particularly

sales, total accounts date latest in Education months. Division, to which results of strong the the company continued our and in approximately XX Finally, year quarter XX% be for third to

X.X grew and the XX, XX% the third sales in XX% XX months. latest in million or Slide shown quarter, year-to-date, XX% As education in

and was to billed subscription in and and in XX% XX latest subscription of retention XX% quarter, XX% deferred at XX approximately the sales, in balance strong the high sales subscription services growth third date, very Leader in remained and unbilled, months. increased increasing the Education, the third latest XX% months. Education's of year-over-year year Me for schools XX% quarter

activities. Now, cash operating flows from

in flows activities in the were of that Slide our third our operating cash As back the This XX, shown is with from million expectation cash half fiscal the this would quarter. at year. $XX.X flows of strengthen end consistent

liquidity excess cash after last in revolving XXX than in we even mentioned, Finally, with XX.X of the million ended of quarters agreement XX including in XX with the We million investing including stock purchases full quarter as and more million for quarter. did in more million liquidity, the undrawn. XX.X credit million purchase than five this stock the

on guidance. So to going now,

expect As Paul shown FY XXXX. our EBITDA XX again reaffirm and we're Slide currency to for that XX is of noticed, XX, million and between million we as in pleased previously said achieve in constant adjusted to guidance

range. quarter, the already close is latest the EBITDA of low-end our for through noted, month the period very that third As XX adjusted to

adjusted of further course, fourth the EBITDA, growth We quarter. in in expect

XXXX As results. expect we formal report year-end we FY when to we do year, provide each guidance

currency in increase to million FY EBITDA million is to year continue XXXX expected projected that XX XX then to and our and outlook FY approximately in adjusted to XXXX increase However, each thereafter. constant and we approximately

adjusted future low-double-digit to revenue through of growth significant company's EBITDA requires revenue these only the targets flows the of percentage in growth in Because adjusted EBITDA, achieving to high-single-digit ranges.

multi-year and years. revenue to outlook in move our is coming low-double-digits to teens high-single-digits However, low from growth into

our benefited EBITDA top currency growth XX% growth this course in after from with XX% adjustment numbers. guidance, XX third against the the of As company was on of of is revenue to pandemic FY that noting year million company's constant noted earlier, XX.X impacted quarter XXXX’s XXXX latest adjusted X.X of million. date Consistent month

EBITDA in good the million between We XX.X in and expect about currency. adjusted quarter feel constant XX.X million achieving result. fourth this We to be

of revenue to for XXX million, fourth XX.X revenue consistent update, As the approximately expect the for last reflecting quarter. revenue, year be quarter's we to approximately million

targets, in geopolitical of possibility world have despite in factors dramatic these We the and environment, other changes our impact the the could confidence economy, expectations.

you. So, Paul, back to

Paul Walker

that. three of Appreciate addressing questions. the And We're to portion begin Steve. call. like as Q&A do, the you, the we to begin of I'd by ready Thank now transition

of you an have previously Some you interest in. have indicated

our First, it in the some have impacting may asked environment is how how the durability potential of or economic uncertainty impact business? current subscription

thought business, we're quick bit right little seeing provide you maybe I'll just points across All our I I'd now what color Pass make here. Access Enterprise just and a of four about

chosen aspect organize around First, durability. entire as is one clients company to the you our win challenges we've solution face. Therefore, know, must the opportunities of and important most durability

are viewed external must and behavior of change. solutions Our to and continue and challenges the challenges opportunities best-in-class these win And at regardless collective driving environment. action as opportunities these

their number desire Second, as with to continue our new invest which we to growth continued a need top opportunities. be to to address and challenges of clients shows in and reported, growth logos, pleased we

new year. first quarters three logos from grown of revenue has Year-over-year the this each in fiscal

our we've over we've sizable Canada who Franklin that and partnership these grown on the clients recognize and in as a an at few considerable of the Third, years, the zero with end U.S. of they the third Covey. quarter. the benefit from to, said, one increasing XX% and past portion After multi-year long-term of effort clients percentage from of contracts are focus

the Interesting XX% revenue revenue of predictability not of visibility creates multi-year revenue. these future [ph] annual point, of contract. XXX% the and associated at multi-year And durability is of our clients in] the this term subscription base contracts tremendous course, revenue. only their during And growing [retention of least is and

with contract contract even period, multi-year multi-year percent already contract revenue next our is retention a conclusion term, these beginning higher the high of the of clients. At their

of their term XX% that In fact, higher base. it's on an already high single-year peers than

reported impact last our quarter, business majority was by vast high were few we macro comp those with the quarter retention year's unaffected growth growing due the overall environment, to the the the Access of revenue partially did combined Finally, subscription growth clients the impact on the year, while who rates. percentage, in over previous that and large elevated that some All prior have Pass and COVID

our with be returning the third We're pleased in fiscal report the XXXX. same strengthened compared strong expecting in to that stronger, percentage retention achieved quarter, and quarterly fiscal revenue we're quarter second; roughly levels meaningfully the to year we the fourth throughout even retention quarter the of last to first and

of incredibly feel level good subscription to durability business. confidence the high have of our Access continue Pass and about All We a

If that's we're up thinking of to is our from about time sales I question a to time how come second the could, growth maybe related force?

client Specifically, partner, in strategist, Me Leader of and revenue coach. the key implementation facing client generating roles

number client the from quarter, through end fiscal fiscal by end XXXX, a to XXX% of grown last XXX reported our XXX. of of we partners As we've XXXX the from

since account and zero Me the coaches key Leader from grown we've in fiscal our to a our Education implementation two our of and in XXXX, additional Additionally business Enterprise people. division, in XXX created subscription client strategists in approximately roles launch Division facing

the our Each expansion, client industry. is the represent in retention to a these and and is roles largest of new largest these in three and in subscriptions, far away sale client of history, our among professionals organization company's driving roles the team the subscription services. facing critical Today, that

successful that development XXXX. net new approximately As and ramp these facing client in hire we fiscal XXX to across we roughly and professionals fiscal associates, each we will three XX prioritize of roles of these professionals with client XXXX then the facing anticipate expect

Additionally partners and the is a up ultimate increasing revenue his and ramp new client initial significantly. expectation or for importantly, potential beyond growth her

our business have Prior of did consistent and model. recurring contractual a subscription we not revenue to the launch

to lot achieve tended the partner sales, because of reached million when grow year, once only for more top million partners X% their consistently $X.X to their had aggregate, grow X% up each X.X annual client $X.X difficult the it revenue was million growth above result, and above level. them by did year. in client fully fully these achieving replace goal a ramp each ramped they a to As And revenue in of level, the ramped or they revenue that

Today, increasing million of in coach by that of we management sales roles, average for revenue factors, client to $X.X contract, is than including: combination multi-year client of years. eight sales our clients growth ramped a high Leader nearly data enablement fact will our experience significantly important made and the subscription, of one levels grow every client Me our the fully ramped in nearly retention, approximately partner and continue revenue to capabilities. by increased for the expansion possible our and at the are a our headroom to This and for of clients, that our more partners XX% conversion within significant have addition and the XX% next years once their into five strategist rate demonstrate implementation least

tremendous client us gives revenue us and growth. generate confidence gives ability key our future these of significant factors confidence these to it account expanding of in combination each to facing roles The continue

today make question, to the invest to what while third quarters, And your to is, before growth past continuing than outstanding five more open of $XX shares company's significant decide we the business? investments led us the to X% million in purchase questions to over

share to like to to framework. briefly I'd asked our approach we shares. we're the share purchase Sometimes decision how

strategic investments expand sales and our return objective ensure to the team high making all in growth work of our we client moat. we're technology, content, First, force facing expansion expansion, that internal and necessary meet to

small moat, want we such to to and quickly available ensure Robert tuck-in Jhana, strengthen strategic Strive. further did the with can complete as we we liquidity Second, that have acquisitions, Gregory, always which our

cushion be margin want opportunities when of always significant we provide a to able to additional plenty to Third, to and to expansion accelerate arise, provide maintain safety. liquidity of

shares As million of $XX and mentioned to sales liquidity. and ongoing than Steve over facing the we're force in make earlier, even purchase team to continuing client more technology, five $XXX significant pleased to excess have still million expansion and of utilizing currently quarters past investments after content, liquidity

the return and true an that values Fourth, the really the increased and of expected excess has shares five because million high has trade they its our past the share utilize We continues to the extremely is purchase of way of to value, conviction been own. to at determination the on quarters the stock believe of strong in an pretty both easy of $XX one returning because because cash a very have current to stock significant It's offers capital we at value. shareholders over increase and to purchases great rate shareholder discount the form of company straightforward. investment,

Specifically, shares, price relates is at extremely our shareholder the which we've to value repurchasing the ability shares purchasing analysis deep the reflects believe as discount create is we that what to to an it been true by value.

that adjusted purchasing value years. we've First cash currency deep believe with and we know million at an XX the our net extremely you shared coming in million and XX then and expected which the in been of of we two letting million we've million, expect to map you EBITDA between of that discount constant achieve shares present by to and XX XX foremost, a future partial flows,

we value at to Second, EBITDA adjusted rate enterprise future. growth EBITDA represents have of the the achieved the total in to cash appropriate discount the to a the adjusted by and we are we also flow multiple currently expect and significant believe in reflected multiple achieve very trading which

upside. investment, values, EBITDA we cash of a all retain and significant and on return being cash cash XX%, a achieved, the on earn the still current given remarkably return flow can high on cash Third, levels approaching adjusted our cash at

to additional cash attractive. years. of few we flow already on find and just to is the generate than we reflected cash be more the stock XXX the buying over in sheet net of balance have value, present We market that next at multiples, a continued the a of our we value value, to our of valuations the companies an more and has price Fourth, depend of believe in expectation current enterprise heavily expansion whereas on discounted share half or than total terminal high the expect the combination current discount million many at

beginning if has like questions answering three the any session that now today. lines ask been helpful. hope the questions I for and you them to posing have open Q&A additional We'd he'd with Victor these

Operator

Our comes Instructions] Martin ROTH. Sure. from from [Operator question line Jeff the first of

line Your open. is

Jeff Martin

everyone. afternoon, Good Thanks. Great.

Paul Walker

Hi, Jeff.

Jeff Martin

expand client bit for revenue What you improvement related? more little that significant was leads retention could the saw impact in Paul, maybe conviction QX? more market to QX? you Hi. on than then what a in And specific

Paul Walker

Yes, Great question. great.

quarter. This were a quarter end So, who bit of second a were who themselves you any about of whom clients We clients, who clients, drag handful the remain not our our as the of of uncertainty renew in the we talked same. that the were clients the roughly we some larger used snow. reported few retention. if were But we retain there clients by unaffected either while metaphor, handful drug a of on – the didn't the deeper a provided given percentage our recall, environment. handful a quarter, there – downgrade size of at of some revenue of – And their or on past in

revenue quarter, just occurred customers. second our degree with better we're We in the are it much we third having in a that which what to the there our was with some less. that third quarter. in while And the had far in pipelines, of retention the conversations quarter That seeing quarter

far down of final discussions a in we clients advance know, review we with you business begin As one the and that subscribing every them actually quarterly our have with where we QBR. renewal of quarterly sit

a in year. we into there and in the so, a rates retention as move out in discussions, we're bit pipelines I And a QX normal and normalized bottoming return to was QX much of next more think what those seeing

Jeff Martin

And wanted subscription the quarter, North American X% revenue services That's projects, teens and are helpful. year pushing a in Division, to, taking dynamic? clients date pause? to to between, just bridge that kind Great. of gap XXs they underlying then growth deferred for at percent relative Is between the in anything let's of the to example, growing the gap X% high out the there revenue. take Enterprise low some subscription Are

Paul Walker

over year. the remarks It's X% year basis here comping a few a growth question. the last is very, this significant a good today's that a comparison noted is, there in we've on percentage very times Part percentage of

looked the what we're frankly point. size the of business – we're we're a this what pleased subscription-related we so with just of couple at if And years, services is, where quite seeing level over that and normalize for and that

really spot. If lower percentage. pandemic. we comping had just to pick of big this what over about where number, and we then a a It of go And and back would year exciting growth an with we're a couple would year of growth came is in first the years because in thought that be same the be

question, in than environment in To a get get your actually year the the meaningful with percent of a even day, we're back being mean, third above quite are specific about of in more out. clients we'd pleased the pushing are contracts. our contracts didn't jump this the if number seeing percentage in to clients we signing multi-year, we a of know year-over-year and not we're There's I now things XX% half. not, lot revenue who in the year ever might clients, that's now multi-year thought of We're

even I being think view that the I challenges with in aren't they partnership and a it seeing the and and in this solved reflected recognizing us, to year. that quarter want address, types a of we're to up that long-term as numbers. need They or speaks think a clients show

Jeff Martin

you the longer-term being what's impact one rate? last that platform, uptake responses getting? of on you update is What the of acceleration? a Do kind me growth see And are for Great. driver revenue the

Paul Walker

want is Jen, on. President, Jennifer one? Colosimo, take you to do Yes. that Division Enterprise

Jennifer Colosimo

for Thanks the question, Jeff. course. Of

are an have winter tremendous primary vast getting seeing impact in the clients platform. of our fall are a we'll our now platform. speaking from languages, languages and early our The that majority on impact English secondary We launched be the deploy it We us real we're roughly from get as scale clients and much to in. at talk behavior that easier finding and about change to is, collective launched What makes platform so XX scale, we languages behavior will have change.

out great I rolls new technology – world. that also some see where So, it multi-year’s logos, story our impact around cases the driving continuing better the think the use to as of of is

Jeff Martin

Jen. you, Thank

Jennifer Colosimo

Thanks, Jeff.

Operator

One Thank moment question. for you. our next

will Nehal Northland from Chokshi from of the question line next come Capital. Our

Your line is open.

Nehal Chokshi

great Yes. on Thank the quarter. you congrats and

value I in-quarter So, and guys metric. that year-over-year definitely growth year-over-year an on think invoice you And would a basis. excellent is that improved that agree

Looking initial in forward, what kind of invoice maintain growth XXXX would perspective? that EBITDA you year to fiscal need in confidence order

Paul Walker

Yes.

And a so, great it’s question.

we achieve to million and XX targets outlook total is confident EBITDA XXXX First, of the quite adjusted fiscal maintaining then – million would growth that XX in of XXXX, that. single our of level, our we're digits, low revenue reason mentioned fiscal achieve the company reported XX% about digits, good to is what we level, we growth double those feel high revenue need targets. We very need that call it,

In growth the be if fact, months, $XX.X thing million, million minute last XX we next that the did again a achieved as months, mentioned the $XX-or-so growth. would XX% roughly ago, I same of that in XX we've in

invoice eventually at sales question into those of convert question, Your little ahead a be a sales. need around your company level, invoiced as reported bit sales to right, subscription that,

EBITDA we out a growing need and bit enough reaffirm confident put little the would for two feeling is in so, next to we're see, that And those years. and that of good those targets what and to ahead

Nehal Chokshi

Okay.

first invoice to think, just I the three is the quarters, now your clear, three so, basis, And first for on for overall digits be mid-single an up value quarters.

digits digits you fiscal the high XXXX of your quarter. XXXX you've strong guys to about fourth objectives. a And talked and to do in So, order sounds fiscal be double in for single you to fiscal achieve need expectations like low

year-over-year So, well [indiscernible]. you levels invoice on that expecting sounds as that a correct? like fiscal accelerate to in are your Is basis

Paul Walker

Yes.

meaningfully of them – absolutely. year, and We in are first to the through part through expecting next accelerate quarter the fourth then the first

Nehal Chokshi

doesn't that the that coming indeed here? And will you it. a given into Because it you're fourth easy look accelerate? comp quarter has what like materially Got into confidence

Paul Walker

growth dip rates back bit in it Yes, are flips, comp confidence beginning the in a QX what's But here. meaningfully we next we that as revenue easier and the towards in nicely end the we not fall of meaningfully – so one, the the QX see here. year, was of giving coming – after do quarter, us little QX said, retention materially fourth is, a the the in at

a that's strengthen. That's right, is number and that retention So the big biggest have we're to driver. revenue seeing number, we that influence,

going per as continues up new new continue. those tick than is the logo year of to reported, sales the sold in – logos did a ago, that's logos both we – we've year And revenue this well. the – been year and we Second, of higher and more first we've to average the we've and new quarters three as expect

increases subscriptions services. we base to have base the of that attach to So renew and that have to which we the

third I lot think hired a of the client is, we've partners.

client partners client ramping effective. is thought where this increasing. three – to who on we ended and partner the remember are we're of possible number same time, the more year [indiscernible] While about the we far prior beyond go and over partners their you XXX, or year, the we'll end years we we seeing so about client added what to significant becoming are who At that ability that at more last already was – year where front got ramped

the comping business the grow put the over there. – EBITDA off hit there's of growth to amount while total out confidence is – And us I that that, been level growth needed us factors of and enough of that year-over-year we be to we subscription the again, will in slowing subscription able those giving think of we will year throw had a partially bit so, for the growth, the company targets the there's combination amount revenue related last at to a to

Nehal Chokshi

you sure renewal, XX% it mentioned higher seeing you there? I you said just for where Great. customers quite said repeat Can contract, much And are into not I multi-year that you're the think Paul, at that that renewal. a but is understand, then, Okay. I'm value entering you that

Paul Walker

Yes.

better it's four – we're doing whether the And have multi-year so how things an term, to years, end multi-year. is, do? what of initial happy they analysis of happy the two much course, contracts interesting single really and What But three their to a have contracts? it's is, question multi-year. our all at to client we're do contracts, And or multi-year years? the we've one single-year happens So, watched of years,

they for and whether analysis they showing Do do conclusion all, just is coming they contract it's out that had renew, larger And the and the than two at is years contract, that do they're were they as the that same the XX% renew do don't clients they renew value the expand? four contract like of who, next multi-year that or when feel value the place, done of renew of at three was. more, and value years, renew years, those of they in they

Nehal Chokshi

higher clear, that total or be that's [indiscernible]? value a Just value annual contract to contract is

Paul Walker

Annual.

Nehal Chokshi

Wow.

revenue secondly, three-year – XX% contract, uplift rate. it's if three So effectively a average, on and [Multiple later, like Speakers] that's a retention years you're seeing that's

Paul Walker

Nehal, it's their greater not greater peers. than XX% than in. they XX% single-year are contract their contract

contract, specific the – likely value versus the renewal So, is more point single and expand. the upon client. contract during are revenue single-year we're only versus XX% what clients, because to of why multi-year the not are clients that is they the guaranteed they on much to analysis them they relative of year that multi-year hard valuable It's contract to how more happens pushing are – multi-year term is get so multi-year not

to day, customer – They're engagement treating those are our that, way a sure be can expanding clients teams customer them, not we doing to models hope by we're happen. love We make that and we could XX%. will success One in everything that that possible.

do, what's in to the compared they their It's that's peers, single-year growth peers. but not some, not happening. value. For contract It's XX%

Nehal Chokshi

Okay.

Paul Walker

clarification. for Great you clarifying Thank that.

Nehal Chokshi

to just then that relative generally single-year one upsell, there's the then components, renewal a to peers, here? contract bigger is XX% and right, And factor Yes. clear, rate two which improvement be

Paul Walker

renewing can a establish is with for time – those year do of because the relationship go again, they – up sell so journey it's is for they and that greater clients renew. But the they've we for with more a are may But larger been more we longer, versus but because to likelihood populations sign on slightly clients us as additional the rate slightly longer and to are the expanded we've because driver larger look the tee of journeys multi-year not next clients us. first than with client, those with rate, see client. to well, more likely example, had Renewal that expansion renewal that factor up to are that

Nehal Chokshi

Got it.

Okay. Great. Thank you.

Paul Walker

Thanks Nehal. questions. you. to talk to Good Good

Operator

our for moment One question. next

Our next will Storms Stonegate come from question the from Capital. Dave line of

open. is line Your

Dave Storms

afternoon. Good

Paul Walker

Dave. Hi,

Dave Storms

there it more is saw jump sequentially. going? of seasonal Just Is had I nice to kind good come EBITDA factors to macro or sign start, that, that How’s wanted the education adjusted story just there margin a of or it's a margin, maybe a things driven?

Paul Walker

to Okay. QX sequential The QX?

Dave Storms

Yes.

Paul Walker

a together of process. – charge And – where and in of bring clients quarter, Sean what more good events we in these, to so attendance did in we we to there third client great those, the expose we for first What what are them of is as in doing Leader the that really Me call, symposiums, revenue. second And current driver all, a way we education did is are quarter. of and that thrills in we and the than it them that prospective there. to do answer specific question. Dave, comes question really business and team QX doing The as

costs. the that the no we in coming in quarter we're those. quarter, that help – profit than We've did so a not sequential to just more margin. third with there we and the in We're of had a bump And defray second caused gross revenue and attached on it we to money but of charging bit making – don't little in some got

Dave Storms

then forward were your in than other about or that the earlier? mentioned Understood. been for came could the you you thing, Very just there some is in expected, company you. adjusted anything came – And you of there really comments quarter in higher right EBITDA stuff going know was level talking retention revenue that see the helpful. Thank I the that total that

Paul Walker

think I want Steve, to... you

Steve Young

lot quarter a revenue. control hiring in things like impacting and without controlling in process everybody that reviewing One a else, just can and our we're everything really this the significant just we that is negatively of expenses of our

expenses a came quite anticipated lower – our revenue we good. So, And in our had than up bit held QX. in so we

up we Our gross had held good, margin and expenses. less

So, big the of that. of everything expenses kind were together, part a added but

Dave Storms

and helpful. taking Very for congrats quarter. Thank my on the questions you

Paul Walker

Dave. Thanks,

Operator

moment for next One our question.

from Paris comes question Barrington of line next Research. Alex Our from the

Your open. line is

Alex Paris

were here HI, last guys. three call mix, what third a deep to you seems Thanks months on right? for the than also taking through the that my a Yes, to And questions. in spring. the melted call. snow quarter have that difference strong conference waiting congratulate this big the in difference comment we want performance conference and bit I

incremental just So, of questions kind trying to here. ask

up – in number or not lose What's that impact maybe expanded prepared sequentially? large Access You or consistent business? or did said renewed into Pass dive didn't clients you you like clients All on with in renew the QX, comments in Can of the was just that you and that QX your a American QX. bit more macro little enterprise North the who

Paul Walker

Yes. Great question.

larger of as – certainly. had on who QX we had in that. were we clients – saw handful that. weren't and disproportionately in had few a with circumstances QX, QX, So, a We of their on our able our we some to couple mentioned, that clients clients that weighed of less yes, – a of much – big of side, No because that renew like

renewed quarter-to-quarter clients client those third while a the the in because, was couple – same. in we the clients didn't like the – percentage retained QX. improved that roughly clients did we quarter that percentage was so have retained those better of from – again, And of who was But outlier revenue

the And trend throughout then into beyond. levels strengthening with that to is And and revenue QX. what we there in the consistent year. trend outlook the expect getting quarter QX into – we seeing last further back continue we're were and retention more continue And we that seeing that being up were to that trend the first

Alex Paris

– then have to renew you in of win QX? expectations And that have to you. that clients you'll larger Got didn't opportunity still or those able some hope weren't the back

Paul Walker

XXX%.

that the conversations QX, in in we There who are not those if side, things and were going they'll every come about were on clients But we so expectation, do their going back. are we're on, are. they we they have they position to knew the in, understand about them, some are talking why we're ones the talk were you and you would fact, so disappointed. In

In fact, reviews. have and we continue to them with quarterly meet business

They for really of That's life. kind a them back. if and Alex, access We standpoint, products them relationship clients. they're both, about we and behaving. our it's And treating way still that's don't hope a of have the of mentality, We're clients. services, a will also but we talk mantra, expect take of from to as all our that but we with kind win clients

so, some every clients quarter backs And that, renew. of weren't nice for win able we have to reason, some

unsure in to wasn't this consulting quarter the about for in large the quarter very year for company in us. would were this fourth look with talked the global their we client, second They that renew a renew They quarter. didn't size renew, fact, large significantly to client and the an did second that renew wasn't able able what like year subscription but them. In expanded they of about with a services IT a

ones we those so, and in can doing that And case QX. any we particularly client a expect and we big hope that and make couple for of are everything to lose the

Alex Paris

represented in first international were the they Thanks. Good of Good China drag hear. in mentioned performed Japan better. to prepared then a fiscal comments, and half Together, on that And your of the China hear. you still obviously enterprise Paul, the to XX% business, year. sales.

You China overview what's just specifically, but in a on mention Japan little maybe Japan did quarter-over-quarter? and on going

Paul Walker

Japan pleased. in thought were the We quarter. third China like you. they would Thank and we behaved

– of around still year. about in anticipated kind a be to QX. providing bit that that So, through quarters on and drag gave and And overall year quarter in growth the They had a and second do first that the reported kind of been we this continued of they overall, drag guidance you'll net-net recall, we the we drag fact of are they that. were talked a a two this

China QX, that out, had quarter. has now and the kind expect third in in a in has Xx That said, the back growth each grown and this China have That quarter, out seen significantly. of time meaningful again fourth happened with they'll of them. the And we We've they've and responded come Xx experience. COVID rapidly. business strengthened in

little would They in we to XXXX, start in the but expected growing this bit will not we like at just are the level happening meaningfully would for year. have full-year, back been year, to be the some thought a they point later do fiscal is they they

And trajectory both into Japan China as on growth and a and fourth next in are meaningfully they'll contribute nice we that so basis quarter expect back a year-over-year move on year. and the

Alex Paris

renewals schools. a on Great. And Maybe seeing and in there, thing The update in I significantly then focused the on focusing just color believe, I a districts sort Sean, the early and on little summer. question you're that, important Education in the what for for rather very know quick that summer just business? renewal season. you're Division than a of is period

Sean Covey

how Sure. are Hi Alex, you?

Alex Paris

Good. you? How are

Sean Covey

summer. excited we're the So yes, about

good So generally, it. about feel we really

right now. schools and on We a have coming districts of lot

what our quarter, the far now. and strength fourth is like our the schools facing are challenges growth that feel designed solution right so year we of for think perfectly this I the like going into

scores in So, test learning a amongst students, lot well the loss, long as teachers, been mental are of as lowest time. a they've wellness

problems. And those so, loss able learning being to help overcome

student Teacher at just Whole looking issue. turnover instead academics, whole is big development a the students. of

to those. So well things all perfectly – are deliver on those we're designed

The we summer into it. the about coming district really is focus So, good feel working.

And year, of that we to amount with of double districts really at compared clumps but is the the end brought of I the on of schools. to year, instead we're this think I single comes good think on last we'll going news. report schools which

renewing you [district It to And little comps has of are it's big that of [ph], far much the so been historically. is twosies. like schools on] usually they're really but strong, terms in get instead bigger boy, get longer a the – retention takes and a and onesies, good

our results So, we really data a and strong. continue with research momentum. is there's lot to The of get

just study a we a big and Leader schools big teacher that's higher. Me example, did And on become is For significantly in issue. retention

market we [Multiple our favor to got just Speakers]. lot going a course, that So now, of message. a of with right that out get – things we're solid Was But that fourth we've we've got in and quarter. and expect

Alex Paris

renewal fourth the Thanks and on on luck Thank the and was That's for Sean looking good you, what absolutely. season No, good taking question. I overall. quarter luck for. my

Paul Walker

Thanks, Alex.

Operator

moment One you. next our question. Thank for

next will Our question Capital. be follow-up Chokshi Nehal a from Northland from

is open. Your line

Nehal Chokshi

your Yes. your the little wanted well to bit there. thoughts the how out A on I own question, the Thank on as you can as thoughts of questions. generative follow-up employees? impact customers, can AI but for your impact of potential you impact your it I how know appreciate

Paul Walker

a great question. That's

would In question but fact, somebody ask. many. thought, that the I considered kind hoping was that proactively, be I that, too making won't would answer I of no, fourth do going I I was to

present AI it for is two us by opportunity then you the to So, outlined encouraged we're that quite going generative actually ways. and

really power work financial the operating generative AI help that for a think future opportunity embrace business of as efficiently. even more become and have we us. an could efficient. accelerant be can the there's even strong model, just We already more we a that One, in more as but to internally ought We how this unleash to help to us for real we work us

that opportunity. big think a be will I

opportunity watch offerings. to our weave but I clients. can, to; AI out be into and We're think A, to actually working quickly the with now as our figure this how to we bigger right might about aggressively think as

that differentiator and and helping as to people and at things and we the a plus being important change content it example, clients plus company technology of people achieve relates about scale. are a doing integration For behavior those talk three it

have learning people. ago, is The Covey people of people but time don't And away, is, the component your part – kind of just-in-time, that in it's – our We in some expect imagine coach a day Franklin support the of your a few kind to the acquisition I with that Jhana pocket the is where going coaching really go AI, to the you they're important. of of but of time. can for that's be of all also that on, supportive lot performance journeys It's moment. push Jhana role a text-based. a now, the in right to of coaching years information We play just to coaching,

AI where to Covey that you coming is the not be companies can one information around do if tremendous. the And is Franklin there, can I And source? questions trust What could be, would the from. most, going the of of AI most for you leadership trusted definitely one being think out that trust

important There's our to it. it a will of opportunity measure, ways. big we as buy to people think bigger our kind excited in across so, different a role feeding us impact helping actually track, a back And in analytics as customers. for in change, of there. behavior on, a solutions, We're monitor, And couple speak, be quite so plays to accelerant it AI platform turn great

Nehal Chokshi

to this Do have of or off point that you have discussion kicked such make any programs where more been a might know developed, in generative at actual time want you is development AI investments? this you of

Paul Walker

question. great Yes,

have that Expect into yet. things our I any don't are working have on we like we clients we to the But our – released so we to not have released for offering officially of future, what do have yet. But – not that in near and we just our put So, anything described. clients future.

Nehal Chokshi

Near future.

Great. you. Okay. Thank

Operator

further Thank call for you. And the I'm over Paul to closing any turn showing questions in to not I'd back like queue. remarks. the

Paul Walker

Thank Okay. Victor. Wonderful. you,

of a Bob we dropped. to are to a And to Before share Bob he's just turn And couple – we going – we go, Bob thoughts. had minute on. was to

can share you're share be have Steve, going we're minute Bob to end to it's as if [Indiscernible] a by happy his he'd And what Bob has going well. wanted this, if thought that Steve going be so okay, do, what them the to prepared say, we're to to or so for and remarks, Bob. to to willing he here. I'm listening of ask pretend two a

Steve Young

voice. to Maybe Bob's I'll talk try in

I'm words. in to say, it's going his – he was what So, really and

I'm I, you all delighted and things. to share couple Bob, obviously, here be with So, of a

Okay.

would like have to and how I First, you much appreciated guidance. appreciate shareholders express trust, we to and your our support,

team and confidence, You great your earn are wakes determined trust, commitment. day advisers and continue to up supporters to our executive every and

Jen, for executive leadership appreciation know to and as Paul, Sean Steve, future our for entire day. to creating way the Second, combined I'd great admiration express building an Board, expanding strength team, to and and and in shareholders, significant and the I their and has strategic the for you and is moat, ongoing our shareholders. which like value remarkable leadership vision execute each of our incredible strength they our lead The significantly and of the

third, customers, And out a employees Paul, Board an leader and and much Covey's as clients and each Board is behalf like of a person, on CEO. I Paul you. of as how confidence to of to Franklin done I our and team myself remarkable would the and and we admire Directors, has my know as he executive incredible him express the full doing just and of of job, has on of our of our

of for pleased Directors stand announce Shareholder starting a has to to the Annual Board serve been as that this Meeting. at member and Paul immediately, Given year's the company's I appointed am will Board he this, election that of to formally

help performance to I wanted September any Chairman Chairman also will the and order the over and transition actively any transition you I during I Given effective that return of the Board, way took role continue could that to in way can. know in help X, in happily of the team's to Paul the deep and I single I role strength that to where tremendous company, in the leading XXXX, from let I Executive and as additional will

the on And pleased have everything Chairman Paul appreciate and appointed – he do has as of pleased will Bob the Board Board. done all that that he are that been and with to we as has the serve still I company. support the said, Bob influence And for and company Paul. very totally So, we're the

Paul Walker

I just final on Bob. for Bob. thanks, say comment Thanks, Stephen, the and would me,

continue know, company. have. better Chairman and You and that the be not Bob, you partner case the he's And has going just excited the that's as a not the could you could all been case, I'm than to to have as of

we year-end little So, it all know thank over, you all I could to Bob when look and important, important of to And share, we was we so again we have careful and much results. that. forward of went report wish understanding think, appreciate a you. for talking to for your Thanks your for company, the share to good Have your but bit time interest today. you been I a evening.

Operator

today's for concludes participating. you Thank conference call. This

may great day. Everyone, have disconnect. You now a

Franklin Covey (FC) 28 Jun 232023 Q3 Earnings call transcript