Franklin Covey (FC) Q2 2025 earnings summary

Executive summary

• Q2 FY25 revenue was $59.6M (down 2.8% year-over-year), impacted by government contract cancellations, macroeconomic and geopolitical uncertainty, and lower North America and International sales; Education Division revenue grew 3% to $15.1M, partially offsetting declines.

• Adjusted EBITDA for Q2 FY25 was $2.1M ($2.6M constant currency), down from $7.4M in Q2 FY24; net loss for Q2 FY25 was $(1.1)M, or $(0.08) per share, compared to net income of $0.9M in Q2 FY24.

• Deferred subscription revenue increased 10% year-over-year to $94.4M, with 55% of All-Access Pass contracts for at least two years.

• Liquidity remains strong with $40.4M in cash and a fully undrawn $62.5M credit facility at quarter-end.

• Free cash flow for the first half was $7.8M, down from $24.7M year-over-year.

Financial highlights

• First half FY25 consolidated revenue was $128.7M, nearly flat year-over-year; Q2 gross margin improved to 76.7%.

• Operating expenses rose $6.1M in the first half, mainly due to $7.3M higher SG&A from new hires and compensation increases.

• Adjusted EBITDA margin for Q2 FY25 was 3.5%, down from 12.1% in Q2 FY24.

• Cash and cash equivalents at quarter-end were $40.4M.

• Share count as of March 31, 2025, was 12,988k.

Outlook and guidance

• FY25 revenue guidance lowered to $275M–$285M, midpoint 2.5% below FY24 and 5% below original guidance, reflecting $10M–$20M revenue impact and $7M–$10M EBITDA impact from government and international headwinds.

• Adjusted EBITDA guidance for FY25 is $30M–$33M, down from prior guidance of $40M.

• Management expects FY25 to be a one-year step back, with FY26 Adjusted EBITDA expected to rebound and resume growth; specific 2026 guidance to be provided in November.

• Q3 guidance: revenue of $67M–$71M and adjusted EBITDA of $4M–$6.5M.