- Enterprise North America Growth: Invoiced amounts grew 7% (13% excluding government business) in Q1, driven by 25% new logo subscription sales and 29% services booking growth.
- Deferred Revenue Expansion: North America deferred revenue increased 8% YoY to $49.1 million, while consolidated deferred revenue rose 5% to $100.2 million.
- Revenue and EBITDA Guidance: FY2026 revenue guided at $265–275 million; adjusted EBITDA projected at $28–33 million, with margin expansion expected from restructuring.
- Share Buybacks and Capital Allocation: $10.4 million spent on repurchasing 582,000 shares; $20 million stock buyback plan active, with a $20 million revolver for liquidity.
- AI and Future Growth: AI initiatives to embed across solutions; 17% of revenue from healthcare, with opportunities in verticals like hospitals and AI-driven change management.
Segment Performance
The Enterprise Division generated 74% of the company's overall revenue, with invoiced amounts growing 4% to $45.5 million. The North America segment within Enterprise reported a 7% growth in invoiced amounts to $34.9 million. In contrast, the Education Division's revenue was $16.1 million, 2% lower than the prior year. The company's International invoiced amounts are expected to grow modestly in fiscal 2026.
Growth Drivers and Outlook
The growth in Enterprise North America was driven by a 25% increase in new logo subscription sales and a 29% rise in services booking pace. The company expects North America invoiced amounts to continue growing and has reaffirmed its fiscal year 2026 financial guidance, anticipating reported revenue of $265 million to $275 million and adjusted EBITDA in the range of $28 million to $33 million. Analysts estimate next year's revenue growth at 3.6%.
Valuation and Capital Allocation
With a P/S Ratio of 0.83 and EV/EBITDA of 21.12, the market is pricing in a certain level of growth for Franklin Covey. The company continues to pursue a balanced capital allocation strategy, focusing on maintaining liquidity, investing for growth, and returning capital to shareholders. Franklin Covey has been actively buying back shares, having spent over 130% of free cash flow on share buybacks over the last 12 quarters, and has a new 10b5-1 plan to purchase up to $20 million of its common stock.
AI Initiatives and Restructuring
The company is focusing on AI initiatives, planning to embed AI across its portfolio of solutions, and is considering both building in-house capabilities and licensing or partnering with external providers. The restructuring in the first fiscal quarter was factored into the original fiscal '26 guidance and is expected to drive margin expansion, partly through cost takeout, with the full annualized impact to be seen in the rest of the year.