Franklin Covey Company

Q3 2021 Earnings Conference Call


spk_0: welcome to the que three twenty twenty one franklincovey a conference call my name is and and i'll be your operator for to they've all at this time all participants learn to listen only mode later will conduct a question the of better bathroom during the questionnaire professor if you have a question least dar than one on your touched on phone please note the scampered this being recorded matter of the color of their cat corporate and polar bear cats may begin
spk_1: the you a room
spk_2: luckily was a gentleman on behalf of franklin i like to have moved to or conference call to discuss the third quarter of fiscal twenty twenty one financial results and hope everyone is having a great summer before we begin this presentation we'd like to remind everyone that this presentation contains forward looking for looking statements within the meaning of the private securities litigation reform act of nineteen ninety five ford like is demons are based upon management's current expectations that are so great to various risks and uncertainties including but not limited to the ability the company to stabilize girl revenues the acceptance of and or your age for subscription offerings including the all access pass a leader and me memberships the duration recovery from the the duration and recovery from the circa nineteen pandemic the ability of the kobe i higher productive sales professionals general economic conditions competition in the company's targeted marketplace market acceptance of new offerings are services and marketing strategies changes in the company's market share changes in the size of the overall market for of the company's product changes in the training spending policies of the companies clients and other factors identified discuss the company's most recent annual or unformed nk and other periodic reports filed with the securities and exchange commission many of these conditions are beyond our control or influence any one of which may cause future results to differ materially from the company's current expectations and there can be no assurance the company's actual future performance will meet management expectations these forward looking statements are based on measures current expectations and we take no obligation to update or revise is for the his favorite to reflect events or circumstances
spk_3: after the date of today's presentation except as required by law
spk_2: with that out of the way would like to turn the time over mister by women are chairman and chief executive officer bob
spk_4: thanks very much at good afternoon everyone that we're happy to have the up to talk for you today really appreciate you joining us oh we're pleased to report and as you saw in the press release their third quarter results were strong and even stronger than expected your we believe this again reflects the strength power of quality and durability of of our customer value proposition and of the high growth durable subscription business model that we have created you're just some highlights who showed him slide three revenue was at fifty eight percent in the quarter and it was also greater the and to school my teens strong third quarter i gross margin procedures at five hundred and eighty seven basis points are operating as una as a percentage of sales improved to sixty three point six percent the just leave it die increase twelve point two million me quarter to eight point six million our net cash from opry activities increase sixty five percent to thirty point nine million
spk_5: and we ended to with fifty one million liquidity even made after making a major investment in the acquisition and strides so of a little more detail on each of these key highlights
spk_4: of revenue in the third quarter with and was fifty eight point seven million which obviously represented a big increase compared to the thirty seven point one million of revenue in last year's third quarter which of course is impacted by the kobe pandemic importantly though the fifty eight point seven million in revenue is not only significantly higher than last year so quarter was also higher than the fifty six million in revenue achieved in the strong third quarter of fiscal my to treat pandemic which itself represented a big increase compared to the fifty point five million revenue achieved in the third quarter of fiscal two thousand a teague the strong growth was driven primarily by the strength from growth of all access pass and also their subscription business in education alex's pets we see were inside for in the third quarter all access pass subscription sales increase seventeen percent to nineteen point two million schools have two point eight million compared to answer courage to school twenty twenty
spk_5: importantly the strip say growth and forty percent compared to the thirteen point eight million dollars has passed sales achieved in the strong third quarter of fiscal two thousand and nineteen
spk_4: when you take a subscription plus subscription services sales grew forty three percent to twenty nine point seven million and third quarter compared to twenty point eight million in the third quarter fiscal twenty twenty but also grew thirty nine percent compared to the twenty one point four million all access pass scripts and when subscription services sales in the third quarter of fiscal two thousand and nineteen
spk_5: or tonal balance deferred subscription revenue grew twenty six person and third quarter to fifty five point three million an increase of eleven point four million pedro balance forty three point nine million at the end of last year's third quarter misrepresented very strong growth and thirty nine percent triggered for revenue balance and thirty nine point nine
spk_4: nine million in the third quarter of fiscal nineteen and plenty of balance of unveiled the for revenue grew twenty three percent to forty one point three million issues third quarter and grew seventy four percent compared to arab twenty three point seven million dollar balance of until the for revenue and the third quarter of fiscal night chain reflect in this reflects course insignificant ongoing increase in the procedure all access pass contract which are now multi year we've talked to the task of having roughly a third of our contracts multi year it's now more than forty percent and their forty percent of contract represents fifty two percent of all of our all access pass subscription revenue is now and multiyear contract and in north america and that's really encouraging and saying that people are seeing that value and that were already a have different revenue not just for two thousand and twenty two fiscal year the already significant amounts for two thousand and twenty three
spk_5: i revenue growth as strong as he talks about the shown in slide fly
spk_4: the growth of our profitability and cash flow related to this revenue growth was even more significant
spk_6: gross margin percentage for the camp the increase five hundred and eighty seven boy basis points to seventy eight point two percent in the third quarter compared with seventy two point three percent in last year's third quarter seventy point eight percent in the third current fiscal nineteen and sixty nine point two percent in a third quarter of cisco
spk_5: waiting
spk_4: gross margins and enterprise division itself actually grew to eighty one and a half percent in the third quarter
spk_7: operating sgt is percentage of sales as image and declined to sixty three point six percent representing a significant improvement compared to the to record siskel twenty twenty was also level lower than the sixty five point three percent achieved in fiscal two thousand and nineteen thirty third quarter and the sixty eight percent achievements of quarters
spk_5: cisco eighty
spk_4: noted that just need to die increased eight point six million into quarter that's an increase of twelve point two million compared to just leave the loss of three point six million last year but it also represents sniffing increase compared to three point one million and adjust to be the dough achieved in the third quarter of fiscal nineteen and compared to the six hundred thousand just adjusted bit achieved in fiscal eighty
spk_5: which he a year to date adjusted ebitda increase seventy two seventeen point four million which is a big increase the pigment compared to five point four million in year to date a just leave it does it through last year's third quarter
spk_4: it's also big compared to seven point two million me in your to date you just need died she'd
spk_5: and the very strong first three quarters of fiscal nineteen and a half a million of here today to jesse the shooting fiscal eighty importantly just saved up for the way this twelve months through the end of this year's third quarter totals twenty six point three million
spk_4: level which not only substantially exceeds eighteen point eight million achieve for the same with as twelve month period last year but also the eighteen point six million in that little old ladies twelve months a as just needed a cheap for the same period and fiscal nineteen
spk_5: you'll know that this twenty six point three million and latest twelve months of jesse of unidos also well ahead of our existing for your guidance of twenty to twenty two million of adjusted of fiscal twenty twenty one as a whole
spk_4: so more and more on that a moment
spk_5: our cash cashflows also strong with net cash generated the third quarter increasing to eleven million as the increase of twenty three point two million compared to negative twelve point to in that cash generated during the same year to decreed last year was also well ahead of the negative four point eight net cash generated the same year nature and cisco it same and the seven point two for the same period and eighteen and then finally arc net cash provided by operating activities increased
spk_4: sixty five percent to thirty point nine million to the third quarter the next target eighteen point seven million to that century last year eighteen six and nine games in the same trees and eight six a point six million in eighteen so we ended this is a quarter of a strong liquidity with factually fifty one million even after investing ten point six million for the acquisition of strive which paul will talk about later in this call and this liquidity level is up
spk_5: thirty seven million and liquidity we had at the start of the pandemic a year ago even after the investment stride sober grapes within a strong balance sheets edition we'll discuss the more detail and just moment that when to give you the same context we surveyed in the in the past that three quarters and says you can say what's behind the of make sure you understanding each exponents behind this performance
spk_4: as a good as you can see inside six the for trends are as follows first two types that alex's tassels and continue to achieve strong growth second that all access pass subscription services sales of continued to grow in are now significantly higher than even they're pretending to close a year ago third our international operations contained a strange and
spk_5: and forth the performance and trends and or education business of also strength and substantially both and from to retention revenue number of new leader me the schools and outlook
spk_8: now just a little more detail a cities key trends
spk_5: first as expected all access pass and subscription sales which now account for eighty two percent of enterprise cells know it's merits continued strong as you can see and chart one in on flight seven total can alex has cast inscription sales grew seventeen percent in the third quarter to nineteen point two million your leg grosses fifteen percent new and latest twelve months was fourteen percent
spk_9: the nineteen point two million alex has passed destruction sales in the third quarter compared to sixteen point four in all access pass subscription says the third quarter of twenty thirteen point eight million answer core of nineteen and eleven point one in the third quarter of a team
spk_4: in addition shine chart to and slide seven are all access pass deferred revenue balance who and even more rapid twenty five point nine percent and third quarter to forty four point two million which represents increase of thirty six point eight percent compared to last year's balance and at the end of it at thirty two point today balance and for rather at the end of the third quarter of of even cisco maintain and that's when broad based across all the key elements the number of alex test new logos increase ninety three percent in this third quarter of this year compared to last year annual revenue retention continued to exceed ninety percent as shown in charge three on on of same slide and the sale of multiyear contract has also consider and strong with her balance than build to for revenue increasing twenty five percent to forty point five million compared to thirty two point four million and it's a quarter of twenty as the up seventy four percent compared to the twenty three million balance and build the for revenue we headed in the third quarter of the like team as you can see in short for the second friend relates to this is subscription services sales all access pass subscription service increased to ten and a half million third quarter making it our highest as subscription services quarter ever
spk_5: this compared alex's pets subscription services sales of four point four million it's or quarter of fiscal twenty seven point six million and third quarter of nineteen and five million and eighteen
spk_4: which is shown in in the also inside a
spk_10: also shown for the first time are all access pass subscription fiction services sales exceeded the hundred million two lanes twelve month period minutes of that to dig
spk_4: when mark
spk_5: going to chart nine time that subscription services shows the strong booking trend for alex's pets subscription services oliver almost all of which have now been being delivered live on line
spk_4: as you can see and charge three on that side nine to begin beginning of the pandemic in march of last year bookies of services delivered live on site that client locations where necessarily cancelled and the your of your dollar value of our services inclined with delivered get engagements down six point nine million in north american the third quarter
spk_5: however with our quick pivot to delivering services live on line in the fourth quarter of fiscal twenty twenty new book me to increase to level nearly equal to that achieving the fourth quarter of fiscal night jane
spk_4: just three months into the dead them like of these strong books and in turn drove an increase in the dollar going with services actually delivered
spk_5: as a result instead of being off six point nine million in the third quarter the dollar volume of services live in the fourth quarter was i've only one point one million the same positive trend continued in first quarter accelerate in the second quarter and continued to the third quarter were sales as subscription service and exceeded by sixteen percent the highest
spk_4: level ever achieved in any quarter as shown in sharp to begin the vast majority their subscription services are now deliver to quite slave online mean their momentum can continue regardless of when and whether certain organizations return to their offices third as shown in slight ten performance in our international operations as continued to strengthen our throughout the answered the third quarter as previously reported bad started attending mic we had recent skip reschedule substantial live on site tree engagements nary international offices well since these countries were just starting so all access pass and therefore did not have a strong base and durable subscription revenue to cushion then sell these countries declined significantly compared to the third quarter of fiscal team however is shown in last year's fourth quarter while still operating well below the level achieving the prior fourth quarter sequential sale then sales percent of the prior year in these countries improve significantly your yourselves improve further in the first and second quarters respect and sales contagious drinks in a third quarter and we're pleased that they did
spk_5: good
spk_4: the third quarter erudition cells were ahead of her expectations and just thirty percent lower than in the third quarter of nineteen and a porsche that thirteen percent down is reflecting the fact that we're sorry dad more subscription sales and those offices well which which are going on to the balance sheet rather than on the income said queller continue to be pandemic legion challenges and japan in a certain latency operations were pleased with strong rebound overall in our international operations or importantly in addition to signature recovery and reported sales shown and slide ten or internal national priests have seen significant increases as in it's and alex's pets to for revenue so finally on these trends we've also seen real strengthening in the performance no role market trends in our education does in the third quarter
spk_5: the shown in inside eleven the strength did stations performance includes that the number of leader me schools which have renewed or a razor need earlier in me membership increased nineteen hundred and twenty wondering third quarter compared to sixty eighty one and the same time last year
spk_4: the number of new leader me schools who contracted evidence or quarter or in the run the trusted contract he is naive greater than that of she by the end of last year's third quarter or three hundred and five schools versus to fifteen
spk_5: and addition to the strong booking performance education reported for foreigners also increase against go in third quarter education third quarter revenue grew forty four point eight percent over last year's third quarter they also grew seven point three can present competitive fiscal my teams third quarter this reflects among other things editions new large multi york district contracts louis hearted during the third quarter of all of which are expected to being on additional revenue over the coming quarters and years also include includes a substantial increase in number of coaching the is a gross profit education division also improved eleven hundred and forty based points in the quarter from a gross so margin and city so
spk_4: one point three to sixty eight point seven percent
spk_5: and finally just deeper depth of education of is increased by two point seven million over last years third quarter and was also up one point three million compared even fiscal ninety answered quarter our inner education our international latency network also showed substantial improvements men and just the dirt during the quarter so conclusion on education there's a detroit they're also trends in the overall education market which we expect will help education business during the remainder of this fiscal year and into the next fiscal year including the increasing conference in educational to me that most schools will be open and largely back to normal in the fall of the sheer
spk_11: and that the three big coded does stimulus bills passed by congress dedicated nearly two hundred billion toward stabilizing budgets and k twelve schools so with that overview and detail i'd like to nasty eve young to die to bit deeper into the foreigners in the third quarter go to the financials steve i thank you bob and good afternoon everyone it's nice to to the with you saw just jump right in as shown in slide twelve and as bob talked about our performance for the third quarter was stronger than expected and showed positive momentum up on almost every front as you know i just had a model for the first quarter was eight point six million an increase of twelve point two million compared to last year's third quarter of negative three point six million and a amount substantially exceeding expectations of adjusted ebitda of between four and for half million importantly this eight point six million and adjusted ebitda has also significantly higher than the three point one million of a just as a bit dodgy ibd in the strong third quarter of f y nineteen as also shown both year to date and last twelve months adjusted ebitda substantially exceeded that achieve in both f y twenty and of why nineteen and our last twelve months adjusted ebitda of twenty six point three million as bob said are substantially exceeds our for your guidance of twenty to twenty two million for a point twenty one our cash flow and liquidity position also increased significantly as you can see and slide thirteen our net cash generated year to date through the third quarter was eleven million this was twenty three point two million higher than the negative twelve point two million of net cash generated in last year's third quarter and was also higher than the negative four point eight million and net cash generated enough why nineteen and this negative seven point two million generated and f y eighty this increase in that cash generated reflect strong growth in adjusted ebitda and that are balance of build and and build the third revenue increased by almost seventeen point one million or twenty five percent to ninety six point six million in the third core also as as shown in flight fourteen our cash flows from operating activities year to date for the three quarters and and may thirty first twenty twenty one increased twelve point one million or sixty five percent to thirty point nine million compared to eighteen point six million last year or eighteen point seven last year eighteen point six through the third quarter of nineteen and eight point six through the third quarter of a eighteen the strong castro reflects an additional benefit of our subscription model specifically that we invoice up front and click the cash remembers the mounts even faster than we recognize all the revenue when this strong cash flow with we ended the quarter with fifty one million in total quantity compared to thirty six which is comprised of cash of thirty six million and fifteen million of our revolving credit facility still undrawn and available even after has bob also said pain the ten point six million at during this quarter related to the acquisition of strike right this was this overall good performance was driven by first strong revenue growth as shown in slide fifteen our third quarter revenue was fifty eight point seven million was not only higher than the thirty seven point one million and last year's third quarter but also higher than the fifty six million of revenue in shaved in the third quarter of f y nineteen the strong revenue growth was driven in part by very strong performance and or north american operations driven by the continued outstanding performance of the all access pass additionally a shown and chart one of slide sixteen company wide all access pass subscription sales grew seven ten percent in the third quarter fifteen percent year to date and fourteen percent even during the last twelve months pandemic period and the in addition to the all access pass subscription revenue recognized in the corridor chart to shows that we also achieved a very strong increase in our balance of all access pass deferred revenue which grew twenty six percent or nine point one million to forty four point two million in the third quarter a balance of all access pass deferred revenue not only grow substantially compared to last year's third quarter but consistent with many other measures was also thirty seven percent or eleven point eight million higher than that achieved in the third quarter of f nineteen pre pandemic this all access pass deferred revenue will be recognized and future periods and help to accelerate our growth the significant growth and all access pass deferred revenue resulted from one strong all access pass sales to new logos to a continued quarterly and last twelve months revenue retention rate of greater than ninety percent as shown in chart three and a large hammer of all access pass expansions and as shown in chart for as significant volume of multiyear all access pass it sales of all access pass subscription sale shown in slide sixteen are also strong in the third quarter groin one hundred thirty six percent compared to last year's third quarter and up thirty seven percent compared to the third quarter of of f y nineteen
spk_12: then second as shown in slide seventeen are strong all access pass sales growth significant growth in our gross margin percentage again in the third quarter
spk_11: as shown are gross margin percentage increased five hundred and eighty seven basis points in the third quarter to seven a point two percent
spk_13: up from seventy two point three percent in the third quarter of that boy twenty and up from seventy point eight percent in the third quarter of f for nineteen
spk_11: as also as also shown year to date or gross margin percentage increased five hundred and fourteen basis points and has increased four hundred and eighty nine basis points for the last twelve months in the enterprise division driven by the significant growth in the all access pass and related sales are gross margin percentage increased to eighty one point five percent compared to seventy eight point one percent and last year's third quarter an increase of three hundred forty basis points
spk_13: and an increase of seven hundred and thirteen basis points from the seventy four point three percent in gross margin percentage achieved in the third quarter of f y nineteen
spk_11: third as shown inside seventeen our operating as dna in the third quarter was of was only sixty three point six percent of revenue this is a level significantly lower than the eighty two point one percent of revenue in the prior year and also lower than the sixty five point three percent of revenue in the third quarter of f night pain finally the combination of these factors riddled and note as to in a groin eight point six million in the third quarter and increase like reset of twelve point two million this is a level significantly higher than the expectation of adjusted a big dog four to five million for the quarter the strong third quarter also resulted in a just as a better offer the first nine months of there for twenty one of seventeen point four million and for the last twelve months twenty six point three million as you notice and all of these were not i compared to f y twenty but f y nineteen because of why nineteen was such a good pre pandemic year i just wanted to show they were not only just rebounding from a from the pandemic but also growing compared to breathe and damage numbers importantly know that as noted our balance sheet of build and unveiled deferred revenue which will add two and be recognized and future quarters increased to ninety six point six million reflecting growth of nineteen point three million or twenty five percent compared to our balance of seventy seven point three million at the end of last year's third quarter this large balance of building on bail deferred revenue will help us provide significant stability of invisibility
spk_4: he into our future performance the strong combination of factors continue to drive our expectation that will to high rates of growth and adjusted the bid on cash flow in f y twenty one f y twenty two an ongoing basis thereafter so we're very pleased with the other result of a
spk_5: of the third quarter the that as broad based in almost every area doing of a little bit better or better than we expected so bob back over to you
spk_4: steve just a couple of points on looking forward as we discussed the essential or growth has been has been given by growth nice has passed instruction subscription services sales and they have the stronger of his continued throughout the been that mix with showing respect it's fast container drive the future so driven we expect really that substantial all of the company's sales will be subscription subscriptions services within three or four years as we mentioned last quarter that we give you a little background in the tree bullet points system why we think that will be the case
spk_5: first and but the the growth of weeks begged and says past subscription subscriptions sales son to continue to increase in enterprise division in north america where are those sales already account for eighty two percent certain slightly eighteen all access pass subscriptions gibson services sales reps and only searching for sanders thirteen point seven million of total sales in north american two thousand and sixteen when we first introduced alex alex's passed
spk_4: dramatic sustain com padded row since then israel no exit fast and subscription service sales increasing didn't two hundred and three that point two million for the latest twelve months to this years to quarter from reported in sent out by others at achieving a hundred million it's description and run in service revenue normally five years
spk_5: the places among a relatively elite group was task companies actually with the of median time to those who actually make it two hundred million being around nine years
spk_4: and as shown inside nineteen
spk_5: an all access pass inscriptions some sales now accounts for eighty two percent of sales in north america with xp with the continued expectation a double digit growth in all access pass revenue and with legacy sales now at very low levels unexpected expected remained flat or even decline of bit further
spk_4: we expect alex fast and serve ends and subscription services to increased to more than ninety percent of total north america enterprise sales or the next year so that's the first begins in the second major driver as having the does has become almost totally subscription subscription services the expected to version of the majority of our inner national operations italy's has passed and subscription in the coming years in addition to the two percent north america which are already there we've also progressed rapidly and our he was speaking direct offices
spk_5: as you can see inside nineteen from having no subscription cells on these oaths just five years ago all access pass description instruction service sales
spk_4: that said least twelve months now accounts for seventy two percent of total sales in the uk and seventy two percent australia
spk_5: both is officer well on their way towards the same ninety percent penetration we expect her to the north america as you know our largest international drakes officer in china and japan both of which are in the early stages of version deluxe has past but importantly japan this year will have a third of it's sales of isis task subscriptions fiction services and dog and china has now begun selling new contract the as as entered some do large of likes has past contracts will start to be recognized so i think this week's thanks again international will get to that same level and finally that education division
spk_3: of which have since you know twenty two percent of total sales reported subscription sales already account for sixty five percent of sales silly as twelve months and we expect both k twelve and hired to continue to advance toward ninety percent in subscription subscription services in the coming year or so with the combination of all these
spk_14: we expect a vast majority of the business to reflect the same high growth high margin hi retention properties of our subscription operations in the coming years and that's that's really encouraging legislate said turn time paul walker to touch on three packs a sexual conceded dried this so grosso kind of it puts underlying it paul thanks bob and hello everyone good afternoon as all briefly describe are these three factors and going to disappear up on each had the first factor that we expect will continue to drive the significant growth are subscription and assailed and profitability as that the already significant lifetime customer value or all access pass holding organizations will continue to increase the second factor that as we continue to aggressively grower salesforce and are like to see network the volume of new high lifetime value all access pass while others will accelerate and third recent acquisition to strive and then john and which hillary i recall the way acquired and and mid mid two thousand and seventeen that together their accelerate
spk_5: in our body to address larger and larger population inside new and existing all of past clients for helping to accelerate the growth of the path inside those organizations and so briefly discussing and describing the three and that more detail
spk_14: first all access pass and subscription services revenue will continue to climb and that will drive increasing lifetime customer value is shine flight twenty and hour north american operations all access pass has first a relatively large additionally increasing of average path sized now forty three thousand dollars which is that
spk_5: from thirty seven thousand just year ago
spk_14: second annual returns from integrated the ninety percent which had been to although it's through the pandemic and third a subscription services tax rate of forty eight percent up from to seventy percent a few years ago
spk_5: the combination of revenue from the all access pass subscription itself and from attached subscription services totaled approximately sixty one thousand dollars purposefully customer in the third quarter which without thirteen percent from fifty four thousand dollars a year ago the blended gross margin on all of this ah continues to be a great and eighty five percent and the strong economics are driving a very significant left and customer value and additionally as a mention and fever looted to earlier i in north america more than forty percent of passes representing fifty two percent of subscription revenue are now and
spk_14: or a multiyear contract and is that back from that majesty think about that for minute from where we were a number of years ago added that amount of revenue under contract set the come in it is difficult thing for us and and for our life partners as well the second point in the second factor as we discussed in the path and is shown in fly twenty one we have lot of headroom for continue clap partner growth
spk_5: expected the continued edition of at least thirty net new client partner he year well drive significant subscription and subscription services growth since almost all these new people have to sell at all access pass or in the case of education leader and be subscriptions additionally we expect significant growth the come from the approximately hundred and twenty existing client partners that we've hired of the past few years course bill in the ramp this as the all recall each apply a partner that we hired expected to generate annual revenues in their first year of two hundred thousand than their second your five hundred thousand and eight hundred thousand going to one point one million and then one point three million over there first five years with us and we define one point three million that being fully ramps in india
spk_14: course expect their rallies will continue to grow their after
spk_5: today we have approximately one hundred and twenty client partners in our north american enterprise and education divisions
spk_14: who depending on their year of high of the past four years fall somewhere along the ramp curve and the natural ramp of the client partners even net of attrition abnormal trusting with that when i expect to see would result in tens of millions of additional dollars of revenue growth in the coming years
spk_5: and so combination of ramping those we have and hiring the net know thirty year or we believe will will generate significant or subscription revenue growth for us and then the third point that all that i'll touch on briefly as the recent acquisition of strife coupled with gianna is accelerating our ability to address larger and larger populations
spk_14: during the third quarter we're pleased to complete the acquisition of strive which led meaningfully to our technology platform or city to capabilities and overall impact a key benefit resulting from tribe that it will increase our ability to address ever larger quiet population the unique combination of drives platform coupled with i can have the best in class content and subscription services will accelerate our ability to help clients predictably achieve an employee behavior change at stale
spk_5: streisand to it if social learning platform will enable seamless integration deployment of franken can be best in class contents are services technology and metrics to provide a highly engaging in impactful learning experience
spk_14: with maximum impact
spk_4: when combined with gianna a push based just in time digital codes for leaders and individual contributors the all access pass platform is taking a significant leap forward and and it's ability to support large scale impact journey roll out for entire organizations while simultaneously allowing individual learners to focus
spk_11: on their own skill development and so it's for the be three reading the and others that we feel very positive about the future of our ability to get into growler subscription and subscription services business and that with adult and bucky above and paul face and that's an alternate to steve's touch better guidance network okay thank you again so you know it and past quarter as we have confirmed or guidance that we expected to generate adjusted a but are are between twenty and twenty two million this year based on the strong performance in the third quarter and year to date and our expectations of a strong fourth quarter or glad now be in a position or adjust that gun support our new guidance as the we expect to just as a bit off for f y twenty one to be between twenty four point five and twenty six point five million the middle of this range would reflect adjusted the but our growth of more than seventy five percent compared to the fourteen point four million of adjusted a bid on achieved and last year of point twenty with our last twelve months adjusted a bit odd through the third quarter already a twenty six point three million if our fourth quarter result is that least the same as last year strong fourth quarter our results of the fourth quarter would already be at the near the top end of that rang and we do expect to achieve strong growth in revenue in the fourth quarter however were also making some significant growth investments and will incur other costs in the fourth quarter that will partially offset the adjust to the but dog growth we could otherwise expect from are expected growth in revenue these growth investments include the hiring of a significant number of new client partners to position ourselves for strong growth and on enough y twenty two and beyond to some new strategic marketing investments that we expect will broaden our reach three costs associated with the acquisition of strife for and and some other growth investments were also expect that there will be some extra site coming out of the pandemic costs including some increase travel and profit based compensation which will impact caught in the fourth quarter these additional investments notwithstanding we still expect the fourth quarter to be a very strong core as far as like for f y twenty two twenty three and beyond in pass quarters waves said the we expected adjusted a bit on f y twenty two to increase to approximately thirty million and adjusted a bid on f y twenty three to increase further to approximately forty million based on the strong performance and f y twenty one to date
spk_5: and expected through the fourth quarter we now expect the trajectory of our results and up y twenty two and twenty three
spk_4: will also be somewhat higher than our previous outlook we expect it to increase and provide more detail on i'll look for future years when we very poor year and results in november so bob that's that's guidance and outlook
spk_5: right right side note as theater really oh great feel great about a momentum play spades addition to increase or guidance and really excited about the business just before returning to cure and a i'd like to thank are absolutely tremendous associates around the world for their continued and unwavering commitment to our mission to our clients and excellence and all they do
spk_4: i had they're amazing huddles like to recognize and think our great leaders are top leadership roles role feel by extremely talented experienced committed individuals read the combination of a long tenure and yet because of the relatively young age many years of strong service still ahead of
spk_5: they lead in a way that engages their teams and predictably grows or operations that our overall business
spk_4: strategically culturally and financially i'm thrilled that given the strong results trends in strategic position new franklincovey his business we are now prepared to make some tea promotions on the executive team that will help to further accelerate our progress really excited that he said these are exempt from team as thanks as a true partnership for many years now gold has been to have each leader continue to increase his of responsibilities for still keeping all members of our executive team kind of on the playing field and contributing in both old and new ways even as the rules change they'll continue be the case following a key leadership most of the will take place effect of september first first over the past couple of years paul walker is overseas upset you all are day to day operations and i have folks the majority of my efforts working closely with paul stephen executive team and are key strategic initiatives or innovation strategy agenda in capital transactions
spk_5: i'm excited personally the now move over one share at the table in addition to serving as chairman the board become executive chairman the a affected september first
spk_4: the victim sherman oaks into work in the same strategic areas in which i post over the past few years as chairman i'll spend even more time working to ensure that the tremendously goalies of a remarkable board or fully utilized i'm thrilled to announce the paul walker will become a new ceo effect of september first the board the executive team and i have all have tremendous confidence and trust from paul he's fully prepared for this expanded role paulo other completely trust and partner has tremendous capabilities instincts and drive engages everyone to come to the best decisions he also executed excellence
spk_5: the idea that park is already become our next year old has been something the board and i began discussing their be ten years ago with that potential in mine paul was first given responsibility for running or central region
spk_4: men for simultaneously overseeing the central region and or operations in the uk and ireland then for the all north american operations for the enterprise division than serving as president entire enterprise value which in such a strong growth engine and most recently as the company's chief operating officer who has done an absolutely incredible job including all the way to the condemning over the past six years time i've worked hand in hand everyday and most evenings together with the other members executives launch grow all access pass from it was just an idea to it now generate more than a hundred million and subscription subscriptions service revenue on the way to having alex has fascinated price vision
spk_5: and leaders in the membership in education division represent substantial the company's revenues and operations next few years during this time poet dexter's of our strategy to increase client fire fire partner hiring served and all or strategic committees and assumed essentially all other key operational responsibilities
spk_4: and since september first twenty twenty in israel as chief operating officer paul is effect with running the does as day to day so making this transition to ceo lousy a recognition of what is already been doing and the transitional leasing was
spk_5: some additional great news of the steve young remains the info for at least the next several years to teams provide that tremendous inconsistent knowledge leadership and influence we'll count on jennifer cosimo president replace vision will now assume full responsibility for overseeing the entire enterprise vision
spk_4: including little of us and canada operations which would cheap tremendous growth under her leadership but all the leaders and enterprises international operations and we're really excited that gens expand leadership role and have full confidence in her ability she's an amazing person amazing leader sean cabbie will also continue leading service transit education division which is done and continue to do so brewing exactly and really our top thirty other leaders or to to you at least up thirty dollars up thirty will continue in their rules when and countries i just had the privilege of being a so she was accompanying when rule or another since i joined the board with the cabbie leadership centered ninety three became shermer the word franklincovey ninety nine following emerged and then resist serve as those chairman of the board and and ceo which said them for the test twenty one years
spk_0: in my ongoing role as chairman board and as a large shareholder and i don't intend to sony shares my new as executive shame know remain involved in our most important strategic decisions chief financial matters and acquisitions other kim cattrall transactions mainly elderly i can help paula the frankly cabbie concede when any other way that we can think ah that i'm excited to remain a close partners with paul in the executives many years come these changes a lot along with the strong them into the business make it really exciting time for franklincovey feel great a better strategy or business model or financial position and or leadership bench strength and love this company i loved my love and our people are shareholders or clients are mission and look forward to continued his involvement depreciate are more than a thousand associates and partners around the world appreciate each of you in your ongoing that frequently so that long thing i'll say about these chains on now of the time for question answers
spk_15: thanks
spk_16: thank you can the class and antecessor if you have a question the faster than and one and your touchdown town
spk_14: if he was he in less than a few these press the pound sign on has it will be a speakerphone
spk_15: you may need to pick up the handset for before personally number length began at the have a question please post dar than one on your touchstone phone and or first question i'm from in the middle of the william blurring the line is open
spk_5: i thank you good afternoon in credit congratulations to teach abuja and bar and corner the new roles i get centers start i'm
spk_4: come on but i get to start in terms of the the guidance in the garden seems ah you touched on on the increases spending in the fourth quarter as hoping you could spend a little bit more time on exactly what what those investments are ah my i know stevie you listed them but if we could get maybe a few examples of what those spending this look like and then you know related lee is there any way that quantify that spanned and and should we view that as kind of a one time set of initiatives or are these kind of a malt i quarter span that that you're kind of leaning into growth with think tanks and rotary give you a morph job contacts and invite pollen and steve to add on i think there's some in both categories in the gentle ones that we always do or the contagion this new client partners it's a little bit more back and loaded this year because we didn't hire as many in the first half and therefore reading more
spk_5: in this back have three have more of those folks coming on in the fourth quarter we might normally have we are also kind of a one time expenditure in in some and marketing initiatives to we've been working with some firms need our big dollar amounts of me but incrementally
spk_17: of the of the combination of the marketing and which is yo maybe a half a million dollars of extra and
spk_14: involved with the a really big increase our footprint around the world in thought leadership and some things will be announcing later this year these are really kind of the out near the outsourced work we've been doing our client partners new incremental you're adding may be a half million or so in the fourth quarter i think i'm the ones the that are just more one time or that he allowed in last year's fourth quarter yeah we had reserved bunch for i'm no compensation and than a profit sharing and so forth so the the you must or compensation is tied to results in the to the over all results for the year we're going to be lower reaches the ten damage make we reverse some of those things in the fourth quarter this year the authors will be true as that's more meaningful a couple million dollars
spk_5: we know swing of between those two and i think those are the primary the primary things we also had some traveled coming back you're not a lot that there is some coming back to offices open and clients expect you to be there and see them than so those expenses will come back a little more than they were less years for
spk_18: quarter never be somewhat ongoing but basically the thought is that near it's possible that the fourth quarter to be higher than the end of our top of our range we do have some expenses leagues those areas that were talking about in the fourth quarter
spk_14: the that hopeful
spk_5: yes very much so thank you and maybe for my fall of switching gears on a bit
spk_14: i know you'd have signed in you're prepared remarks but i was hoping we could spell of the more time on on strive i think more specifically you mention the ability to target large groups are could you bust that out a little bit further and and then maybe bigger picture question if you get just cannot to go through that the top one or two things
spk_5: it's dry brings franklincovey that may be your most excited about sure paul would you like to take them sure hi enter sell side with that that that the beginning heard it in addition to some of the ah
spk_14: the increases the costs that will pick up in the fourth quarter above mentioned there are some costs related to this integration of strive as well again prepared to come out in our next fiscal year
spk_5: with with striving to big way i bet that's your questions typically so we're very excited about strives drive ah if they'd a platform upon which we can we think more more effectively
spk_14: distributed minister provide access to our solutions to clients and sell if you think in the past week we had a great platform with alex path and on and on that platform we poland disparate pieces we pull in our ability to people experience content or assessing the capability we pull john it ended as
spk_15: that and there's another postulation of resources and services we provide client on that platform will strive they've been out there last few years of the start up
spk_5: focus primarily on in the leadership space and they were a content company first they were a platform company first and they created a platform that that it it's even better than what we've had ah just inside the all access pass portal where users administrators can deploy content to larger population
spk_0: and that not the focus their their focus was on driving behavior change through technology our focuses on driving behavior change to the great content solutions we haven't so we marry these two things together and our clients now because they were the one or two things it's it's really the the user experience and the outcome that organizations will it's
spk_19: heave at our content now runs on this drive platform and it'll be easier it'll be
spk_20: even more digestible be able to provide metrics in real time the engagement will be even higher ah both my organizations are to trying to play something two thousand and also when individual themselves are going in working on their own skill development and so it's a to think of it as
spk_19: in a way town like what palatine did combining the bike the instructor the what you know blah live life sessions be a metric the social aspect of that all in the one seamless system
spk_4: strive is going to help us bring all that together in our in our in our it use case which is around learning and driver driving behavior changes scale
spk_19: perfect perfect well thanks very much in again to get on the new rule thank you thanks hundred
spk_5: added as question after death march and for roth capital partners to line is helping
spk_14: thanks good afternoon guys and all that her jeff both well deserved
spk_5: than and bothered in a nicer and i swear
spk_14: introduce that and so compliments to you on on on tap or to put together
spk_5: thanks to the average score partners one as of one of the jump in hair in a third quarter was an impressive quarter to start out or there any particular areas that were stronger than what you had thought
spk_14: many new logos may be on or higher average customer spanned know what we think that that hill surprising the upside in the corner and what what does that and implicate for the future nepal view on it
spk_5: click eris of a i was here a couple don't know also i'll share one or two and then engine please jump in and and the education tucson
spk_21: i said sir geoff a couple of things that were pleasantly surprising and we had high expectations are a but even came in higher one one what was new logos back that metric continue to to climb forth every quarter he repeated recalling during the pandemic we were we reported that actually new logo this out with an area where i wasn't quite sure what could happen in the in the darkest days the pandemic a new logos really hung in there quite well and we're we're seeing an acceleration there and the other as we mentioned we had a fantastic a subscription services quarter and i yeah i type of the more we get into that the more i think even as the command a pandemic and certainly some of our clients will want to go back and have a come on site again and person i think the fact that the world is shifted and week we're can be can do both can do live online and live in person i think it's going to continue to lead to greater demand for services overall and that that that
spk_22: that and since i think there's some about driving of increasing serves as business and then ah the third like adaptable as it is is we we have returned client expansion retention was was great also on the quarters with the combination of things really help on that revenue side ah and and course that that businesses we talk about as is that the high
spk_23: archie business so we're continually as more more the business can to all access pass with the high margin that flow through the bottom line is driving both revenue and and even though the be at least three
spk_24: jan anything you been added that on enterprise and then bit maybe if they were too bad at
spk_25: sir i think from an enterprise division just one of that paul mentioned expansion as clients stay with us and make band and that makes sense and it came definitely to play in that quarter in that typically a client well hire us to do a particular large scale behavior change
spk_24: and as they ah complete that start to see some results they have the opportunity to work with our implementation specialist which is very unique in the industry in the way that we provide them to our clients they work with our implementation specialist to uncover either additional populations
spk_26: you to go after the same job to be done or they work at they see other opportunities that they could utilize what was in their path and so we are seeing a significant expansion and we did as paul mention have an increase in new logo ah in addition i think our team are franklincovey team
spk_5: all individual contributors are firing on all cylinders as paul mentioned we have a significant opportunity with those that are in ramp and we are seeing on newer client partners find success quicker or sales in a moment so i would also true a lot to our people but also are value proposition of all it's the alex
spk_24: a path and how about the to expansion great the three helpful yeah or job this is shaun herschel
spk_19: yeah hi should i want me to share a little bit about with gone on ad
spk_27: don't be great
spk_24: yeah so just develop with what paul and young share them
spk_4: similar in education
spk_19: retention is stronger than we supposed and natalie the number of schools that are that were retaining but also the a dollars per retain school the average amount is is increasing having a lot of this is because the market is back to normal i think people are making decisions again
spk_2: they are in a lot a lot of pent up demand of people than kind of waiting on the sidelines of he has been going to turn out but because it when feel like you're going to be largely back to normal come fall and decisions being made so we got a lotta
spk_4: new schools coming on a lot higher than last year new districts i'm if you recalled you know a few sessions ago we talked about return the four point own house more district friendly were seen the results of that now we're we're bringing on some release sizable districts many of them all over the country
spk_5: i'm that maybe a few years ago you're unprepared to do on those are those are coming in starting in the third quarter of that that's helping has quite a bit as well so between retention new schools and and their new districts that we're getting to and letting us would cause the increase in the third quarter and that is this stride something that made applied to the education division and not just enterprise is curious
spk_4: i yeah i don't know
spk_17: ultimately i think it's going to start more on their enterprise said that will start am take all their innovation there will be able to the for your lives at some point education as well
spk_19: at the level of the one of the great things we get with strive is also the great people that are at a dirty nerve and we're grateful for that him there some very very strong technology know maybe oriented people and and are great people going through so
spk_0: great i look for to sing of them on that said god and then my other question centers around here can i your your high level growth outlook i think in the passive articulated pretty clearly that he you view yourself as kind of and eight percent and perpetual growth business at least for the first
spk_5: he have a future my subscription sales and and add on sales and in the hiking below twenty percent growth rate and as we get to a critical mass add seems like that growth rate it's it's some a conservative you add a technology platform of strive that addresses the larger population and what what's your out worker what's your view on on growth acceleration from that eight percent level going forward
spk_28: job i think you've identified the factors that would argue for for a higher growth rate in the future i think the combination in the past we knew that the growth is a subscription was being offset partially by the way to decline in a legacy business now that that is largely flattened out even the same
spk_5: growth we didn't already cheating
spk_3: the a would would mean that to is less drag you'd be you'd be a bit higher so they were thinking going for that we can move into that low know make colored ten anyway be a that we can figure who timbers in are so we celebs seen from version or international operations little creates
spk_14: and know you add add more into for grab integrating it's natural that that was growth rate of our subscription the things you mentioned it will tend to a job a bit of going toward
spk_5: thanks thanks for the time and and actually a really strong quarter faceless can't as classic come to makeover rodrigues get capital your line is up and ah good afternoon everyone he am i'm more trump questions a what's again just said congratulations everybody with all the promotion of events well very well deserved and i had a couple could follow ups here i'm just coming back on the strike acquisition the integration aspects maybe we can talk a little bit about that as far as the complexity levels and in when you expect to have that done fully integrated power to go minute talk about that bob surf the of the great that's her hammer at hi mark of is so vague
spk_14: did he bought mention this team the team that came with dr that they can with they were the adventures of it this is an amazing thing i backed it would be fun day to do a demo and and have you have a chance to meet them the key get one that team we felt so strive strife russell power kind of three use cases that you i think of and slay one one is lana when a client has not be done state developing york first level leaders and they want to take them through our six critical practices content will do that now and the strive platform which will will a draw the the that talked about a minute ago and i out explain to andrew how strike tribal benefit the client ah so the first thing we're doing right now is were making all of our contents strive a little if he says you have you will the wouldn't it ready so that it the assessments all tied together and everything's on that off when we expect that worked large had done and be ready to go in january
spk_29: the second use case for then is that's when franklincovey when are people are delivering services and were guiding were guiding the client through that they've hired us to now nautilus for our content a want our expertise in delivering the training during the coaching second use case that have fallen up for his cases in his equipping our client filters
spk_30: to to implement our content like they can't the day but benefiting from the strive platform as well that's another reason why you want to have the all access pass it because even if you're not purchasing subscription services from us you'll you'll get the benefit at an all access pass older from the technology that's their insides drive which of the entire portal and in the thirties
spk_31: katie switch will will come along in kind of alongside those his disability for even when you're it when you're not on a company sponsored journey you know what when and when i haven't been asked by bob to go through with a cohort of people a leadership development experience i may have a skill that i feel like i need to address your the that that my assessment has told me
spk_14: i need to work on public speaking or platform skills we have content the path around of at more effectively presenting and i can go in and the on the strike platform i can work on those skills myself and rather than just watching a video or page turning some online content stride experience would be it'll be your back to the telephonic now
spk_15: apple much more engaging in much more focused and have had the pieces of their make sure that even if i'm going through by myself
spk_4: by behaviors more likely to change is more accountability built in their social aspects built and itself over the coming months and quarters will we see with will strive country needs to be able to do that across all of our content for that that the primary programming and and in engineering the got behind that it's getting frankly can be content into the strive platform
spk_17: i would say it's not a it's not it
spk_5: difficult time they won't happen overnight it'll it'll happen over the that the next number of months and your start will start to be able to really come to our clients are in january issue were doing some a pilot asking with clients that right now i didn't you know we were we're ready to go run it is we acquired them and our off on our way on the pilots in understood are and then just kind of confirming here you ya busy about up the integration cost that that will be there for strive i'm just trying to understand if those costs will be stripped out of your adjusted evened out in in in and obviously your gear guidance for that inclusive
spk_4: are there included
spk_5: marco got it okay i'm and then lost a question for me just kind of a higher level on that sounds like obviously confidence levels are are rising on performances it is is very good here on maybe if you can toggle of by looking on the next twelve months what do you think are the that the greatest op activities for you to achieve in a accelerate growth and at the same time you know what what is the greatest risk that you see out there that you might need to manage
spk_21: a i could start new know negative real so
spk_32: you're enjoying in bit of these the big opportunity we've seen you have any people have been apart the no coming back together whether that's office or whatever or or they in their new way of working
spk_4: and it there's a lot to get the most organizations have to him to do to get a about that there's a lot to do and particularly in building their teams and building their leaders it said years and more difficult for them
spk_7: during this period of time and writing big opportunity is as organizations take on big new opportunities of their own for execution cases that are trying to build leaders and really get all their teams together a they tend to look for things that were the wheat weird we play where there's collective but
spk_33: a buell changes needed men leaders building trust in a new environment and new work environment unconscious bias
spk_5: overcoming that and all these different ways of working i think is one big average as a category as lots of dimensions think that's a big thing
spk_15: he also any trained him make a break and operational breakthrough in in a world we've we've always done well coming out of the as charge to disruption in execution other things people say guess i really want to pick something narrow and achieve a big the big opportunity sudden up to the side i'd say though
spk_24: those
spk_7: jan and paul and may a what else would you add to them
spk_24: bob i'll laugh speak to that i think bob released out to where we have the biggest opportunity with clients as they think about place
spk_5: the ah place and location and as well as the space that behavior change and the things that they need for their people the other one that's been mentioned and steve mentioned it and we talked about that is ah i think we have a great opportunity in terms of our thought leaders sat and our market and are pro
spk_24: name further strengthened by our work i of integration of strive but many many opportunities for ah as especially if we look for new logos to soften the beaches and have a ah new and distinctive message around who we are and what we do and how we can help you with those operational
spk_5: right in moving a metric or obtaining collected behavior change so i'm excited both about web client opportunity as that also what we have to go after that marketing standpoint
spk_4: june i think on the challenge side and les paul are we're going admitting er shun to the opportunity said not not not off guard how does acknowledge opportunely said site and the pretty dancers shown him thank you chef your
spk_5: yeah i think i think the opportunity patient has huge right now because them social emotional learning as the our is more popular than ever because of all the mental wellness issues that have come up during covered
spk_14: mental health for students and teachers become big issue we address that so well and leader and me
spk_4: combined with the stimulus many of the two hundred billion and top of the fifty the federal government normally stands is two hundred billion will be in the marketplace for to that two and a half years
spk_0: i'm says a great opportunity and runway for an you know new clients to to join us
spk_4: site so we think there's a real bright future for education because these trends going in marco on your question without help on the on the one site on the option inside yeah that's great
spk_0: great and the i think on the challenge right now american are you worried about a lot of things that we the thing where you are spending most of our time where you that is how do we to as an organization take advantage of that opportunity and a funny way because because everybody every organization the world has those challenges that we just talked about we've got great distribution great content etc but how can we steal it both in terms of delivering bigger and bigger pipes was we talks about that with strives to the but also how do we get the word out and how do we make sure that every person who's in that position can think gosh if i need you behavioral changes

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