This article first appeared on GuruFocus .
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Revenue:$67.8 million for Q3, a 1% increase over the prior year.
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Adjusted EBITDA:$8.3 million, a 14% increase compared to last year's Q3.
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Net Income:$3.1 million compared to a net loss of $1.4 million in the prior year.
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Deferred Revenue:$96 million, a 7% year-over-year increase.
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Enterprise Division Revenue:$48.1 million, a 2% increase over the prior year.
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Education Division Revenue:$19 million, a 2% increase over the prior year.
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Gross Margin:73.9%, down from 76.5% in the prior year.
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Operating, Selling, General and Administrative Expenses:$41.8 million, a 5% decrease from the prior year.
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Cash Flow from Operating Activities:$17.5 million for the first three quarters, an 8% decrease from the prior year.
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Free Cash Flow:Negative $1 million for Q3 compared to a positive $2.8 million last year.
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Subscription Revenue (Education Division):Up 11% in Q3.
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Enterprise North America Invoiced Amounts:Up 4% in Q3 to $36.7 million.
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International Segment Revenue:$10.1 million, a slight decline from the prior year.
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Share Repurchase:Nearly 1.6 million shares purchased year to date for $28.1 million.
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Revised Revenue Guidance:$260 million to $267 million for fiscal 2026.
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Revised Adjusted EBITDA Guidance:$28 million to $31 million for fiscal 2026.
Release Date: July 01, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Franklin Covey Co ( NYSE:FC ) reported its third consecutive quarter finishing in line with expectations, showcasing the company's strategic strength and resiliency.
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The Enterprise division in North America saw invoiced amounts up 6% year to date and 4% in the third quarter, indicating strong client retention and expansion.
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Deferred revenue increased by 18% compared to the previous year, establishing a strong foundation for future growth.
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The Education division reported an 11% increase in subscription revenue in the third quarter, with a strong school retention rate.
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Franklin Covey Co ( NYSE:FC ) is well-positioned for growth in fiscal '27, with deferred revenue up 7% year over year and significant services already contracted for future delivery.
Negative Points
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Revenue guidance was revised due to a timing shift of $2 million in previously invoiced services and a $2 million impact from geopolitical tensions affecting international operations.
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The Education division faced a $2 million revenue impact due to gubernatorial budget reductions affecting a statewide education client.
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Gross margin decreased to 73.9% from 76.5% in the prior year, primarily due to increased delivery costs and a shift in the mix of services.
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The International segment faced challenges, particularly in China, due to ongoing trade tensions and macroeconomic uncertainty.
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Free cash flow for the third quarter was negative $1 million, compared to a positive $2.8 million in the previous year, due to unfavorable changes in working capital.
Q & A Highlights
Q: Can you discuss the underlying strength of Franklin Covey's various businesses, excluding the timing shift for the large enterprise contract and the education budget reduction? A: Paul Walker, CEO, explained that the timing shift in Enterprise North America and the education budget cut are isolated incidents and not reflective of the broader environment. The Enterprise North America business remains strong, and the education division is expected to recover next year. Internationally, some challenges persist, particularly in China and the Middle East, but these are seen as temporary.
Q: How is the Education division performing, especially given the importance of the fourth quarter? A: Michael Covey, President of the Education Division, noted that despite the setback with the state deal, the division is performing well. School retention rates are higher than last year, and new school growth is expected to be comparable to last year. The division is also seeing success with charter schools and after-school programs, which are helping to offset some challenges.
Q: Can you provide an update on the Enterprise division, specifically regarding new logos versus retention and the win-back rate on lost contracts? A: Holly Procter, President of the Enterprise Division, highlighted strong retention and expansion efforts. Although the government business has not yet rebounded from previous losses, the division is seeing positive results from its transformation efforts, with increased retention and expansion among existing clients.
Q: What are the early indications of the go-to-market strategy's success in international markets? A: Holly Procter stated that the strategy is being implemented in Europe, focusing on dividing the sales force into hunters and farmers to improve new logo acquisition and retention. The execution is set to begin in Q1 of the next fiscal year, with plans to expand to other geographies based on success in Europe.
Q: How is Franklin Covey leveraging AI in its offerings, and what is the roadmap for AI integration? A: Paul Walker mentioned that Franklin Covey has launched AI-related solutions and is seeing strong demand. The company plans to release additional AI modules and functionalities, including AI-enabled coaching and integration with platforms like Slack and Microsoft Teams. The focus is on helping clients navigate AI transformation and improve leadership and execution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
