Franklin Covey Co. reported fourth‑quarter 2025 revenue of $71.2 million, a 15.5% decline from $84.1 million in the same period last year, and full‑year revenue of $267.1 million, down 7% from $287.2 million in fiscal 2024. Net income fell to $4.4 million from $12.0 million in Q4 FY2024, while Adjusted EBITDA dropped to $11.7 million from $22.9 million. Gross margin contracted to 76.2% from 77.0% in FY2024, and the company posted earnings per share of $0.34, missing the consensus estimate of $0.59 (or $0.43). Deferred subscription revenue stood at $111.7 million, up from $98.3 million a year earlier.
The decline in total revenue was driven largely by a 10% drop in the Enterprise Division, which generated $45.7 million in Q4 FY2025 compared with $58.2 million in Q4 FY2024. The Education Division remained flat in the quarter ($24.4 million) and grew modestly in the full year ($74.6 million versus $74.2 million in FY2024). Management attributed the Enterprise slowdown to macroeconomic uncertainty, federal budget cuts, and the absence of a large North America IP deal that had boosted the prior year’s results. In contrast, the Education segment’s stability reflects continued demand for training and development services in the public sector.
The EPS miss was largely a consequence of the sharp revenue decline and the company’s higher operating costs associated with its go‑to‑market transformation. While the firm maintained a strong gross margin, the shift to a subscription model and increased investment in sales and marketing pushed operating expenses higher, compressing earnings. The company’s cost‑control initiatives helped keep the margin from falling further, but the net effect was a $0.25 shortfall against consensus. The slight revenue beat—$71.2 million versus an estimate of $70.97 million—was driven by a modest uptick in subscription revenue and a small rebound in the Education segment.
Franklin Covey reiterated its fiscal 2026 outlook, guiding revenue between $265 million and $275 million and Adjusted EBITDA between $28 million and $33 million. CEO Paul Walker emphasized that the company is entering a “period of execution” and expects the benefits of its transformation and AI integration to accelerate growth in 2027. CFO Jessica Betjemann noted that, despite macro headwinds, the firm’s liquidity remains robust, with more than $90 million in cash and a $10 million stock‑repurchase program underscoring management’s confidence in future prospects.
Investors reacted positively, with the stock rising 5.11% in after‑hours trading. The market’s enthusiasm was driven by the revenue beat, the company’s steady guidance, and the announcement of a $10 million share‑repurchase program. Analysts highlighted that, while the EPS miss was disappointing, the company’s strategic focus on subscription growth and AI‑enabled services positions it for a rebound in the coming years. The firm’s ability to maintain a high gross margin and strong liquidity amid a challenging macro environment reinforces investor confidence in its long‑term trajectory.
The results underscore the dual challenge of navigating short‑term macro headwinds while investing in a subscription‑based model that promises more predictable revenue streams. The Enterprise Division’s decline signals continued pressure from government budget cuts, but the Education segment’s resilience and the growth in deferred subscription revenue suggest a solid foundation for future expansion. With the transformation initiatives gaining traction and AI integration underway, Franklin Covey is poised to return to growth in fiscal 2026 and accelerate further in fiscal 2027.
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