Q4 2021 Franklin Covey Co Earnings Call
[laughter].
Welcome to the queue for 2021 Franklin Cubby earnings Conference call My Name's Darlene I'll be your operator for todays call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press Star then one on your Touchtone phone I have now.
Turn the call over to Derek head corporate controller Dark you may begin.
Thank you.
Good afternoon, ladies and gentlemen on behalf of Franklin Covey, It's my pleasure to welcome you to our fourth quarter and full fiscal year 2021 conference call before we get started like to remind everybody that this presentation contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 forward looking.
Statements are based upon management's current expectations that are subject to various risks and uncertainties, including but not limited to the ability of the company stabilizing grow revenues the acceptance oven renewal rates for our subscription offerings, including the all access pass. It later in the memberships the duration in recovery from the COVID-19 pandemic.
The ability of the company to hire productive sales professionals.
General economic conditions competition, and the companies targeted marketplace market acceptance of new offerings, our services and marketing strategies changes in the company's market share changes in the size of the overall market for the company's products.
As in the training and spending policies of the company's clients and other factors identified and discussing the company's most recent annual report on Form 10-K.
In other periodic reports filed with the Securities and Exchange Commission. 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 management's expectations. These forward looking statements are based upon management's current expectations we.
Undertake no obligation to update or revise these forward looking statements.
Events or circumstances after the date of today's presentation, except as required by law.
But that out of the way, we'd like to turn the time over to Mister Paul Walker, Our Chief Executive Officer, Thanks, Derek and good afternoon, everyone. We're really excited to be with your day and thanks, so much for joining us.
We're pleased to report that our fourth quarter and full year results were strong in fact, very strong and stronger than expected.
As you can see shown and slide three <unk>.
Just did EBITDA for fiscal 2000, 22021 increased to $28 million, which was up 96% from $14.3 million of adjusted EBITDA in fiscal 2020.
And up 36% when compared to fiscal 2019 strong 26 million of adjusted EBITDA.
This result, with well above our original guidance for the 2021 fiscal year between 20, and 22 million and also $1.5 million above the high end of our updated guidance range of 24.5% to $26.5 million.
These results reflect the strength and power of Franklin Cubbies high growth and durable subscription business model, which is shown in slide four achieve strong growth on every key metric.
Specifically as you can see in slide four first total revenue grew 47% or $20 million in the fourth quarter and grew 13% or 25 $7 million for the full fiscal year 2021.
Second you can see there that total subscription revenue grew 33% or $7.2 million in the fourth quarter and.
And 15% or $13 million for the full fiscal year.
Total subscription and subscription service revenue grew 52% or $17.7 million to 52.1 million in the fourth quarter, and 21% or $27.5 million for the year and finally as you can see shown there the sum of build an unbilled deferred revenue grew 27% or 27.
$2 million to $127.4 million for the year.
There are five things, we'd like to talk about today and have you take away from our discussion and you can see these summarized and slide five the.
The first is that our results for the fourth quarter and full year 2021 were strong and even stronger than expected and as you will hear in a moment. The strength is reflected in every key P&L category, including revenue growth growth margins adjusted EBITDA in cash flow the.
The second take away, we'll talk about today is that the strong performance was driven by the strength of our rapidly growing subscription business model. The third is that also driving our growth as a fundamental importance of challenges where.
We're helping our clients address.
The fourth is that we expect subscription and subscription services to account for greater than 90% of the company's sales within three years.
And finally, the fifth takeaway is that we expect our almost complete conversion to our subscription and subscription services to also drive significant additional value to our shareholders to talk about this first takeaway I'd like to turn time and ask Steve Young to address this our performance for the fourth quarter and full fiscal year results.
Thank you Paul.
Good. After every good afternoon, everyone and very pleased to have an opportunity to share some comments about Ah results for the quarter and for the year.
As you can see and slide seven and eight there are some key highlights for the quarter and for the year.
As shown revenue for FY 21 grew 13%.
Or 25 7 million to $224 2 million.
Fourth quarter revenue increased 47% or $20 million to 68.9 million.
Gross margin for the year increased 388 basis points to 77.1% from 73.3% in FY 20.
The operating SG&A to sales percentage declined to 64, 7% from 66.1% in FY 20.
Adjusted EBITDA for the year increased to 28 million.
An increase of 96%.
Or $13.7 million compared to $14.3 million in FY 20.
Just did EBITDA for the fourth quarter increased 18.5% to $10.6 million.
Cash flow from operating activities for the year increased 68% to 46.2 million.
Up from $27.6 million in FY 20.
And we ended the quarter with $62.4 million and liquidity.
All I would like to provide a little more detail on these key.
Highlights as shown in slide nine.
Revenue in the fourth quarter like like we said grew 47% to $68.9 million, an increase of $20 million compared to the $49 million of revenue generated in last year's fourth quarter.
This revenue was also a $3.8 million higher than the $65.2 million of revenue recorded in the fourth quarter of FY 19.
We're also pleased that revenue forever 21 came in essentially the same as in FY 19 were strong revenue growth in North America, and the Education Division offsetting the fact that despite significant improvement international revenue did not quite get back to the.
19 levels.
And as strong as our revenue growth was the growth and or profitability and cash flow related to this revenue was even more significant.
Gross margin percentage increased a strong 388 basis points for the year to 77 point.
$1 million up from.
And already good $73.3 million in FY 20.
Gross margin percentages 644 basis points higher than the 77 gross margin percentage, we achieved in FY 19.
Reflecting the ongoing shift to our high margin subscription offerings.
Are operating SG&A as a percentage of sales declined 139 basis points to 64, 7% for FY 21, and this improvement despite operating SG&A, increasing 287 basis points in the fourth quarter to 60.
To.
Percent, primarily reflecting.
The accelerated commissions associated with FY 20 ones strong finish.
Compared to those in last year's Covid impacted fourth quarter.
Adjusted EBITDA increased 96%.
Or $13.7 million to $28 million for FY 21, compared to $14.3 million.
And FYI 20.
This $28 million of adjusted EBITDA also represented a 36.
Percent increase and adjusted EBITDA.
Compared to the 26 million achieved in FY 19.
As noted this was also significantly higher than our initial guidance in FY 21 of 20% to $22 million also higher than our updated full year guidance of $24.5 million and $26.5 million of adjusted EBITDA.
This $28 million of adjusted EBITDA also represented a $7.9 million or 36% increase.
Over even the strong $26 million adjusted EBITDA.
<unk> and F y 19.
For the fourth quarter, adjusted EBITDA increased to $10.6 million, an increase of 18, 5% compared to $8.9 million adjusted EBITDA last year.
Cash flow and will acquit liquidity position, we're also very strong.
Shown on slide 10, net cash generated for FY 21 was 39 7 million.
Which is $38 million higher than eight nine generated in FY 20.
End up 78% compared to $22 $2 million of net cash generated in FY 19.
This increase in net cash generated reflects very strong growth and adjusted EBITDA, a very significant increase in deferred subscription revenue and reduced amounts of capital expenditures and capitalized content development.
Also shown in slide 11.
Cash flow from operating activities for FY 21 increased a very strong $18.6 million or 68% to 46.2 million.
Compared to 27.6 million FY $20 35 million FY 19.
This strong cash flow reflects an additional benefit of our subscription model.
Specifically that we in voice upfront and collect the cash for men voiced amounts even faster than we recognize all of the subscription revenue.
With this strong cash we ended the fourth quarter with $62.4 million in total liquidity.
Even after investing $10.6 million in the third quarter related to the acquisition of strive extending our management training and learning platform.
R $62.4 million of liquidity at year end was comprised of $47.4 million in cash which means no net debt.
And with our $15 million revolving credit facility remaining fully undrawn.
Importantly, this $26.4 million of liquidity.
Is significantly higher than even the $39.8 million and liquidity, we had at the end of our second quarter in February 2020, just before the start of the pandemic. So we're very pleased with our results. So now turn it back Paul.
Thank you Steve.
I'd just like to add that this strong performance reflects the continuation an acceleration of three key trends that we've talked about on the last number of calls with you.
And these are shown on slide 12, the first.
And the Enterprise Division sales in North America have continued to be extremely strong driven by rapidly accelerating growth an all access pass subscription and subscription services sales total.
Total revenue in North America grew 16.3 million or 16% from $103.3 million of fiscal 20 to $119 $6 million of fiscal 21.
The second is you can see there in the middle of that pages that.
That are international operations of continuing to strengthen.
While pandemic related challenges continue in Japan and in certain of our licensee partner operations.
Resulting in our total international revenue still being somewhat below fiscal 19 levels were pleased with the strong ongoing rebound in our international operations were in the fourth quarter revenue grew 54% compared to the fourth quarter of fiscal 2020.
In addition, the strong focused on all access pass sales and our international operations has resulted in significant increases in all access pass deferred revenue, which will establish the foundation for strong sales growth in the future and third as you can see on the right side of slide 12, the performance of and trends in our education division of stress.
And substantially.
The strengthening is reflected by two things first an increase in the number of leader in <unk> schools that renewed their leader in me membership to 2323 schools in fiscal 21.
From 2193 schools in fiscal 20.
And second the significant 79% increase in the number of new leader in <unk> schools brought on during fiscal 21, we.
We added 574, new leader in me schools up from 320 and fiscal 20.
This increase in new and retain schools drove strong performance in the education Division with revenue growing five 5 million or 12.7% compared to fiscal 20, and adjusted EBITDA, increasing $4.9 million over fiscal 2000 and $1.2 million over fiscal 19.
So that's the first takeaway we wanted to share relative to our strong fourth quarter and strong full fiscal 21 results the second takeaway.
Would like to talk about is that this strong performance was driven by the strength.
And a rapidly growing subscription business model as you can see on slide 14 are total subscription and subscription services sales grew 21% to $157.2 million in fiscal 21, representing additional growth of 27.5 million compared to $129 7 million in subscription.
<unk> and subscription services revenue in fiscal 2020.
In the fourth quarter subscription and subscription services sales grew 52% to $52.1 million, which was an increase of $17.7 million compared to the fourth quarter of fiscal 2020.
Importantly, the salsa represented growth of 29% compared to the $43 million in subscription and subscription services sales achieved even in the strong fourth quarter of fiscal 2019.
As you can see the sum of build an unbilled deferred revenue also grew substantially growing 27% for the year to 127 $4 million that was an increase of $27.2 million compared to our some of 100.2 million of build an unbilled deferred revenue at the end of last year's fourth quarter.
This provides significant stability of and visibility into our future revenue growth.
The breakout between build deferred and Unbilled deferred revenue that you can also see on slide 14.
As shown our balance of deferred subscription revenue grew 27% or $16.4 million to 77 million at the end of that year and compared to $66 million at year end fiscal 2020, and our balance of Unbilled deferred revenue grew 27% or 10.8 million to $54 million in this year's fourth <unk>.
Quarter, reflecting the significant an ongoing increase in the percentage of our all access pass contracts, which are now multi year. An example of this would be in North America in fiscal $2021 and 41% of all access pass contracts, representing 53% of total all access pass contract value, we're under multiyear contracts.
Importantly, we achieved this strong subscription growth in both enterprise and education divisions.
As shown in slide 15 in the Enterprise Division all access pass subscription and subscription services sales grew 24% or $22 million to $112.5 million in fiscal 2021.
Compared with $95 million in fiscal 2020.
That is also reflected growth of 38% or $31 million compared to fiscal 2019.
And then the fourth quarter, all access pass subscription and subscription sales grew 41% or nine 3 million to $32 million.
Additionally, the number of all access pass new logos in North America increased 39% in the fourth quarter annual revenue retention continued to exceed 90% and the sale of multiyear contracts as I mentioned a minute ago continued to be strong with our balance of unbilled deferred revenue, increasing 28% to $49.2 million in the enterprise Division.
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That compares to 38.5 million in the fourth quarter of fiscal 20.
And is up 69% compared to the $29 1 million balance of Unbilled deferred revenue, we had at the end of the fourth quarter fiscal 2019.
As shown on slide 16 in the Education Division.
In fiscal 2021 leader in my subscription and subscription services sales grew 14% or five $4 million to 44 $7 million compared with $39.2 million in fiscal 20.
Fiscal 2021, 44, 7 million a subscription subscription services sales reflected growth of 5% or $2.1 million compared to fiscal 2019.
In the fourth quarter liter in my subscription sales and subscription services grew $8.4 million to $21 million. This represented growth of 72% compared to the $11.7 million in the fourth quarter of fiscal 20 and growth of 13% compared to the strong fourth quarter of fiscal 19, which was prepandemic.
The third overall takeaway we'd like.
Talk about today is showing slide 17 is that also driving our strong performance is the importance of the opportunities and the challenges that we help our clients address.
As you can see in slide 18, while lots of things, including sharing information and helping people learn new skills can add value to an organization what.
What it takes to really move any organization aggressively forward is to achieve collective behavioral change on the most important challenges in other words getting everyone moving together and offering their collective best contributions toward the achievement of the organizations highest priorities.
Helping organize organizations achieve this kind of seismic progress is where Franklin covey really shines.
This is the reason why in the middle of the pandemic more than 1000 organizations purchased renewed and or expanded they're all access pass and purchased support services from Franklin Covey to help them achieve their objectives and an incredibly challenging environment.
It's also the reason why during the last 12 months in the middle of the pandemic when schools were scrambling to learn how to teach to remotely connect with kids provide breakfast and lunches to students who otherwise wouldn't have any in the myriad other challenges. They were facing 2320 through three schools renew their leader in my subscription and 507.
Four new schools became leader in the schools.
It's also the reason why is showing 519 the.
The lifetime value of our customers continues to be both large and growing.
Is showing slide 20, the fourth takeaway do we want to share today is that we expect subscription and subscription services to account for greater than 90% of the company's sales within three years.
At this almost complete conversion to subscription and subscription services occurs we expect virtually the entire company to be able to generate the same strong growth in revenue gross margins revenue retention and customer impact that we've seen in our subscription business over the past five years.
In North America, all access pass subscription and subscription services already account for 83% of total sales and this is expected increased to more than 90% within the next couple of years.
As shown on slide 21, all access pass subscription subscription services sales represented only 13% or $13.7 million a total sales in North America in 2016, when we first introduced the all access pass.
The dramatic sustained compounded growth. Since then has resulted in all access pass subscription subscription services sales increasing to $112.5 million in fiscal 2021 with annual all access pass subscription and subscription services sales expected to continue to grow to more than double digit pace and with legacy.
Sales now at very low levels and expected to remain flat or even declined a bit further we expect all access pass subscription and subscription services sales to increase to more than 90% in North America.
As I mentioned over the next couple of years.
All access pass subscription subscription services are also expected to make up the vast majority of our sales internationally in the coming years.
The growth and penetration of all access pass subscription and subscription services is also progressed rapidly and our English you can direct offices as you can see also shown on the right side of slide 21 from having no subscription sales with all of these offices just five years ago, all access pass subscription and subscription services sales for the latest 12 months.
<unk> account for 81% of total sales in the UK and 76% in Australia.
Both of these offices are well on their way towards the same 90% penetration, we expect to achieve in North America.
As you know our largest international direct offices are in China, and Japan, both of which are in the relatively early stages of converting themselves to all access pass.
Having made the conversion in the U S. Canada UK in Australia, we're confident that in China, and Japan, we too will convert the vast majority of their revenue to all access pass subscription subscription services in the coming years in fact.
I think it's important to note that in fiscal 21, all access pass subscription subscription services made up a third of Japan's total sales. So we're pleased with the progress there.
And finally, because of our leader and the subscription model more than 90% of sales and education division are already subscription and subscription services.
Another reason, we expect that our subscription subscription services growth will accelerators that we continue to make significant growth investments.
We've continued to invest in hiring additional salespeople or client partners. As you can see on slide 22, we ended fiscal 2021 with 273 client partners and as we've discussed in the past we have many decades of headroom for additional client partner growth.
As we continue to aggressively grow our sales force in our licensee network the volume of new all access path logos, all with high lifetime value is expected to continue to accelerate.
Additionally, we expect significant growth to come from the approximately 120 existing client partners. We've hired over the past few years, who are still in the middle of their ramp up process.
We've also made ongoing and growth investments in new content technology and as shown in this slide twenty-three acquisitions, such as Gianna, Robert Gregory and most recently strive.
The combination of our powerful content and solutions.
Donna are vast coaching and training delivery capabilities and key behavior change in performance metrics all integrated into our new strive learning platform will create an industry leading solutions for clients, who seek to drive collective behavior change to address their most important challenges.
These investments are accelerating our ability to ensure that the all access pass users have constant access to the solutions and tools they need to improve performance and increase results on a daily basis.
There are also providing an important foundation for us to address larger and larger populations inside existing and new path holding clients and are helping us to accelerate the growth of all access pass sales.
I think it's important to note that we're also making significant investments in marketing and advertising.
The annual global learning and development spend total is nearly $400 billion with more than $90 billion of that spent externally.
Additionally, billions more is spent by business leaders on strategy execution in sales performance and by school superintendents and principals around the world. These markets are large and growing and no single provider in the space owns more than one or 2% of the market.
We have the opportunity before us is massive and we're focusing heavily on ensuring that Franklin cabinets clearly positioned at the top of the mines for current and future clients around the world.
Finally, the fifth takeaway today is that we expect our almost complete conversion to subscription and subscription services to drive significant additional value to our shareholders into discusses takeaway I'd like to turn the time Bob.
Thanks, Paul.
Nice to talk to all of you.
Shareholders you all are often asked us how we think about the true value of the company.
And while the specific valuation is something we will leave to you to determine.
I would emphasize that we expect the achievement of our multiyear business plan to create significant incremental value for our shareholders.
Just note, we expect that additional value to be created in three key ways.
First just as a natural resource the significant growth and adjusted EBITDA that we expect.
With strong continued growth in subscription subscription services revenue and the expectation of achieving strong gross margins in the high flow through of these additional sales to incremental adjusted EBITDA in cash flow.
As shown on the slide 25, we expect adjusted EBITDA over the next few years to grow from $28 million in fiscal 2021 to between the <unk>.
$34 and $36 million in fiscal 2022.
To between 44, and 46 million in fiscal 2023.
In between 54 and $56 million in fiscal 2004.
Second reason, we believe that too just the natural result of our growth will drive shareholder value is that we we expect to generate a significant amount of cash flow. During those same so same years and to use it to create additional shareholder value.
We expect our growth in cash.
To meet or even exceed a rapid growth and adjusted EBITDA.
And we believe the expected growth in cash flow is likely to far exceed any reasonable discount rate anyone.
Might apply to it.
As a result, we believe the net present value very expected cash flows likely were significantly more than the value implied base applying a mobile poop to a given years adjusted EBITDA, particularly would adjusted EBITDA is growing at a 25%.
Right or higher.
As a consequence, we expect we will be able to create additional shareholder value by investing a portion of the more than $100 million available cash we expect to have over the coming years to make strategic acquisitions to grow the business and also to repurchase substantial.
Number of our shares.
Finally, we expect that are almost complete conversion.
Being a high revenue growth high adjusted EBITDA in high casual growth subscription subscription services business.
Is likely to drive and increasingly SaaS like valuation.
We're pleased to be achieving metrics that level is very similar to those being achieved by the strongest asked companies, which are trading at high multiples of revenue.
However, like Adobe and other companies, who during the period of conversion to SaaS created a discount to smaller subscription startups. We expect that is our conversion to subscription subscription subscription services to SaaS becomes nearly complete the impressive quality of our subscription metrics is likely to drug evaluation.
More reflective of the hike.
Life time customer value, we're creating.
Turn it back to Paul Thanks, Bob and I would like to turn to Steve to talk about guidance and our outlook. Okay. Thank you Bob.
Outlook and guidance.
Our guidance for FY 22 is that we expect to generate adjusted EBITDA of between 34 and $36 million.
In the mid point of this range would reflect in approximately 25% increase and adjusted EBITDA compared to the 28 million of adjusted EBITDA achieved in FY 221.
Underpinning this guidance are the following expectations.
First the recognition that.
During FY 2002 of a large portion of the 77 million of deferred revenue already on the balance sheet and.
And the billing of a large portion of the $50 million of Unbilled deferred revenue, which has been contracted this provides significant visibility into our FY 2002 revenue and gross margin.
Second in addition to the recognition of deferred revenue.
The factor of which is expected to have the greatest impact on our FY 22 results is also the one in which we have high confidence that has the strength of all access pass and related sales.
We expect that all access pass will continued to achieve one strong growth in both sales and invoice sales two hybrid high revenue retention rates.
Three strong sales to new logos.
And for continued growth and pass expansions and multiyear contracts.
We also expect that all access pass subscription services will continue to be strong.
There, we expect that our revenue in Japan, China, and among our licensees will continue to strengthen.
The increase in all access pass, which we expect to achieve in these countries will obviously have resulted in a portion of the new sales being added to the balance sheet as deferred revenue.
And fourth in education, we expect to continue to achieve strong retention of both schools and revenue among existing later in many schools.
In addition.
Despite the fact that the number of new leader in many schools grew significantly in FY 21, we expect to receive achieve growth and the number of new leader in these schools beyond that achieved last year.
Now now for our first quarter.
We expected adjusted EBIT will be between five and a half and 7 million.
Compared to the $3.7 million in the first quarter of fiscal 2021.
Reflecting strong performance.
By all access pass it in the Us Canada and government.
And the same general expectation just.
Outlined for international operations and education.
Now in addition to.
Guidance will offer some insight into our targets for FY 22, 23 and 24.
Building on the 34% to $36 million, an adjusted EBITDA, we expect to achieve this year.
And driven substantially by the expected to continue.
The growth of all access pass.
Our target is to achieve adjusted EBITDA increase by about $10 million per year.
Each year thereafter.
To be as Bob said around $45 million in FY twenty-three and around $55 million in FY 2004.
These targets reflect our expectation of being able to achieve low double digit revenue growth.
And approximately 40%.
Of that growth in revenue to flow through to increase and adjusted EBITDA in cash flow.
Even after significant growth investments in marketing or sales force technology and expansion into new content areas.
All of this at least until we achieve an adjusted EBITDA sales percentage margin.
Of approximately 20% are approaching 20%.
While dramatic changes in the world environment could impact these expectations we.
We want to share that these are our current expectations, an accent and assumptions, we I don't want to share that not only are these are targets and expectations, but when you read our proxy statement, you'll see that the executive teams al tip awards still depend on achieving these strong multiyear.
Growth goals.
When I cough.
Steve.
We feel great about our momentum and are pleased to be in a position to offer this guidance and looking forward to a great 2022, and with that we'd like to ask the operator to open up for questions.
If anyone has a question you can press Star then with one on your touch tone phone. Once again, if you have a question.
Star then one on your touch tone phone.
Our first question comes from Andrew Nicholas from William Blair Go ahead Andrew.
Good afternoon. Thank you for taking my question I.
Hi, Andrew My first one.
Okay.
First one was going to just be on the education segment.
Really really strong number I think.
Record revenue by by at least a couple of million dollars.
Just wondering you spent some time talking about.
Strong new logo growth.
Wondering if you could flesh that out a little bit further.
And maybe speak to if there's anything timing related in there are one time from maybe pent up demand from prior years, just wanted to get a sense for for.
What drove such a strong number.
Yeah great.
Great question, and I'll turn to Shawn, but just at the high level really nothing one time just a it was a really great strong performance by the team a lot of work during the pandemic and a lot of work prepandemic to reposition the solution and to prepare for what was what was a great year. This last year, but let's let's have Sean quite a little additional.
Detail there.
Okay. Thank you Paul.
Hi, Andrew how are Ya.
Good good good yet so.
Yes, two pulse point there was nothing one thing in particular I think.
If I had to point to a few things that made all the difference one would be the focus that we have put on districts on selling the districts. Instead of individual schools, we were able to bring on a lot of really large urban districts. This last two quarters.
And.
Those are a lot stickier, we find the retention rate on districts is very very highlight about 95% range.
And so that was that was the key reason I also feel that.
We just really we executed really well we have we launched leader in the four point out of the latest version of leader in May and.
And that fiscal year, 2020, and we really didn't get to see.
<unk> and I'll get the chance to see it play through.
With all the improvements that we made and.
And we were able to see that once the pandemic cleared up some so that that helps as well.
Definitely the there was a backlog of demand came through but we're finding a momentum is continuing really strong.
There's a lotta money in the market right now because of all the fiscal.
Stimulus money that was sent into the market and will be for the next two to three years, most negative dry up anytime soon.
So we're we're plays and as as was mentioned we feel like we can even do more schools is coming here.
Great. Thank you that's very helpful and then.
For my follow up I, just wanted to talk about the client partner number a little bit I think last last quarter not only that you mentioned kind of all the all the opportunity there from a <unk> perspective, but I think a willingness to try and and add 30 client partners or so a year.
Just kind of curious if that's still the goal.
Whether or not that that's something that is achievable in this current labor environment I noted that other companies across the economy, frankly are having trouble filling sales roles in some cases.
And to the extent that is an issue whether or not that would have any impact on.
On your ability to grow top line or new logos and this upcoming year or if you expect to offset any any potential pressure there with increased productivity. Thank you.
Great Great question, So I'll I'll take maybe just part of it and then ask Jenn policy Moda sure some.
Some thoughts on that as well so yeah as we reported we we added.
We reported we added 19, new client partners, we actually the 20th came on but a week. After August 31, so in our minds were saying we hit the 20, but but that and that was the projection. We had for the year. We mentioned that we would hire we kind of back and that are hiring because of the impact of COVID-19 earlier in the year. So we felt great about bringing on.
The net 20, and we're projecting and planning to bring on the net 30. This year we've talked about.
It is a different environment for sure right now and Jen can talk about that but I would say to answer your question specifically.
I think we'll get there.
And.
If we're a person or two short we don't expect that that would have any impact on new logo sales as we mentioned and as I mentioned in the remarks in a few minutes ago. We have 120 client partners that are still in the middle of their ramp there's there's frankly tens of millions of dollars of latent potential revenue that.
There as that group continues to ramp and so that would that would more than more than cover significantly.
Significantly more than cover any any gap there might have been if we if we failed to to get to the hiring number but Jen why don't you out a little bit of comment perspective, you out there every day, helping us recruit an onboard these new client partners.
Thanks, Paul I think you tapped on two of the big elements. We can't do we have so much late and productivity and those client partners that are in ramp and in addition, we are committed to the 30.
Our subscription business as you've heard in the comments, particularly the nature of the multiyear contracted engagements that's very attractive to a sales force.
On average 41% of our contract from 53% of our contract value is in multiyear engagements mean, thank you or a sales person you are not starting a fiscal year at zero and trying to recreate what you obtain last year and grow on that of course, there's a significant amount of work to get those.
Numbers, but it's a very attractive model and.
And in addition, having done two interviews today for client partners.
Our mission our values the culture, we have and the impact we have on these large problems in the partnership we dealt with clients is attractive to client partners, both within our industry and now it's coming from outside but very successful salespeople and other industry. So we are committed to doing that and.
As Paul mentioned, we're also looking forward to the growth that we have.
Really helpful. Thank you have a nice night.
Thanks, Andrew Andrew.
And our next question comes from Alex Perez from Barrington Research go ahead Alex.
Hi, guys. Congratulations on the strong finish to the year and thanks for taking my questions.
Thanks, Alex.
I have a couple of higher level questions I suppose as we transition.
From pre Covid to Covid too.
And demick Covid or post Covid.
As I look back.
As we look back pre Covid I think you've said before that 90% to 95%.
Of your content delivery was in person only 5% to 10% was live online obviously it flipped during the Covid years.
Where does it go from here what is the delivery looked like today as the economy has begun to open again is it still 90 domain is it still the vast majority live online and what are you thinking it looks like steady state a year from now or two years from now.
Yeah. It's great question, so you're right pre cold, but it was it was 95% live in person.
That completely flipped to greater than 90% live online and it remains there so and whatever phase we're in right now of Covid.
It remains substantially all live on line, we saw in the in the fourth quarter.
A little bit of a return to live in person, what I would say a little bit. It was we deliver hundreds and hundreds and hundreds of days a quarter and we had 20 more days 25 more days of our lives in person so.
Substantially remains live online I think the answer to your to your broader question.
I think it stays.
Mainly live online and the reason for that is I think there's some things that we can do live online and at the end the others in the industry can do that are frankly that provide a better experience.
The way that learning can be spaced overtime and in between the spacing of the learning can be coaching and reinforcement and on the job application. The use of the tools that you learned in the last session can be applied on the job. The next week and then you come back to that it provides a.
A better experience for behavior change and I think this plays into our our strength. It's one of the reasons we purchased strive.
Is to make sure that we have a platform that is the best out there to support that kind of development and that kind of deployment and to make that kind of deployment easy historically to if you are the learning administrator and you have to you have to manage all those individual touch points over time is just frankly harder than saying Hey, let's just have everybody come next Tuesday will get in a room will do it.
We'll say we did it we're done and we're out.
And so to combat and to make it really easy for our clients. What we're building on strive as this is platform that really kind of powers that by itself and makes it very easily deployable by the learning leader and enjoyable and easily accessible by the individual but you still have that cohort group experience in the coaching the other things that we know are.
Important to drive behavior change so I think it stays live online to the extent that live in person comes back that would be great for us too because that's right in our wheelhouse, we've done that our entire time as a company. So I think we're in a position to kind of.
To get the best of both worlds whatever the world ends up officially looking like in the.
Endemic Covid period.
Great. Thanks, and then.
Just to follow up and since you brought it up strive.
It was only acquired what.
Five months ago or so in April.
Alright, I wonder, where we stand with regard to the integration process and.
Just a little additional color there.
Yeah, great great happy to talk about that.
We are we are we.
We were thrilled when we when we purchase drive where more thrilled today now honestly than we were then we're right on track we had targeted a January launch of strive kind of in its version 1.0 for US which is strive powering all of our core content and we're right there expecting to launch then and.
Over the course of this fiscal year from January on we'll add more and more functionality for our for our users. We have a great short term and long term roadmap for what happens with dry, but we're right right, where we expected we would be in the integration and and preparing for the launch phase of that.
Great good to hear.
Let me just sneak in one last one here kind of related to the first question.
In person events it is pretty.
Pre call that it was.
Producer of leads for Franklin Covey, Covid, obviously stopped at what are your plans here I know you're kind of shifted to zoom to.
To some extent, but maybe just a little additional color and that'll be my last question. Thanks, Yeah.
Great question.
Jan do you want to.
You live in the event, where all the all the time you want to take that one.
Yes.
We have had a significant lead generation as the statistic is in the 50% that many DDB buyers bye.
Web research and we had lead magnets on our website and.
Take each of Berkeley and follow up on them, an addition or online.
Strategy has grown significantly leaps and bounds and both in terms of the follow up out of those events. So we are finding actually more legion in the digital world than we were having with our lives.
<unk> to the previous conversation I think we're well positioned regardless of where the world goes.
If we have larger conferences in the future are returned to some live events.
At a minimum remain complimented by the work that we're doing with our website and our live online event, because we've had such great success is that responsive Alex.
That's exactly what I was looking forward, thanks, Jen and I'll get back in the queue.
Thanks, Thanks, Alex.
And our next question comes from Marco Rodriguez from Stony go ahead Marco.
Good afternoon, guys with some gay capital.
I wanted to go when he wanted to kind of follow up on on kind of that last couple of questions as it relates to kind of a high level.
Discussion on training servicing an important market dynamics, you kind of alluded to the fact that online is becoming much more important for behavior changes. Just wondering if you can maybe talk about any other important market dynamics, you kind of see coming for train services over the next two.
12 to 24 months.
Yes, it's a great. It's a great question I think.
And so.
I'll describe one and I'll probably appear a little bit biased in my response, but it's something we see happening in the market and we think it is really important and that's why we've.
Organize the way we have.
Over the last couple of years. This training market. This industry that we're in is it pretty hot market right now a lot of people are entering and many of those that have entered the last few years have entered as.
Large library providers.
Lots and lots and lots of content as I mentioned in my remarks earlier.
Really setup to impart knowledge helped.
Help people with individual skills they may need.
But not necessarily setup.
To drive.
True behavior change and collective action across a large population or across the entire organization and that's that's kind of a holy Grail, we think and so we could talk about trends, we see coming I think.
You see these these cycles go through all kinds of industries and we've been through this cycle, where it's been all about how much content could accompany acquire and put out there and there's a value to that but.
But I think we're.
The next phase of the cycle is likely to be and when we think it will be as this premium on it's great to have a lot of content, but we really wanted was the result, we needed behavior to change we needed cultures to change me the leaders to really become more proficient in how they I mean, there's a war for talent right now and the war is going to be one by those companies who can.
Create the right kind of environment, where people feel trusted they feel valued the company of leaders are able to drive performance et cetera, and so I think that I think you'll see the pendulum to the extent that it ever shifted away from that to ship back right onto that and so we're spending all of our time, making sure that.
Spend our heritage, but making sure that we're right they're staying on those important topics that our clients care about I think that'll be one is that.
The nature of the problems and the ability to deliver on those problems and deliver real solutions won't become less important I think it will become even more important and that's really being driven and exacerbated by just what's going on in the world. It's hard to find people, it's hard to retain people and.
We used to say culture was a competitive advantage of culture is a competitive advantage right now without question and will be I think for for some time to come that that'd be one I guess in addition to kind of the digitization and being able to deliver in a variety of modalities.
Very helpful.
<unk>.
Thinking about your all access all access pass multiyear holders as it relates to percentage of your total revenue.
How are you guys thinking about that as far as in upper limit is concerned when it comes to your clients in their particular demands if you will.
Yeah.
I don't know if we know exactly what the upper limit will be.
But I'll bet, it's still a fair bit higher than where it is today we we.
A funny little inside joke around here and we launched all access path. We haven't we didn't even really think early in that we that multiyear with something we ought to do and one day, we said Hey, we got to see if we can get some clients to buy this thing for more than one year at a time and we've been really pleased with how rapidly that has grown and I think it's grown because again back.
To this the nature of what we're helping clients with it's not going to get solved in a month or three months or even in the year. Right. These are these are these are big challenges they exist across entire organizations and so just the nature of the problem lends to a discussion that is longer term in nature and so it's a great win win for us.
And for our clients to sign a multiyear agreement, we provide a little bit of a discount to them. They don't have to go through the re contracting phase every year and our whole mantra is.
Is the client relationship for life, and we hope on their side. They feel the same way and so I think today, where we're at 41% of the contracts 53% of the revenue I think easily that gets over 50, and who knows how high that will go.
But I suspect there is still a bit of a fair bit of headroom there on both the number and the percentage of revenue.
And last question for me just on your international direct I appreciate the.
Six and the data you provided in the presentation.
But can you give us a little bit more on some color updated on China, and Japan, they're converging.
Kind of where they are in terms of earnings and are there any dynamics in those markets that might differ from North America UK, Australia.
And what kind of relate to timing issues when it comes to getting them up to the same all access pass percentages.
Yeah, great questions. So we.
We mentioned so first of all taking international direct and total of the UK.
Pretty much mirrored exactly where the U S has been there at 80, I think I said, 83% and on their way to the same 90%. We are I think the same thing will happen in Australia, there at 76% right now and they're well on their way in.
In Japan.