Breaking Down Franklin Covey Co. (FC) Financial Health: Key Insights for Investors

You've been watching Franklin Covey Co. (FC) navigate a choppy economic environment, and honestly, their fiscal year 2025 results give us a classic mixed bag. The headline is that the company hit its revenue guidance, posting full-year revenue of $267.1 million, but the full-year diluted earnings per share (EPS) of just $0.24 was a significant step back from the prior year, largely due to a tough Q4 where EPS missed consensus. Still, the real story for this subscription-based model is the sticky revenue: deferred subscription revenue actually increased 3% year-over-year, hitting $111.7 million as of August 31, 2025, which is a defintely strong forward indicator. So, while the Enterprise Division struggled with canceled government contracts, the underlying client commitment-the All Access Pass-is holding up, and that's why some analysts are keeping a bullish stance with a median 12-month target of $35. The question now is whether that subscription backlog can truly offset the near-term macroeconomic drag on new sales; let's break down the balance sheet and the strategic pivot to see where the real opportunity lies.

Revenue Analysis

You need a clear picture of where Franklin Covey Co. (FC)'s money is coming from, especially after a year of market volatility. The direct takeaway is that while the company's total revenue for fiscal year 2025 saw a dip, the underlying shift to a subscription model continues to build a strong foundation of deferred revenue, which is a key stability indicator.

Franklin Covey Co. (FC)'s consolidated revenue for the fiscal year ended August 31, 2025, came in at $267.1 million. This represents a 7% decline from the prior fiscal year's revenue of $287.2 million. This year-over-year revenue growth rate decrease is defintely a point of focus for investors, but it's crucial to look at the primary revenue streams to understand the full story. The core of the business is now its subscription model, which is a more predictable source of revenue.

The primary revenue source for Franklin Covey Co. (FC) is its subscription and subscription services, which accounted for $225.9 million of the total revenue in fiscal 2025. This is slightly down from the prior year's $231.8 million, but the long-term trend toward recurring revenue is clear. The All Access Pass (AAP) is the engine here, and the strength of this model is best seen in the deferred subscription revenue, which grew 3% year-over-year to $111.7 million as of August 31, 2025. That's future revenue already contracted-a great sign of customer commitment.

Here's the quick math on how the two main business segments contributed to the total revenue for fiscal 2025:

The Enterprise Division, which focuses on organizational performance improvement for businesses, is the clear revenue leader, generating 70% of the company's overall revenue. However, this segment was the primary driver of the overall revenue decline. The Education Division, which works with K-12 schools, showed relative stability, with revenue increasing slightly to $74.6 million in fiscal 2025 compared to $74.2 million in the prior year.

What this estimate hides is the impact of specific, non-recurring events. The Enterprise Division's revenue performance was heavily impacted by a few key factors, signaling near-term risks you need to watch:

• Canceled U.S. federal government contracts.
• A $15.8 million decrease in North America segment revenue.
• A $4.0 million decrease in International Direct Office revenue.
• The non-repeat of a $6.2 million North America intellectual property (IP) deal recognized in Q4 FY2024.

The company is addressing this by restructuring its North America sales force to focus on new client acquisition and expansion, which should accelerate sales growth in future periods. To be fair, the stability of the Education Division and the growth in deferred subscription revenue indicate that the core value proposition is still resonating with clients. For a deeper dive into who is betting on this future, you should be Exploring Franklin Covey Co. (FC) Investor Profile: Who's Buying and Why?

Profitability Metrics

You need to know if Franklin Covey Co. (FC) is turning its revenue into real profit, especially as the market shifts its focus from pure growth to efficiency. The direct takeaway for the fiscal year (FY) 2025 is that while the company maintains a strong gross margin, a significant increase in operating costs has severely compressed both its operating and net profitability.

Franklin Covey Co.'s core profitability ratios for the fiscal year ended August 31, 2025, show a mixed picture. The Gross Profit Margin remains robust, reflecting a strong pricing model for their All Access Pass and content, but the Net Profit Margin has fallen sharply, signaling a major issue with expense control.

• Gross Profit Margin: The margin was 76.2% in FY 2025. This is a high-quality margin, suggesting the Cost of Goods Sold (COGS)-primarily content development and direct service delivery-is well-managed relative to revenue.
• Operating Profit Margin: This margin fell to approximately 10.75%, reflecting a substantial increase in Selling, General, and Administrative (SG&A) expenses.
• Net Profit Margin: The final margin was a thin 1.16%, down dramatically from the prior year. That's a razor-thin cushion.

Profitability Trends and Operational Efficiency

The trend over the past year is a clear warning sign. In FY 2024, Franklin Covey Co. reported a Net Income of $23.4 million. For FY 2025, that figure plummeted to just $3.1 million, despite generating $267.1 million in revenue. Here's the quick math: that's an 86.7% drop in net income year-over-year.

The root cause is operational efficiency, specifically cost management. The Gross Margin only slightly decreased from 77% in FY 2024 to 76.2% in FY 2025. This small dip was attributed partly to increased product amortization costs and shifts in product mix. But the real pressure point is SG&A, which jumped to $174.8 million in FY 2025 from $165.8 million in the prior year. This spending surge was primarily due to the hiring of new sales and sales support personnel as part of their go-to-market transformation. Simply put, they spent more to chase revenue that didn't materialize as expected.

Benchmarking Against Industry Averages

When you compare Franklin Covey Co.'s performance to the broader Professional Services and Consulting industry, the divergence in margins is stark. The company is excelling at the top line but failing at the bottom line.

Franklin Covey Co.'s 76.2% Gross Margin is defintely a strength, placing it at the high end of the Professional Services benchmark. This suggests strong pricing power and a valuable Mission Statement, Vision, & Core Values of Franklin Covey Co. (FC). But that 1.16% Net Profit Margin is a major red flag; it places the company at the lower end of the general service industry, which typically sees net margins between 10% and 20%. The investment in the sales force and go-to-market structure has not yet translated into the necessary revenue growth to absorb the higher costs, which is why the Operating Margin is also lagging the strong industry benchmark of 15% to 20%.

Next Step: Review the Q1 2026 guidance for revenue and Adjusted EBITDA to see if the cost-cutting measures and sales investments are projected to reverse this margin compression.

Debt vs. Equity Structure

If you're looking at Franklin Covey Co. (FC), the direct takeaway is that the company operates with a remarkably conservative capital structure, relying almost entirely on equity financing and its own cash flow, not debt. Their Debt-to-Equity (D/E) ratio for the third quarter of fiscal year 2025 (Q3 FY2025) is exceptionally low, sitting at about 0.0124. This is a clear signal of financial strength and minimal leverage risk.

To be fair, in the professional services and consulting space, high debt isn't typical, but Franklin Covey Co.'s position is still outstanding. The median D/E ratio for the Management Consulting Services industry in 2024 was around 1.01. Here's the quick math: Franklin Covey Co.'s total debt is only about 1.24% of its shareholder equity, which is defintely a risk-averse profile.

• Total Debt (Q3 FY2025): The company's short-term debt, specifically the current portion of notes payable, was only about $0.816 million as of May 31, 2025.
• Long-Term Debt: The long-term portion of notes payable was effectively zero, and the company reported no drawdowns on its substantial $62.5 million revolving credit facility as of the fiscal year end, August 31, 2025.
• Total Shareholders' Equity (Q3 FY2025): Equity stood at approximately $65.579 million as of May 31, 2025.

The balance sheet tells a story of a company that prioritizes liquidity and internal funding. As of August 31, 2025, Franklin Covey Co.'s liquidity remained strong at over $90 million, including $31.7 million in cash and cash equivalents. They simply don't need to borrow heavily to fund operations or growth, which is a big plus for stability.

Instead of debt financing, Franklin Covey Co. has actively pursued equity funding mechanisms to return capital to shareholders. The company completed $10 million of common stock repurchases during the fourth quarter of fiscal 2025 and the first quarter of fiscal 2026. They also entered into a $20 million 10b5-1 trading plan in November 2025 under an existing $50 million authorization. This capital allocation strategy favors enhancing shareholder value and maintaining a pristine balance sheet over taking on new liabilities.

What this estimate hides is the potential for a larger, strategic debt issuance to fund a major acquisition, but for now, the signal is clear: the company is self-funding and cash-rich. If you want to dive deeper into who is buying the stock, you can check out Exploring Franklin Covey Co. (FC) Investor Profile: Who's Buying and Why?.

Liquidity and Solvency

You're looking for a clear picture of Franklin Covey Co. (FC)'s ability to meet its near-term financial obligations, and honestly, the numbers for the fiscal year ended August 31, 2025, show a mixed, but manageable, liquidity profile. The headline is that while the traditional ratios are below the 1.0 benchmark, the company's subscription model and significant off-balance-sheet liquidity provide a critical cushion.

FC's Current Ratio for FY2025 stands at approximately 0.82. This is calculated by dividing total current assets of $129.5 million by total current liabilities of $157.3 million. A ratio below 1.0 means that, technically, current assets don't fully cover current liabilities. But here's the key context: a significant portion of those liabilities is Deferred Subscription Revenue (money paid upfront for services not yet delivered), totaling $106.5 million. This isn't a typical debt; it's a future revenue obligation, not a cash drain.

The Quick Ratio (Acid-Test Ratio), which excludes inventory and prepaid expenses to measure the ability to pay obligations with only the most liquid assets, is also tight, sitting at about 0.79. This is defintely something to watch. The ratio is calculated by taking quick assets (Current Assets minus Inventories of $5.2 million) and dividing by Current Liabilities. The low ratio reflects the high deferred revenue balance, but also points to a reliance on collecting the $68.4 million in Accounts Receivable to cover short-term cash needs.

• Current Ratio: 0.82 (Current Assets / Current Liabilities).
• Quick Ratio: 0.79 (Quick Assets / Current Liabilities).
• FC is a service company, so deferred revenue inflates current liabilities.

When assessing liquidity, you must look at the cash flow statement, not just the balance sheet. For the full fiscal year 2025, cash provided by operating activities was a solid $29.0 million, but this was a sharp decline from the prior year. Free Cash Flow (FCF) also dropped substantially to $12.1 million, down from $48.9 million in FY2024. This decrease was driven primarily by lower net income and a $7 million unfavorable change in working capital, which reflects the timing of collections and payments.

Here's the quick math on their cash flow situation for FY2025 (in millions of USD):

The real strength of FC's liquidity lies in its total available capital. The company reports total liquidity remains strong at over $90 million, composed of the $31.7 million in cash and cash equivalents plus an undrawn $62.5 million credit facility. This substantial, untapped line of credit means that while the operating cash flow saw a dip, the company has an immediate financial backstop to manage any unexpected near-term obligations or to fund strategic initiatives, like the $10 million in common stock repurchases completed during Q4 FY2025 and Q1 FY2026.

For a deeper dive into who is betting on this model, you should check out Exploring Franklin Covey Co. (FC) Investor Profile: Who's Buying and Why?

Valuation Analysis

You're looking at Franklin Covey Co. (FC) after a tough year, wondering if the recent stock dip makes it a bargain or a value trap. My take is that while the trailing metrics look stretched, the forward-looking picture, coupled with the dramatic stock price decline, suggests the stock is currently undervalued based on analyst consensus and future earnings projections.

The market capitalization for Franklin Covey Co. sits at about $182.95 million as of November 21, 2025, with an Enterprise Value (EV) of $159.07 million. Here's the quick math on the key valuation multiples using the fiscal year 2025 data, which ended August 31, 2025:

• Price-to-Earnings (P/E) Ratio: The trailing P/E ratio is a high 63.41. This is based on a challenging FY2025 Net Income of only $3.07 million, which was significantly impacted by transformation costs and macroeconomic headwinds.
• Forward P/E Ratio: This tells a better story, dropping sharply to 18.50. This implies investors and analysts are defintely expecting a substantial rebound in earnings for FY2026.
• Price-to-Book (P/B) Ratio: At 2.81, the P/B is reasonable for a content and services company, meaning the stock trades at less than three times its book value.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: This multiple is a moderate 7.62, using the FY2025 Adjusted EBITDA of $28.8 million. This is a clean one-liner: The company is priced like a stable, mature business on an EV/EBITDA basis.

Stock Price Trend and Analyst View

The stock price trend over the last year has been brutal. The Franklin Covey Co. share price has fallen by a substantial 61% over the last 12 months, trading near its 52-week low. The stock closed at around $15.05 per share on November 21, 2025. This massive drop is a direct reflection of the 7% decline in FY2025 revenue to $267.1 million and the sharp drop in Adjusted EBITDA.

Still, Wall Street analysts see a clear path for recovery. The consensus rating on Franklin Covey Co. is a clear Buy. This optimism is grounded in the company's subscription-based All Access Pass (AAP) model and the expectation that strategic transformation costs will yield results in the coming years. The average 12-month price target is set at $24.50.

What this estimate hides is the execution risk of their go-to-market transformation, but the upside potential is significant if they hit their FY2026 guidance. Also, if you are looking for income, you should know that Franklin Covey Co. does not currently pay a regular cash dividend, so the dividend yield and payout ratio are not applicable metrics for this stock. The focus is entirely on capital appreciation through business growth. For a deeper dive into who is betting on this turnaround, you should check out Exploring Franklin Covey Co. (FC) Investor Profile: Who's Buying and Why?

Risk Factors

You're looking at Franklin Covey Co. (FC) and seeing a strong brand, but the fiscal 2025 results tell a story of a business navigating some serious headwinds. The core takeaway is this: while the company has a solid cash position, the external economic climate and internal strategic shifts have hammered near-term profitability. Your focus should be on the steep drop in net income and the execution risk of their sales restructuring.

External Pressures and Market Headwinds

The biggest risks facing Franklin Covey Co. (FC) are external, plain and simple. They operate in a corporate training and education space that is often the first to see budget cuts when the economy gets tight. We saw this play out in fiscal 2025 with consolidated revenue falling to $267.1 million, a 7% decline from the prior year.

The Enterprise Division, which is the corporate training arm, took the brunt of the hit, with revenue dropping to $188.1 million. This downturn wasn't just a slow leak; it was directly tied to three concrete issues:

• Macroeconomic Uncertainty: Ongoing global uncertainty is causing clients to delay or outright cancel large-scale contracts.
• Geopolitical Tensions: These tensions are specifically impacting international direct office revenue, which saw a $4.0 million decrease in fiscal 2025.
• Government Contract Volatility: Canceled U.S. federal government contracts significantly impacted North America revenue.

Honesty, when companies tighten their belts, training is an easy target. That's a structural risk for Franklin Covey Co. (FC).

Operational and Financial Risks

The operational and financial risks are clear from the income statement: a dramatic drop in profitability. Net income for fiscal 2025 plummeted to just $3.1 million, a sharp decline from the $23.4 million reported in fiscal 2024. Here's the quick math: that's a massive contraction, even with a strong gross margin of 76.2% for the year.

This decline is partly due to strategic, but costly, internal moves. The company incurred significant restructuring costs, including $4.7 million in the third quarter alone, as part of a sales force realignment in North America. This is a necessary investment to shift their go-to-market strategy, but it introduces execution risk. If the new sales model doesn't accelerate subscription growth fast enough, you'll see more quarters of depressed earnings.

Another key risk is subscription renewal. The business model relies on clients renewing their All Access Pass (AAP) contracts. While deferred subscription revenue is up 3% to $111.7 million, any dip in the renewal rate would immediately hit future revenue recognition.

Mitigation Strategies and Clear Actions

Management is defintely not sitting still; they are taking concrete steps to mitigate these risks. Their strategy is two-fold: structural change and financial discipline.

On the operational side, they are investing heavily in a sales force restructuring to focus on new client acquisition ('hunters') and deeper engagement with existing clients ('farmers'). They are also integrating AI into their service offerings to enhance sales coaching and leadership development.

Financially, the company remains solid, which gives them a buffer to execute this transformation. They ended fiscal 2025 with a strong liquidity position, reporting $31.7 million in cash and no borrowings on their revolving credit facility. Plus, they've been buying back stock, repurchasing approximately 769,000 shares for a total of $23.0 million during the year.

The table below summarizes the key financial impact of the risks and the corresponding mitigation efforts:

For a deeper dive into who is betting on this turnaround, you should check out Exploring Franklin Covey Co. (FC) Investor Profile: Who's Buying and Why?

Growth Opportunities

You're looking at Franklin Covey Co. (FC) after a transitional fiscal year in 2025, and the key takeaway is this: the company is betting its future on a completed sales-force overhaul and the resilience of its subscription model. While consolidated revenue for FY2025 landed at $267.1 million, down from the prior year, management is forecasting a return to growth in fiscal year 2026, with an expected acceleration in 2027.

The near-term risk is that the macroeconomic headwinds that dragged down the Enterprise Division's North America revenue by $15.8 million in FY2025 could persist. But honestly, the foundation for future growth is solid, built on a high-margin, recurring revenue structure.

Here's the quick math on what drives the next few years:

• Go-to-Market Transformation: This strategic initiative, completed in FY2025, is designed to shift the revenue trajectory from single-digit to double-digit growth in the coming years.
• New Client Acquisition: The new sales model is focused on winning new clients, or 'new logos,' with new logo sales pacing to achieve approximately 40% growth for the year.
• Subscription Stickiness: The All Access Pass (AAP) model is sticky; as of August 31, 2025, 60% of contracted amounts were represented by multi-year contracts.

For fiscal year 2026, the company's guidance points to total revenue in the range of $265 million to $275 million, in constant currency. More importantly for shareholders, earnings per share (EPS) are projected to grow by a significant 39.18%, climbing from $0.97 per share to $1.35 per share in the next year. That's a defintely meaningful increase.

Competitive Edge and Product Innovations

Franklin Covey Co.'s core competitive advantage isn't just its content-it's the business model wrapped around it. They are one of the largest and most trusted leadership companies in the world, having been named a 2025 Top 20 Leadership Training Company for the 15th time. This brand recognition, especially among Fortune 500 companies, gives them a powerful starting point.

The high-margin, recurring revenue model is a huge plus. Gross margin for fiscal 2025 was a strong 76.2%. Also, deferred subscription revenue, which is revenue already contracted but not yet recognized, increased 3% year-over-year to a balance of $111.7 million at the end of FY2025. That deferred revenue acts like a built-in tailwind for future reported revenue.

Product innovation continues to feed the All Access Pass (AAP) content library. New course launches, like the one based on the book Disrupt Everything: Innovate for Impact, keep the offering fresh and relevant. The company's unique approach to leadership development is what clients are buying, and you can see their focus on Mission Statement, Vision, & Core Values of Franklin Covey Co. (FC).

Division-Specific Growth Drivers

While the Enterprise Division faced headwinds in 2025, the Education Division remains a consistent growth engine. Education Division revenue for FY2025 totaled $74.6 million. The Education Division's subscription revenue, primarily from The Leader in Me program, increased 10% in fiscal 2025 to $45.9 million.

Here's a breakdown of the FY2025 division performance and the key focus areas:

The company's strategic focus is clear: leverage the new sales structure to drive client penetration and new logo wins in the Enterprise Division, while continuing to scale the proven subscription model in the Education Division. Plus, a recent move to enter into a $20 million 10b5-1 trading plan for share repurchase shows management's commitment to returning value to shareholders under its existing $50 million authorization.