Franklin Covey Co.

Third quarter reported revenue was $67.8 million, up 1% from the prior year, with Enterprise and Education each up 2% and corporate revenue down $0.5 million from the prior year. Consolidated subscription and committed services invoiced amounts rose 17% to $37 million, and subscription and subscription services revenue was $57.5 million, relatively even with last year. Gross margin was 73.9% versus 76.5% last year; SG&A was $41.8 million, down 5% from $44 million; adjusted EBITDA was $8.3 million, up 14%; and net income was $3.1 million versus a net loss of $1.4 million a year ago. For the full year, revenue guidance is now $260 million to $267 million, while adjusted EBITDA guidance remains $28 million to $31 million. Management also said deferred revenue was $96 million, up 7% year over year, and balance of billed deferred revenue in North America was $58 million, up 18%.

Paul Walker framed the quarter as the third straight one in line with expectations and said the business continues to show strength and resiliency. He emphasized that the go-to-market transformation is working, with better retention, expansion, new-logo wins, and a strong services pipeline, and said the company is underpenetrated in its markets. His tone was confident about fiscal 2027, pointing to new solution launches across leadership, execution, and AI transformation and saying the current year is building the foundation for accelerated growth.

Jessica Betjemann led with the hard numbers: revenue of $67.8 million, gross margin of 73.9%, SG&A of $41.8 million, adjusted EBITDA of $8.3 million, and net income of $3.1 million. She explained the full-year revenue cut was driven by a $2 million timing shift in Enterprise North America, about $2 million tied to an education budget reduction, and about $2 million from international headwinds, while adjusted EBITDA guidance stayed at $28 million to $31 million because of cost reductions. She also highlighted liquidity of over $74 million, including $12 million cash and a fully available $62.5 million credit facility, and noted nearly 1.6 million shares repurchased for $28.1 million year to date.

Analysts focused on whether the issues on the call reflected broader weakness or just isolated items, and management repeatedly said the revenue shortfall was mostly timing-related or contract-specific rather than a sign of a worsening macro environment. Questions also centered on education retention, new-school growth, international weakness, services attach, and whether fiscal 2027 could see higher revenue with faster EBITDA and free cash flow growth; management answered yes, saying invoiced growth should convert to next-year revenue and that restructuring should provide operating leverage. They also said services booking pace is up more than 25% year to date, retention is strong, and the AI opportunity is driving customer demand for leadership and execution support.