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The call conveyed clear operational momentum—strength in invoiced amounts, deferred revenue, adjusted EBITDA, cash flow, contract signings, and Education momentum—while also acknowledging conversion timing from invoiced to reported revenue, some segment-level revenue declines, one-time costs and margin/mix pressures. Management reaffirmed FY26 guidance and emphasized structural opportunities (multiyear contracts, AI-related demand and cross-sell expansion), supporting confidence in stronger reported revenue and EBITDA in fiscal 2027.
Management reaffirmed fiscal 2026 guidance of $265–$275 million in revenue and $28–$33 million of adjusted EBITDA, while forecasting continued solid invoiced‑amounts growth that should position the company for accelerating reported revenue, adjusted EBITDA and cash flow in fiscal 2027; Q2 metrics cited in support include consolidated invoiced amounts up 5% (Enterprise invoiced +7%; Enterprise North America ex‑government +10%), consolidated deferred revenue of $101.5M (up 7% YoY), consolidated subscription/committed services invoiced $39.3M (up 16%), and one‑quarter patterns with ~50–55% of back‑half revenue expected in Q4 and ~60–65% of FY26 adjusted EBITDA generated in Q4. Management also reiterated free cash flow will be positive (YTD operating cash flow $16.4M; Q2 free cash flow $13.2M), liquidity of >$76M (cash $13.7M plus $62.5M credit facility), ongoing share repurchases (≈1.6M shares for $28.1M YTD; $50M authorization with ~$20M remaining), and a plan to update FY27 guidance in the fall while targeting roughly a 1‑point per year improvement in adjusted EBITDA margin toward prior ~20% levels.
Consolidated invoiced amounts grew 5% year-over-year; Enterprise division invoiced amounts grew 7% to $52.0M, with Enterprise North America up 7% (10% excluding government) and Enterprise International invoiced amounts up 7% (International Direct Offices +14%).
Consolidated deferred revenue balance increased 7% year-over-year to $101.5M; North America billed deferred subscription revenue grew 16% year-over-year to approximately $59M and the percentage of revenue under multiyear contracts increased to 62%.
Adjusted EBITDA for Q2 was $4.1M, up 99% (an increase of $2.0M) compared with prior-year quarter; North America segment adjusted EBITDA rose $1.1M to $5.9M; International adjusted EBITDA improved to $1.0M from $0.5M.
Q2 free cash flow was $13.2M versus negative $3.6M prior year; cash flow from operating activities for first two quarters increased 28% to $16.4M, driven by improved receivables collections and higher invoiced amounts.
Consolidated subscription and subscription services revenue recognized increased 3% to $50.9M; consolidated subscription and committed services invoiced amounts rose 16% to $39.3M; total value of contracts signed grew 8% to $53.7M (Enterprise +12%).
Education reported revenue grew 16% in the quarter to $17.5M; Education subscription-related revenue increased 19% to $12.0M and Education adjusted EBITDA turned positive to $0.4M from a loss of $0.3M.
Operating SG&A expenses declined 6% year-over-year to $41.2M, reflecting cost-reduction measures and restructuring actions that improved adjusted EBITDA and operating leverage.
Total liquidity over $76M (including $13.7M cash and a $62.5M undrawn credit facility). The company repurchased ~922k shares (~$16.5M) in Q2 and ~1.6M shares YTD (~$28.1M) under a $50M authorization, signaling confidence and shareholder returns.
Management emphasized increased demand for leadership and change-management services in AI transformations; reported one of the strongest expansion quarters and noted that current solutions typically reach only 5%–10% of employee populations, implying substantial internal growth opportunity.
Good day, and thank you for standing by. Welcome to the Second Quarter 2026 Franklin Covey Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Boyd Roberts, Head of Investor Relations. Please go ahead.
Good afternoon, everyone, and thank you for joining us today on Franklin Covey's Second Quarter 2026 Earnings Call. We appreciate having the opportunity to connect with you. Before we begin, please remember that today's remarks contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including, without limitation, statements that may predict, forecast, indicate or imply future results, performance or achievements and may contain words such as believe, anticipate, expect, estimate, project or words or phrases of similar meaning. These statements reflect management's current judgment and analysis and are subject to a variety of risks and uncertainties that could cause actual results to differ material -- materially from current expectations, including, but not limited to, risks relating to macroeconomic conditions, tariffs and other risk factors described in our most recent Form 10-K and other filings made with the SEC. We undertake no obligation to update or revise any forward-looking statements, except as required by law. Now with that out of the way, I'd like to turn it over to Mr. Paul Walker, our CEO.
Thanks, Boyd. Good afternoon, everyone, and thank you for joining us. It's great to be with you and to have the opportunity...