Franklin Covey (FC) investor relations material

Executive summary

• Q2 FY2026 revenue was $59.6 million, flat year-over-year, with 5% growth in invoiced amounts and strong Education Division performance, which grew 16% driven by Leader in Me services and increased training and subscription activity.

• Adjusted EBITDA nearly doubled to $4.1 million, supported by improved cash flows and cost control, while net loss widened to $2.0 million due to restructuring and higher share-based compensation.

• Deferred revenue increased 7% year-over-year to $101.5 million, with 62% of revenue now under multi-year contracts.

• Strong liquidity of over $76 million at quarter-end, including $13.7 million in cash and a $62.5 million undrawn credit facility.

• Share repurchases totaled $17.0 million in Q2 FY2026, with year-to-date buybacks reaching $28.1 million.

Financial highlights

• Gross margin for Q2 FY2026 was 75.9%, down from 76.7% due to higher amortization and mix shift.

• Operating SG&A expenses decreased 6% year-over-year to $41.2 million.

• Free cash flow for Q2 FY2026 was $13.2 million, up from negative $3.6 million last year; YTD free cash flow improved to $9.5 million.

• Net loss per share was $(0.17), compared to $(0.08) in Q2 FY2025.

• Subscription and subscription services revenue increased to $50.9 million from $49.5 million year-over-year.

Outlook and guidance

• FY2026 guidance reaffirmed: total revenue expected between $265–$275 million and Adjusted EBITDA between $28–$33 million (constant currency).

• Revenue and EBITDA expected to be seasonally higher in Q4, with 50–55% of back-half revenue and 60–65% of EBITDA in Q4.

• Effective tax rate for FY2026 estimated at 37%.

• Anticipates accelerated growth in reported revenue, EBITDA, and cash flow in fiscal 2027.

• Long-term Adjusted EBITDA margin target remains at 20%, with plans for ~100bps improvement per year.