Franklin Covey Company

Welcome to the Q1 2022 Franklin Covey Earnings Conference call. My name is Adrienne, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press star and 1 on your touchtone phone. I'll now turn the call over to Derek Hatch. Derek Hatch, you may begin.

Thanks, Adrienne. Good afternoon, ladies and gentlemen, and happy new year. On behalf of FranklinCovey, it's my pleasure to welcome you to our earnings call this afternoon to discuss the first quarter of fiscal 2022. Before we begin, I'd like to remind everybody that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management's current expectations that are subject to various risks and uncertainties, including, but not limited to, the ability of the company to stabilize and grow revenues, the acceptance of and renewal rates for our subscription offerings, including the All Access Pass and Leader in Me memberships, the duration and recovery from the COVID-19 pandemic, the ability of the company to hire productive sales professionals, general economic conditions, competition in the company's targeted marketplace, market acceptance of new offerings or services and marketing strategies, changes in the company's market share, changes in the size of the overall market for the company's product, Changes in the training and spending policies of the company's clients and other factors identified and discussed in the company's most recent annual report on Form 10-K 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's expectations. These forward-looking statements are based on management's current expectations, and we undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of today's presentation, except as required by law. With that out of the way, we'd like to turn the time over to Mr. Paul Walker, our Chief Executive Officer. Paul?

Thank you, Derek. Good afternoon, everyone. I'm joined here also by Steve Young and Bob Whitman. We're happy to have the opportunity to talk with you today, and we're grateful that you joined us. We're very pleased to report that our first quarter results were very strong. As you can see shown in slide three, total revenue in the first quarter grew 27%, or $12.9 million to $61.3 million, and for the latest 12-month period, revenue grew 26%, or $48.9 million to $237.1 million. Adjusted EBITDA for the first quarter increased to $9.9 million, an increase of $6.2 million, or 167% compared to the $3.7 million of adjusted EBITDA on the first quarter. Sorry, everyone. Our phone line cut out in here. So we're on a different line. We'll just pick right back up where we were. Why don't we start back on slide four and talk about the strong growth on each key metric. As you can see, as I mentioned there, in the first quarter, subscription revenue grew 31%, or $6.7 million. to $28.4 million, and for the latest 12 months, it grew 22%, or $19.1 million, to $106.2 million. As you can see, total subscription and subscription services revenue in the first quarter grew 32%, or $10.8 million, to $43.9 million. And for the latest 12 months, it grew 31%, or $39.4 million, to $168 million. And in the first quarter, the sum of billed and unbilled deferred revenue grew 24%, or $23.7 million to $121.1 million. So the first point here is we really continue to be really pleased with the strong results we're achieving in our subscription business and in the company overall. Today there are four key things that we'd like you to take away from our discussion. And I'll summarize these. They're shown in slide five, and then we'll go into a bit of depth on each. The first is that our results in the first quarter, as we've just previewed, were exceptionally strong. This strength is reflected in every key P&L category, including revenue growth, gross margin improvements, adjusted EBITDA, and also in cash flow. The second that we'll talk about today is that this strong performance was driven by the strength of our rapidly growing subscription business model. The third is that we expect the entire business to become increasingly subscription and subscription services over the coming years. And finally, we'll talk about point number four, that we're really excited about the size of the market opportunity before us, and we're doing a lot to ensure that we continue to execute on it at scale. I'd now like to ask Steve Young to address takeaway number one, the strength of our first quarter and latest 12 months results. Steve?