Subscription and subscription-related revenue was $27.8 million, a 36 percent increase year-over-year.

Additional highlights for the quarter include:

• The Enterprise Division had sales of $42.1 million, a 12 percent increase year-over-year. Revenue from this division make up nearly 80 percent of total revenue.
• The Education Division had revenue of $10.3 million, a 13 percent increase year-over-year.
• Subscription and subscription-related revenue was $27.8 million, a 36 percent increase year-over-year.
• At the end of the quarter, Franklin Covey had $65.8 million of billed and unbilled deferred subscription revenue, an increase of $18.1 million, or 38 percent, year-over-year.
• The organization’s balance of billed deferred subscription revenue was $41.4 million, a 32 percent increase year-over-year.
• The organization’s balance of unbilled deferred subscription revenue was $24.4 million, a 50 percent increase year-over-year.
• Franklin Covey’s gross profit was $36.8 million, or 12 percent, year-over-year. Gross margin for the period was 68.3 percent, compared to 68.6 percent year-over-year.
• The company’s operating expenses increased to $1.3 million.
• The company reported a net loss of $1.4 million, or $0.10 per share, compared to a net loss of $2.4 million, or $0.17 per share, year-over-year.
• At the end of the quarter, Franklin Covey had $11.5 million in cash, compared to $10.2 million on August 31, 2018.
• The adoption of Accounting Standards Codification (ASC) 606 had a $1.1 million favorite impact on company revenue in the Education Division.

“We were very pleased with the strong start to fiscal 2019, which exceeded our expectations and produced increased sales, increased gross profit, improved operating results, and a significant increase in Adjusted EBITDA in the quarter and for the latest 12 months. Our revenue grew 12%, or $5.9 million, to $53.8 million, with growth occurring in both our Enterprise and Education Divisions, and our Adjusted EBITDA improved $2.6 million over the prior year,." said Bob Whitman, chairman and CEO.

The company’s fiscal 2019 outlook remains the same with estimated Adjusted EBITDA between $18 million and $22 million.

“Three years ago, the company determined that it could better serve its clients, and substantially expand the breadth and depth of its client impact by providing world-class content and offerings through subscription-based offerings and services,." said the company. “These new offerings are changing the way in which clients engage with the Company; the extent of both the impact and reach they can have within their organizations; and the flexibility and agility with which they can develop leaders and teams to improve their organization’s results.."

The All Access Pass is a package of solutions, designed with specific goals in mind. The There are three packages – Personal Effectiveness Pass, All Access Pass (same as Personal Effectiveness Pass plus leadership solutions) and All Access Pass Plus (designed for organizations for specific business outcomes). The packages include tools, assessments, videos, digital learning modules and in-person or live online training courses. The Franklin Covey website does not disclose pricing for the passes.

Investors gave Franklin Covey stock a little boost, following the January 9 earnings report. On January 9, stock closed at $22.68 per share. As of 9:39 a.m. EST on January 14, stock was valued at $24.19 per share. This is down from $29.05 from its value a year ago on January 16, 2018.

Insider Take:

A subscription-based model for a company like Franklin Covey makes sense. Both the company and their clients benefit from an ongoing relationship. The company gets the opportunity to build a lasting relationship as well as recurring revenue, while the client gets more than a one-off experience. Three years in, it looks like the strategy is working well with Franklin Covey reporting a 36 percent increase in subscription revenue growth. If this was a test of the model, Franklin Covey could potentially apply the model to some of its other divisions and solutions, positioning it for long-term success and turning the net losses into net income.

Dana Neuts is Subscription Insider's Senior Staff Writer, covering our daily subscription news as well as member features, case studies, and reports.  

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