Franklin Covey reports $67.1M in Q3 revenue and $1.4M loss as restructuring impacts performance
Franklin Covey reports lower revenue and a net loss in Q3 FY2025, citing restructuring charges and increased costs, while pointing to growth in deferred subscription revenue and multi-year contracts.
Franklin Covey, a U.S.-based provider of organizational performance improvement solutions, has reported revenue of $67.1 million for the third quarter of fiscal 2025.
The company develops content, training programs, and behavior-change tools used by schools, businesses, and public institutions worldwide.
Third quarter revenue fell from $73.4 million in the same period last year. The company attributes the decline to weaker performance in both its Enterprise and Education divisions, driven by ongoing macroeconomic uncertainty, canceled U.S. federal contracts, and reduced materials revenue in education.
Enterprise Division revenue totaled $47.3 million, down from $51.9 million in Q3 FY2024. The North America segment accounted for most of the decline, falling by $3.5 million. International Direct Office revenue declined by $1.0 million.
Education Division revenue was $18.6 million, compared to $20.2 million a year earlier. The company cited a state-wide initiative in Q3 FY2024 that contributed a large volume of initial materials revenue, which was not repeated this year. Growth in training, coaching, and membership revenue partly offset the decline.
Subscription metrics reflect contract strength
Total subscription and subscription services revenue was $57.7 million in Q3 FY2025, compared with $60.8 million in the prior-year period. Invoiced subscription revenue was $31.7 million, down from $34.5 million.
Deferred subscription revenue rose 7% year-over-year to $89.3 million. Unbilled deferred revenue declined to $62.0 million from $69.4 million. Franklin Covey notes that 58% of All Access Pass contracts in North America now span at least two years, up from 55% last year, while 62% of total subscription value is tied to multi-year agreements.
Restructuring charges drive net loss
Franklin Covey reported a net loss of $1.4 million, or $0.11 per share, compared with net income of $5.7 million, or $0.43 per share, in Q3 FY2024. The company incurred $4.7 million in restructuring charges as part of a cost reduction and go-to-market transformation strategy launched in December 2024. Operating costs also rose by $1.6 million year-over-year due to continued investment in sales capabilities.
Adjusted EBITDA for the quarter was $7.3 million, down from $13.9 million a year ago but above company guidance.
Cash flow declines but balance sheet remains strong
Operating cash flow for the first three quarters of fiscal 2025 was $19.0 million, compared with $38.4 million for the same period last year. Free cash flow was $10.6 million, down from $30.6 million. Cash on hand at the end of Q3 was $33.7 million.
The company reported no drawdowns on its $62.5 million credit facility and repurchased 372,000 shares of its common stock for $8.3 million during the quarter. Total repurchases for fiscal 2025 reached 769,000 shares valued at $23.0 million.
Franklin Covey has updated its full-year guidance, citing continued client decision-making delays and delivery timing risks that could push some activity into fiscal 2026. It now expects:
Full-year revenue between $265 million and $275 million
Adjusted EBITDA in the range of $28 million to $33 million
Further guidance for fiscal 2026 will be provided during the company’s year-end earnings release in November. The company expects that recent restructuring actions will support improved adjusted EBITDA and free cash flow in the next fiscal year.
Paul Walker, President and CEO, says: “We are pleased that our third quarter revenue was in line with our expectation and that Adjusted EBITDA exceeded the high end of our range. We are now 180 days into the sales transformation of our Enterprise North America business, and despite an environment where uncertainty is prompting organizations to scrutinize costs, we continue to be confident in the actions we are undertaking to accelerate future growth.”
Walker adds that the company saw strong client retention, a rise in multi-year contracts, and consistent performance in the Education division, which is expected to deliver full-year growth.
Jessi Betjemann, Chief Financial Officer, says: “I am thrilled to be part of a company that is a trusted partner to leaders of enterprises and schools around the world to deliver improved organizational performance and breakthrough results through collective action. I look forward to partnering with Paul and the leadership team to help drive the growth trajectory for FranklinCovey during this transitory period.”
