Franklin Covey outlines $265M–$275M fiscal 2026 revenue target as invoice growth accelerates in North America

Earnings Call Insights: Franklin Covey Co. (FC) Q4 2025

MANAGEMENT VIEW

* CEO Paul Walker reported that "fiscal '25 full year revenue and adjusted EBITDA results came in right in line with what we expected when we provided guidance in our Q3 call" and described the year as a period of transition and organizational transformation. Walker stated the company is now entering "a period of execution and a return to growth," particularly highlighting strong momentum in Enterprise North America, with accelerated invoice growth driven by investments in the go-to-market sales transformation.
* Walker explained that "services booked in Enterprise North America [are] up double digits over the prior year," and new logo growth is pacing above the prior year for the first two months of fiscal 2026. He expects this acceleration to drive "meaningful growth in invoiced amounts" for fiscal 2026, which will translate into more reported revenue in fiscal 2026 and even greater reported growth in fiscal 2027.
* Walker emphasized strategic priorities: "to be the leader in combining world-class content, technology and services to deliver breakthrough impact for our clients" and "to transform and accelerate our go-to-market approach to win more larger and more strategic new logos and to expand and retain existing ones."
* CFO Jessica Betjemann stated, "our fiscal year 2025 results were in line with our most recent guidance provided on our third quarter earnings call on both revenue and adjusted EBITDA." Betjemann noted that macroeconomic and government-related headwinds, including tariffs and federal spending cuts, impacted results, but the company has "retained the vast majority of our client base" and expects fiscal 2026 to be "a year of focused execution where our adjusted EBITDA and more importantly, our free cash flow will return to growth."

OUTLOOK

* Franklin Covey projects fiscal 2026 revenue in the range of $265 million to $275 million and adjusted EBITDA in the range of $28 million to $33 million. Guidance anticipates that "approximately 45% to 50% of fiscal year revenue will be recognized in the first half," while "adjusted EBITDA...approximately 30% to 35% to be generated in the first half, with margin expansion expected as cost savings and operating leverage build through the back half of the year" (CFO Betjemann).
* Management expects most of the growth in invoiced amounts in fiscal 2026 to translate into stronger top line growth in fiscal 2027, with "strong EBITDA and free cash flow growth with improved margins and free cash flow conversion in fiscal '27 and thereafter."

FINANCIAL RESULTS

* Franklin Covey reported total revenue of $267.1 million for fiscal 2025, with revenue down 7% from the prior year due to a 10% decline in the Enterprise Division, partially offset by a 1% increase in the Education Division (CFO Betjemann).
* Fourth quarter revenue was down 15%, with Enterprise Division revenue down approximately 22% and Education Division revenue flat. Consolidated subscription revenue was flat year-over-year at $147.9 million.
* Consolidated deferred revenue balance increased 3% year-over-year to $111.7 million, with unbilled deferred revenue contracted for the year up 7% to $48.4 million. Gross margin for fiscal 2025 was 76.2%. Operating, selling, general and administrative expenses for fiscal 2025 were $174.8 million, up from $165.8 million the prior year, reflecting increased investment in sales and support personnel, marketing, and product-related costs.
* Adjusted EBITDA was $28.8 million, within the guidance range. Cash flow from operating activities was $29 million, with free cash flow at $12.1 million.
* The Enterprise Division generated $188.1 million in revenue, Education $74.6 million. North America segment revenue was $147.6 million, down 10% from the prior year. International direct operations revenue was $29.3 million, down from $33.3 million. Education subscription revenue grew 10% to $45.9 million, with 13% growth in the balance of deferred revenue.

Q&A

* Jeff Martin (ROTH Capital Partners) asked about the evolving decision-making environment and sales transformation performance. CEO Walker said the company is "dealing with that uncertainty better today than we were certainly November through April, May last year," and noted strong first quarter invoiced growth in Enterprise North America, with new logos and services bookings up.
* Martin inquired about client renewals. Walker explained that "the percentage of overall clients staying with us has remained very consistent and very steady" and that revenue retention was "a little bit lower in fiscal '25," but expects expansion to outweigh contraction in future periods.
* Martin also requested revenue and EBITDA expectations for Q1; CFO Betjemann provided only first-half/second-half guidance, stating revenue would be 45%–50% in the first half and EBITDA 30%–35%.
* Nehal Chokshi (Northland Capital Markets) clarified that Enterprise North America invoice subscription bookings are up year-over-year for the first two months of fiscal 2026. CFO Betjemann confirmed. When asked about growth drivers, President of Enterprise Division Holly Procter noted that "large deal" wins are a result of new systems supporting faster RFP turnaround, which "never would have been able to facilitate that type of engagement a year ago."
* Alexander Paris (Barrington Research) questioned the seasonality of revenue and EBITDA; CFO Betjemann confirmed historical trends will persist. Paris also asked about sales force size and turnover, with CEO Walker stating the structure is unchanged and growth is expected on the new logo hunting side. Paris sought more detail on Education, and President of Franklin Covey Education Michael Covey projected a return to "good solid growth" in fiscal 2026, citing a strong pipeline and 13% deferred revenue growth in Education.
* David Storms (Stonegate) asked about AI integration. CEO Walker described AI as "a real accelerator to add to those other two legs" of content and services, enabling "better visibility... new type of coaching... new way to reinforce the principles we're teaching." Walker said the company is "in the early innings" but rapidly advancing AI integration.

SENTIMENT ANALYSIS

* Analyst sentiment was slightly positive, with questions focusing on sales transformation progress, client renewals, and growth drivers in the evolving macro environment. Analysts acknowledged improved early fiscal 2026 momentum but probed for clarity on seasonality, salesforce structure, and Education recovery.
* Management maintained a confident and constructive tone, with CEO Walker affirming "I'm confident that the strategy we've been pursuing will continue to create value in the years ahead" and CFO Betjemann highlighting "we expect fiscal 2026 to be a year of focused execution where our adjusted EBITDA and more importantly, our free cash flow will return to growth."
* Compared to the previous quarter, management's tone shifted from cautious optimism and focus on cost discipline to a more assertive outlook on growth, especially for fiscal 2026 and beyond. Analysts' tone moved from probing for downside risk to seeking details on execution and growth opportunities.

QUARTER-OVER-QUARTER COMPARISON

* Current quarter guidance for fiscal 2026 revenue and adjusted EBITDA is unchanged from the previous quarter's outlook, with a continued range of $265 million to $275 million for revenue and $28 million to $33 million for adjusted EBITDA. Management reaffirmed the impact of macroeconomic headwinds and government-related disruptions but now highlights stronger first quarter momentum and improved client decision-making.
* The previous quarter emphasized cost reductions and prudent expense management; this quarter's call pivots toward execution and growth, with evidence of new logo wins and services bookings up in early fiscal 2026.
* Analysts' focus has shifted from questioning downside risk and timing uncertainty to asking about the sustainability of early gains and the specifics of sales and Education recovery.
* Management's confidence appears to have increased, with a stronger emphasis on the go-to-market transformation producing results and anticipated acceleration in fiscal 2027.

RISKS AND CONCERNS

* Management cited ongoing macroeconomic and geopolitical uncertainty, tariff threats, and U.S. government spending cuts as headwinds impacting both Enterprise and Education segments. CFO Betjemann said, "In response to the economic uncertainty, many of our current and prospective clients sought to reduce their spending... which led to delayed decision-making and decreased contract expansion."
* Disruption in Department of Education and Title funds delayed new school purchases, but management expects to recapture these in fiscal 2026. CEO Walker said, "We're pleased that Education reported revenue growth for the year overall... and that our balance of deferred revenue increased 13%."
* Management described cost controls and restructuring actions leading to "$7 million in SG&A savings for the year and an annualized run rate savings of $8 million in fiscal year '26."

FINAL TAKEAWAY

Franklin Covey management expressed confidence that the company is exiting a transitional year, with early fiscal 2026 showing strong growth in new logos and invoiced amounts driven by the go-to-market transformation. Guidance remains steady, projecting $265 million to $275 million in revenue and $28 million to $33 million in adjusted EBITDA for fiscal 2026, as management expects a meaningful acceleration in growth and free cash flow in fiscal 2027. The leadership team highlighted robust client retention, expanding demand for performance solutions, and the early impact of AI integration as key drivers for future value creation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/fc/earnings/transcripts]

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