Franklin Covey (FC) Q3 2024 earnings summary

Executive summary

• Q3 FY24 revenue rose 3% year-over-year to $73.4M, with net income up 25% to $5.7M ($0.43 per diluted share) and Adjusted EBITDA up 17% to $13.9M; YTD revenue was $203.1M and Adjusted EBITDA $32.3M.

• Free cash flow for the first three quarters nearly doubled to $30.6M, with operating cash flow at $38.4M.

• Strong liquidity with $36.6M in cash and $62.5M available on the credit facility; no borrowings as of May 31, 2024.

• $25.8M in share repurchases YTD, with a new $50M board authorization; $61.4M repurchased over two years.

• Key growth drivers included strong Education Division performance, high subscription retention, and new content launches.

Financial highlights

• Gross profit margin for Q3 FY24 was 76.6%, with operating income up 27% to $8.3M and net income at $5.7M.

• Deferred subscription revenue at May 31, 2024, increased 15% to $83.8M; unbilled deferred revenue rose 2% to $69.4M.

• Free cash flow for the first three quarters rose 96% to $30.6M; operating cash flow for nine months was $38.4M, up 48%.

• Adjusted EBITDA margin for Q3 was 19.0%, up from 16.7% year-over-year.

• Diluted EPS for Q3 FY24 was $0.43, up from $0.32 in Q3 FY23.

Outlook and guidance

• Full-year revenue guidance reaffirmed at ~$284M in constant currency; Q4 revenue expected at ~$80.5M.

• Full-year Adjusted EBITDA guidance reaffirmed at $54.5–58M, expecting to be at the low end, representing ~13% year-over-year growth.

• Management expects continued strong cash flows, high subscription retention, and record results for fiscal 2024.

• Depreciation and amortization for FY24 expected to be ~$4.4M and $4.3M, respectively; capital expenditures projected at $3.5M–$4.5M.

• Capitalized curriculum costs expected at $6M–$8M; effective tax rate for FY24 projected at 28%–32%.