Q2 2020 Earnings Call
220, 25 copy earnings Conference call. My name is Adrian and out of your operator for today's call.
Hi, all parties, it's kinda listen only mode later, well conduct question answer session.
And the question answer session you have a question. Please press Star then one on your Touchtone phone.
Please note. This conference is sand card it I'm not sure collared their catch care catch you may begin.
Thank you on behalf of Franklin Covey would like to welcome you to our conference call to discuss our second quarter fiscal 2020 financial results and hope that you are all staying safe and are well at this time before we begin we'd like to remind everybody.
This presentation contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements are based upon managements current expectations and are subject to various risks and uncertainties, including but not limited to the ability of the company to stabilize and grow revenues. The acceptance of in renewal rates are the all access pass the ability of the company the higher productive sales professionals general economic conditions competition and the company's targeted.
Marketplace.
Market acceptance of new products or services and marketing strategies changes in the company's market share changes in the size of the overall market for the company's products.
Changes in the training and spending policies of the company's clients and other factors identified and discussed and the company's most recent annual report on form 10-K, and other periodic reports filed with the Securities Exchange Commission, including the forthcoming 10-Q for the second quarter of fiscal 2020, which is expected to be filed next week.
Many of these conditions are beyond our control or influence any one of which may cause future results to differ materially from the company's current expectations and there can be no assurance the company's actual future performance will meet managements expectations. These forward looking statements are based on management's current expectations are we undertake no obligation to update or revise.
These forward looking statements to reflect reflect events or circumstances. After the date of today's presentation, except as required by law.
With that out of the way, we'd like to turn the time over to Mr., Bob Whitman, Our chairman and Chief Executive Officer Bob.
Okay, great. Thanks Derek.
Hi, Good afternoon, everyone. We appreciate you joining us today.
And these challenging times, we've been doing a lot lately to help our clients and even non clients respond to the new channel changes and challenges they face.
For example is you can see in slide three.
Nearly a month ago, we created a special set of digital materials for all access pass holder organizations.
Title, leading through uncertainty leaders not organizations the guy.
With that provides those leaders organization the guide for utilizing various of the all exes past resources to help them lead through change.
Work to build the skills or productivity in resiliency throughout the organization lead in a remote environment et cetera.
These are sources are providing clients with the ability to engage their workforces provide team building and development upgrade for the remote workers and utilize digital assets and training.
As well.
The option of you, having even higher engagement, we're having Franklin Covey training consoles facilitate these sessions live online capability in which we've invested for more than a decade.
Similarly in Education Division as you can see in slide four week curated, especially for question and family educational resources and provided them Oliver education clients.
In addition, given that so many families are now in home schooling situation. We've also provided these resources to all.
Access pass holders.
Organizations and made them free of charge the journal public on our website leader in me Dod work. These robust resources include hundreds of videos articles and tools from families to be used with their children at home, including animated videos, which are very popular the teach life's skills coloring pages in home activities for fan.
Please award winning videos made.
By students students speaking contests, and our leader and me weekly news letter, which features relevant tools and articles for schools and families. In these challenging times you might want to check out these resource yourself at leader in me door.
Also our employees many of whom we've always worked from what we are now all working remotely.
We're pleased to report that with only a few exceptions, they and their families are safe and healthy.
I can't adequately express how much we appreciate the extraordinary links which are employed you're going to serve our clients always and now more than ever.
We're glad to have a chance talked with you today.
And this uncertain environment really there for things, we'd like to take away from today's discussion.
You can see on slide five first.
With our results for the second quarter were very strong and even better than we expected and as a result, we entered the third quarter with real strength operationally and financially and with significant liquidity.
Our results for the second quarter as you can see reflected the compounding power over the same key factors that have driven or accelerate accelerated results over the past quarters nears.
Second we are grateful that we also entered this period not only strong strategically and not only strong financially and operationally but strategically.
With solutions and business model, there really valued by our clients.
Well the coming months will undoubtedly contained a lot of uncertainty in challenges.
This strength on all three fronts is allowing its really.
Provides services to our clients that they value.
We've consistently invested in content technology based delivery portals micro learning language availability with 21 languages.
Wide variety of delivery modalities and in our subscription business model and as a result, we're in a unique position to be able to serve our clients in whatever circumstance they find themselves in today.
And whenever this period ends we expect competitive it having increased our strategic importance to our clients.
Third we expect that the same three factors that have driven our accelerated growth in adjusted EBITDA and cash flow.
Over the past many quarters, we'll continue to do so as we come out of this downturn.
We expect we don't know when not exactly will be obviously, we but we expect that these three factors, namely our strong subscription offerings.
The fact that we have very high lifetime customer value and retention.
And the high flow through of incremental to the incremental EBITDA and cash flow, which our business model has driven.
Continue to drive very high rates of growth in adjusted EBITDA and cash flow.
Again in the future.
Once we get passed this period.
And fourth we really are great would be in a position to provide our clients with the kinds of solutions modalities in the systems they need during these times.
As a result, we expect to exit this period with an even deeper more enduring relationship for their clients.
So I'd like to just briefly address each of these.
I think they're all relevant to the current situation even going over the financial results here is because it shows the patterns, which we expect will both made a strong going into this period as well as we'll make a strong coming out.
As noted in slide six our result for the second quarter were very strong and as I mentioned. This result, we ended the third quarter with strengths operationally financially in the significant liquidity.
Our strong second quarter performance reflected the strength of the same key factors that have driven our accelerated results over the past quarters in years, namely strong high single digit revenue growth second accelerated growth in subscription sales.
Third increasing gross margins and fourth declining operating SDMA as a percentage of sales.
This has resulted in a high flow through of incremental revenue to increase as much adjusted EBITDA and cash flow.
As you know from meeting our earnings release, some is shown in slide seven.
We had a very strong.
We had a very strong second quarter results on all four of those key metrics. Despite the fact that are operations in China, and Japan were closed the restricted for a portion of the quarter.
You can see revenue grew 3.4 million or 6.7% in the second quarter grew eight point is this also grew 8.2 million or 7.8% year to date and $14 million or 6.4% noise 12 months not shown on this adjusted EBITDA increased $3.1 million, that's obviously, a big percentage stream.
21% in the second quarter.
Increased $4.9 million, 118% year to date and 9.4 million.
Were 858.6% latest 12 months.
The flow through continued to be high.
Incremental revenue to incremental adjusted EBITDA, 91% flowed through for the second quarter.
60% year to date, 67% for the latest 12 months for that train discontinued.
And our cash flow from operating activities continue to be strong through the second quarter, increasing again, 30%.
Or 4 million to 17.4 million.
And as strong as these reported metrics were excluding China, and Japan, which as I noted were closed down for summer most of the quarter.
The company's performance was even stronger as you can see on the right hand side.
Excluding the offices in China, and Japan revenue grew 4.9 million or 11.2% in the second quarter 9 million or 9.9% year to date, and 14.7 million or 7.6% fully this 12 months.
And also adjusted EBITDA grew 4 million in the second quarter.
And would have grown 5.7 year to date and 10.8, so just stepping back from it.
Thank you very strong quarter.
It showed resiliency in the face some challenges in Asia.
And we were really happy with it and Im pleased to enter this.
New period with those credit with that kind of a strength.
I'd like to briefly touch on a couple of metrics first.
As shown on slide six we had really strong revenue growth on all metrics.
Our revenue has reported grew 3.4 million were 6.7% in the second quarter.
7.8% year to date.
6.4% for the latest 12 months.
Our total subscription and related revenue grew 24%.
Were 6.1 million in the second quarter to 31.4 million.
Grew 21% of 11 million year to date, and 22% or 24 million.
Latest 12 months to for totaled 133.7 million.
While exes past and related revenue grew 28%.
Or 5.1 million in the second quarter to 23.4 million.
Growing 25% year to date, and 27% or 19.6 million to the latest 12 months.
Our total Invoiced revenue.
Some of which of course grows on the balance sheet.
Grew 9.2% or 4.5 million in the second quarter to 53 million.
This was led by the US in Canada, whose invoiced revenue grew 15.1% were 3.7 million. So the us in Canada has been getting stronger and stronger driven by all access passing grew 15%.
Or 3.7 million during the quarter year to date Invoiced revenue.
Has grown 8.8% were 8.3 million and latest 12 months 7.3, or 16.4 million to 242 million.
Our balance of billed and Unbilled deferred subscription revenue.
Grew a very strong 18.2 million or 28% in the second quarter.
To 82.7 million compared to a balance of 64 and a half million.
End of last year's second quarter and finally in addition, our total value of contracts signed.
In the second quarter grew 9.7% or 4.8 million to 53.8 million.
And is growing 13% to 107 million for the latest 12 months in the buildup of that contracted revenue is very helpful to us as we move into this period. So we felt very good about our revenue growth for the quarter.
As we noted we had very high flow through of incremental revenue to incremental adjusted EBITDA as you can see in slide nine.
91% or 3.1 million of our increase in revenue in the second quarter flowed through to increases in adjusted EBITDA.
This resulted in adjusted EBITDA, increasing to 4.1 million from 1 million in the second quarter fiscal 19.
And excluding our offices in China, and Japan agency, they actually grew faster and grew $4 million during the second quarter.
Year to date, adjusted EBITDA as increased 4.9 million or 118% the flow through has been 60%.
And in the latest 12 months adjusted EBITDA increased 9.4 million were 59% to 25.5 million.
Despite a more than $1 million negative impact from Japan and China.
Second quarter.
And Thats up.
16 million.
For the 12 month for the same 12 month period last year, showing a 67% flow through.
Yes. This flow through obviously is very high and again that reflects the four factors obviously the high single digit revenue growth, which has been increased but with exception of China, Japan, increasing.
Our increasing gross margin percentage.
Where gross margin percentage increased 271 basis points.
In the second quarter 257 basis points year to date, and 130 basis points for the latest 12 months.
Third the fact that operating SGN, a as a percentage of sales is declined during the second quarter. It declined to 64.4 percentage revenue.
Which is a 392 basis point improvement.
Compared to 68.3% in last year's second quarter.
And as you can see in the appendix and slides 23 in 28, we also achieved strong revenue growth from very high EBITDA growth.
In the Enterprise Division in the second quarter, we had strong growth.
In the Education Division. So we were really pleased with the strength of the second quarter and year to the performance.
We were pleased that for the latest 12 months adjusted EBITDA had had reached 25.5 million with the third and fourth quarters to go and of course, it we're pleased with momentum.
As we said we ended the third quarter as a consequence with the robust third quarter pipeline, almost 25 million of cash on the balance sheet.
Well $15 million available under the revolving credit line.
Importantly, once this current period of uncertainty is over.
Whenever that is we expect these same factors that have driven our past performance will drive accelerated growth in adjusted EBITDA and cash flow again in the future. So that's just a quick review of our results going on as slowed and as a slide 10, you want to talk about the current environment.
So we're pleased that not only did we entered the third quarter was strong momentum.
And strong financially, but really is important as we entered a period strong strategically me our relationships there customers the value they placed in our solutions.
And as you all know for more than a decade really we have invested in creating digital courses and content content that can be delivered live online blended impact journeys five years ago, We added Mike learning and much of our innovations budget in the last few years has been around on demand and blended delivery offerings portals.
The phase.
As a consequence.
We expect that we will not only pertain to drive percentage our clients. During this time.
But also we increase our value to them as they try new methods of deliberate they might not otherwise tried.
And we expect to exit this period really with even deeper stronger and more pervasive client engagements in relationships.
As the current situation.
Obviously, it's a difficult one just generally all of you were living in it.
Hopefully getting through it so we're all living unit and soil. So we're all of our clients.
And our experience will bring times of significant uncertainty of course, its natural for there to be a period of time in which for both individuals and organizations focus energy and bandwidth is directed to getting their bearings in adapting just to the immediate circumstances.
During such times.
Normal business in decision, making processes are often interrupted.
In the past few weeks has been seeing exactly this.
The first time also course organizations must also adapt to having the vast majority of their employees working remotely.
In the context of this environment I'd like to address the areas of greater and lesser uncertainty for Franklin Covey.
Ill first start with areas, which we have a lot of confidence.
The areas, which historically have been very predictable, which we expect to continue to be predicts will include the following first our deferred revenue.
As shown in slide 11.
We had $47.9 million billed deferred revenue on the books at the end of the second quarter substantially all of this highly profitable revenue will be recognized over the next four quarters.
Second our Unbilled deferred revenue.
You can also seeing slighted 11. In addition to the deferred revenue. We also had 34.8 million of Unbilled deferred revenue in the second quarter, primarily related to multi year all access past contracts all of this revenues under contract.
And the vast majority of this unbilled deferred revenue will be invoiced over the next six quarters, we don't see.
To that.
Third our all access past subscription renewals.
As illustrated in slide 12.
Historically, our annual revenue retention of all exes past subscription revenue has been very high exceeding 90% in each of the last nine quarters as will address the minute we believe that.
Most of our.
Clients intend to renew their past and still.
For us all access pass add on services revenue.
Alex This past related services totaled about 33 million the year spread throughout the year.
Historically these services on a same store base of also repeated year over year at a high rate of more than 90%.
And fifth.
Leader in the memberships historically between 87 a 91%.
The more than 2700 leader and meet schools in the U.S and Canada have renewed their subscription membership in any given year.
Now as to the areas of uncertainty.
The areas or greater uncertainty for us over this period or not there for about the strength of our solutions.
Or about our client impact or about clients commitment fundamental commitment.
Or about to strengthen our business model, rather the uncertainty primarily relates to three things first.
To the potential impact, which delays in decision making caused by current circumstances.
Could impact the timing of renewals and new sales.
For me to promote companies and particularly in the Education Division, where both the annual membership renewal of the majority of leader in the schools and the addition of new leader and me schools normally takes place between May in August.
We address this more second.
So the first is just the delayed decision, making people not able they don't have the normal processes.
The school district isn't getting together they if they are they're doing it by.
Bye.
Video conferencing et cetera, just has changed.
The decision making second.
Concern is the potential impact, which the fact that people are working home could have on planned training and coaching engagement through jorges positions have typically scheduled to take place on site at their offices, even though they've been available live online.
Or digitally.
It now means that people seek frustration means that these treat engagements now need to be done live online or digitally both of which are available and very capably delivered through all exes past and leader in me, where they need to be rescheduled.
Many of these have already been reschedules or in the process of being reschedule live online. We believe that people do not intend to cancel very very very small minority are really going to be cancelled.
And even those who want to continue to have onsite days, our rebooking them postponing it with to hope that that will be done later on this summer.
However, the shifting the timing of delivery.
We'll caused revenue to move from one quarter into another and create revenue gaps and uncertainty and then the third major area of concern.
Is as to the time required to ramp up our recently reopened offs in China and Japan.
Following their operations have been having been closer restricted for a portion of the second quarter, they're back in operation the teams or.
Generally back in the office, making calls they're going to need to rebuild their pipelines.
So the impact of these factors is not expected to be long lasting however, it does create gaps and indeed, the tight the uncertainty as their timing and magnitude.
Makes it difficult to provide accurate quarterly guidance or to update update or annual guidance today.
Nothing would please as more than to be able to tell you as we have done each quarter that our guidance for next quarter is X and for the year. It's why and then go back and hope to exceed those numbers. However, in this environment and with educations biggest quarters coming up it really up coming up in the end of the third quarter in May.
And in our fourth quarter, we can't be complements and are confident in our guidance. So we're not providing any at this time.
We expect getting 60 to 90 days, we'll report on our third quarter performance, we should be much better position to provide more guidance, we look towards during that time.
Now moving forward I'd like to ask Paul Walker to talk about some recent what's happening with our clients in this environment in both divisions Paul.
Thanks, Bob.
And good afternoon, everyone on the call, it's going to be with you today.
By the current uncertainty we're pleased that in the enterprise Division. Many organizations have now begun to get their bearings and move forward.
And for these organizations our focus is now shifting to critical priorities, which you might expect like.
Sharpening the organization's focus and execution.
Building the capabilities of their sales forces.
Establishing our increasing trust, but theyre stakeholders.
Each of these areas and others are areas, where we're really we have expertise and the solutions are found in available to tar all access pass holders.
And our strategic relevance and importance to our customers as being demonstrated and reinforce everyday.
In our discussions with significant significant portion of our passholders over the past 30 days.
They've continued to express how important and impactful our solutions are to them.
Particularly in this current business environment.
And that just to give you a glimpse into what we're seeing while a few are requesting changes for example in the past quarter populations upon renewal or flexibility in the timing of payment.
Almost all of reaffirm their commitment to the all access path and because of the relevance of our solutions new clients are also purchasing new all access passes.
Even in the month of March during the middle of the storm.
This could this current environment that we're in.
To help address organization to help the dresser organizations need and we are grateful to be in a position to be serving both existing and new and potential customers. If I may I'd just like to give you had just a little bit of color. What we're seeing in both the enterprise and education divisions and you can see on slide 13.
At some examples of these earlier this week and new clients, who are seeking to proactively work on strengthening their culture of trust and inclusion and they want to do it right now and not delay because they believe that having a strong culture will be an even bigger asset to them. During these times of uncertainty and so they move forward with the purchase of a two year term all access path.
For approximately 4000 people, which was for us.
Very nice sized path.
One of our largest execution clients or the second example, called US last week to let us know that they needed the for display disciplines of execution now more than ever.
And expressed that they're 100% committed to the four disciplined process since they are ongoing subscription with us.
Another one of our large multiyear passholders a major airline is facing a great deal of uncertainty right now and while they're not a condition to expand their path.
The fact that they're in the middle of a multiyear pathway with us give them tremendous capacity to utilize the all access path and cut back on investments that they may have made with other providers and we're currently engaged with them to transition live on site training to live online training and are introducing a significant number of our digital offerings to their employees. So that they can make a big.
Push on leader and employee development, while they're associates have the increase tied to focus on their development.
Just a couple of more here another seeking to expand our solutions to a large group of employees.
They're doing us because these employees now working remotely.
And so they're considering expanding their already significant path with us to an additional population of about 800 people.
To meet the needs of this this new remote working workforce.
And then finally, the leader of our sales performance practice.
Is receiving regular call some senior sales leaders, who want health that they try to stabilize revenue with existing customers and look for ways to grow sales in the current environment.
As a result for the month of March that just ended our all access past revenue, which is a combination of new passes plus renewals.
Actually grew over March of last year in the USA and Canada.
If I may just for a minute similarly in education and education Division at a very difficult time for schools.
And in the month with unprecedented disruption, including school closings schools scrambling to deliver lunches, providing packets of homework teaching lessened digitally et cetera, we all know what it's like in that environment.
As Bob noted earlier, our education division done a great job, providing clients and non clients with not schools with free access to leader in the student at Bauma resources.
They also continue to stay close to be schools.
With new and existing school to help to maintain and expanding the can their commitment to their students and as a result, even in a very difficult month school, we're seeing school commitment to the leader in me.
Process continue and just a couple of examples that you can see on slide 14.
During the month of March 248 liter and me schools renew their subscriptions.
38, new schools entered into contracts to provide the leader and media their students and faculty.
Last week, a district entered into a contract that's designed to train 8400 High school students and leadership skills and they'll all be delivered via the zoom platform.
Another large district called this week schedule final conversations for Onboarding their 20 schools in the leader and me this summer.
And finally another.
One of our client partners has 10, New school districts, we put a lot of focus on districts, but 10, New school districts are planning to start leader in munis year.
And so while the coming months, we expect will undoubtedly contain plenty of uncertainty and challenges.
We are grateful that we entered this period as Bob mentioned, not only strong financially, but with a lot of momentum.
Best in class offerings, and a business model that are really value by our clients and as a result, when this period does and we expect.
Two exited having increased our strategic importance to our clients and hopefully have been a great health and a great partner to them throughout this entire time.
So Bob I'll turn it back to you.
Thanks, and we'll just to thanks very much Paul will just to.
Quick question, a couple of other points and then open up for questions.
Metaphorically, having for those who have been mountain climbers. You know you you can't you feel like you're making great progress of the mountain then there is a massive snowstorm or an avalanche.
And.
Your strength and isn't last.
Your capability as a climber isn't less but you are in deep snow and your progress is less.
But the fact that you can make progress at all through the deep snow.
He is a testament to the strength not not an indictment of blackened strengths and I think thats, how we felt the last few weeks.
Is that we're in deep snow right now, but we're moving forward the examples but Paul and.
It has talked about in the enterprise and Education Division.
Actually suggested in some areas.
The snow is getting more firm in others. It depends on individual clients. There. They are circumstance may mean that were in deeper snow, but to and that will continue for a while we don't know when we'll be out of the deeper snow.
But we are moving forward our clients moving forward and we expect.
As we go forward as kind of identified in slide 15 that the same three factors that have helped move us up the mountains. So rapidly in the last few years, we'll also be the things that allow us both to power through the deep snow and accelerated as we get under more firm footing.
So while the timing and trajectory will likely be uncertain maturities ideas. The power of our subscription model, our high lifetime customer value and a business model that generates high flow through we're really be very powerful assets to have you can just just touching one slide on each of those coin.
The power of our subscription business model.
On slide.
16.
And you can see in slide 17.
That we've grown rapidly our total subscription related revenue in the second quarter grew 20, or 24% has grown 21% year to date and 22% for the latest 12 months.
Alex has passed portion of that is growing more rapidly at 28% in the quarter.
A significant 34% of all access pass that are now multiyear passes.
27% at the end of last year's second quarter, that's providing a lot of structural.
Strength here.
All access pass and related sales have grown from just 47 million at the end of.
For the latest 12 months ended the.
In fiscal 2018, two years ago second quarter to 91 million for the latest 12 months of 20.
And during the same period of time, all access pass and related sales have increased from 32% of our total enterprise division sale to now 52% and we expected over the next to three years or so that will increase to around 75%.
With this strong growth in Alex has passed and related sales and leader and be subscription sales has also come as we've noted a significant increasing the amount of our deferred revenue balances billed and Unbilled, which.
Got to $82.7 million, that's up from just $18 million.
At the end of 2017 second quarter.
The second driver of our growth. So the first as you know this subscription model. The second is the high lifetime customer value.
In the on slide.
The next slide if I can read 18.
Annual revenue retention high relative average price hike good gross margin as services attachment rate. This now increase to just over 50%.
And more than 90% and.
Annual revenue retention.
And this has created a virtuous cycle, which is establishing what we believe is a high expected lifetime customer value Thats course being tested in these times, but as Paul said, having had discussions with the.
Huge percentage of our total all excess pass holders.
They remain almost almost entirely committed.
There will be some of course, who aren't able to continue to their circumstance.
But we believe the retention rate wind up being very high some may asked to renew a month later or something but I mean generally it's going to be extremely high and and so we feel good about that and in the third driver. As we said is just the high flow through created by the high single digit revenue growth, which adds.
Around 20 million or more than a little over $20 million revenue year has been adding.
Strong increasing gross margins, which has increased our gross margins by several hundred basis points.
In a declining operating SGN as a percentage of sales which has.
Allowed that.
Increased gross margin to flow through final point.
Is that we really are grateful.
To be in a position to provide our clients of the kinds of solutions they need during these times.
As a result, we really do expect us to this period will be one that allows us to deepen and strengthen and create enduring.
Deeper more pervasive ongoing.
Clients for life type relationships.
I think it's also.
For our employees, who are extremely mission oriented.
This is a time when.
The value of what they do as brought to the four and they.
I don't know I reports from the field or they've never been more engaged we've always had to have engaged employees, but they're there with our clients daily by video conference your phone, making a difference.
And to our shareholders to you our shareholders. We appreciate the trust and confidence you've extended to us.
And we began an end each day committed to ensuring that trust.
Well placed.
With that we'll now turn that opened this for questions and be delighted to take any questions.
Thank you well now begin the question answer session.
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First question comes Alex Paris, with Barrington Research Your line is open.
Hi, Alex.
Good afternoon, everyone. This is Chris how sitting in for Alex I Hope, everyone, Hi, Chris healthy.
Thank you we hope you are as well.
I guess, just starting off with these two questions that I had on top of mind.
Can you provide some more color on.
A typical sales cycle for all access past and for education and.
How does that sales cycle currently look and then my follow up question.
That is in relation to contracts.
Of different lakes, whether they be multi year or other contracts to these contracts we knew automatically these multiyear contracts.
Okay, Great Paul and Sean do you want to address those questions Paul during the start.
Sure sure I'll start Hey, Chris I'll start with the.
The sales cycle and how contracts work in the enterprise Division for all access pass. So the sales cycle. There are two different sales we make right. One is a sale to a new logo, a new new all access path and that sales cycle as can be varying lengths, but on average it's 101 hundred 120 days or so on average.
And as far as or seeing I don't know exactly what thats going to look like in the coming.
Couple of months as I mentioned a minute ago in March we were we were.
Happy to see all access pass sales continue to stay strong.
The renewal is the other sale that we make of course, when we go for renewal and that sale cycle as work from the day, we set the path. We're doing everything we can over the next year to set up that renewal and so there's a whole process that we engage with around with our clients are passholder engagement process, we call. It that ensures that we're doing all the steps necessary to ensure that that path does it.
Q on times, a year later, hopefully it expands and add more Steve et cetera.
In terms of multi any contract multi or otherwise.
Clients do sign when the when the contract term is over they do sign for another contract term and so while there is language in the contract that says that it's it's going to renew we keep that language and everything that makes the contracting process easier, but the clients do.
Commit and re up so to speak.
If we're in a multiyear agreement.
Of course that discussion doesn't need to happen until the end of that multiyear agreements. So if a client signs for three years to gave the example of minute ago of the airline.
During the middle of a three year deal, we're not talking about whether they will or won't renew because they thought that's where a year and a half away from that conversation.
Because they're in the middle of that multiyear contract.
Let's say that.
That healthy there okay.
And this may look at this multiyear contracts people within these contracts and we take into consideration this uncertain environment and.
The difficulty in placing a timeline against this environment.
What portion or how should I think of this what portion of multiyear contracts.
Extend beyond this uncertain environment in other words, which ones are up for renewal or what portion is up for renewal this calendar year.
So.
Yes, we were signing these contracts all the time and sell there the exact portion that's up for renewal and the next you say in the fiscal year the calendar year.
Calendar year.
In the next in the calendar year.
Bob and Steve I would say.
Maybe.
Third.
There is a stretch out.
One to two several years.
Yes, yes, theres thirtys $36 million of revenue and I think.
The actual contracts yet as you say extend out over several years the renewal dates.
Not renewal, but when they'll actually be invoice.
The majority will be invoiced over the next 18 months or so but do the contracts extend much longer and that's important I think because what tends to happen.
Yes, no one knows what the pattern of this of this recovery will be.
But if history is serves you you look at things.
Absent sequestration when Cwind duped.
Organizations.
Resumed spending and so forth and making decisions and historically after a couple of months organizations are back making decisions and so even in the great financial crisis about four months later, the booking pace and everything was still with back to basically the normal booking pace, but you lost that three or four month period here.
We have an advantage that to the deferred revenue and the multiyear contracts bridge over that period, largely even single year contracts.
Which we have is a huge number of those really don't all they they come up.
New Cub pretty evenly throughout the year and so we're not facing an extraordinary number of of renewals for example in this quarter.
Our third quarter, we have around 13 million.
$13 million of passes up for renewal.
This quarter.
Paul I think we've got.
Somewhere close to half of those.
Done now is that true.
Yes, Thats right, where it were about seven of 13, yes.
Yes, so so it isn't a huge portion that's exposed to any particular period of time, which is helpful.
That is likely to combat Bob on the.
The education side.
Yes, Please show.
Sure Chris just to address your questions on education side.
Yes.
Sure, Yes, so the cell cycle and education, typically pretty long sales cycle and that it starts usually in the fall skill set to investigate.
Whether or not the interrupted our our leader in May wholesale improvement system.
And they typically well make decisions starting in January.
Our school.
Well.
Hi.
Usually by May kind of made up their mind that they're going to go and between May and August they're starting in implementing.
And then because of that the retention cycle is on the same as Bob mentioned, we have about 2700 school that.
We're trying to keep in the and assess them.
And keep their subscriptions going and our retention rate has been really high historically around last year was 88% it's always been around that.
And that also starts and may and runs through August.
And.
So we're now that that's coming up and we've had a lot of conversations with schools already and.
Indication that really good that people intend to stay with us.
But thats basically how the renewal cycle works with us, but multiyear contracts.
Go ahead Bob.
No just can mentioned that you'd noted earlier pull noted earlier that.
There were 225 schools, even in March that did.
If we normally wouldnt have a high percentage of schools in March but.
225, or so did renew in the middle of the storm recognizing they needed they were still committed needed foot.
We're doing in that location so.
Yes.
Which was back which was a little slower than last year, but not too far behind which was encouraging to see and some schools. We found just aren't they just stay with call. It back in two or three week, while we have Natalie get our are bearing a little bit more.
So thats, that's kind of how the cell cycle works in education site costs.
That's great I appreciate all the color and.
Thats all I have for now and I'll hop back in queue. Thanks, everyone.
Thanks, Chris.
Your next question comes you May and June Nicola.
William Blair Your line is open.
Hi, good afternoon.
Hi.
I realized the current environment makes any sort of outlook for the remainder of the year difficult. So I totally understand that data provide updated guidance.
Makes sense to me I just.
I'm thinking that investors will typically 0.2 2009 for some sort of proxy on on how the business can be behave in a more cyclical.
Firemen and.
I think in Onein, the account that sale, the consumer solutions that youre down roughly 15% or so on the topline.
I just kind of wondering with with that at context, if you could talk a little bit about the differences in the business between then and now and and in what way as you'd expect the business can be.
More or less resilient.
Nine obviously all assets path with that a key difference, but any any color around that would be helpful.
Okay, Great question in 2009 period.
On a.
Which course started the.
Lehman.
Bankruptcy started right in the sort of our first quarter and so that year. Our revenues. You said went from about 133, the previous year down to 124, so there's a little less than the total I guess, the eight 8.5% decline if thats. The math is exactly for your Directionally.
Correct and almost all of that decline for us occurred in that first four month period when organizations were wondering.
We had part of that which was the Christmas period anyway Quinn.
She has to tends not to have love new sales bridge over that but if those four months.
You included a period, where people just for sure they were survive.
And what happened was really a lease back then we didnt have.
Our next is passed we didnt have contractual revenue multiyear contracts or anything, but but even then people were committed to what they were doing in most of the to most of the business a lot of our business. Then was in terms of these the on site days, we didnt have live online or digital delivery or those kinds of.
Things, but what people did as postponed.
And so it turned out that we lost very little of the business because it postponed.
A few months till they said look we'd like to schedule. This in February reschedule promote from October November were going to see if were around if we are we're still committed.
And people did pickup ticket back up and so we really held their own.
Really well year over year Mark.
Second six months of that have that period.
Interesting during that period is we actually.
The decline of 8% or so is the mix of two things one we actually grew our execution business, our sales performance and customer loyalty business that year.
And our trust business and and that was offset by some.
Declines in the more traditional.
Back been time management training and things like that so hover different now I think we don't know course, how the what the pattern will be this time.
Pattern. This district, we all wish.
We knew but I think the things going into it we had of many but much of our business on contracts.
Multiyear contracts.
That obviously Mitch over that if the period were four months we'd have.
All of our multi years that bridge that and a significant portion or just the one year contracts that Bridget.
The services, rather than being went off really tied to initiatives.
We have a bigger.
Percentage of our business David is in things like execution and sales performance. So thats a.
A place where people in these times historically at least.
Really really doubled down so thats, where they need and we're seeing that now with our head of our sales performance practice getting a number of choose an unsolicited coals from.
Sales leaders at major companies.
And so I think you alluded some differences, we don't know with the pattern will be but the idea of where we are now is.
I think it much more solid solid place, even though it turned out that last time wasn't.
Horrible after those per SKU books.
That's really helpful. Thank you and then great cushion.
Just one more on cost structure I'm, just could you give us kind of a high level view of how much of your cost base today, its fixed versus variable and then what type of opportunities you might have to pull back on spending if the economy remained challenged for a longer period.
Yes, thanks, great.
First of all.
We have our cost structure by design flexes quite significantly.
I mean, if you first start with our sales force our client partners, which are a major part.
Of our total.
Investment cost structure. They are all on commission, so while they get to draw that to equal between 50, and 70% of the target Theres a lot of flick natural there we hope that they won't have to foot, but I mean, there's a natural flex and they're also with the delivery consultants who are paid.
Paid on a per day basis also many years ago, we decided to structure all.
Of our major manager compensation and of course see him.
So that.
That was very significant portion of that is based on this all pay for performance and so there's a natural flex in that just.
I mean if.
Where there is like a 30% flex in the total cost structure, just as a consequence of the way.
In which is structured at the executive team level achieved more extreme were compared.
Targeted compensation.
Base salaries, and so forth to represent depending which individual.
For me roughly 27.
7% or something is is base salary and.
And.
So so I think that part of it we it's helpful because.
This is on it so.
Beyond that the majority of our costs.
Our related to people, we don't have a lot of.
And our central costs haven't increased for years. So we've had we had on projects have once.
Related to this time.
We're trying to take out costs over time, we've done that you Crs DNA as a percentage of.
Revenue, having been declining for like eight or nine quarters. It doesn't it's not just because revenues being an increase of but it's also because of cost initiatives. We have those are ongoing which we think.
Save millions more.
So I think we've heard.
We have.
I think a lot that can be done as a cost just natural given what we've done.
So we feel like that will be.
Hopefully plenty to flex it if not then.
Obviously, we have.
Historically been willing to do what was necessary, particularly starting with executive team to do whats necessary effect became the issue but.
You bet responsive.
Barry Thank you.
Thanks, Mike.
Yeah.
Your next question comes from Marco Rodriguez Stonegate capital Your line is helping.
Hey, good afternoon, Hi, guys. Thanks for taking my questions here Thanks for Christian.
I was wondering.
Spoke a little bit about the impact you guys saw in Asia.
China and Japan.
And the I believe you gave some some revenue tickers there maybe you could.
Give us a little bit more information in a little bit more color in regard to cater kind of how you saw the revenue unfold as as many parts started to go through a lock down and then if you can maybe also talk about what you're currently.
In terms of the cadence of revenues and how that kind of coming back.
Give us what sort of a framework to look at here.
You bet.
Paul do you want to address that.
Sure sure Marco So China and Japan were.
We're both but they were both impacted a little bit differently. So China of course, they the country to dramatic action and did so quite early.
Right.
At the time, the Chinese new year, which was so very there they were impacted throughout the majority almost all of our second quarter.
And for them it was culturally even at an interesting and challenging things people have to go work from home, which is an uncommon thing over there not just in our company, but generally in China and so we saw we saw a big fall off in revenue I mean nearly completely in China.
Just staying on China for a minute, what we've seen as they've come back.
He is.
We're pleased with how quickly clients have begun engaging in conversations again of course in China now they announced that the laws such that you can't have all of your workforce in the office at the same time. So we have people work from home apart of the day coming the office for part of the day and then flip with the other half of the office, but.
We're engaged with customers they're engaged with us.
A lot of selling activity has started again.
They're not quite yet to the point, where they want to have.
Necessarily training programs that are the unless they're done virtually the conversations have ramped up quite quickly after what was a pretty dramatic shut down there in that country.
Pan with little bit different we had a now we had activity that happened well into the quarter, where is that kind of a normal selling quarter up until kind of final month of the quarter in February and of course, they what they locked down as well, but they're locked down with a bit different and so we didnt, we didnt see.
Complete fall off of revenue like we did in China, and we've been able to maintain revenue there conversations with clients continued throughout the process, probably a bit more like the US right now where they are there still conversations going and they're able to still drive business there and.
They are kind of now also coming back out the other side a little bit in terms of clients expressing willingness to begin talking about getting back on the books et cetera.
I don't know if that Marco will start completely or.
No.
Note also that.
The pattern, we expect to be a little different here only because.
China was not yet selling it just started to sell the all expense in the fall because we had to build a separate firewall behind what sep separate portal behind their firewall the Chinese firewall and Japan has just started and so they don't have the same based subscription revenue.
In place impact journeys contracted services, but nevertheless business activity.
So.
Starting to show you look at.
Hotel occupancy rates in their edging up nuts is not fast growing from 18 to 22 to.
This week I.
So that is like was around 25, and so the business environment is starting to edge backup.
And.
Even in the absence of contractual revenue like we have the new us.
Understood topical.
Shifting gears, a little bit here and following up on our part question on on the sales process for the sales cycle.
Just trying to better understand here in North America.
The importance level of your of your client partner is actually being on a planning going to move.
Their clients for for the new logos are for the renewals.
Bob I can address if you want to go so yes. So.
So our client partners first they are.
Almost 100% of them are geographically proximate to the territories in which there clients reside. So so there are scattered throughout the country throughout North America, and most of them live within a well they all live within an easy drive to their clients.
Obviously, they're not driving to the clients right now to go see clients face to face and so they're doing that via video conference. That's a pretty calm that's a pretty common thing for us though.
Our salesforce spend them even in the non.
Current pandemic environment, they spend their time meeting with clients either via.
Platforms, like zoom or face to face and so it's a pretty easy transition for them to do that.
They all work from home anyway.
And there are customers spending a lot of time with clients on the phone on zoom et cetera, and so they're doing that interestingly clients have.
In our in our space to have a good deal of time to talk to us too. So the right now they're available and we're spending a lot of time with our existing client and prospective clients.
I'm sure the decision, making process will will go a little bit slower not because of our inability to engage with them via zoom or video conference, but for them to go and get approvals from other people in their organization before they sign off the fact that they're all not working in the same office that require some extra who works for them to jump through on the clients.
Side, but in terms of our selling ability.
It doesn't doesn't really diminished what we can do right now.
In terms of selling.
Got it.
And last quick question.
You can just kind of update your thoughts and how you think this impact will.
We will play into your hiring targets for additional CP.
I'll just stay on that one Bob that's okay. So so we.
Commit as we know we're very committed to hiring.
And we have hired throughout this year already we.
We are at 255 client partners.
Salesforce now and what we decided to do is just shift by a couple of months the next.
Two classes of client partner hiring and we're doing that primarily because we want to give me and we want these new client partners to come in to be successful and we just don't think maybe exactly right now it could be environment to bring them in and so we're just going to take everything we're planning on doing and just shipped back couple of months.
Hi, Thanks, guys appreciate your time.
Thank you.
Your next question comes from semi Africa Franklin Coffee your line is open.
Smear how are you.
Pretty good thanks for taking my questions.
Paul can you repeat I think you said if I heard you correctly that bookings for both renewal and new sales were actually up in March I hear that correctly enterprise segment, if you get discovered that again.
Yes, they were.
In the U.S and Canada, we did the revenue from new new passes and renewals grew over March year ago.
Okay. Okay. That's that's good to hear and so that's interesting kind of given the disruption.
You mentioned that pointed out our guide, but not a point on that would be also though that part of that would be because we had strong pipeline and some clients really positioned to mitigate decision and they did so but as Paul said earlier.
Starting with a new client, though the sales process maybe longer than it would have been so we closed business thankfully we closed business that was already position we also.
But because of the sales cycle. This is stuff that we were talking about before has completed.
This will be we expect this would be a little deeper spindle and harder to we're having lots of those conversations but there'll be a there'll be some gap likely in the sales cycle as your as you are we have things did all stages of have been things in the front end of it it's going to be a little harder Jake.
Right I mean, thats understandable given given the structure over the last two weeks I was just I was just impressed that you actually managed to close deals that were already in process. So that's got through the related question. Paul I think you mentioned something about renewals some of the renewals maybe happening a month later or something about payment terms I was curious if you get delve into that a little bit with maybe an eye.
Stand a great Portia client basis, probably doing fairly well, but then you may have the companies like Marriott right, where you know obviously, they're probably very committed tier four disciplines of execution, but if there is no one staying in hotels than you know there they're going to have near term challenges and they are laying off a significant portion of the workforce. So if you could maybe talk to.
Kind of where you see that in your client base and what exactly it is is that your.
And with regards to some of those challenge clients.
Sure.
And you just you're just expressed at well so there are.
Clients are across a spectrum right now from there and industries that are doing very very well and they're looking to expand right now and we've had a number of those conversations interestingly enough even in these times where.
They're sending employees to work from home and the original pass they what they need access to hadn't considered those populations at potential they hadn't yet consider that we'd hope they will but hadn't considered them yet its potential pass holding employees, but now that they're working remotely and they want to find ways to engage them and set them up to works.
Successfully from home there in conversations with us about expanding so you kind of bad end of the spectrum and then you have the complete other end I mentioned a minute ago airline example, where they're not looking to expand and in their case during a multi year. So that's great for them and we have somewhere I'm sure we will.
Because we want to be good partners will will want to be asked to extend maybe some preferential payment terms or differential payment terms to them just to get they'll renew on time, but we might collects the cash just a little bit later to help them out and there might be a few that will say, we've just ask some of our employees to take some extended time.
I'm off we may not be able to use the path fully for the next couple of months could we could we get a month or two on the back end, we want to stay with the path and those are things that we'll take one off to try to do right by our clients. These are we think of our clients with clients for life and that's an important thing for us anytime in the client were like Dang, what did we not do that.
We that we maybe should have done that we could retain that client and so we approach every one of the discussions that way thankfully.
Right now we're seeing most of them are.
Planning on their utilizing the path as we had hoped they need and utilizing a differential ways today than they might have a month ago. They are.
Aggressively talking to us about how did they convert what they used to do in person to live online and thankfully for them and for US we have all of that capability in the likes of path and so it's a it's a client by client conversation, that's what our client partners or implementation specialists are doing everyday right now.
And we've been able to have contact with nearly every pass holder in the last 30 days just to check and see where they are and get a good sense for how we can be most helpful.
Understood. Thanks, and do you have out you have this off the top your had but do you have any sort of analysis around what percentage are all access pass base.
Is related to industries like say apparel retail or hotel server Airlines are now does this work so particularly challenged industries at the moment.
Yes.
I don't have the exact number I would tell you. We are clients are are kind of a good cross section representative sample of if you will have the fortune kind of 5000 company. So they may span all of those from technology, but we don't have a particularly heavy concentration in any any industry really it isn't.
An interesting cross section.
Got there to react so we're not we won't have a massive problem because we're all loaded up in one industry is really struggling at same time, we want also an easy time, because all of our clients or.
Company there are thriving right now so it's a good cross section.
No thats helpful. Thank you so much.
Thanks.
Our next question comes is that coming Tim B. Riley Your line is nothing.
Hi, good afternoon, Thanks for taking my question.
Thank you.
Yes, I guess theres been a lot of questions on enterprise side of it but I guess just over on the education portion of this it sounds like a lot of your renewals typically come during this kind of say may through August timeframe can you talk a little bit more about how you're trying to navigate that that renewal cycle given the current climate and is there potential that you.
Could be extending some of these renewal windows beyond that August timeframe.
Sean majority.
Sure Yes.
Yeah, well most of the renewal again as we've shared we have about 2700 trying to get renewed and they.
They start and they started here in March and they just accelerate through the rest of the year and.
So.
And we.
In the month of April increase a little bit over March and then may it starts to hit really hard.
Through July and some into August.
So what we're doing is we've been.
Currently making a lot the phone calls them in many cases some of the schools have said.
Let me you guys wait two or three weeks give us call back.
So we've tried to be sensitive to certain state than districts, where they're not really ready to talk with us.
A lot our and that's why we had a lot of.
Renewal in the month of March.
We're finding that the more urban districts the larger districts are more prepared.
For the tandem that's kind of downturn.
And to go digitally and saw there quicker to get back to us.
The more rural areas are little bit slower.
We felt like because.
Leader at me is saying it's up so that's an implementation process this lack of wine and Don.
And then what we sell it upfront it we sell a process that three to five years long and most of our in that three to five year.
Window right now.
So we feel pretty good about our ability to retain our retention rate comparable to what it's been in the past.
And that thus far we have we're not hearing people say, we're not going to we're not going to Reno.
It's primarily been call us back in a few weeks.
So we feel pretty confident we have.
We have coaching relationships with all these schools is a coaches that go to the schools every year.
And where we're still doing a lot of Cutchin right now we've converted to a live online over zone coaching process than.
We're getting we've been doing this for a long time already for the schools are comfortable with that and we're comfortable with it so thats going along pretty well.
So our processes.
All hands on deck, we have client partners have contacts with this goals, we have what we call education quality partners.
With another key role that we utilized.
It has.
Really good relationship with each of their schools and we have coach. So we have got like three touch points with eight school.
And we fill.
Just going as fast as we can trying to balance.
The consideration for their situations with al.
Our desire to try to.
I am committed for next year.
And yes, so there's there's some possibility that things will get pushed I'm sure there's going to be some of that.
And there will be maybe some extensions that will will give people, but most part the schools have a budget most their budgets turnover and in July and August.
They want to spend the money when they habits that long term relationships with us.
And we feel pretty confident and.
A lot of unpredictable things right now, but we feel pretty confident melts will renew on time.
And I think it we're starting to get a lot of calls right now that around how people, calling us back we called a couple of weeks ago. St Ham ready to talk now just this week, we're starting to hit a lot of that so I want to add a little bit of color.
No absolutely and I think you briefly mentioned some of the coaching service as you do I know that and your fiscal Threeq and Fourq Q you tend to have more services related to the education segment.
I mean can you describe what portion of these can be done remotely or an online format and I guess what portion of those requires somebody to be on site at the schools.
Well all of them can be done.
Either we condemn live weakened in the live online, which is like all the zone and we can do them on demand and we've developed the on demand.
Capability, just it's like in the last few weeks.
We've been working on this for some time of just we just kind of accelerated blessed with head.
So I think in most cases, they can all be delivered either live online or on demand as well as lives and the on demand is where.
The school go go in and do their own.
Training on a computer right and then afterwards they have discussions.
Virtual discussions with.
Everybody out in the community, they're doing the training Wes.
Around what they learned so it's kind of the flipped classroom approach.
So there will be some schools that will prefer live and we'll say how we want to wait until things have cleared up than we'd like to be lives.
Training when and maybe in the fall.
Normally went down in the summer that some of that will happen for sure but in general our approach is hey, you have a live day in July we're planning on to that live online does have an on demand option, if you'd like to go that route.
So that that's kind of how we're approaching.
Got it kind of that's helpful and just final question for me, Bob just going back to the flexibility of your cost structure Evita. It sounds like many of your expenses.
Kind of naturally flexible in a sense, but what I'm thinking about gross margins here in the coming quarters. It sounds like you still have your strong base of growing recurring revenue that that carries a higher margin. So would it be fair to assume that as that portion of the business becomes.
Bigger portion of the overall mix that we could still see some pretty strong gross margins here in the upcoming quarters.
Steve I don't know if you want to address that.
Correct.
New zones above 10 into yes. The so the light there is that if the recurring revenue in the subscription revenue becomes a higher percentage of our overall revenue will that automatically that mix cause our gross margin to.
Go up and I would say that.
Yes. It would there there are also other factors that that play into gross margin like our amortization expense etcetera that would become a a larger portion of our sales. So there are some fixed components to gross margin and bear.
Troubled components and mix and all of those combined I don't see a significant impact on gross margin percentage overall.
Got it that's helpful. Thanks, again for taking my questions and best of luck here in the upcoming quarters think user rich.
And your next question comes from Jeff Martin from Roth Capital. Your line is open.
Jay Good afternoon.
Hi, Bob afternoon out to go out with.
Yes, Great Hope you are too.
With.
Yes, if and I had a lot of distractions. During this call side holiday that asset questions I'd been asked but in terms of your onsite delivery and the conversion of that to online I'm able to give us an idea of how much you're effectively transitioning the on site to in our mind deliberate format currently.
Sure Paul do you want to pick.
Yes.
Sure.
Hi, Jeff.
So let me.
Yes, we as Sean mentioned about education. The same thing is true and enterprise that everything we do can be delivered live online we accept to different platforms do we used with our clients. One is one of one of them Adobe connect.
On the others zoom, which were all becoming very familiar with and and so we can deliver all of the normal training. We would have done everything from a four disciplines track to a sales performance initiative to leadership development and traditional time management training all that can be done live online.
And so for us it's not a problem at all in fact, our net promoter scores when we deliver that way are really every bit as high as they are when we deliver live in person.
And so it's really the it's getting our customers comfortable with that for many of them. It that is the this is a new same for them and so we're we're finding that we're spending a lot of time, educating them and helping giving them demos and helping them.
The and visualize how this could be a really good alternatives. Some course are much more adept at that and already there and others and so that's about for our Salesforce is spending a lot of time right now we and as you would expect in March.
I have seen a number of the live on site programs.
Not really cancel just just just delayed due to their clients called they would just can't do so on the day, we had its scheduled and so we are in conversations about rescheduling, what we've seen in Alaska.
Really, particularly the last six or seven business days.
Is that a number of those clients now are saying, okay. It looks like this is going to be maybe the new normal for a little for longer than a pass over in a couple of weeks and so the now about talking about hey, let's really look at that live online paying help to get comfortable with that and we're starting to re book some of the days that had canceled.
And and so.
You know percentage wise, we were probably right now we probably route rebooked 20, 25% or so of those that had canceled or not came about kind of delayed we haven't actually highlighted the stem from having said that many that actually outright said we're done we're not doing this most are in kind of we got to re educate them on the live online idea or.
They are saying, maybe we'll do that in June or July when this passes so those are the conversations we're in right now.
Okay very helpful. Thank you for that.
And then Bob just want to Ted Ted get a sense, how your how youre thinking about.
The existing infrastructure.
Well, then Franklin Covey Ash.
If you've had to make any changes to this point cash.
To your thinking that.
You might get to too.
Yes.
Situation for another two mine was that force you to look at year.
Cost structure, how are you thinking about.
Yes.
If we we have a one on Monday of both the afternoon is focused business model. We've been dedicated to say hey look by the time, we get to 300 million of revenue, which we.
Before one month ago, we thought it would be over three years.
And maybe it so we'll be but you'd have to kept Chuck a little if this is fixed.
On EMEA and thus for the next quarter to soak, we fundamentally the same trajectory.
It entered million that you'd be at 20%.
EBITDA margins so.
Independent so kind of independent of this situation we have.
For years trade to take that and so to your question.
Usually go from.
Total volume for picture the physical infrastructure in the us.
Of offices and so forth.
It hasn't affected our revenue our client partners, we're already working primarily for them the homes and so thats structures been taken out the practice structure. We had we recognize with all axis pass you are much better off having a broader mandate and so we've eliminated so I think most of the structure in the field, we still have.
No physical offices in the UK.
In Germany.
Japan, China.
In Japan, China, but really otherwise that theres not infrastructure to take out there. So I think there you are not there I think sure in.
Going forward Weve.
In the past we've taken on what we needed to and were.
Those kinds of things that you were you kits.
Have to people, who can generate revenue continue to generate that but take on costs.
Hi, Ti costs and those rolling our list every month, but I think yes, there could be a time, where several of those infrastructure Ikea centric could be challenged what you've seen is with our central costs. Despite having added a lot to revenue over the.
Yes.
Decade.
Our central costs really weve because of these initiatives, we have allowed that to grow much.
And.
No it's declining as a percentage of sales so we have.
Mr projects for already on some of which are accelerating now just naturally could just so it was something we can take on.
But I think largely.
I mean, theres just not the millions of dollars, they're still because we know what those numbers are comes the runner on our list anyway, but we anticipate view would do most that without affecting people.
We opened in the flex with their compensation.
That's great there right.
Thank you and good luck with everyday.
Alright, Thanks Moshe.
Thank you.
Hi back over to Bob's refinery Mac.
All right well, thank you very much for everyone to great questions for.
Your thinking on this and for that.
We'll look forward any any questions anybody else has will just step back and say that.
It is really great to be involved with clients in a way that that they really value and where they're talking about.
I think we've talked about that for several quarters. The the strategic durability of actually working on problem. In every organization has problems the solution to which require large scale change of human behavior.
Thats, improving sales or customer loyalty or trust or whatever it is and I think in these times. So once people will settle out and I think that everybody settling into deferred.
Well when that will affect people differently. This is.
The most enduring fee is the combination of the solving problems they really to get sold at doing through a business model. They really value we think will.
Is that we're glad to be in this position, though but we don't like being in this position if you're in dispositions are glad to have it set of assets. So thanks very much we'll look forward to talking prudent answering questions as those come up thank so much.
So safe.
Ladies and gentlemen.
This conference call. Thank.
Thanks.
You may now disconnect.
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