Franklin Covey Company

Good day and thank you for standing by. Welcome to the fourth quarter 2025 FranklinCovey Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Boyd Roberts, Head of Investor Relations. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us today. We appreciate having the opportunity to connect with you. Before we begin, please remember that today's remarks contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including without limitation statements that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain words such as believe, anticipate, expect, estimate, project, or words or phrases of similar meaning. These statements reflect management's current judgment and analysis and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations, including but not limited to risk relating to macroeconomic conditions, tariffs, and other risk factors described in our most recent Form 10-K and other filings made with the SEC. We undertake no obligation to update or revise any forward-looking statements except as required by law. Now with that out of the way, I'd like to turn it over to Mr. Paul Walker, our Chief Executive Officer and President.

Thanks, Boyd, and good afternoon, everyone, and thank you for joining us. It's great to be with you and to have the opportunity to share our results and an update on the business. We're pleased with our momentum and that our fiscal 2015 full-year revenue and adjusted EBITDA results came in right in line with what we expected when we provided guidance in our Q3 call. We're also pleased that while much of fiscal 25 was a period of transition and organizational transformation, beginning in the fourth quarter and as we turn to fiscal 26, we're now in a period of execution and a return to growth. In a few minutes, Jesse will share more detail about our fiscal 25 results and our fiscal 26 guidance. Before we go there, I just wanted to share a couple of thoughts with you, and the first is that we're off to a strong start in the first quarter, particularly in our Enterprise North America business, where we're experiencing the acceleration in invoice growth we expected to see from investment in and implementation of our go-to-market sales transformation. A few points of evidence of this acceleration in Enterprise North America include We're having a strong contracting quarter in Q1 and expect to achieve strong growth in our invoiced amounts in the first quarter. A portion of this meaningful increase in invoiced amounts is being driven by strong new logo growth across the first two months of this Q1 of this new fiscal year where the number of new logos sold and the associated revenue is pacing above prior year. Similarly, our services booking pace through the first two months this year is off to a very strong start. with services booked in Enterprise North America up double digits over the prior year. This is an indication of the importance of the outcomes we're helping our clients achieve and is an important leading indicator of future reported revenue growth. This acceleration in North America, coupled with the fact that we anticipate our education business to have a strong year, indicates that we expect invoiced amounts for the company, which declined last year to return to meaningful growth in fiscal 26. A portion of this meaningful growth in invoiced amounts will translate into reported revenue in fiscal 26, and an even greater portion will translate into even greater reported growth in fiscal 27, which will also flow through to strong growth in adjusted EBITDA and free cash flow. The objective of our investments in our go-to-market transformation was always to accelerate growth in revenue, adjusted EBITDA, and free cash flow beyond the levels we'd achieved in our previous model. And this is still very much our objective. While we took a step back in fiscal 25, primarily due to external factors we could not foresee at the time we made our investments, we're back on the road to growth and expect this to be reflected in our fiscal 26 results and even more so in fiscal 27. Strategically, we're playing for something very clear and very important, to be the partner of choice for leaders pursuing breakthrough results. Results that depend not only on great strategy, but also on how people work together to deliver it. Every organization faces these challenges. Whether the goal is faster growth, integrating cultures after an acquisition, improving customer experience, or transforming culture, success depends on institutionalizing the right behaviors and practices across leaders and teams. We help leaders make the link between behavior and performance tangible, measurable, and scalable. That's what drives breakthrough results. This work doesn't get easier in uncertain times. It becomes more essential. AI is transforming how work gets done, but it also makes human capabilities, judgment, trust, and collaboration more critical than ever. The ability of people to stay aligned, focused, and accountable while working together with high trust and execution remains the ultimate differentiator. Our role is to help organizations achieve their most important goals by strengthening collective behaviors. raising the level and the consistency of how people lead, collaborate and execute, and scaling what already works well in pockets across entire organizations. As you can see shown on slide four, in pursuit of this objective, we're focused on two key priorities. The first is to be the leader in combining world-class content, technology and services to deliver breakthrough impact for our clients. And the second priority is 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. I'd like to just take a couple of minutes here and go into each of these priorities in a little bit more detail. First, as it relates to building world-class solutions, a few years ago we asked, What would it take to accelerate our ability to be the partner of choice for leaders pursuing breakthrough performance? Our answer led to four key initiatives. First, we sharpened our focus on helping organizations address mission-critical challenges. As you can see shown on slide five, the market in which we operate ranges from content providers to true performance partners. Our strategic focus is on the latter, as a performance partner. the space where large-scale behavior change delivers measurable business results. That focus is reflected in flagship solutions like the four disciplines of execution, helping clients succeed, the leader in me, and our leadership suite of offerings. Focused here, we see AI not as a threat but as a very important enabler. Many of the largest companies in the world across a variety of industries who are themselves pouring millions if not billions of dollars into building AI capabilities throughout their organizations, are at the very same time turning to FranklinCovey every day to help them navigate the vital leader and people elements of alignment, trust, change, and execution. For example, we're currently partnering with one of the largest technology companies in the world, a leader in AI. who engaged us to work with one of the key teams in their organization to speed their progress in making sure they stay at the forefront of the AI race. For this organization, speed will make all the difference. And while they have the best AI engineering capability in the world, their speed is impacted by the level of trust, alignment, and collaboration they're able to achieve. These are among the very breakthrough behaviors FranklinCovey excels at helping leaders address, and we're partnering with this organization to implement our Speed of Trust solution. Leading in the current environment is perhaps more difficult than it's ever been, and FranklinCovey is a trusted partner to leaders around the world. Last March, we held our first ever virtual impact conference, and we were pleased to have 20,000 people register to attend. Building on the success of that first conference yesterday, we kicked off this year's impact conference, and are pleased to have not 20,000, but 30,000 leaders and individuals joining for sessions throughout this week focused on disruption, trust, AI, and leadership. Second, we continue to invest in proven high-impact content and services. Our trusted frameworks, like the seven habits, the speed of trust, the four disciplines of execution, leader in me, and a host of others, continue to deliver measurable client outcomes. Our average net promoter scores are very high. And when I say very high, they're in the 70s and for some of our offerings in the 80s. These solutions have generated billions in cumulative revenue and immense value for our clients. Third, we leverage technology to scale performance. Our impact platform integrates content, services, and technology to deliver solutions globally in multiple languages and at every level. We followed a similar model in education where Leader in Me now serves more than 8,000 schools worldwide. Importantly, we're now embedding AI across all of our offerings, providing real-time coaching, feedback, and reinforcement. For example, in our Helping Clients Succeed sales transformation solution, AI now supports sales professionals with live deal coaching and objection handling to improve win rates. We view the combination of our best-in-class content, our expert facilitation and coaching services, and AI as a powerful combination of capabilities to help our clients accelerate leadership, culture, and execution results. And fourth, we rebuild our business model to support long-term client partnerships. We created the all-access path and built a deep ecosystem of implementation strategists, consultants, and coaches dedicated to lasting partner-for-life relationships. The second key priority that I'll just talk about for a minute here is that of transforming the way we go to market to win more strategic clients and to expand our work with existing ones. Over the past three quarters, we completed this transformation, reorganizing our sales and client success teams around two clear goals. First, landing new strategic clients, and second, expanding relationships with those we already served. This structure is now fully in place and it's delivering strong early results across three areas. The first area is around new client wins. New client growth is up both in volume and deal size with higher services attachment driven by clients who desire collective behavior change and a partnership with us to help them do that. For example, in the fourth quarter, we want a new client. It's a global ingredient processing manufacturer. This resulted in an approximately $250,000 contract that's comprised of around $50,000 in subscription revenue and $200,000 in subscription services. This client's partnering with us to equip their leaders to lead through a high degree of change and to drive performance during a period of rapid expansion for them in their business. And they not only want access to our content and tool, the frameworks, but to our expert coaches and facilitators as well to really drive and cement the behavior change that they're seeking to achieve. The second area and evidence of acceleration is around client retention and expansion. More clients are extending subscriptions, adding services, and broadening their reach. Even in a more difficult environment where some clients have had to adjust over this past year the overall size of their subscription, and we did lose a couple of clients we talked about last quarter, including a couple of government contracts, we continue to achieve the same high percentage of overall client retention that we've been able to achieve over many years, providing a very strong base for expansion both in terms of subscription seats and services this year into that existing client base. And the third area is our subscription services attachment. I mentioned this briefly, but I'll just touch on it again. Despite tighter client budgets, Enterprise services attachment overall was a strong 53% in fiscal 25. And as I mentioned a minute ago, it was an even stronger 56% in North America this last year. And through the first two months of this year, as I mentioned, North America services bookings are up double digits year over year, which is a leading indicator of future services revenue. While fiscal 25 results didn't turn out like we expected at the beginning of the year, due to DOGE-related government slowdowns, mid-year tariff uncertainty, and short-term effects of our own transformation. The lead metrics are strong, and our momentum accelerated through year-end and continues into the first quarter of fiscal 26, setting us up for strong invoice growth in fiscal 26 that, as I mentioned, will lead to growth in fiscal 26 and even more reported growth in fiscal 27. Shifting gears to education. We're pleased with the continued strength of our education business. Despite a difficult and uncertain education environment this past year, where we saw the Department of Ed threaten closure and shrink in size, and where large amounts of federal title dollars were initially available, then pulled back, and then only restored very late in our fiscal year, we're pleased that education reported revenue growth for the year overall, that our education subscription revenue grew 13% in the fourth quarter and 10% for the full year, that our balance of deferred revenue increased 13%, establishing a strong foundation for accelerated growth in fiscal 26, and that we were able to bring on 624 new schools, and that school retention remained a very high 84%, which was equal to the year before, which we felt quite good about in the environment. Just a closing perspective here before I turn the time over to Jessie. As we enter fiscal 26, I feel confident in both our progress and our direction. I'm pleased with the progress our teams are making and I'm grateful for the clients that continue to trust us. And I'm confident that the strategy we've been pursuing will continue to create value in the years ahead. I'd now like to turn the time over to Jessie and she'll share more detail on our results in the fourth quarter and for the full year and also lay out our guidance for fiscal 26.