Franklin Covey Hits Transition Quarter as FY2026 Opens With Revenue Dip, Strong Subscription Signals

Franklin Covey’s first quarter of fiscal 2026 looks less like a setback and more like a pause at an inflection point.

The organizational performance and leadership development company reported Q1 FY2026 revenue of $64.0 million, down from $69.1 million a year ago, alongside a net loss of $3.3 million. On the surface, the numbers reflect pressure from macroeconomic uncertainty, geopolitical trade tensions, and the loss of U.S. federal government contracts.

Dig a little deeper, however, and a different narrative emerges—one centered on subscription durability, improving invoiced growth, and a completed go-to-market transformation that management expects to pay off in the back half of the year and into FY2027.

Enterprise Weakness Masks Underlying Momentum

Franklin Covey’s Enterprise Division, its largest business, generated $47.5 million in Q1 revenue, down from $51.6 million last year. The decline was driven primarily by a $3.9 million drop in North America revenue, compounded by a modest international decline.

Those headline declines obscure an important metric Franklin Covey is increasingly emphasizing: invoiced growth.

Enterprise North America invoiced amounts grew 7% year over year, and 13% excluding government business, suggesting demand from commercial clients remains resilient. Deferred subscription revenue for the Enterprise Division also rose 7% year over year, reinforcing visibility into future revenue.

CEO Paul Walker described the quarter as an anticipated transition period rather than a surprise.

“Our go-to-market sales transition is now complete, and we are beginning to see the acceleration in invoiced amounts,” Walker said, adding that the improvement should translate into stronger revenue, EBITDA, and free cash flow later in FY2026 and into FY2027.

Education Holds Steady, With a Shift in Mix

The Education Division delivered $16.1 million in Q1 revenue, down slightly from $16.5 million a year earlier. Growth in training, coaching, and membership subscriptions was offset by lower materials revenue—a trend consistent with the broader shift away from physical content toward digital and subscription-based learning models.

This mix shift aligns with Franklin Covey’s long-term strategy of prioritizing recurring revenue over transactional sales, even when it creates short-term revenue pressure.

Subscription Revenue Remains the Anchor

Subscriptions continue to be Franklin Covey’s stabilizing force.

• Subscription and subscription services revenue: $52.0 million (vs. $55.8 million last year)

• Subscription and contractually committed services invoiced: $26.0 million (up from $24.7 million)

• Total deferred subscription revenue: $100.2 million, up 5% year over year

Multi-year contracts are also becoming more common. As of November 30, 2025, 58% of North American AAP contracts ran for at least two years, up from 55% a year ago. Multi-year agreements now represent 61% of contracted amounts, improving predictability in an otherwise volatile buying environment.

For investors and HR leaders watching the space, this reinforces a key theme: leadership development and performance improvement spend may slow—but organizations are still committing when value is clear and outcomes are measurable.

Profitability Pressures and Cash Flow Declines

The quarter wasn’t without real financial strain.

• Net loss: $(3.3) million vs. $1.2 million profit last year

• Adjusted EBITDA: $3.7 million, down from $7.7 million

• Free cash flow: $(3.7) million, compared with $11.4 million in Q1 FY2025

• Cash balance: $17.5 million, down from $53.3 million a year ago

Much of the cash decline reflects share repurchases, not operating distress. Franklin Covey bought back approximately 624,000 shares for $11.1 million during the quarter under 10b5-1 trading plans, signaling management’s confidence in long-term value despite near-term volatility.

CFO Jessi Betjemann emphasized that confidence, noting the company completed a $10 million buyback plan and launched a new $20 million 10b5-1 plan in November.

“These actions demonstrate our confidence in our long-term plan and our ongoing commitment to creating shareholder value,” she said.

Guidance Signals a Return to Growth

Looking ahead, Franklin Covey reaffirmed its FY2026 guidance, expecting the benefits of its sales transformation and cost actions to materialize over the course of the year.

The company projects, in constant currency:

• Total revenue: $265 million to $275 million

• Adjusted EBITDA: $28 million to $33 million

Management expects strong invoiced growth in FY2026, with reported revenue and EBITDA growth becoming more visible in FY2027—a reminder that Franklin Covey’s subscription model often lags invoicing by several quarters.

The Bigger Picture: A Reset, Not a Retreat

Franklin Covey’s Q1 results reflect broader conditions facing the HR, leadership, and learning technology market. Budget scrutiny is real. Government contracts are less predictable. And enterprise buyers are taking longer to commit.

At the same time, organizations continue to invest in leadership, execution, and behavior change—especially when solutions are embedded into daily work and tied to measurable outcomes.

Franklin Covey appears to be betting that its All Access Pass (AAP) subscription model, deeper enterprise relationships, and completed sales transformation will position it well once macro pressures ease.

For now, FY2026 is shaping up as a year of rebuilding momentum rather than chasing headline growth—and management seems comfortable playing the long game..

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