Franklin Covey Company

Good day and thank you for standing by. Welcome to the second quarter 2026 FranklinCovey earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a question during the session, you will need to press star 11 on your telephone. You'll 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 call is being recorded. I would now like to hand it over to our first speaker, Boyd Roberts, Head of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today on FranklinCovey's second quarter 2026 earnings call. 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 CEO.

Thanks, Boyd. 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 for the second quarter and provide an update on the business and our outlook for the remainder of the year. We're pleased with our results in Q2. revenue and adjusted EBITDA grew year over year, met our expectations, and were above consensus. As we've shared previously, fiscal 2026 is a year of execution and a return to growth, and we're encouraged by the continued progress and momentum we saw in the second quarter and throughout the first half of the year. Invoiced amounts in the quarter grew 5%, driven by 7% growth in Enterprise North America, or 10% when excluding our government business, which was impacted by the disruption caused by reduction in federal spending. Invoice growth overall was also driven by 7% growth in Enterprise International. We expect invoice growth to remain strong through the balance of the year. Because a significant portion of invoice growth is recognized over time, this positions us for accelerating reported revenue, adjusted EBITDA, and cash flow in fiscal 27. In Enterprise North America, growth was broad-based. We saw strong sales of subscription and services to new logos, continued strong retention, and meaningful client expansion, resulting in one of our highest revenue retention levels in recent periods. Services bookings also continue to be strong and are up 9% for the year as of this week. reinforcing the importance clients place on the business outcomes we help them achieve. In addition, deferred subscription revenue grew 16% year over year, and the percentage of revenue under multi-year contracts increased to 62%, reflecting both client confidence and the long-term nature of our partnerships. In an environment where leaders are working to accelerate results while navigating uncertainty and disruption, FranklinCovey continues to be sought out as a key partner in addressing the human side of strategy, execution, change management, including related to clients' implementation of AI, and achieving measurable performance transformation. We expect the momentum we've experienced in the first half to continue to be strong through the second half of the fiscal year. Turning to our business outside of North America, Our international business delivered strong performance, partially benefiting from foreign exchange, with invoiced amounts growing 7%, and particularly strong performance in our direct offices, where invoiced amounts grew a strong 14%. And in our education business, reported revenue grew 16% in the quarter, driven by strong demand for Leader & Me services and materials. We feel very good about the momentum in education and the business is positioned well for strong second half and full year performance. Overall, we remain confident in achieving our full year revenue and adjusted EBITDA guidance and in the strength of the foundation we're building for accelerated growth in fiscal 27. Jessie will provide more detail on our specific segments in her remarks in a few moments. I'm going to focus the remainder of my remarks today first on Enterprise North America, which makes up more than 50% of total company sales and the area in which we have invested for accelerated growth. And second, I'll talk briefly about the strategic importance of what we do and why a growing number of organizations are partnering with FranklinCovey to drive the human side of strategy and transformation, particularly as they simultaneously leverage AI to transform. So first, as it relates to Enterprise North America. Enterprise North America, which represents more than half of our total revenue, is at an important inflection point. The growth we're seeing reflects both the increasing strategic importance of what we do for our clients and the traction from the go-to-market transformation we implemented last year. We're now seeing clear evidence that these investments are driving stronger new client acquisition, deeper client relationships, and greater expansion within key accounts. Key results embedded in the second quarter's overall 7% increase in invoice amounts in Enterprise North America include the following. First, we had strong sales to new clients or to new logos, reflecting a combination of both subscription sales and services. Second, our balance of deferred subscription revenue grew a very strong 16% year-over-year to $59 million. building on the 8% growth in deferred subscription revenue last quarter. Third, we again had a strong logo or client retention quarter. Fourth, we achieved strong existing client expansion, where expansion drove one of the highest overall revenue retention percentages we've achieved. Fifth, the percentage of our revenue which is contracted for multi-year periods increased to 62%. With our sales engine accelerating as planned, I'd like to focus the remainder of my remarks on the strategic importance of what we do and the growing need organizations have for a partner who can help them unleash their organizations to achieve breakthrough results, and why we believe our position is strengthened in the current environment. Artificial intelligence is creating extraordinary new possibilities for organizations. But before addressing that directly, it's helpful to step back and consider a broader pattern we've seen over time. FranklinCovey has been a trusted partner to leaders and organizations through multiple periods of significant disruption, from the digitization of business processes to the global financial crisis, to rapid shifts in how and where we work and where work gets done, like during the pandemic. In each case, one principle has remained consistent. In times of disruption and transformation, the need for strong leadership, trust, and disciplined execution increases. It doesn't decrease. We believe AI follows this same pattern, and as a result, there are three things that are important to understand about how AI interplays with our business. The first of these, as I noted, is that AI is actually increasing the premium on human leadership and execution. AI is accelerating change inside organizations. It has the potential to raise productivity, expand fans of control, and increase the pace and complexity of decision-making. As routine work is automated and access to information becomes more widely distributed, the differentiators for organizations increasingly become judgment, trust, collaboration, alignment, and disciplined execution. At the same time, we're seeing how AI has the potential to reduce the amount of routine and analytical work organizations do. We also see how AI is increasing opportunities that can result from strong leadership, high trust, winning cultures, and great execution. The second area and the second interplay is that our model is built around behavior change and collective action tied to real measurable performance outcomes. Our model is not about just delivering content or software digitally. Our role is to help organizations strengthen the people side of execution, helping leaders clarify priorities, align teams, build capability, and create accountability systems that translate strategy into measurable results. For many of our clients, FranklinCovey functions as a long-term performance partner to their leadership teams and their organizations overall. While a significant portion of our revenue is subscription-based, our model is fundamentally different from SAS. Our subscriptions and related services are tied to enterprise-wide performance outcomes and long-term partnerships, not simply software usage. This positions us as a performance and advisory partner rather than a software provider. For example, this is reflected in our work with healthcare systems. where we partner directly with chief nursing officers to strengthen leadership capability, trust, and execution across care providing teams. This drives higher employee engagement, lower nurse turnover, and improved patient satisfaction and outcomes, which also directly impacts hospital reimbursement. This reflects the core of our model, the integrated combination of content, technology, services, and advisory applied together to drive sustained behavior change and collective action across organizations. That capability and the measurable outcomes it produces is not something AI can replicate at scale. We also saw this in the second quarter with a large technology company that selected FranklinCovey to support the CEO's strategy to transform the organization to an AI-enabled operating model. While the strategy is technical in nature, successful execution of this transformation shift in their business will depend heavily on strong leadership, successful change management, and high trust, fast-moving culture, all areas where we're a key partner. This work that we're involved in is about changing collective behavior across teams and organizations, something fundamentally different from simply providing access to ideas or content. The significant impact our engagement and solutions have is exactly what is behind the fact that even in, and perhaps especially in, times of significant change, we continue to retain a high percentage of clients, and they continue to extend both the duration and size of their contracts with us. The third interplay with AI is that we have significant room for growth within our existing client base. Today, our solutions typically reach only a small portion of the employee population within our client organizations, generally in the range of 5% to 10%, which provides substantial room for growth over time, even in a more efficient or AI-enabled workforce. We saw this clearly in the second quarter, where we delivered one of our strongest expansion quarters in recent periods, driven by increasing demand for enterprise-wide transformation and leadership capabilities. Taken together, these dynamics position us well in an AI-driven environment. At the same time, we're continuing to evolve our solutions to incorporate AI in ways that increase the value we provide to our clients. We're embedding AI-enabled coaching and execution tools into our platforms and we're helping organizations lead the human side of AI adoption. We're seeing this play out directly in our business through strong client expansion, increasing multi-year commitments, and growing demand for enterprise-wide transformation engagements. These trends reinforce our conviction that as organizations navigate increasing technological change and complexity, the need for strong leadership, trust-based cultures, and disciplined execution will continue to grow. Stepping back from all of that, as I conclude my remarks here today, I just would say that we're pleased with the momentum we're seeing in the Enterprise North America portion of our business and across the business as a whole. Driven by this momentum and the expected strength in education, we believe we're well positioned to deliver meaningful invoice growth this year and to establish a foundation for significant growth in reported revenue, adjusted EBITDA and cash flow in fiscal 27 and beyond. I'd now like to turn time to Jesse to share more detail on our second quarter results.