Q4 2022 Franklin Covey Co Earnings Call

November 2, 2022

Welcome to the Q4 2020 to Franklin Covey Earnings Conference call. My name is Daryl and I will be your operator for today's 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 press zero one on your Touchtone phone.

I will now turn the call over to Derek Hatch Derek you may begin.

Thanks Darryl.

Well, everyone on behalf of Franklin Covey Company, It's my opportunity to welcome you to our <unk>.

Earnings call for the fiscal year ended.

August 31, 2022 on our fourth quarter results as well.

We're excited to report these results to you to begin in just a moment however, we'd like to remind you that as we're going through this presentation that the presentation contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

These statements are based upon management's 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 and renewal rates for our subscription offerings.

Cleaning all access pass and leader in me memberships, the duration and recovery.

The COVID-19 pandemic the ability of the company to hire productive sales professionals general economic conditions competition in the Companys targeted marketplace market acceptance of new offerings or services and marketing strategies changes in the companys market share changes in the size of the overall market for the company's products changes in the training and spending policies of the comp.

These clients and other factors identified and discussed in the company's most recent annual report on Form 10-K, and 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 companys current expectations and there can be no assurance the company's actual future performance will meet our expectations. These forward looking statements are based on management's current expectations and we undertake no obligation to update or revise these forward looking statements.

To reflect events or circumstances after the date of todays presentation, except as required by law.

That I would like to turn the time over to this afternoon to Mr. Paul Walker, President and Chief Executive Officer, Paul Thank you Derrick.

Hello, everyone. Thanks, so much for joining us today I'm here with Steve Young our CFO with Gen call a female president of our Enterprise Division, Sean Covey Who's the President of our Education Division and several members of the executive team are also.

To have Bob our executive Chairman, Bob Whitman, our executive chairman with us as well.

We're very pleased that our results for fiscal 2022 were strong and even stronger for the fiscal fourth quarter than expected.

I'd like to start with a few headlines beginning with those about our revenue growth as you can see as shown on slide four.

Our revenue growth for fiscal 'twenty, two with especially strong increasing 17% to $262 8 million and the 17% growth benefited somewhat by comping against Covid related quarters in the first and second quarters, but also reflected the impact of Covid related lockdowns and restrictions in China and Japan.

Both of which extended over the fiscal second and third quarters and even into a portion of the fourth quarter and also by the impact of foreign exchange.

Excluding China and Japan revenue for the full fiscal year 2022 grew 21% even after the impact of FX.

Our fourth quarter revenue growth was also exceptionally strong with revenue growing 14% and which would have grown 17%, excluding China and Japan.

As significant as was our overall growth for the year and the quarter our subscription in subscription services revenue growth was even stronger.

Also as you can see as shown on slide four total subscription and subscription services revenue grew 29% in fiscal 'twenty two and.

<unk> increased 23% in the fourth quarter.

With all access pass subscription in subscription services revenue growing 28% for the year and 26% in the fourth quarter and leader in me subscription in subscription services revenue growing 29% for the full fiscal year and 18% in the fourth quarter.

The durability of our revenue also continues to increase and our visibility into future revenue growth also continues to expand.

As you can see as shown in slide four our year end balance of deferred subscription revenue billed and Unbilled increased 20% over last year's fourth quarter.

$26 million to a $153 4 million.

And as shown in slide five and our North America Enterprise operations as a percent of our all access pass contracts, which are multi year increased to 46% at year end up from 41% at the end of fiscal 'twenty one.

And the percent of our all access pass subscription revenue represented by these multi year contracts of at least two years increased to 61% of total contracted revenue at year end up from 57% at the end of fiscal 'twenty one.

The average lifetime value of our all access pass customers also continued to increase.

Our average subscription revenue per client increased from 42 to 47000 for the year.

All access pass revenue retention also continues to be well above 90%.

And our services attach rate the subscription services that attach to the all access pass increased to 61% for the year compared to 52% for fiscal 2021, reflecting the importance of our clients place on the challenges they engage us to help them achieve.

The combination of these factors resulted in our gross margin percent remaining at a very strong 85%.

I'd like to now discuss some profit profitability metrics some of the headline metrics as you can see as shown in slide six.

For the fiscal year, our gross margin grew 17% or 29 million to $201 9 million.

And our gross margin percent for the fiscal year remained a very strong 76, 8%.

Ah level almost equal to that achieved in fiscal 'twenty, one even after considering the significant growth in subscription services just noted.

Gross margin percent for the fourth quarter was very strong at 75%.

This was slightly lower than in the fourth quarter of fiscal 'twenty, one, reflecting both the accelerated 26% growth in education sales during the quarter, which have a somewhat lower margin than do all access pass sales and the strong growth in subscription services.

Operating SG&A as a percent of sales improved another 389 basis points for the year ending up at 68% compared to 64, 7% of.

64, 7% in fiscal 'twenty one.

<unk> itself was 139 basis points better than fiscal 2020.

Operating SG&A as a percent of sales also improved 394 basis points for the fourth quarter to 58%.

The flow through of our growth in revenue to growth in adjusted EBITDA for fiscal 'twenty, two with 37%, reflecting the impact of strong gross margins and declining operating SG&A as a percent of sales and the flow through of growth in revenue to growth in adjusted EBITDA was 28% in the fourth quarter.

As a result of this strong revenue growth and high flow through.

Adjusted EBITDA increased 51% or $14 2 million for fiscal 'twenty two.

To $42 2 million and grew 26% or $2 8 million to $13 3 million in the fourth quarter.

Net cash provided by operating activities increased 13% to $52 3 million for the year compared to $46 2 million for fiscal 'twenty one.

During fiscal 'twenty. Two we also returned a significant amount of capital to shareholders investing $23 $9 million to repurchase 585000 shares.

And even after investing this $23 9 million for share repurchases. We ended the year with $75 $5 million of liquidity comprised of $65 million in cash and with our full $50 million revolving credit line Undrawn.

We will discuss our guidance for fiscal 'twenty, three and our outlook for fiscal 'twenty, four and 'twenty five in a moment.

But as shown on slide seven.

As a result of our strong top and bottom line growth in fiscal 'twenty three.

And the strength of factors driving it we're pleased that $42 2 million of adjusted EBITDA achieved for fiscal 'twenty two exceeds both our most recent adjusted EBITDA guidance range of between 40 million $41 5 million and our original adjusted EBITDA guidance range of between 34% and 36 million.

As a result of the strength of these drivers underlying this performance.

Our revenue for fiscal 'twenty, three our revenue guidance for fiscal <unk>, our guidance for fiscal 'twenty. Three is that adjusted EBITDA will increase from $42 2 million.

In fiscal 'twenty, two to between 47% and $49 million in fiscal 'twenty three.

As also shown on slide seven while of course, some quarters revenue growth will be higher than others.

We're increasing our revenue outlook for fiscal 'twenty, three and beyond from the expectation that our rolling 12 months revenue will grow in the low double digits to our current expectation that our rolling 12 months revenue growth will now be in the low teens call. It 12 or 13 ish percent.

And we'll move towards the mid and then high teens in the years to come.

We expect this accelerating revenue growth to be driven by and reflect the ongoing growth in our high margin high recurring subscription and subscription services revenue and expect a significant percentage of this revenue growth to flow through to increases in adjusted EBITDA and cash flow.

As a result.

Building on our adjusted EBITDA guidance range of between 47% and 49 million for fiscal 'twenty. Three we expected adjusted EBITDA will then increase to approximately $57 million in fiscal 'twenty, four and to approximately $67 million in fiscal 'twenty five.

With this strong expected growth in revenue and adjusted EBITDA. We also expect to generate significant amounts of free cash flow, which we will discuss in more detail in a moment, we expect to reinvest in the business to high rates of return while potentially also returning substantial amount to shareholders through ongoing share repurchases.

We're extremely pleased by our accelerated accelerating revenue and adjusted EBITDA growth.

And the business has momentum.

Prior to the pandemic, we talked about our ability to predictably generate high single digit revenue growth while at the same time, achieving even more even more rapid growth in adjusted EBITDA.

We're really pleased to now be talking about our expectation of consistently achieving low teens revenue growth with the expectation that this revenue growth will increase to the mid teens, and then high teens growth and with an expected high flow through of incremental revenue to increases in adjusted EBITDA and cash flow.

I'd now like to turn some time to Steve to dig a little bit deeper into some of these results.

Thank you Paul Good afternoon, everyone, it's nice to be with you today.

As Paul said, we're really pleased with the ongoing combined strength and growth on our revenue adjusted EBITDA and cash flow.

And as Paul also noted we're pleased to have achieved these extremely strong results, even after absorbing COVID-19 related impacts.

In our results in China and Japan.

And after absorbing a $2 6 million decrease related in unfavorable foreign currency fluctuations.

To provide a deeper and more detailed understanding of the factors underlying this strong performance I'd like to quickly report on the three key areas of our company.

Specifically on our enterprise.

In North America.

Our enterprise business internationally, and our education business.

Almost all of which is also in North America.

2% last year.

Second as shown in slide nine while overall results in our international direct offices were slower than originally expected as a result of COVID-19 related impacts on our operations in China and Japan during much of our second and third third quarters.

Revenue growth in our offices in UK, Ireland, Germany, Austria, Switzerland, and Australia countries.

Which together make up approximately 48% of total international sales.

And we're all access pass Mic makes up a substantial portion of those sales.

Was very strong.

Revenue in these offices grew 40% in FY 'twenty, two and grew 23% in the fourth quarter.

All access pass subscription and subscription services sales, which make up approximately 83% of total sales in these countries.

Grew even more rapidly increasing 51% for the year and 7% in the quarter.

Our operations in Japan, and China, and Japan, which account for approximately 52% of international sales.

But less than 7% of total sales of the company.

Widespread COVID-19 related Lockdowns in China.

Cautious and slow return to normalcy.

Post COVID-19 as guided by the Japanese government.

And negative FX impacted much of the year in these two countries as revenue declined 16% for both FY 'twenty, two and the fourth quarter.

Now as shown in slide nine our international licensee partner revenue increased 17% for the year.

And taken as a group our licensee partners operations continue to strengthen coming out of Covid.

Despite the impact of the war in the Ukraine and related economic interruptions in Eastern Europe .

Finally, as shown on slide 10.

The results in our education business, which accounts for approximately 24% of total company revenue were also very strong.

Education revenue grew 26% in FY, 'twenty, two and 17% in the fourth quarter.

Education subscription in subscription services revenue.

The 29% in the year and 18% in the fourth quarter.

Education's year end balance of deferred subscription revenue grew 17%.

And we retained 89% of our existing schools and FY 'twenty, two while adding a record 739 new schools.

An increase of 157 schools or 27%.

Compared to the strong 582, new schools, we added in FY 'twenty one so good results from the.

Three main areas of the company saw basketball.

Thank you Steve Thanks for the Great review of our results.

I'd like to now briefly highlight five key drivers, which are underlying these strong results.

We focused on these last quarter, but I thought that their importance is such that it would be good to report and reemphasize them again here today.

As shown in slide 11, the first drivers at the markets, we've chosen to serve a very large.

They are growing significantly and they're highly fragment fragmented.

This provides us with enormous headroom for growth and the opportunity to earn a significant share in each of these markets.

Second driver will talk about it that we're focused on the most important lucrative and durable space in each of these markets.

The opportunities and challenges we help our clients address challenges that require the collective action of large numbers of people.

Must win for organizations that are very durable.

It provides us with the opportunity to partner with our organizational clients and with schools in both good times and in more challenging.

The third driver is the ongoing strength of our subscription business model.

It's a powerful engine that is driving accelerated and sustainable growth of.

Significant.

Significant and increasing predictability and durability of our revenue and a high flow through of increases in revenue to growth and profitability and cash flow.

Driver number four is that we have a number of compelling opportunities to accelerate our growth.

A combination of the large and growing markets we serve.

The importance of the challenge as we help our clients address.

And the strength of our business model is creating exciting opportunities for further acceleration of growth.

And the fifth driver that I'll touch on here is that we expect to invest our strong cash flow to create significant additional value for shareholders. We generate significant amounts of cash, which we have and expect to continue to invest to create.

Additional shareholder value.

I'd like to touch on each of these first however, I'd like to emphasize that while each of these drivers is important in any environment.

We believe there are even more important in uncertain and turbulent times like at present.

We are of course, not hoping for an economic downturn. However, we believe that the strength of these drivers individually and collectively positions us to be able to perform well and even increased our strategic importance during times such as these.

As shown on slide 12 driver one is the attractiveness of the markets. We've chosen to serve each is large growing and fragmented.

As you can see in slide 13, our focus is on three large and growing market the enterprise learning market.

Where our total addressable market is 99 billion and growing by approximately $3 billion a year.

The education market, where our total addressable market is $59 billion growing approximately $1 billion a year.

And the market where business leaders invest dollars directly from their operating budgets in order to improve their organization's performance.

Here the total addressable market is not defined but organizations operating budgets are in the trillions of dollars and growing.

Each of these markets is highly fragmented with the largest players accounting for only approximately 1% to 2% of sales.

It's the size of these markets and their fragmentation that provides us with tremendous headroom for growth and our strength puts us in a position to increase our share of these markets, we think particularly in difficult times.

Driver number two is shown in slide 14 is that we're focused on the most important lucrative and durable space in each of these markets.

As shown in slide 15.

And as we've explained in prior calls many things can add value to an organization, including things like providing people with useful information and helping them learn new skills.

However, as important as sharing information and helping people learn new skills can be the single most impactful opportunity for breakthrough performance improvement within most organizations lies in mobilizing the collective action and best efforts of large numbers of people toward the achievement of their organizations highest priorities.

In other words as illustrated in slide 16, we help organizations intentionally and systematically move the collective performance of their peoples that are people and units righter and tighter.

Toward what they already do well in different pockets.

This does not happen by accident.

Helping organizations drive this kind of collective behavioral change change that allows them to systematically and predictably move their performance curves righter and tighter is exactly where Franklin covey stands out in.

In fact, our entire organization is focused on helping companies schools in teams of all sizes and across just about every industry achieved just these kinds of results.

Importantly, these righter and tighter challenges and opportunities are very durable.

Every organization has been in both good times and during more challenging one.

For example, as shown on slide 17 throughout the great financial crisis, we experienced exceptionally strong growth in helping clients address challenges related to significantly increase increasing sales performance.

Ensuring execution on major strategic initiatives and driving breakthroughs in customer loyalty.

More recently in the early days of the pandemic and coming out the other side our clients have consistently asked for help with those same challenges together with new emerging challenges, including those related to remote and hybrid work.

Waiting winning cultures and.

And the equipping leaders with the skills to engage build and retain talent and a unique and challenging labor market.

Our ability to help our clients achieve measurable measurable results. In these areas has led thousands of organizations and schools to purchase expand and renew their all access pass and leader in me subscriptions and purchase support services to help them achieve their righter and tighter objectives in the middle of turbulent times. This was not only true during the great financial.

Crisis and throughout the pandemic that continues to be true in the increasingly uncertain economic economic conditions, we're facing today.

I'd like to share three very recent examples of how we're partnering with organizations to address their critical challenges and opportunities in this very environment.

First one of our largest all access pass contracts.

With a contract with a large multinational conglomerate is extending their contracts for an additional five year term.

This clients choosing to extend and expand their relationship with us because of the way in which the solutions in the all access pass directly address their most pressing challenges.

This client sees an opportunity to increase their usage of our solutions and at the same time reduce the number of external providers with whom they work.

The result will create a more scalable and powerful solution for the client and a larger multi year all access pass holding client for Franklin Covey.

The second examples of recent new client win with a significant global logistics company, where we have also.

Also chosen to engage in a multiyear five year all access pass contract will be working closely with this client to increase their global sales and sales leadership capability as they prepare to compete in a more challenging environment.

This client will not only have access to our world class sales performance content, but to all of our leadership and execution content as well, enabling them to create a powerful and comprehensive solution unmatched by other providers in the industry.

Finally, one of the largest technology companies in the United States has been an all access pass client for several years and recently renewed their all access pass for an additional three years.

This client is engaging with us to help them build culture and develop leaders at all levels.

They utilize the seven habits to create the foundation for their culture and every new employee goes through the seven habits as part of Onboarding incidentally, the seven habits as their most highly rated offering.

This client also uses our six critical practices, leading a team solution to equip managers with the right leadership mindset skill sets and behaviors to create winning culture high levels of engagement and sustained results.

Because of the importance organizations place on addressing these kinds of challenges even in this year's fourth quarter at a time when markets were in turmoil in organizations of all types. We're bracing for the prospect of even bigger challenges ahead and.

In our U S, Canada enterprise business more organization signed multi year contracts than in any quarter ever.

We sold more new logos.

In any previous quarter in the last four years.

And all access pass holders purchased the greatest volume of services ever to help them address their most pressing righter and tighter challenges.

As shown on slide 18, Franklin Covey has expertise in helping clients address these kinds of challenges and opportunities combined best in class content.

Best in industry coaches and facilitators, who.

By the way earned an average net promoter score of a remarkable 68, and we combined technology into all of that.

For those who may not be as familiar with NPS score of 50 is the standard to be viewed as an NPS all star.

Franklin Covey deep capability to help organizations address their most important challenges as the resulting in the lifetime value of our customers continued continuing to increase.

As you can see shown on slide 19.

The third driver I'd like to talk about it as shown in slide as shown on slide 20 is the strength of our subscription business model.

Because of the importance of the challenges we help organizations address and because organizations are typically needing to address several of these challenges simultaneously.

We moved to a subscription model so that our clients can have access to the full strength and breadth of our range of powerful solutions.

Our subscription model is a powerful engine that's driving strong growth.

Significantly increasing significantly increasing the predictability and durability of our revenue.

And generating a high flow through of increases in revenue to increases in profitability and cash flow.

At substantially all of our business becomes subscription and subscription services over the next few years, we expect our overall growth in revenue and profitability to accelerate.

I'd like to briefly highlight each of these points.

First our subscription and subscription services model is driving strong overall company growth.

As shown in slide 21.

Our subscription and subscription services revenue grew 29% in fiscal 'twenty, two and now accounts for 77% of our total business.

This growth has been driven by our all access pass subscription in enterprise and our leader in me subscription in our education business.

We expect that all access pass to drive strong overall growth in the enterprise business.

It has and it is.

As shown in slide 22, all access pass subscription and subscription services revenue has grown from $13 7 million in fiscal 2016.

To $144 5 million in fiscal 'twenty two.

This robust growth continued in fiscal 'twenty, two with all access pass subscription in subscription services revenue growing 28%.

Similarly, the leader in me subscription offering is driving strong growth in the education Division.

The leader in me subscription offerings growth has been so substantial that in fiscal 'twenty two liter EMEA accounted for $57 6 million or <unk>, 93% of Education's total revenue and.

And leader in me subscription revenues are continuing to grow rapidly as shown on slide 23 leader in me subscription and subscription services revenues grew 29% in fiscal 'twenty two.

Second our subscription model is driving significant increases in both the durability and predictability of our current and future revenue.

As you can see as shown in slide 24, our balance of deferred subscription revenue billed and Unbilled continues to grow significantly increasing 20% or $26 million to a $153 4 million at the end of fiscal 'twenty two.

And additional durability and predictability of our revenue is being created by the increasing percent of our all access pass contracts, which are multi year.

At year end the percent of contracts, which are multi year was 46% up from 42% a year ago and the percent of total all access pass subscription revenue represented by these multi year contracts increased to 61% up from 52% a year ago.

Third our subscription business model has also resulted in a high percentage of revenue growth flowing through the growth in profitability and cash flow.

With our subscription offerings strong gross margins and declining operating SG&A as a percent of sales a high percentage of accelerating growth in subscription revenue flow through to increases in adjusted EBITDA and cash flow.

As noted a few minutes ago as a result, adjusted EBITDA grew 51% or $14 2 million in fiscal 'twenty two.

Fourth.

With substantially all of our business is expected to become subscription and subscription services over the next few years, we expect Franklin covey to overall growth in revenue and profitability to accelerate.

When we began our conversion to subscription to the subscription model approximately seven years ago in one of our quarterly earnings call. We shared that trajectory of adobe's results as they're needed their conversion to subscription.

As shown in slide 25 in the initial years of their conversion to subscription Adobe strong growth in subscription sales was substantially offset by declines in their legacy box software business.

However, their subscription business continued to grow rapidly and the decline in their legacy business flattened out as.

As indicated by the Green line.

Adobe is overall revenue growth and market cap accelerated significantly.

We said that we expect that our conversion to subscription to follow a similar pattern.

We began our conversion and our enterprise business in North America, and as shown on Slide 26, we're really pleased that our conversion.

All access pass in North America has in fact follow the trajectory quite similar to that experienced by Adobe.

As our conversion has progressed subscription sales growth has continued to be very strong while declines in legacy sales have flattened out.

As a result, North America enterprises overall revenue grew significant 19% in fiscal 'twenty two as indicated by the Green line in the right hand chart.

It's accelerating revenue growth in North America has driven an increase in the company's overall growth rate from high single digits to low double digits and we believe now to at least low teens growth call. It 12 or 13 ish percent.

We believe that with the continued growth of our subscription business substantially all of our revenues will be subscription and subscription services in the next few years.

This occurs we expect that the company's overall revenue growth will accelerate to the mid teens and then high teens growth in the coming years and as this occurs we also expect our adjusted EBITDA and cash flow to accelerate.

As shown in slide 27% fourth driver I want to touch on here is that we have we have compelling opportunities for growth and we're committed to taking advantage of these opportunities.

To that end, we continue to make investments in technology content thought leadership and in growing our sales force.

I'd like to briefly highlight our efforts in two of these areas the first being on the technology and content fronts.

To enhance our existing technology in 2021, we acquired strive a.

On leadership development platform trusted by top companies around the world.

Together, we designed the Franklin Covey impact platform.

And after significant testing with hundreds of our clients, we officially launched our platform on October 18th.

We rolled it out to all of our clients in the U S and Canada.

Our strategy is to seamlessly combine our unique and powerful content or.

Our facilitators, our coaches and technology all into one system that will drive collective action in ways that lead to breakthrough results for our clients.

The impact platform provides users easy seamless access to Franklin Covey is trusted powerful content across four key areas leadership individual effectiveness building culture and strategy and sales execution.

And the platform meets users and learning and development professionals, where they are allowing us to develop capabilities and skills through any combination of live online live in person on demand and micro learning modalities.

Metrics, such as user engagement enjoyment and impact our track automatically to provide clear data to those being developed and to their learning and development professionals about both ROI and possible areas for future investment.

Over the coming months, we will extend availability of the impact platform to all of our clients outside the U S and Canada and into each of our core languages.

I'm incredibly grateful to our technology and content teams and to our marketing sales and operations teams for getting us to this exciting point.

In addition to investing in the creation and launch of new technology like the impact platform. We're also making important investments in content.

We're focused on not merely addressing but on actually helping our clients solve their most pressing people related challenges and opportunities every solution in the all access pass and and the leader in me must be truly best in class and its ability to shift mindset skill sets and behavior.

In addition to refreshing and extending our historic content franchises like the seven habits of highly effective people the speed of trust.

The four disciplines of execution, the fixed critical practices to leading a team and our sales performance solutions.

<unk> powerful new offerings that address needs that live at the intersection of what our clients are asking for and where we believe we have something truly unique to offer the world solutions on topics such as change management wellbeing and communications and collaboration solutions. In these areas have either recently launched or will launch over the course of fiscal 'twenty three and into <unk>.

Early fiscal 'twenty four.

Through our investments in technology and content, we're creating an industry, leading subscription offering in a powerful way for our clients to deploy our solutions at scale across the organization to drive measurable behavior change and collective action.

The second area of investment I'd like to highlight is our continued investment and focus on growing our sales force.

Last year, we said that we expected to end fiscal 'twenty to fiscal 'twenty two with just over 300 client partners or salespeople as shown in slide 28. We're pleased that we ended the year with 300 client partners and had an additional two client partners who accepted offers by the end of the year in August , but who start dates were in September .

Our new hiring generally takes place in the back half of our fiscal year and this did incur again in fiscal 'twenty two.

Over the past years. We've also made investments that have established the foundation and infrastructure for being able to further accelerate our sales force growth and we expect to add at least 40 net new client partners in fiscal 'twenty three.

This growth in a number of new client partners not only not only drive accelerating growth as these new client partners ramp, but at any given point in time, the embedded future growth expected to occur from those we have already hired who are in ramp continuing to ramp.

Some of those cohorts totals more than $50 million in latent revenue growth.

Finally, as shown on slide 29.

Fifth driver is that our strong cash flow has been and we believe can continue to be invested to create significant additional value for shareholders.

We've said that our objective is to be a relatively unique kind of company.

Our company to simultaneously generate revenue growth and at least the low teens accelerating to the mid and high teens.

Generates annual growth in adjusted EBITDA in the range of 20% per year.

And reinvest its excess free cash flow into the business and.

High rates of return, while also returning substantial amounts of capital to shareholders.

We believe that we are becoming exactly this kind of company as.

As noted our revenue growth has increased to the low teens and we believe that it will increase into the mid and high teens in the coming years.

We've shared our expectation of generating adjusted EBITDA growth with a compound annual growth rate approaching 20% per year over the next three years and we've been investing our excess cash at high rates of return both in the business and in repurchasing shares to create additional shareholder value.

Having gone through those five drivers I'd like to turn some time now to Steve to review our guidance and outlook.

Thank you again Paul.

So guidance and outlook.

As shown in slide 30, our initial guidance provided last fall.

Is that in FY 'twenty to adjusted EBITDA would increase to a midpoint of $35 million.

And the increase of $7 million or 25% compared to adjusted EBITDA of $28 million in FY 'twenty one.

As discussed we are pleased.

<unk>, both that initial guidance and our interim updated guidance ending the year with $42 2 million of adjusted EBITDA representing growth of 51%.

<unk> to the $28 million of adjusted EBITDA achieved in FY 'twenty one.

Our guidance for FY 'twenty three is that in constant currency.

Adjusted EBITDA will increase from $42 2 million in FY 'twenty two to between 47 and $49 million in FY 'twenty three.

Even after making accelerated investments in sales force.

Of course growth and in content and technology.

And in the context of current macro economic environment, and the continued COVID-19 impact in China.

Underpinning this guidance are the following expectations.

First a significant amount of the deferred revenue currently on our balance sheet will be recognized.

This deferred subscription revenue is secure it has already been built and a majority of it has already been collected.

In addition, a significant portion of our more than $65 million of Unbilled deferred revenue will be built this year and a portion of that will also be recognized this provides tremendous visibility into our revenue for FY 'twenty three.

Beyond.

Second in addition to the recognition of our deferred revenue.

Our all access pass and leader in me subscription and subscription services sales will continue to achieve strong growth.

Driven by high revenue retention.

Sales to new logos, and then expanding lifetime customer value.

These are all assumptions, which we have high confidence.

Third in addition to the strength of our subscription business model.

The increased level of investments, we're making in sales force.

And content and technology this year.

It gives us confidence in our ability to accelerate our growth in years to come.

We view this as an important time to make these investments because it gives us the opportunity to increase our share of market in this environment.

Fourth we're expecting sales in China and Japan.

Tivoli flat and in the year, reflecting the impact of Covid.

Related restrictions implemented in FY 'twenty two that are continuing in FY 'twenty three.

Consistent with our overall guidance of adjusted EBITDA, increasing from $42 $2 million in FY 'twenty, two to <unk> $47 million to $49 million in FY 'twenty three.

We expect adjusted EBITDA in the first quarter to increase from $9 9 million in last year's first quarter.

I am pleased to remember.

And looking at this $9 9 million last year.

That was up from $3 2 million in 2019, the pre pandemic.

So to go from nine 9% to our guidance of 10 5 million to $11 million in constant currency and this and this year's first quarter, even after absorbing the expenses associated with our hiring 30, new client partners during the back half of 'twenty two and on.

Our rollout of our new impact platform, we believe Theres a good first quarter result.

This guidance reflects our expectation of achieving strong growth in the first quarter in North America.

In our English speaking direct offices in the UK and Australia.

And in education.

Partially offset by year over year declines in our operations in China and Japan.

Their rebound from Covid restriction related declines in the back half of FY 'twenty, two we will still still leave them a bit behind in their performance in last year's first quarter prior to the implementation of their new COVID-19 related restrictions.

We expect revenue growth in the first quarter of approximately 12% to 13.

Percent.

And while some quarters revenue growth will be higher than others. We expect revenue growth for the year also by approximately 12% to 13% as Paul said ish.

So that's our guidance now.

Our targets for FY 'twenty three through FY 'twenty five.

A little over a year ago, we set targets for adjusted EBITDA to increase to $40 million in FY, 'twenty, three and to $50 million in FY 'twenty four.

A year ago, we increased those targets to $45 million and $55 million respectively.

As shown in slide 30 at the end of the third quarter FY 'twenty two we increased those targets further to.

To 50 $557 million.

In FY 'twenty, four and gave a new target of $67 million.

Adjusted EBITDA for FY 'twenty five.

Despite these business.

Despite these current environment.

Current environment, we still expect to achieve those targets.

Obviously, while dramatic changes in the world geopolitical Geo political environment and the economy and other factors could impact our expectations. We wanted to show that those are current estimates so Paul back to you. Thank.

Thank you, Steve we feel great about our continued momentum and look forward to accelerating growth in the future with that Darryl why don't we turn it back to you to open the line for some questions.

If anyone has a question you can press zero one on your Touchtone phone. Once again, if you have a question it's zero one on your Touchtone phone.

I am standing by for questions.

Our first question comes from Jerry Martin from Roth Capital Partners go ahead Gerry.

Thanks, Jeff, Jeff excuse me noise Hi.

Hi, Paul how are you doing.

Okay.

I hopped on the call about halfway through so I apologize if you've already addressed this was just curious where you are with the impacts of that platform in terms of its rollout and what what.

Initial uptake here youre seeing out of the client base.

Right, Yes, we did address that we launched it so youll recall.

We acquired strive in 2021, we did some initial work to do some some beta testing with clients, we didn't need to beta test the platform it was already.

Going concern, but we needed to put our content on it and then earlier mid.

Midway through fiscal 'twenty, two we did a limited launch.

Spring and summer with clients in one in one part of the country that went very well and then we are really excited we launched on October 18th.

To all of our clients in the U S and Canada.

And our English speaking clients really February , but U S and Canada focused primarily at so it's been out there since the 18th going very well receiving great feedback and then we will be localizing the platform into our core languages and throughout this year as we approach the winter and into the winter months rolling it out into the other languages. So Phoebe.

<unk> been great at every stage of the initial kind of pilot phase the limited launch phase and in the last couple of weeks here since it's been out in the wild.

We've had great feedback from clients.

Okay, Great and then I assume with the rollout of that you have some pricing power within the all access subscription.

What what your plan is in terms of.

The pricing environment going forward.

Yes. So we just we having just completed our fiscal year, we always do our we do price increases annually. So those land to effect September one.

And.

Built into those price increases that we did we was the presumption that they now have access to the impact of our clients have access to the impact platform plus a whole slew of additional content and solutions still to come this year I think maybe just stepping back for a second.

Or do we see the impact platform driving increased revenue one it does support.

The case for us for a continued price increases, but I think even more and more significant and that will be that.

The thesis for the impact platform seamlessly seamlessly combined these really important elements that are necessary to drive measurable sustained behavior change and heretofore those pieces have been there a bit desperate not just for us but anywhere in the industry.

For a client to pull together into an elegant seamless way that you can deploy.

In math across an entire organization and so the impact platform, providing a much more elegant and easy way for learning and development professional to deploy content in a much more elegant experience for the end user we think that there ought to be three outcomes here one the attractiveness of the all access pass.

<unk> value proposition will which was already attractive will even be more attractive that ought to help us on the new logo front as we show that showcase that and talk about how this really gets the job done for clients. So that'll help on the new logo front.

It's built really to help us expand to larger populations right. So it's this idea of being able to scale, our content, even deeper and further into and across organizations. So we ought to be able to see more pass expansion and then because it allows us to so easily if not just a on demand like self study.

A synchronous learning platform. It it brings together the ability for us to do cohort learning with Franklin Covey facilitators and for us to provide live human being based coaching all within the platform as well so it ought to continue to drive the services growth we've seen over the last many quarters.

Those are probably the most important drivers of where the growth will come from but it also does to your point support.

The case for.

Continually taking a look at pricing.

Okay, and then I was curious if you could give us an update on the education Division I know there is substantial amount of stimulus dollars.

First of all is to help them get their kids caught up.

Based on the on the growth that you're posting and the number of schools added I was just curious if theres any additional commentary you can provide around specifically what youre seeing in terms of the flow through of the stimulus funds.

Yes, Thank you I'm going to turn it to Sean Covey to answer that because I do I, just want to applaud, Sean and the team they had a great year.

Just fantastic number of new schools and Great school retention in the in the current environment. So Sean do you want to take on that question.

Sure Hi, Jeff.

Sure.

Yes so.

The <unk> dollars are out there 200 billion over the three different packages that came out.

It's interesting that less than 20% of that money has been spent so far.

So thats definitely helping the market and.

Helping us.

And Theres a lot more to come over the next couple of years.

I think that as a factor for our success I think more important I think.

While we are having success, probably the number one number one and two reason would be.

Why would this be.

Our solution is just perfectly designed to meet the needs and the challenges in the marketplace right now.

What you have right now is a lot of turnover of teachers and principals.

Mental wellness issues.

And equity you've got a lot of underperforming minority groups learning loss because of Covid.

And.

Need suddenly for the market recognizing that social emotional learning needs life skills.

And people skills are so important to employers and to college and career.

And all of that is just write down or a lane that's what we're best at and so when we started this 12 years ago, we were already in a good spot.

The events of the last few years have made us even more.

More needed.

So that is helping us tremendously and then one other thing I would point to is just that we've really turned our focus from selling to schools to selling the districts and districts are bigger there.

They are stickier, our retention rate with districts is 95%, while our retention rate overall is 89% for single schools.

And where we've earned the right because of our performance and are in the kind of results we're getting.

To work with districts and so I think the district focus.

Our solution being perfectly in line with the challenges of today combined with.

A good funding environment has helped us.

Great very helpful. I appreciate it.

Thanks sure.

And once again, if you have a question is zero one on your Touchtone phone and our next question comes from Dave storms from Stonegate Capital Partners go ahead, Dave.

Thank you and appreciate you all taking my call just a quick from me when.

How's it going.

Looking at your release, you mentioned that approximately 46% of your all access subscriptions are now multi year contracts I was wondering if you could just shed a little more light on the length of those contracts.

You are happy with that number at 46% or you're looking to drive that higher what are your thoughts around.

Contract clients.

Yeah. Thanks, so much that's a great question.

We're very happy with that number.

A little context.

When we when we converted to a subscription model.

About seven years ago.

We haven't conceived of the idea that we ought to try to sell multi year contracts that sounds a little filling in and.

It sounds a little silly now, but we haven't and so and really throughout the first couple of years of all access pass that was not a focus of ours. So it became a focus.

And over the past handful of years that number has continued to steadily increase.

Nothing to now approaching half of the contracts and I think maybe even more importantly significantly more than half of the revenue. So while it's 46% of contracts that 61% of the revenue of our subscription of our all access pass subscription revenue is in a multi year contract and for us multi year to answer the other part of your question.

These are two year or longer contracts. So so all of our all access pass contracts are a minimum one year and we bill upfront so everybody signs at least a one year contract, we bill and collect all the cash upfront.

Almost half of the contracts, though are two years or longer and I would say Steve that.

Probably is like.

Two point.

Something years two.

<unk> here.

As pioneers of kind of the most common.

And there are 61% of the revenue wrapped up in those contracts. So we're we're happy about that I think maybe the other question that would be the other point here that might be helpful. If what's driving that.

Is the nature of the challenges we are helping clients solve we're not we're not really in the thick or thin things are things that a client is going to get solved because they come in and work with us for a quarter right.

The journey that they're on with us.

<unk> is a larger journey of transformation.

Across the entire organization equipping people with the skills and capabilities and that's just not something that happens overnight and our clients recognize that and so out of the gates there they're thinking in terms of multi year, we're thinking in terms of multi year. We're on a journey together, we have a mantra we throw around internally as clients for life, and we kind of wring our hands.

Time, one of those clients that we have done it.

Doesn't end up being a client for life and so I think.

I believe this number will continue to grow its grown.

Over quarter, I don't know that we'll ever be at 100% multi year contracts that will always be a CFO or two like Steve out there to say no we're not going to sign a multiyear contract but.

Just getting <unk>.

But I do think there's continued growth opportunity here and both on the number of contracts and on the.

The amount of revenue.

Okay, that's perfect and Mexico office, but long term solutions require long term contracts.

Yes, if I could ask one more just going back to your client.

Client partners.

Just any more color on the current hiring environment are you starting to see that.

Swing back in our favor.

The employer or is it still challenging out there.

Yes. The answer is yes. It has it has swung back a bit it was challenging.

The first part of last year frankly, even into the later part of our fiscal year or are we have an amazing recruiting team.

They did a great job we set the goal at the beginning of the year to say, we were going to add net 30, which for US was again if you go back in time this is Ben.

Hiring client partners has been a part of our growth strategy an important part for many many years.

And early on we built the infrastructure to step out and say, okay. We're going to hire five year, New and then let's move that to 10, and then we bumped that to 15 and then we said hey, what if we can hire 20, new in a year.

And we did and then this last year, we said we're going to go for 30, and we felt great about achieving that.

It was both a difficult environment, but also.

I think partly because of what's happening inside our company and how well things are going we are attracting amazing people, who want to come be a part of what's going on they are attracted to our mission and what we're doing and so we were pleased to hire 30 and build the infrastructure at the same time to step across again and move that.

Number to <unk> 40 in this current year.

That's perfect. Thank you and congrats on the strong year.

Thanks, Nick.

Once again, if you have a question is zero one and our next.

Question is from Alex Paris from Barrington Research go ahead Alex.

Thank you.

Thank you for taking my question congratulations on the strong finish to the fiscal year.

I wanted to dive a little deeper into.

Capital allocation I think you talked about it a little bit earlier I had a technology glitch here, but I think I got it.

You did share repurchases of close to $24 million. This year didn't look like you repurchased any shares during the fourth quarter.

I think that was the nine months total as well so.

But.

How do you decide when to repurchase shares.

Is it a market price versus your calculation of the intrinsic value that sort of thing and what sort of share repurchases should we be assuming going forward I realize they are opportunistic to some extent, but cash is building.

Okay.

Steve you want to comment on that.

Alex.

Yes.

We like being in a position of Opportunistically buying shares in the open market and then we also.

For the next few years, we'll have an accelerating.

Significantly accelerating.

<unk> shares granted under our <unk> programs or extended two years due to Covid. So will we have a lot of buybacks related to those grants also.

But yes, we.

We're in a position to buy Opportunistically means we're looking at a lot of things. We're looking at alternative uses of cash of course, we're looking at our our net present value of cash flows calculations compared to the stock price looking at the direction of that.

Stock prices going and then and then also we're considering.

Are things going on internally that might preclude us from buying shares at any point in time.

So I believe what we're doing is what you might expect we're considering all of those factors all all of the time.

And deciding when when it would be prudent for us to be in the in the market.

At what price.

And then we buy shares.

And as you know, we don't make any commitments as to how much we're going to buy but I think you can expect us to be buying to be buying shares in FY 'twenty three.

Got you that's helpful and then other priorities, obviously, our organic organic investments, which you've given a lot of detail on hiring of the client partners content technology and so on repurchases. We just spoke about what about M&A, you've been reasonably acquisitive over the years.

Whats your expectations for M&A going forward are there any areas that you need to add and there is a build versus buy decision and things like that.

Yes, Alex this is Paul.

I would say that is that is another area, where as we think about capital allocation, we're thinking about.

Quite a bit right now.

There is a lot going on in the industry, which presents a lot of intra.

Interesting opportunities and I think for US It comes down to two one of the one of the deciding factors is that build versus buy right. So the last couple of deals that we've done strive and jonna.

We're very much that we were clear we needed the capabilities that each of those companies brought to us and we thought gosh. It's.

This should be a a buy versus build we will get there more quickly et cetera, and so there.

We could envision adding additional capability to the all access pass and making a potential.

Potential buy versus build decision.

There could also be.

No.

Expanded content areas, where again, we would ask the question do we have the wherewithal to build or should we go by.

Increasingly there might be opportunities.

To add more customers more quickly that could be.

Buy versus build of course, we're going to build our own customers. I mean, we have great a great return on hiring client partners as you know from over the years of hiring and growing our own salesforce, but if there was an opportunity to accelerate growth even more quickly than.

Then that singular plywood provide that would be another opportunity so were we.

We're thinking about those.

Maybe even.

At greater rates right now that we have in the past and I would expect would continue to do so as we go throughout fiscal 'twenty three.

Great. Thank you very much that's helpful.

Thanks, Alex.

And we have no more questions at this time I'll turn it back to Paul Walker for closing comments.

Thank you Darrell well again, thanks, everybody for joining today and I just want to thank our entire team for their great work throughout fiscal 'twenty two.

We are pleased that Europe , you are on this journey with us as well.

Thanks again for joining us have a great rest of your evening.

And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

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Welcome to the Q4 2022 Franklin Covey earnings Conference call. My name is Daryl and I will be your operator for today's 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.

Zero one on your Touchtone phone I will now turn the call over to Derek Hatch Derek you may begin.

Thanks Darryl.

Hello, everyone on behalf of Franklin Covey Company, It's my opportunity to welcome you to our <unk>.

Earnings call for the fiscal year ended.

<unk> 31, 2022 on our fourth quarter results as well.

Forward looking statements are based upon management's 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 and renewal rates for our subscription offerings, including the all access pass we earn new memberships the duration and recovery from the COVID-19 pandemic the ability.

Of the company to hire productive sales professionals general economic conditions competition in the Companys targeted marketplace market acceptance of new offerings or services and marketing strategies changes in the companys market share changes in the size of the overall market for the Companys products changes in the training and spending policies of the Companys 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 and Exchange Commission.

Our expectations. These forward looking statements are based on management's current expectations and we undertake no obligation to update or revise these forward looking statements.

To reflect events or circumstances after the date of todays presentation, except as required by law.

With that I would like to turn the time over to this afternoon to Mr. Paul Walker, President and Chief Executive Officer, Paul Thank you Eric.

Pleased to have Bob our executive Chairman, Bob Whitman, our executive chairman with us as well.

We're very pleased that our results for fiscal 2022 were strong and even stronger for the fiscal fourth quarter than expected.

I'd like to start with a few headlines beginning with those about our revenue growth as you can see as shown on slide four.

Our revenue growth for fiscal 'twenty, two with especially strong increasing 17% to $262 $8 million and the 17% growth benefited somewhat by comping against Covid related quarters in the first and second quarters, but also reflected the impact of Covid related lockdowns and restrictions in China and Japan.

Both of which extended over the fiscal second and third quarters and even into a portion of the fourth quarter and also by the impact of foreign exchange.

Excluding China and Japan revenue for the full fiscal year 2022 grew 21% even after the impact of FX.

Our fourth quarter revenue growth was also exceptionally strong with revenue growing 14% and which would have grown 17%, excluding China and Japan.

As significant as was our overall growth for the year and the quarter, our subscription and subscription services revenue growth was even stronger.

Also as you can see shown on slide four total subscription and subscription services revenue grew 29% in fiscal 'twenty two and.

<unk> increased 23% in the fourth quarter.

The durability of our revenue also continues to increase and our visibility into future revenue growth also continues to expand.

As you can see as shown in slide four our year end balance of deferred subscription revenue billed and Unbilled increased 20% over last year's fourth quarter or $26 million to a $153 4 million.

And as shown on slide five and our North America Enterprise operations as a percent of our all access pass contracts, which are multi year increased to 46% at year end up from 41% at the end of fiscal 'twenty one.

The average lifetime value of our all access pass customers also continued to increase.

Our average subscription revenue per client increased from 42 to 47000 for the year.

All access pass revenue retention also continued to be well above 90%.

The combination of these factors resulted in our gross margin percent remaining at a very strong 85%.

I'd like to now discuss some profit profitability metrics some of the headline metrics as you can see as shown in slide six.

For the fiscal year, our gross margin grew 17% or $29 million to $201 9 million.

And our gross margin percent for the fiscal year remained a very strong 76, 8%.

Ah level almost equal to that achieved in fiscal 'twenty, one even after considering the significant growth in subscription services just noted.

Gross margin percent for the fourth quarter was very strong at 75%.

Operating SG&A as a percentage of sales improved another 389 basis points for the year ending up at 68% compared to 64, 7% of 64, 7% in fiscal 'twenty, one which.

Which itself was 139 basis points better than fiscal 2020.

Operating SG&A as a percent of sales also improved 394 basis points for the fourth quarter to 58%.

As a result of this strong revenue growth and high flow through.

Adjusted EBITDA increased 51% or $14 2 million for fiscal 'twenty, two to $42 2 million and grew 26% or $2 8 million to $13 3 million in the fourth quarter.

Net cash provided by operating activities increased 13% to $52 3 million for the year compared to $46 2 million for fiscal 'twenty one.

During fiscal 'twenty. Two we also returned a significant amount of capital to shareholders investing $23 $9 million to repurchase 585000 shares.

And even after investing this $23 9 million for share.

Purchases, we ended the year with $75 $5 million of liquidity comprised of $65 million in cash and with our full $15 million revolving credit line Undrawn.

We will discuss our guidance for fiscal 'twenty, three and our outlook for fiscal 'twenty four 'twenty five in a moment.

But as shown on slide seven.

As a result of our strong top and bottom line growth in fiscal 'twenty three.

And the strength of factors driving it we're pleased that the $42 2 million of adjusted EBITDA achieved for fiscal 'twenty to exceed both our most recent adjusted EBITDA guidance range of between 40 million $41 5 million and our original adjusted EBITDA guidance range of between 34% and $36 million.

As a result of the strength of these drivers underlying this performance.

Our revenue for fiscal 'twenty, three our revenue guidance for fiscal <unk>, our guidance for fiscal 'twenty three of that adjusted EBITDA will increase from $42 2 million.

In fiscal 'twenty, two to between 47% and $49 million in fiscal 'twenty three.

As also shown on slide seven while of course, some quarters revenue growth will be higher than others, we're increasing.

Our revenue outlook for fiscal 'twenty, three and beyond from the expectation that our rolling 12 months revenue will grow in the low double digits to our current expectation that our rolling 12 months revenue growth will now be in the low teens call. It 12 or 13 ish percent.

And we'll move towards the mid and then high teens in the years to come.

As a result.

Building on our adjusted EBITDA guidance range of between 47% and $49 million for fiscal 'twenty. Three we expected adjusted EBITDA will then increase to approximately $57 million in fiscal 'twenty, four and to approximately $67 million in fiscal 'twenty five.

With this strong expected growth in revenue and adjusted EBITDA. We also expect to generate significant amounts of free cash flow, which as we'll discuss in more detail in a moment, we expect to reinvest in the business to high rates of return while potentially also returning substantial amount to shareholders through ongoing share repurchases.

We're extremely pleased by our accelerated accelerating revenue and adjusted EBITDA growth.

And the business has momentum.

Prior to the pandemic, we talked about our ability to predictably generate high single digit revenue growth while at the same time, achieving even more even more rapid growth in adjusted EBITDA.

I'd now like to turn some time to Steve dig a little bit deeper into some of these results.

Thank you Paul Good afternoon, everyone, it's nice to be with you today.

As Paul said, we're really pleased with the ongoing combined strength and growth on our revenue adjusted EBITDA and cash flow.

And as Paul also noted we're pleased to have achieved these extremely strong results, even after absorbing COVID-19 related impacts.

And our results in China and Japan.

And after absorbing a $2 6 million decrease related in unfavorable foreign currency fluctuations.

To provide a deeper and more detailed understanding of the factors underlying this strong performance I'd like to quickly report on the three key areas of our company.

Specifically on our enterprise <unk>.

Business in North America.

Our enterprise business internationally.

Our education business.

Almost all of which is also in North America.

First as shown in slide eight results in our enterprise business in North America.

Were especially strong.

Revenue in North America, which accounts.

423% of total Enterprise Division revenue.

Grew 19% in FY, 'twenty, two and 17% in the fourth quarter.

Subscription and subscription services revenue grew even more rapidly increasing 26% for the year and 22% in the fourth quarter.

North America Enterprise's balance of deferred revenue billed and Unbilled grew 20% to $110 6 million.

And the percentage of North America as all access pass contract revenue represented by multiyear contracts increased 61%.

<unk> year end up from 52% last year.

Second as shown on slide nine while overall results in our international direct offices were slower than originally expected as a result of COVID-19 related impacts on our operations in China and Japan during much of our second and third quarters Rev.

Revenue growth in our offices, and UK, Ireland, Germany, Austria, and Switzerland, and Australia countries.

Which together make up approximately 48% of total international sales.

And we're all access pass Mic makes up a substantial portion of those sales.

Was very strong.

Revenue in these offices grew 40% in FY 'twenty, two and grew 23% in the fourth quarter.

All access pass subscription and subscription services sales, which make up approximately 83% of total sales in these countries.

Grew even more rapidly increasing 51% for the year and 7% in the quarter.

Our operations in Japan, and China, and Japan, which account for approximately 52% of international sales.

Less than 7% of total sales of the company.

Widespread COVID-19 related Lockdowns in China are very cautious and slow return to normalcy.

Post COVID-19 as guided by the Japanese government and negative FX impacted much of the year in these two countries as revenue declined 16% for both FY 'twenty, two and the fourth quarter.

Now as shown in slide nine our international licensee partner revenue increased 17% for the year.

And taken as a group our licensee partners operations continue to strengthen coming out of Covid.

Despite the impact of the war in the Ukraine and related economic interruptions in Eastern Europe .

Finally, as shown on slide 10.

The results in our education business, which accounts for approximately 24% of total company revenue were also very strong.

Education revenue grew 26% in FY, 'twenty, two and 17% in the fourth quarter.

Education subscription in subscription services revenue.

The 29% in the year and 18% in the fourth quarter.

Education's year end balance of deferred subscription revenue grew 17%.

And we retained 89% of our existing schools.

2022, while adding a record 739 new schools.

An increase of 157 schools or 27%.

Compared to the strong 582, new schools, we added in FY 'twenty one so good results from the.

Three main areas of the company saw back to Paul.

Thank you Steve Thanks for the Great review of our results.

I'd like to now briefly highlight five key drivers, which are underlying the strong results.

We focused on these last quarter, but I thought that their importance is such that it would be good to report and reemphasize them again here today.

As shown in slide 11, the first drivers at the markets, we've chosen to serve a very large.

They are growing significantly and they're highly fragment fragmented.

This provides us with enormous headroom for growth and the opportunity to earn a significant share in each of these markets.

Second driver will talk about is that we're focused on the most important lucrative and durable space in each of these markets.

The opportunities and challenges we help our clients address challenges that require the collective action of large numbers of people.

Must win for organizations that are very durable.

This provides us with the opportunity to partner with our organizational clients and with schools in both good times and in more challenging.

The third driver is the ongoing strength of our subscription business model.

It's a powerful engine, that's driving accelerated and sustainable growth.

<unk>.

A significant and increasing predictability and durability of our revenue and a high flow through of increases in revenue to growth and profitability and cash flow.

Driver number four is that we have a number of compelling opportunities to accelerate our growth.

The combination of the large and growing markets we serve the.

The importance of the challenge as we help our clients address.

And the strength of our business model is creating exciting opportunities for further acceleration of growth.

Additional shareholder value.

I'd like to touch on each of these first however, I'd like to emphasize that while each of these drivers is important in any environment.

We believe there are even more important in uncertain and turbulent times like at present.

As shown on slide 12 driver one is the attractiveness of the markets. We've chosen to serve each is large growing and fragmented.

As you can see in slide 13, our focus is on three large and growing market the enterprise learning market.

Our total addressable market is 99 billion and growing by approximately $3 billion a year.

The education market, where our total addressable market is $59 billion growing approximately $1 billion a year.

And the market where business leaders invest dollars directly from their operating budgets in order to improve their organization's performance.

The total addressable market is not defined but organizations operating budgets are in the trillions of dollars in growing.

Each of these markets is highly fragmented with the largest players accounting for only approximately 1% to 2% of sales.

Driver number two is shown in slide 14 is that we're focused on the most important lucrative and durable space in each of these markets.

As shown in slide 15.

And as we've explained in prior calls many things can add value to an organization, including things like providing people with useful information and helping them learn new skills.

However, as important as sharing information and helping people learn new skills can be the single most impactful opportunity for breakthrough performance improvement within most organizations lives and mobilizing the collective action and best efforts of large numbers of people toward the achievement of their organization's highest priorities.

In other words as illustrated in slide 16, we help organizations intentionally and systematically move the collective performance of their peoples that are people and units righter and tighter.

Toward what they already do well and disparate pockets.

This does not happen by accident.

In fact, our entire organization is focused on helping companies schools in teams of all sizes and across just about every industry achieved just these kinds of results.

Importantly, these righter and tighter challenges and opportunities are very durable.

Every organization has been in both good times and during more challenging one.

Ensuring execution on major strategic initiatives and driving breakthroughs in customer loyalty.

Winning cultures.

And equipping leaders with the skills to engage build and retain talent and a unique and challenging labor market.

Crisis and throughout the pandemic that continues to be true in the increasingly uncertain economic economic conditions, we're facing today.

I'd like to share three very recent examples of how we're partnering with organizations to address their critical challenges and opportunities in this very environment.

First one of our largest all access pass contracts.

With a contract with a large multinational conglomerate is extending their contracts for an additional five year term.

This clients choosing to extend and expand their relationship with us because of the way in which the solutions in the all access pass directly address their most pressing challenges.

This client sees an opportunity to increase their usage of our solutions and at the same time reduce the number of external providers with whom they work.

The result will create a more scalable and powerful solution for the clients and a larger multi year all access pass holding client for Franklin Covey.

The second examples of recent new client win with significant global Logistics company, where we've also.

Also chosen to engage in a multi year five year all access pass contract will be working closely with this client to increase our global sales and sales leadership capability as they prepare to compete in a more challenging environment.

Finally, one of the largest technology companies in the United States has been an all access pass client for several years and recently renewed their all access pass for an additional three years.

This client is engaging with us to help them build culture and develop leaders at all levels.

Utilize the seven habits to create the foundation for their culture and every new employee go through the seven habits as part of Onboarding.

Incidentally, the seven habits as they are most highly rated offering.

This client also uses our six critical practices, leading a team solution to equip managers with the right leadership mindset skill sets and behaviors to create winning culture.

High levels of engagement and sustained results.

And our U S, Canada enterprise business.

More organization signed multi year contracts and in any quarter ever.

We sold more new logos.

And in any previous quarter in the last four years.

And all access pass holders purchased the greatest volume of services ever to help them address their most pressing righter and tighter challenges.

As shown on slide 18, Franklin Covey has expertise in helping clients address these kinds of challenges and opportunities combined best in class content.

Best in industry coaches and facilitators.

By the way earned an average net promoter score of a remarkable 68, and we combined technology into all of that.

For those who may not be as familiar with NPS score of 50 is the standard to be viewed as an NPS all star.

Franklin Covey deep capability to help organizations address their most important challenges as the resulting in the lifetime value of our customers continued continuing to increase.

As you can see shown on slide 19.

The third driver I'd like to talk about it as shown in slide as shown on slide 20 is the strength of our subscription business model.

Because of the importance of the challenges we help organizations address and because organizations are typically needing to address several of these challenges simultaneously.

We moved to a subscription model so that our clients can have access to the full strength and breadth of our range of powerful solutions.

Our subscription model is a powerful engine that's driving strong growth.

Significantly increasing significantly increasing the predictability and durability of our revenue.

And generating a high flow through of increases in revenue to increases in profitability and cash flow.

Substantially all of our business becomes subscription and subscription services over the next few years, we expect our overall growth in revenue and profitability to accelerate.

I'd like to briefly highlight each of these points.

First our subscription and subscription services model is driving strong overall company growth.

As shown on slide 21.

Our subscription and subscription services revenue grew 29% in fiscal 'twenty, two and now accounts for 77% of our total business.

This growth has been driven by our all access pass subscription in enterprise and our leader in me subscription in our education business.

We expect that all access pass to drive strong overall growth in the enterprise business.

It has and it is.

As shown in slide 22, all access pass subscription and subscription services revenue has grown from $13 7 million in fiscal 2016.

To $144 5 million in fiscal 'twenty two.

This robust growth continued in fiscal 'twenty, two with all access pass subscription in subscription services revenue growing 28%.

Similarly, the leader in me subscription offering is driving strong growth in the education Division.

The leader in me subscription offerings growth has been so substantial that in fiscal 'twenty two liter EMEA accounted for $57 6 million or <unk>, 93% of Education's total revenue and.

And leader in me subscription revenues are continuing to grow rapidly as shown on slide 23 leader in me subscription and subscription services revenues grew 29% in fiscal 'twenty two.

Second our subscription model is driving significant increases in both the durability and predictability of our current and future revenue.

And additional durability and predictability of our revenue is being created by the increasing percent of our all access pass contracts, which are multi year.

At year end the percent of contracts, which are multi year with 46% up from 42% a year ago and the percent of total all access pass subscription revenue represented by these multi year contracts increased to 61% up from 52% a year ago.

Third our subscription business model has also resulted in a high percentage of revenue growth flowing through the growth in profitability and cash flow.

With our subscription offerings strong gross margins and declining operating SG&A as a percent of sales a high percentage of accelerating growth.

In subscription revenue flow through to increases in adjusted EBITDA and cash flow.

As noted a few minutes ago as a result, adjusted EBITDA grew 51% or $14 2 million in fiscal 'twenty two.

Fourth.

When we began our conversion to subscription to the subscription model approximately seven years ago in one of our quarterly earnings calls we shared the trajectory of Adobe's results as they're needed their conversion to subscription is.

As shown in slide 25 in the initial years of their conversion to subscription Adobe strong growth in subscription sales was substantially offset by declines in their legacy box software business.

However, their subscription business continued to grow rapidly and the decline in their legacy business flattened out.

As indicated by the Green line Adobe.

Adobe is overall revenue growth and market cap accelerated significantly.

We said that we expect that our conversion to subscription to follow a similar pattern.

We began our conversion and our enterprise business in North America, and as shown on Slide 26, we're really pleased that our conversion.

All access pass in North America has in fact follow the trajectory quite similar to that experienced by Adobe.

As our conversion has progressed subscription sales growth has continued to be very strong while declines in legacy sales have flattened out.

As a result, North America enterprises overall revenue grew significant 19% in fiscal 'twenty two as indicated by the Green line in the right hand chart.

We believe that with the continued growth of our subscription business substantially all of our revenues will be subscription and subscription services in the next few years.

As this occurs we expect that the company's overall revenue growth will accelerate to the mid teens and then high teens growth in the coming years and as this occurs we also expect our adjusted EBITDA and cash flow to accelerate.

As shown in slide 27% fourth driver I want to touch on here is that we have we have compelling opportunities for growth and we're committed to taking advantage of these opportunities.

To that end, we continue to make investments in technology content.

<unk> leadership and in growing our sales force.

I'd like to briefly highlight our efforts in two of these areas the first being on the technology and content fronts.

To enhance our existing technology in 2021, we acquired strive.

Our leadership development platform trusted by top companies around the world.