Franklin Covey Reports 2014 Second Fiscal Quarter Results
Sales Increase of 15%, Diluted EPS Increase of 50%
Adjusted EBITDA Increases 19%
Operating Income Increases
20%
Best Second Fiscal Quarter Ever for Company’s Current
Business
Company Reaffirms Its Fiscal 2014 Adjusted EBITDA
Guidance of
Fiscal 2014 Second Quarter Financial Highlights
-
Sales increased 15% to
$46.5 million , compared with$40.4 million in the prior year. -
Sales grew in all of the Company’s major channels, including its
U.S./
Canada regional sales offices, national account practices, international direct offices, and from licensee partners. -
Gross profit increased 15% to
$31.4 million due to increased sales as the Company’s gross margin remained consistent with the prior year at 67.5% of sales. -
Adjusted EBITDA increased 19% to
$6.6 million , or 14.2% of sales, compared with$5.6 million , or 13.8% of sales, in the prior year. -
Operating income increased 20% to
$3.9 million compared with$3.3 million in fiscal 2013. -
Net income increased 24% to
$2.0 million compared with$1.6 million in the second quarter of fiscal 2013. -
Diluted earnings per share (EPS) grew 50%, to
$0.12 per share, from$0.08 per share in the prior year. -
Cash balances remained strong and totaled
$7.2 million atMarch 1, 2014 compared with$2.0 million atNovember 30, 2013 , and$12.3 million atAugust 31, 2013 . -
The Company’s pre-launch of its re-created premier leadership program, The
7 Habits of Highly Effective People Signature Program (The 7
Habits Signature Program) in
February 2014 exceeded expectations. To promote the pre-launch of this program, the Company conducted an initial 68-city tour with events inthe United States ,Canada ,Australia , and theUnited Kingdom . The formal launch of the re-created program is currently underway with additional marketing events scheduled in 170 locations around the world. The 7 Habits Signature Program is the Company’s best-selling program in boththe United States and internationally.
The successful pre-launch of The 7 Habits Signature Program in
Fiscal 2014 Second Quarter Financial Results
The Company’s consolidated sales increased to
Gross profit increased 15% to
Selling, general and administrative expenses (SG&A) expenses for the
second quarter of fiscal 2014 increased
Income from operations increased
The Company’s balance sheet and liquidity position remained strong
through the end of the quarter as the Company had
Fiscal 2014 Year-to-Date Financial Results
Consolidated sales for the two quarters ended
Adjusted EBITDA was
Fiscal 2014 Outlook
The Company reaffirms its previous guidance that Adjusted EBITDA for
fiscal 2014 is expected to range from
Earnings Conference Call
As previously announced, 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; the expected impact of new program launches; 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 excluding the impact of interest expense, income tax expense, amortization, depreciation, share-based compensation expense, and other non-recurring items. 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. The Company does not provide forward-looking GAAP measures or a reconciliation of the forward-looking Adjusted EBITDA to GAAP measures because of the 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) |
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Quarter Ended | Two Quarters Ended | ||||||||||||||||||||||||||||||||||||||
March 1, | March 2, | March 1, | March 2, | ||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||||
Net sales | $ | 46,506 | $ | 40,430 | $ | 89,924 | $ | 84,491 | |||||||||||||||||||||||||||||||
Cost of sales | 15,095 | 13,146 | 28,483 | 27,648 | |||||||||||||||||||||||||||||||||||
Gross profit | 31,411 | 27,284 | 61,441 | 56,843 | |||||||||||||||||||||||||||||||||||
Selling, general, and administrative | 25,707 | 22,691 | 50,458 | 45,634 | |||||||||||||||||||||||||||||||||||
Depreciation | 816 | 722 | 1,601 | 1,423 | |||||||||||||||||||||||||||||||||||
Amortization | 989 | 619 | 1,978 | 1,241 | |||||||||||||||||||||||||||||||||||
Income from operations | 3,899 | 3,252 | 7,404 | 8,545 | |||||||||||||||||||||||||||||||||||
Interest expense, net | (450 | ) | (448 | ) | (867 | ) | (900 | ) | |||||||||||||||||||||||||||||||
Discount on related party receivable | (142 | ) | (135 | ) | (283 | ) | (283 | ) | |||||||||||||||||||||||||||||||
Income before income taxes | 3,307 | 2,669 | 6,254 | 7,362 | |||||||||||||||||||||||||||||||||||
Income tax provision | (1,336 | ) | (1,077 | ) | (2,564 | ) | (2,873 | ) | |||||||||||||||||||||||||||||||
Net income | $ | 1,971 | $ | 1,592 | $ | 3,690 | $ | 4,489 | |||||||||||||||||||||||||||||||
Net income per common share: | |||||||||||||||||||||||||||||||||||||||
Basic | $ | 0.12 | $ | 0.09 | $ | 0.22 | $ | 0.24 | |||||||||||||||||||||||||||||||
Diluted | 0.12 | 0.08 | 0.22 | 0.23 | |||||||||||||||||||||||||||||||||||
Weighted average common shares: | |||||||||||||||||||||||||||||||||||||||
Basic | 16,717 | 18,550 | 16,640 | 18,356 | |||||||||||||||||||||||||||||||||||
Diluted | 16,926 | 19,709 | 16,892 | 19,493 | |||||||||||||||||||||||||||||||||||
Other data: | |||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA(1) | $ | 6,620 | $ | 5,564 | $ | 12,640 | $ | 12,654 | |||||||||||||||||||||||||||||||
(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) |
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Quarter Ended | Two Quarters Ended | ||||||||||||||||||||
March 1, | March 2, | March 1, | March 2, | ||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
Reconciliation of net income to Adjusted EBITDA: | |||||||||||||||||||||
Net income |
$ | 1,971 | $ | 1,592 | $ | 3,690 | $ | 4,489 | |||||||||||||
Adjustments: | |||||||||||||||||||||
Interest expense, net | 450 | 448 | 867 | 900 | |||||||||||||||||
Discount on related party receivable | 142 | 135 | 283 | 283 | |||||||||||||||||
Income tax provision | 1,336 | 1,077 | 2,564 | 2,873 | |||||||||||||||||
Amortization | 989 | 619 | 1,978 | 1,241 | |||||||||||||||||
Depreciation | 816 | 722 | 1,601 | 1,423 | |||||||||||||||||
Share-based compensation | 983 | 971 | 2,244 | 1,445 | |||||||||||||||||
Reduction of contingent earnout liability | (67 | ) | - | (587 | ) | - | |||||||||||||||
Adjusted EBITDA | $ | 6,620 | $ | 5,564 | $ | 12,640 | $ | 12,654 | |||||||||||||
Adjusted EBITDA margin | 14.2 | % | 13.8 | % | 14.1 | % | 15.0 | % | |||||||||||||
FRANKLIN COVEY CO. |
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Additional Sales and Financial Information |
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(in thousands and unaudited) |
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Quarter Ended | Two Quarters Ended | ||||||||||||||||||||
March 1, | March 2, | March 1, | March 2, | ||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
Sales Detail by Region/Type: | |||||||||||||||||||||
U.S./Canada direct | $ | 24,158 | $ | 20,952 | $ | 45,066 | $ | 42,711 | |||||||||||||
International direct | 6,973 | 6,767 | 13,198 | 15,198 | |||||||||||||||||
Licensees | 3,899 | 3,588 | 8,273 | 7,918 | |||||||||||||||||
National account practices | 8,394 | 6,108 | 17,248 | 12,280 | |||||||||||||||||
Self-funded marketing | 1,317 | 1,395 | 2,795 | 2,888 | |||||||||||||||||
Other | 1,765 | 1,620 | 3,344 | 3,496 | |||||||||||||||||
Total | $ | 46,506 | $ | 40,430 | $ | 89,924 | $ | 84,491 | |||||||||||||
Sales Detail by Category: | |||||||||||||||||||||
Training and consulting services | $ | 43,683 | $ | 37,744 | $ | 85,018 | $ | 78,807 | |||||||||||||
Products | 1,747 | 1,624 | 3,073 | 3,567 | |||||||||||||||||
Leasing | 1,076 | 1,062 | 1,833 | 2,117 | |||||||||||||||||
46,506 | 40,430 | 89,924 | 84,491 | ||||||||||||||||||
Cost of Goods Sold by Category: | |||||||||||||||||||||
Training and consulting services | 14,035 | 11,939 | 26,449 | 25,528 | |||||||||||||||||
Products | 576 | 746 | 1,083 | 1,171 | |||||||||||||||||
Leasing | 484 | 461 | 951 | 949 | |||||||||||||||||
15,095 | 13,146 | 28,483 | 27,648 | ||||||||||||||||||
Gross Profit | $ | 31,411 | $ | 27,284 | $ | 61,441 | $ | 56,843 | |||||||||||||
FRANKLIN COVEY CO. |
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Condensed Consolidated Balance Sheets |
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(in thousands and unaudited) |
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March 1, | August 31, | ||||||||||
2014 | 2013 | ||||||||||
Assets |
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Current assets: | |||||||||||
Cash | $ | 7,188 | $ | 12,291 | |||||||
Accounts receivable, less allowance for doubtful accounts of $670 and $982 |
45,099 | 52,684 | |||||||||
Receivable from related party | 122 | 3,305 | |||||||||
Inventories |
5,326 | 4,321 | |||||||||
Deferred income taxes | 4,669 | 4,685 | |||||||||
Prepaid expenses and other current assets | 4,464 | 3,822 | |||||||||
Total current assets | 66,868 | 81,108 | |||||||||
Property and equipment, net | 17,255 | 17,180 | |||||||||
Intangible assets, net | 59,123 | 60,654 | |||||||||
Goodwill | 16,135 | 16,135 | |||||||||
Long-term receivable from related party | 4,893 | 4,453 | |||||||||
Other assets | 14,440 | 9,875 | |||||||||
$ | 178,714 | $ | 189,405 | ||||||||
Liabilities and Shareholders' Equity |
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Current liabilities: | |||||||||||
Current portion of financing obligation | $ | 1,217 | $ | 1,139 | |||||||
Accounts payable | 9,566 | 9,294 | |||||||||
Income taxes payable | 112 | 1,365 | |||||||||
Accrued liabilities | 18,601 | 31,140 | |||||||||
Total current liabilities | 29,496 | 42,938 | |||||||||
Financing obligation, less current portion | 26,746 | 27,376 | |||||||||
Other liabilities | 5,620 | 6,106 | |||||||||
Deferred income tax liabilities | 7,416 | 6,479 | |||||||||
Total liabilities | 69,278 | 82,899 | |||||||||
Shareholders' equity: | |||||||||||
Common stock | 1,353 | 1,353 | |||||||||
Additional paid-in capital | 205,237 | 210,227 | |||||||||
Retained earnings | 44,119 | 40,429 | |||||||||
Accumulated other comprehensive income | 1,634 | 1,686 | |||||||||
Treasury stock at cost, 10,378 and 10,759 shares | (142,907 | ) | (147,189 | ) | |||||||
Total shareholders' equity | 109,436 | 106,506 | |||||||||
$ | 178,714 | $ | 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