Franklin Covey 2025 Q3 Earnings Misses Targets as Net Income Drops 124.6%

Franklin Covey (FC) reported its fiscal 2025 Q3 earnings on Jul 08th, 2025. Franklin Covey's third-quarter fiscal 2025 results fell short of expectations with a significant drop in net income compared to the prior year. The company adjusted its guidance downward, anticipating revenue to range between $265 million and $275 million, reflecting ongoing macroeconomic challenges. Despite these setbacks, Franklin Covey exceeded Adjusted EBITDA expectations, signaling resilience in its underlying business operations. The company remains focused on its strategic initiatives, aiming for significant growth in fiscal 2026.

Revenue
Franklin Covey's total revenue decreased by 8.5% to $67.12 million in 2025 Q3, down from $73.37 million in 2024 Q3. The Services and Products segment contributed $25.70 million, and Subscriptions accounted for $36.78 million. Royalties brought in $3.72 million, while Leases and Other added $917,000 to the overall revenue. The consolidated revenue matched the previously reported total.

Earnings/Net Income
The company swung to a loss of $0.11 per share in 2025 Q3 from a profit of $0.43 per share in 2024 Q3, marking a 125.6% negative change. The net loss reported was $-1.41 million in 2025 Q3, a deterioration of 124.6% from the net income of $5.72 million in 2024 Q3. Overall, the earnings per share performance was notably poor, reflecting a challenging quarter.

Price Action
The stock price of Franklin Covey has edged down 0.14% during the latest trading day, has dropped 6.09% during the most recent full trading week, and has dropped 5.76% month-to-date.

Post-Earnings Price Action Review
Investors who purchased Franklin Covey shares following a quarter-over-quarter revenue increase on the earnings release date and held them for 30 days saw moderate returns, though these underperformed the market significantly. The strategy yielded a compound annual growth rate (CAGR) of 4.66%, falling short of the benchmark by 61.49%. With a maximum drawdown of -59.24% and a Sharpe ratio of 0.12, this strategy highlighted a challenging risk-return profile. This underscores the importance of implementing robust risk management strategies in volatile market conditions, as the potential for significant losses is evident. The performance of Franklin Covey stock post-earnings release suggests that while there is potential for gains, market volatility can lead to substantial risks for investors.

CEO Commentary
Paul Walker, President and CEO, expressed satisfaction with the third quarter results, noting that revenue met expectations and Adjusted EBITDA surpassed guidance. He highlighted the company's progress in its sales transformation within the Enterprise North America business and emphasized the improvement in new client acquisition, strong client retention, and high subscription services attachment rate. Walker remains optimistic about achieving top and bottom-line growth for the full year and anticipates significant growth in Adjusted EBITDA and Free Cash Flow in fiscal 2026 and beyond.

Guidance
The company has updated its guidance for fiscal 2025, expecting total revenue to fall between $265 million and $275 million, with Adjusted EBITDA projected in the range of $28 million to $33 million. This revision reflects ongoing macroeconomic challenges affecting client decision-making and service delivery timing risks. Franklin Covey anticipates a meaningful increase in Adjusted EBITDA and free cash flow in fiscal 2026, bolstered by recent cost reductions and a solid foundation of recurring revenue.

Additional News
Franklin Covey recently appointed Dariusz Paczuski as Chief Marketing Officer, signifying a strategic move to strengthen its marketing initiatives. Additionally, the company announced the retirement of its Chief Financial Officer, Stephen D. Young, and named Jessica Betjemann as his successor, marking a significant change in leadership. Franklin Covey also engaged in a substantial buyback activity, purchasing approximately 769,000 shares of its common stock for $23.0 million during fiscal 2025, reflecting confidence in its long-term growth prospects. These developments highlight Franklin Covey's focus on enhancing its executive team and shareholder value amidst challenging market conditions.