Franklin Covey Announces Fiscal 2014 First Quarter Results
Results Reflect Continued Strong Momentum in the Company's Business
and
Strong Growth in Both Revenue and Adjusted EBITDA Over
the Last Four Quarters
Continued Strong Bookings Results in
Largest Pipeline Ever at the End of a First Quarter
Second
Strongest First Quarter Sales for Company’s Current Business
Financial Highlights
-
Revenue: Consolidated revenue for the
first quarter of fiscal 2014 was the second strongest ever for the
Company’s current business. First quarter fiscal 2014 revenue
decreased 1% to
$43.4 million , compared with$44.1 million in the prior year. Revenue increases in the Company’s U.S./Canada direct offices, Education practice, Sales Performance practice, and international licensee partner operations, were more than offset by declines in government services revenue, most of which shifted out of the first quarter into subsequent quarters due to the effects of the government shutdown; and to a decline in revenues from the Company’s foreign direct offices that were adversely impacted by foreign exchange rates. For the trailing four quarters, consolidated revenues increased$15.3 million , or 9%, to$190.3 million . -
Gross profit: First quarter gross profit
increased to
$30.0 million , with the Company’s gross margin increasing to 69.2% of sales compared with 67.1% in the prior year. For the trailing four quarters, gross profit increased to$129.5 million , compared with$115.7 million for the corresponding period of the prior year. The Company’s gross margin for the trailing four quarters endedNovember 30, 2013 was 68.0% compared with 66.1% for the preceding trailing four quarters. -
Adjusted EBITDA: First quarter Adjusted
EBITDA decreased
$1.1 million to $6.0 million , compared with$7.1 million in the first quarter of the prior year, reflecting the above-noted shifting of government revenue into subsequent quarters; decreased direct foreign office revenues; and significant incremental growth investments. For the trailing four quarters, Adjusted EBITDA increased to$30.3 million , compared with$27.8 million for the same period last year. -
Net Income: First quarter net income
decreased to
$1.7 million compared with$2.9 million in the first quarter of fiscal 2013, reflecting the above-noted factors. For the trailing four quarters, net income increased to$13.1 million , compared with$9.1 million during the four-quarter period endedDecember 1, 2012 . -
Diluted EPS: Diluted EPS decreased to
$.10 per share compared with$.15 per share for the first quarter of fiscal 2013. -
Booking Momentum: The Company’s booking
momentum continued to be strong in the first quarter, with its
pipeline of Booked Days and Awarded Revenue increasing to
$35.0 million , the Company’s largest-ever pipeline for a first quarter end. The corporate pipeline increased from$28.2 million atDecember 1, 2012 to$31.5 million atNovember 30, 2013 , while the government contract pipeline decreased by$2.2 million to $3.5 million atNovember 30, 2013 . -
Adjusted EBITDA Outlook: Given strong
booking momentum, and the expected shift of postponed contractual
government services’ revenue into subsequent quarters, the Company
affirmed its previously-announced annual guidance range for Adjusted
EBITDA of
$35 million to $37 million .
Fiscal 2014 First Quarter Financial Results
Consolidated sales decreased by 1% to
Gross profit increased to
Selling, general and administrative expenses (SG&A) increased
The Company’s depreciation expense increased by
Increased operating expenses from the Company’s investments in
additional sales personnel and other marketing expenses supporting
strategic sales initiatives reduced the Company’s income from operations
by
The Company’s balance sheet and liquidity position remained healthy
through the first quarter as the Company had
Earnings Conference Call
On
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995
including those statements related to the Company’s future results and
profitability; expected Adjusted EBITDA in fiscal 2014; anticipated
future sales; and goals relating to the growth of the Company.
Forward-looking statements are based upon management’s current
expectations and are subject to various risks and uncertainties
including, but not limited to: general economic conditions; the expected
number of booked days to be delivered; market acceptance of new products
or services and marketing strategies; the ability to achieve sustainable
growth in future periods; and other factors identified and discussed in
the Company’s most recent Annual Report on Form 10-K and other periodic
reports filed with the
Non-GAAP Financial Information
Refer to the attached table for the reconciliation of a non-GAAP financial measure, “Adjusted EBITDA,” to consolidated net income, the most comparable GAAP financial measure. The Company defines Adjusted EBITDA as net income or loss from operations excluding the impact of interest expense, income tax expense, amortization, depreciation, share-based compensation expense, and certain other items such as adjustments to the fair value of expected earnout liabilities resulting from the acquisition of businesses. The Company references this non-GAAP financial measure in its decision making because it provides supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods and the Company believes it provides investors with greater transparency to evaluate operational activities and financial results. We do not provide forward-looking GAAP measures or a reconciliation of the forward-looking Adjusted EBITDA to GAAP measures because of our inability to project certain of the costs included in the calculation of Adjusted EBITDA.
About
FRANKLIN COVEY CO. |
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CONDENSED CONSOLIDATED INCOME STATEMENTS |
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(in thousands, except per-share amounts, and unaudited) | ||||||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||||||
November 30, | December 1, | |||||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||||||
Net sales | $ | 43,418 | $ | 44,061 | ||||||||||||||||||||
Cost of sales | 13,387 | 14,502 | ||||||||||||||||||||||
Gross profit | 30,031 | 29,559 | ||||||||||||||||||||||
Selling, general, and administrative | 24,752 | 22,943 | ||||||||||||||||||||||
Depreciation | 784 | 702 | ||||||||||||||||||||||
Amortization | 989 | 622 | ||||||||||||||||||||||
Income from operations | 3,506 | 5,292 | ||||||||||||||||||||||
Interest expense, net | (417 | ) | (452 | ) | ||||||||||||||||||||
Discount on related party receivable | (142 | ) | (147 | ) | ||||||||||||||||||||
Income before income taxes | 2,947 | 4,693 | ||||||||||||||||||||||
Income tax provision | (1,228 | ) | (1,796 | ) | ||||||||||||||||||||
Net income | $ | 1,719 | $ | 2,897 | ||||||||||||||||||||
Net income per common share: | ||||||||||||||||||||||||
Basic | $ | 0.10 | $ | 0.16 | ||||||||||||||||||||
Diluted | 0.10 | 0.15 | ||||||||||||||||||||||
Weighted average common shares: | ||||||||||||||||||||||||
Basic | 16,564 | 18,161 | ||||||||||||||||||||||
Diluted | 16,859 | 19,275 | ||||||||||||||||||||||
Other data: | ||||||||||||||||||||||||
Adjusted EBITDA(1) | $ | 6,021 | $ | 7,089 | ||||||||||||||||||||
(1)The term Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share-based compensation, and certain other items) is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results. For a reconciliation of this non-GAAP measure to the most comparable GAAP equivalent, refer to the Reconciliation of Net Income to Adjusted EBITDA as shown below. |
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FRANKLIN COVEY CO. |
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Reconciliation of Net Income to Adjusted EBITDA |
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(in thousands and unaudited) | |||||||||||||||||||||||
Quarter Ended | Four-Quarter Period Ended | ||||||||||||||||||||||
November 30, | December 1, | November 30, | December 1, | ||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||
Reconciliation of net income to Adjusted EBITDA: | |||||||||||||||||||||||
Net Income | $ | 1,719 | $ | 2,897 | $ | 13,140 | $ | 9,075 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Interest expense, net | 417 | 452 | 1,684 | 2,285 | |||||||||||||||||||
Discount on related party receivable | 142 | 147 | 514 | 1,516 | |||||||||||||||||||
Income tax provision | 1,228 | 1,796 | 4,511 | 6,292 | |||||||||||||||||||
Amortization | 989 | 622 | 3,558 | 2,490 | |||||||||||||||||||
Depreciation | 784 | 702 | 3,091 | 3,010 | |||||||||||||||||||
Share-based compensation | 1,262 | 473 | 4,377 | 3,117 | |||||||||||||||||||
Reduction of contingent earnout liability | (520 | ) | - | (520 | ) | - | |||||||||||||||||
Other income, net | - | - | (21 | ) | - | ||||||||||||||||||
Adjusted EBITDA | $ | 6,021 | $ | 7,089 | $ | 30,334 | $ | 27,785 | |||||||||||||||
Adjusted EBITDA margin | 13.9 | % | 16.1 | % | |||||||||||||||||||
FRANKLIN COVEY CO. |
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Additional Sales Information |
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(in thousands and unaudited) | |||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||
November 30, | December 1, | ||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||
Sales Detail by Category: | |||||||||||||||||||||||
Training and consulting services | $ | 41,335 | $ | 41,063 | |||||||||||||||||||
Products | 1,326 | 1,943 | |||||||||||||||||||||
Leasing | 757 | 1,055 | |||||||||||||||||||||
Total | $ | 43,418 | $ | 44,061 | |||||||||||||||||||
Sales Detail by Region/Type: | |||||||||||||||||||||||
U.S./Canada direct | $ | 20,908 | $ | 21,759 | |||||||||||||||||||
International direct | 6,225 | 8,431 | |||||||||||||||||||||
Licensees | 4,375 | 4,330 | |||||||||||||||||||||
National account practices | 8,854 | 6,172 | |||||||||||||||||||||
Self-funded marketing | 1,478 | 1,493 | |||||||||||||||||||||
Other | 1,578 | 1,876 | |||||||||||||||||||||
Total | $ | 43,418 | $ | 44,061 | |||||||||||||||||||
FRANKLIN COVEY CO. |
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Condensed Consolidated Balance Sheets |
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(in thousands and unaudited) | |||||||||||||
November 30, | August 31, | ||||||||||||
2013 | 2013 | ||||||||||||
Assets |
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Current assets: | |||||||||||||
Cash | $ | 2,002 | $ | 12,291 | |||||||||
Accounts receivable, less allowance for doubtful accounts of $811 and $982 |
46,705 | 52,684 | |||||||||||
Receivable from related party | 1,789 | 3,305 | |||||||||||
Inventories | 5,088 | 4,321 | |||||||||||
Deferred income taxes | 4,666 | 4,685 | |||||||||||
Prepaid expenses and other current assets | 4,285 | 3,822 | |||||||||||
Total current assets | 64,535 | 81,108 | |||||||||||
Property and equipment, net | 17,426 | 17,180 | |||||||||||
Intangible assets, net | 59,648 | 60,654 | |||||||||||
Goodwill | 16,135 | 16,135 | |||||||||||
Long-term receivable from related party | 4,695 | 4,453 | |||||||||||
Other assets | 12,005 | 9,875 | |||||||||||
$ | 174,444 | $ | 189,405 | ||||||||||
Liabilities and Shareholders' Equity |
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Current liabilities: | |||||||||||||
Current portion of financing obligation | $ | 1,177 | $ | 1,139 | |||||||||
Accounts payable | 7,815 | 9,294 | |||||||||||
Income taxes payable | - | 1,365 | |||||||||||
Accrued liabilities | 19,491 | 31,140 | |||||||||||
Total current liabilities | 28,483 | 42,938 | |||||||||||
Financing obligation, less current portion | 27,064 | 27,376 | |||||||||||
Other liabilities | 5,664 | 6,106 | |||||||||||
Deferred income tax liabilities | 6,896 | 6,479 | |||||||||||
Total liabilities | 68,107 | 82,899 | |||||||||||
Shareholders' equity: | |||||||||||||
Common stock | 1,353 | 1,353 | |||||||||||
Additional paid-in capital | 204,639 | 210,227 | |||||||||||
Retained earnings | 42,148 | 40,429 | |||||||||||
Accumulated other comprehensive income | 1,608 | 1,686 | |||||||||||
Treasury stock at cost, 10,419 and 10,759 shares | (143,411 | ) | (147,189 | ) | |||||||||
Total shareholders' equity | 106,337 | 106,506 | |||||||||||
$ | 174,444 | $ | 189,405 | ||||||||||
Source:
Franklin Covey
Investor Contact:
Steve Young , 801-817-1776
investor.relations@franklincovey.com
Media
Contact:
Debra Lund, 801-817-6440
Debra.Lund@franklincovey.com