Franklin Covey (NYSE:FC) executives said the company’s fiscal second quarter 2026 results showed continued momentum from its go-to-market changes in Enterprise North America, with invoiced amounts rising and deferred revenue building, while the Education Division delivered double-digit revenue growth.
Management highlights: invoice growth and expanding deferred revenue
CEO Paul Walker said the company was “pleased with our results in Q2,” noting that revenue and adjusted EBITDA grew year-over-year and came in above consensus expectations. Walker described fiscal 2026 as “a year of execution and a return to growth,” pointing to invoiced amounts that increased 5% in the quarter.
Because “a significant portion of invoice growth is recognized over time,” Walker said the company believes the invoiced momentum positions Franklin Covey for “accelerating reported revenue, Adjusted EBITDA and cash flow in fiscal 2027.”
In Enterprise North America, Walker said results reflected strong new-logo activity and expansion within existing clients, contributing to “one of our highest revenue retention levels in recent periods.” He also highlighted that services bookings were up 9% year-to-date “as of this week.”
Walker and CFO Jessica Betjemann both pointed to a growing deferred revenue base. Walker said deferred subscription revenue rose 16% year-over-year and that multi-year contracts represented 62% of revenue. Betjemann later said billed deferred revenue in North America ended the quarter at $59.3 million, up 16% year-over-year.
Second quarter financial results
Betjemann reported total second quarter revenue of $59.6 million, flat year-over-year, as a 4% decline in Enterprise Division revenue was offset by a 16% increase in the Education Division. She said foreign exchange provided a $0.7 million favorable impact to consolidated revenue.
Subscription and subscription services revenue recognized increased 3% to $50.9 million. Betjemann said consolidated subscription and committed services invoiced amounts rose 16% to $39.3 million, and the total value of contracts signed increased 8% to $53.7 million, led by a 12% increase in the Enterprise Division.
Consolidated deferred revenue ended the quarter at $101.5 million, up 7% year-over-year. Unbilled deferred revenue contracted for the quarter increased 9% to $10.6 million, while the unbilled deferred revenue balance totaled $64.9 million, up 1% from the prior year.
Gross margin was 75.9%, compared to 76.7% a year earlier, which Betjemann attributed to higher amortization of capitalized curriculum expenses and a mix shift in services and products. SG&A expenses declined 6% to $41.2 million, reflecting reduced associate costs and prior cost reduction efforts.
Adjusted EBITDA was $4.1 million, up 99% year-over-year, with Betjemann citing stable revenue, gross margin, and lower SG&A. Foreign exchange benefited adjusted EBITDA by $0.2 million.
The company posted a net loss of $2.0 million, compared with a net loss of $1.1 million in the prior year. Betjemann attributed the change primarily to $1.5 million in restructuring expense (severance and related costs), higher share-based compensation expense, and increased building exit costs, partially offset by lower SG&A.
Segment performance: Enterprise softness in revenue, Education strength
Betjemann said the Enterprise Division contributed 70% of company revenue in the quarter, while the Education Division contributed 29%.
Enterprise Division invoiced amounts increased 7% to $52.0 million, while reported revenue declined 4% to $41.6 million. In Enterprise North America, invoiced amounts grew 7% to $42.7 million (10% excluding government). Reported revenue for the segment was $32.5 million, down 6% year-over-year, which Betjemann said primarily reflected lower subscription revenue recognized due to lower invoiced amounts and deferred revenues in the prior fiscal year.
Betjemann also discussed a shift tied to the company’s “solution selling” focus, where clients may commit upfront for predefined services delivered over time. She said approximately $3.5 million in invoiced amounts in the quarter came from such contractually committed predefined services, with revenue recognized upon delivery, and any unused days recognized at contract end.
Enterprise North America adjusted EBITDA rose to $5.9 million from $4.8 million, driven mainly by lower SG&A due to restructuring actions.
In Enterprise International, revenue was $9.2 million, up 1% year-over-year. Direct office revenue increased 7%, which Betjemann said was driven largely by foreign exchange benefits in France and China, while licensee revenue decreased 10%. Invoiced amounts for international direct offices grew 14%, with Betjemann noting that 6 points of that growth was due to foreign exchange. International segment adjusted EBITDA increased to $1.0 million from $0.5 million, helped by higher revenue and lower operating costs, including lower bad debt expense.
Education Division revenue rose 16% to $17.5 million, primarily reflecting “more than 300 additional training and coaching days” compared with last year, an additional symposium event, and increased school purchases of classroom and training materials, according to Betjemann. Education invoiced amounts were $8.5 million, slightly below $8.6 million a year ago, which she attributed partly to the timing of a large statewide deal expected to fall into the third and fourth quarters of fiscal 2026. Education subscription-related revenue increased 19% to $12.0 million. Education adjusted EBITDA was $0.4 million, compared with a loss of $0.3 million a year earlier.
Cash flow, buybacks, and liquidity
Betjemann reported operating cash flow of $16.4 million for the first two quarters of fiscal 2026, up 28% year-over-year, and said second quarter operating cash flow was $16.3 million versus negative $1.4 million in the prior-year quarter. Free cash flow was $13.2 million in Q2, compared to negative $3.6 million a year earlier.
On the Q&A, Betjemann attributed the free cash flow outperformance primarily to “a very strong positive swing in the net working capital,” especially improved accounts receivable collections.
The CFO said total liquidity was over $76 million at quarter end, including $13.7 million in cash and a fully available $62.5 million credit facility. She said Franklin Covey repurchased about 922,000 shares in the open market during the quarter for $16.5 million and completed a $20 million 10b5-1 purchase plan in January 2026. Year-to-date, the company repurchased nearly 1.6 million shares for $28.1 million. The company has a $50 million repurchase authorization, with $20 million remaining after completion of the two 10b5-1 plans.
Guidance reaffirmed; AI transformation positioned as demand driver
Betjemann reaffirmed fiscal 2026 guidance of $265 million to $275 million in revenue and $28 million to $33 million in adjusted EBITDA. She said the revenue outlook reflects “the lower deferred revenue generated in fiscal 2025 and the conversion lag of invoiced to reported revenue.”
For the second half, Betjemann said the company expects revenue to be “slightly higher in Q4 compared to Q3,” with roughly 50% to 55% of back-half revenue in Q4. For adjusted EBITDA, she said about 60% to 65% is expected in Q4, driven by education contributions and anticipated margin expansion from cost savings and operating leverage.
On the call, Walker said the macro environment was “largely unchanged” from the prior quarter, describing it as neutral and “more stable” than a year ago. Asked about longer-term targets, Betjemann said the company would evaluate whether to share longer-term direction as it updates its five-year plan during summer planning for fiscal 2027. Walker added that the company still views an adjusted EBITDA margin around 20% as “a good number out there,” stating that prior investments were not intended to “permanently reset the cost structure.”
Executives repeatedly framed AI-driven change as a tailwind for Franklin Covey’s leadership, execution, and behavior-change solutions. Walker said AI is “increasing the premium on human leadership and execution,” and emphasized the company’s model is built around “behavior change and collective action tied to real, measurable performance outcomes,” positioning it as a “performance and advisory partner rather than a software provider.”
In Q&A, CFO Betjemann said “very few of our new logos are pilots,” arguing it is “really hard to pilot a solution like ours.” Enterprise Division President Holly Procter said the company expects both new-logo growth and continued improvements in retention and expansion, citing traction from healthcare specialization and demand tied to helping companies through “AI transformation.”
In Education, division President Sean Covey said the segment has “probably the best [pipeline] we’ve ever had in terms of large opportunities,” including three state-level opportunities described as “very large multi-million, multi-year deals,” plus larger district opportunities. He cited continued support from funding partners “in the range of…$20 million a year,” and said the business is aligned with market needs such as raising test scores, teacher retention, and mental wellness, while acknowledging headwinds including uncertainty at the U.S. Department of Education and the expiration of ESSER funds.
About Franklin Covey (NYSE:FC)
Franklin Covey Co (NYSE:FC) is a global consulting and training firm specializing in performance improvement solutions for individuals and organizations. The company offers a range of services, including leadership development, productivity tools, execution frameworks and assessments designed to foster personal effectiveness and drive business results. Its flagship offerings integrate training workshops, digital resources and coaching to support clients in areas such as strategic planning, team productivity and change management.
The origins of Franklin Covey trace back to the merger in 1997 of Franklin Quest Co, founded in 1983 by Hyrum W.
