Franklin Covey's Q2 2025: Key Contradictions on Government Revenue, Subscription Durability, and Growth

These are the key contradictions discussed in Franklin Covey Co.'s latest 2025Q2 earnings call, specifically including: Government Revenue and Impact, Subscription Revenue Durability, and Subscription Revenue Growth:



Impact of External Environment on Revenue:
- Franklin Covey Co. reported that government revenue is approximately 6% or $17 million of the total business, with $5 million in government revenue already cancelled or postponed.
- The company's international direct and licensee operations are expected to result in a $4 million decline in revenue compared to the original guidance, primarily due to trade tensions and political factors in countries like China.
- The external environment, including federal government actions and trade uncertainties, has impacted revenue growth in the year and is the primary reason why results will be down compared to expectations.

Education Business Strength:
- Education revenue grew 3% in the second quarter and is up 7% year-to-date, with invoiced amounts up 13%.
- The Leader in Me program is driving demand due to its focus on delivering outcomes such as leadership development and student engagement, which is fueling transitions from selling to individual schools to entire districts and even statewide contracts.
- The strong demand is positioning the education business for continued growth, despite potential disruptions from federal policy changes at the Department of Education.

Go-to-Market Transformation Success:
- Franklin Covey's new go-to-market strategy resulted in 50% more new logo sales than planned in Q2 and is on track for 40% growth in new logo sales for the year.
- The company exceeded pipeline targets by 30%, with conversion rates above targeted levels, indicating early traction from the transformation.
- The strong traction is attributed to the new organizational structure, the addition of top-tier talent, and the strategic focus on serving more clients with broader, more effective solutions.

Revised Financial Guidance:
- Due to government actions, Franklin Covey adjusted its fiscal 2025 revenue guidance to between $275 million and $285 million, down 2.5% from last year and 5% from the low end of the original guidance.
- Adjusted EBITDA guidance is now between $30 million and $33 million, reflecting anticipated declines in government and international revenues.
- The adjustments are directly linked to the government-related actions and international impacts, while the company remains confident in its growth and transformation strategies for future years.