Franklin Covey Reports Strong Revenue Growth of 10.3% for Fiscal 2015 First Quarter
Strongest First Quarter Revenue Ever for Current Business
Strong
Growth in Both Revenue and Adjusted EBITDA Over the Last Four Quarters
Company
Reaffirms Adjusted EBITDA Guidance of
Financial Highlights
-
Revenue: Consolidated revenue for the
first quarter of fiscal 2015 was the strongest first quarter ever for
the Company’s current business. First quarter fiscal 2015 revenue
increased 10.3% to
$47.9 million , after absorbing$0.7 million of adverse revenue impact from foreign exchange rates. This compares with$43.4 million in the prior year. Revenue growth was broad-based, with revenue increasing in all of the Company’s major delivery channels, and in all of its practices. For the trailing four quarters, the Company’s consolidated revenues increased$19.3 million , or 10.2%, to$209.6 million . -
Gross profit: First quarter gross profit
increased to
$31.2 million , due to increased sales, compared with$30.0 million in the first quarter of fiscal 2014. The Company’s gross margin decreased to 65.2% of sales compared with 69.2% in the prior year. The change in gross margin reflected several factors, including absorption of additional selling, general, and administrative expenses into cost of sales resulting from increased sales activity, increased capitalized curriculum amortization costs, and underutilization of delivery consultants and coaches. The absorption of additional selling, general, and administrative expenses had no impact on operating income. Increased curriculum amortization costs are expected to be offset by increased pricing on these new offerings, and the impact of underutilized delivery personnel is expected to be replaced by improved utilization and increased margins in future periods. For the trailing four quarters, gross profit increased to$139.4 million , compared with$129.5 million for the corresponding period of the prior year. -
Adjusted EBITDA: First quarter Adjusted
EBITDA was
$5.9 million , compared with$6.0 million in the first quarter of the prior year. The Company’s first quarter Adjusted EBITDA was affected by$0.7 million of additional foreign exchange related expenses, the costs associated with hiring new client partners and new Education practice coaches, and holding additional marketing events during the quarter. For the trailing four quarters, Adjusted EBITDA increased 13.2% to$34.3 million , compared with$30.3 million for the same period ending in fiscal 2014. -
Net Income: First quarter net income
increased to
$1.8 million compared with$1.7 million in the first quarter of fiscal 2014, reflecting the above-noted factors. For the trailing four quarters, net income increased to$18.2 million , compared with$13.1 million during the four-quarter period endedNovember 30, 2013 . -
Diluted EPS: Diluted EPS for the quarter
ended
November 29, 2014 increased to$.11 per share compared with$.10 per share in the first quarter of the prior year. -
Adjusted EBITDA Outlook: The Company
affirms its previously-announced annual guidance range for Adjusted
EBITDA of
$37 million to $40 million .
Fiscal 2014 First Quarter Financial Results
Consolidated sales increased by 10% to
Gross profit increased to
Selling, general, and administrative (SG&A) expenses for the quarter
ended
The Company’s depreciation expense increased by
Income from operations for the quarter ended
The Company’s balance sheet and liquidity position remained healthy
through the first quarter of fiscal 2015 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 2015; 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 earn out 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. The Company does not provide forward-looking GAAP measures or a reconciliation of the forward-looking Adjusted EBITDA to GAAP measures because of its inability to project certain of the costs included in the calculation of Adjusted EBITDA.
About
FRANKLIN COVEY CO. | |||||||||||
CONDENSED CONSOLIDATED INCOME STATEMENTS | |||||||||||
(in thousands, except per-share amounts, and unaudited) | |||||||||||
Quarter Ended | |||||||||||
November 29, | November 30, | ||||||||||
2014 | 2013 | ||||||||||
Net sales | $ | 47,875 | $ | 43,418 | |||||||
Cost of sales | 16,671 | 13,387 | |||||||||
Gross profit | 31,204 | 30,031 | |||||||||
Selling, general, and administrative | 25,699 | 24,752 | |||||||||
Depreciation | 964 | 784 | |||||||||
Amortization | 953 | 989 | |||||||||
Income from operations | 3,588 | 3,506 | |||||||||
Interest expense, net | (428 | ) | (417 | ) | |||||||
Discount on related party receivable | (130 | ) | (142 | ) | |||||||
Income before income taxes | 3,030 | 2,947 | |||||||||
Income tax provision | (1,202 | ) | (1,228 | ) | |||||||
Net income | $ | 1,828 | $ | 1,719 | |||||||
Net income per common share: | |||||||||||
Basic | $ | 0.11 | $ | 0.10 | |||||||
Diluted | 0.11 | 0.10 | |||||||||
Weighted average common shares: | |||||||||||
Basic | 16,870 | 16,564 | |||||||||
Diluted | 17,092 | 16,859 | |||||||||
Other data: | |||||||||||
Adjusted EBITDA(1) | $ | 5,879 | $ | 6,021 | |||||||
|
(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. | ||
FRANKLIN COVEY CO. | |||||||||||||||||||||||||
Reconciliation of Net Income to Adjusted EBITDA | |||||||||||||||||||||||||
(in thousands and unaudited) | |||||||||||||||||||||||||
Quarter Ended | Four-Quarter Period Ended | ||||||||||||||||||||||||
November 29, | November 30, | November 29, | November 30, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Reconciliation of net income to Adjusted EBITDA: | |||||||||||||||||||||||||
Net Income | $ | 1,828 | $ | 1,719 | $ | 18,177 | $ | 13,140 | |||||||||||||||||
Adjustments: | |||||||||||||||||||||||||
Interest expense, net | 428 | 417 | 1,821 | 1,684 | |||||||||||||||||||||
Discount on related party receivable | 130 | 142 | 1,185 | 514 | |||||||||||||||||||||
Income tax provision | 1,202 | 1,228 | 3,666 | 4,511 | |||||||||||||||||||||
Amortization | 953 | 989 | 3,918 | 3,558 | |||||||||||||||||||||
Depreciation | 964 | 784 | 3,563 | 3,091 | |||||||||||||||||||||
Share-based compensation | 402 | 1,262 | 2,675 | 4,377 | |||||||||||||||||||||
Reduction of contingent earnout liability | (28 | ) | (520 | ) | (1,089 | ) | (520 | ) | |||||||||||||||||
Impairment of related-party receivable | - | - | 363 | - | |||||||||||||||||||||
Other income, net | - | - | - | (21 | ) | ||||||||||||||||||||
Adjusted EBITDA | $ | 5,879 | $ | 6,021 | $ | 34,279 | $ | 30,334 | |||||||||||||||||
Adjusted EBITDA margin | 12.3 | % | 13.9 | % | |||||||||||||||||||||
FRANKLIN COVEY CO. | |||||||||||||||||||||||||
Additional Sales Information | |||||||||||||||||||||||||
(in thousands and unaudited) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
November 29, | November 30, | ||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||
Sales by Region/Type: | |||||||||||||||||||||||||
U.S./Canada direct | $ | 23,393 | $ | 20,908 | |||||||||||||||||||||
International direct | 6,916 | 6,225 | |||||||||||||||||||||||
Licensees | 4,539 | 4,375 | |||||||||||||||||||||||
National account practices | 9,701 | 8,854 | |||||||||||||||||||||||
Self-funded marketing | 1,578 | 1,478 | |||||||||||||||||||||||
Other | 1,748 | 1,578 | |||||||||||||||||||||||
Total | $ | 47,875 | $ | 43,418 | |||||||||||||||||||||
Sales by Practice: | |||||||||||||||||||||||||
Leadership | $ | 12,102 | $ | 11,126 | |||||||||||||||||||||
Productivity | 6,690 | 6,120 | |||||||||||||||||||||||
Speed of Trust | 4,713 | 4,125 | |||||||||||||||||||||||
HR Suite Subtotal | 23,505 | 21,371 | |||||||||||||||||||||||
Education | 5,854 | 5,159 | |||||||||||||||||||||||
Execution | 4,682 | 4,594 | |||||||||||||||||||||||
Sales Performance | 4,326 | 3,420 | |||||||||||||||||||||||
Customer Loyalty | 1,604 | 1,381 | |||||||||||||||||||||||
Other | 7,904 | 7,493 | |||||||||||||||||||||||
Subtotal | 24,370 | 22,047 | |||||||||||||||||||||||
Total Practice Sales | $ | 47,875 | $ | 43,418 | |||||||||||||||||||||
Sales by Category: | |||||||||||||||||||||||||
Training and consulting services | $ | 45,473 | $ | 41,335 | |||||||||||||||||||||
Products | 1,314 | 1,326 | |||||||||||||||||||||||
Leasing | 1,088 | 757 | |||||||||||||||||||||||
47,875 | 43,418 | ||||||||||||||||||||||||
Cost of Goods Sold by Category: | |||||||||||||||||||||||||
Training and consulting services | 15,421 | 12,414 | |||||||||||||||||||||||
Products | 637 | 506 | |||||||||||||||||||||||
Leasing | 613 | 467 | |||||||||||||||||||||||
16,671 | 13,387 | ||||||||||||||||||||||||
Gross Profit | $ | 31,204 | $ | 30,031 | |||||||||||||||||||||
FRANKLIN COVEY CO. | ||||||||||
Condensed Consolidated Balance Sheets | ||||||||||
(in thousands and unaudited) | ||||||||||
November 29, | August 31, | |||||||||
2014 | 2014 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash | $ | 7,571 | $ | 10,483 | ||||||
Accounts receivable, less allowance for | ||||||||||
doubtful accounts of $912 and $918 | 53,611 | 61,490 | ||||||||
Receivable from related party | 2,219 | 1,851 | ||||||||
Inventories | 6,372 | 6,367 | ||||||||
Income taxes receivable | 2,267 | 2,432 | ||||||||
Deferred income taxes | 4,257 | 4,340 | ||||||||
Prepaid expenses and other current assets | 6,038 | 6,053 | ||||||||
Total current assets | 82,335 | 93,016 | ||||||||
Property and equipment, net | 16,703 | 17,271 | ||||||||
Intangible assets, net | 56,219 | 57,177 | ||||||||
Goodwill | 19,641 | 19,641 | ||||||||
Long-term receivable from related party | 3,450 | 3,296 | ||||||||
Other assets | 14,062 | 14,785 | ||||||||
$ | 192,410 | $ | 205,186 | |||||||
Liabilities and Shareholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Current portion of financing obligation | $ | 1,341 | $ | 1,298 | ||||||
Accounts payable | 7,038 | 12,001 | ||||||||
Accrued liabilities | 20,020 | 29,586 | ||||||||
Total current liabilities | 28,399 | 42,885 | ||||||||
Financing obligation, less current portion | 25,723 | 26,078 | ||||||||
Other liabilities | 3,936 | 3,934 | ||||||||
Deferred income tax liabilities | 5,954 | 5,575 | ||||||||
Total liabilities | 64,012 | 78,472 | ||||||||
Shareholders' equity: | ||||||||||
Common stock | 1,353 | 1,353 | ||||||||
Additional paid-in capital | 207,445 | 207,148 | ||||||||
Retained earnings | 60,324 | 58,496 | ||||||||
Accumulated other comprehensive income | 799 | 1,451 | ||||||||
Treasury stock at cost, 10,250 and 10,266 shares | (141,523 | ) | (141,734 | ) | ||||||
Total shareholders' equity | 128,398 | 126,714 | ||||||||
$ | 192,410 | $ | 205,186 |
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