What Franklin Covey (FC) Said on Its Q4 Earnings Call

Key Points

• Fiscal 2027 outlook calls for growth: Franklin Covey forecast constant-currency revenue of $263 million to $273 million and adjusted EBITDA of $29 million to $34 million. Management said the midpoint implies about 3% revenue growth excluding the China transition and roughly 9% adjusted EBITDA growth.
• Higher invoicing and deferred revenue support the outlook: North American Enterprise invoiced amounts rose 4% to $151.4 million, and deferred revenue increased 17% to $59.2 million, with much of that business expected to be recognized in future quarters. The company plans to expand its sales hunting team by more than 20% in fiscal 2027.
• Fiscal 2026 results were mixed: Revenue fell 2% to $261.5 million, while adjusted EBITDA edged up to $28.9 million; operating cash flow declined to $21.6 million. Education revenue grew 2%, but invoicing fell 10% amid budget delays and a renewal shifted into fiscal 2027.

Franklin Covey NYSE: FC expects revenue and adjusted EBITDA to grow in fiscal 2027, as a rise in North American invoicing and deferred revenue flows into reported results after a year of declining sales.

The leadership training company reported fiscal 2026 revenue of $261.5 million, down 2% from a year earlier, while adjusted EBITDA edged up to $28.9 million from $28.8 million. For the fourth quarter, revenue fell 2% to $70 million, but adjusted EBITDA rose 9% to $12.8 million.

CEO Paul Walker said investments in the company’s sales model had gained traction. Enterprise North America invoiced amounts increased 4% to $151.4 million for the year, while deferred revenue rose 17% to $59.2 million. The company recognizes much of that invoiced business as revenue over subsequent quarters as it delivers services or satisfies other obligations.

“That growth is already on our books, establishing a strong foundation for the revenue and adjusted EBITDA growth we expect in fiscal 2027,” Walker said.

Fiscal 2027 Outlook

Franklin Covey forecast fiscal 2027 revenue of $263 million to $273 million in constant currency, including an expected approximately $2 million reduction from its planned transition of China operations to a locally owned licensee. Adjusted EBITDA is projected at $29 million to $34 million.

CFO Jessie Betjemann said the midpoint of the outlook implies approximately 3% revenue growth when normalized for the China transition and about 9% growth in adjusted EBITDA. Fiscal 2026 revenue was $260.4 million in constant currency.

Management expects 45% to 50% of annual revenue and 30% to 35% of annual adjusted EBITDA in the first half of fiscal 2027. Betjemann cautioned that North American invoiced amounts are expected to decline in the first quarter because the prior-year period included $5.6 million of upfront invoicing for contractually committed services, much of it associated with one large contract.

For the full year, the company expects North American invoiced amounts, including subscription invoicing, to increase. Betjemann said the low end of the outlook accounts for risks such as delays in education contracting and service delivery, while earlier invoicing could help revenue reach the higher end.

Enterprise Sales Investment

Enterprise Division revenue declined to $182.7 million from $188.1 million in fiscal 2025, even as total Enterprise invoiced amounts rose 3% to $190.6 million. Subscription and contractually committed services invoiced amounts in the division increased 18% to $117.7 million.

Walker said the company’s sales restructuring, which separates new-client “hunters” from “farmers” focused on retaining and expanding existing accounts, has improved productivity. Compared with fiscal 2024, invoiced amounts per hunter have more than doubled, he said. Invoiced amounts per retained client grew in the high single digits in fiscal 2026.

Franklin Covey plans to expand its hunting team by more than 20% in fiscal 2027, supported by more sales development representatives and increased marketing spending. Walker said the farming team already has capacity for additional clients.

Revenue retention improved in fiscal 2026, although Walker said client logo retention was a couple of percentage points below the prior year. He said the company expects that measure to improve in fiscal 2027.

Education Invoicing Declines

Education Division revenue rose 2% to $76.2 million, supported by a 10% increase in subscription revenue and the delivery of approximately 900 more coaching and consulting days. The division’s invoiced amounts, however, fell 10% to $72.8 million, and deferred revenue declined 6% to $51.2 million.

Betjemann attributed the invoicing decline to statewide budget delays, large multi-year prepayments in the prior year that did not recur at the same level, and an approximately $3 million district renewal that shifted into fiscal 2027. Management expects Education invoicing to return to growth in the new year.

Walker said school retention improved to its highest level since 2022 and that the company’s Leader in Me program serves more than 8,000 schools worldwide. John Buchanan has joined as executive vice president of Education, while Sean Covey has moved into a company-wide chief product officer role.

Costs, Cash and China Transition

Full-year operating selling, general and administrative expenses fell $7.7 million to $167.1 million, helping offset lower gross profit. Net income rose to $4.9 million, or 42 cents per diluted share, from $3.1 million, or 24 cents per share, in fiscal 2025.

Operating cash flow declined to $21.6 million from $29 million, while free cash flow fell to $9.2 million from $12.1 million. Betjemann attributed the operating cash flow decline to a working-capital swing and said the company expects free cash flow conversion to improve in fiscal 2027.

Franklin Covey ended the year with $13.3 million in cash and an available $62.5 million credit facility. It repurchased approximately 1.6 million shares for $28.1 million during fiscal 2026.

The company expects to close the transition of its China business to a locally owned licensee by the end of fiscal 2027’s second quarter. Betjemann said the change is expected to reduce reported revenue but have no material effect on adjusted EBITDA, with royalties replacing direct-office revenue.

About Franklin Covey (NYSE:FC)

Franklin Covey Co NYSE: FC is a global professional-services and training company that helps organizations improve leadership, execution, productivity, sales performance and workplace culture. Its services are designed for businesses, government agencies and other institutions seeking to develop employees and improve organizational performance.

The company provides consulting, training, coaching, assessment tools and digital learning solutions. Its offerings address areas such as leadership development, trust, change management, business execution, customer loyalty and individual effectiveness.

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