Franklin Covey’s QQ1 2026 results reflect a year of transition toward an accelerated growth path anchored by the Enterprise North America (ENA) engine. Revenue declined 12.7% year-over-year to $64.0 million, largely due to a net base effect from last year’s large statewide education contract that compressed reported revenue in Q1 FY26. Management reaffirmed guidance for FY2026 (revenue $265–275 million; adjusted EBITDA $28–33 million) and stressed that the majority of the invoiced growth in ENA will be recognized over time, with much of the incremental profitability and cash flow anticipated in FY27 as the back-end recognition and operating leverage materialize.
Key near-term positives include: (1) ENA invoiced amounts up 7% in Q1 (up 13% excluding government DOGE-related basis), underpinned by a 25% year-over-year increase in new logo subscription invoicing and an 8% rise in deferred subscription balance to $49.1 million; (2) a disciplined go-to-market transformation yielding higher-quality pipeline, greater attach to services, and a 29% increase in services bookings; (3) a robust pipeline with multi-year, high-value deals (e.g., a 3-year, ~$6 million agriculture client win) and ongoing AI-enabled product innovation (AI Sales Coach and AI Coach for 4 Disciplines of Execution) with more to follow. Nevertheless, GAAP profitability remains pressured by lower current-period revenue and higher SG&A from transformation actions, leading to a Q1 GAAP net loss of $3.29 million and negative GAAP earnings per share of -$0.27.
Management’s 2026 outlook emphasizes a year of execution and a subsequent year of acceleration (2027) as the company benefits from operating leverage and a stronger revenue mix. The degree of confidence hinges on ENA invoiced growth sustaining into the back half of FY26, the Education cycle normalizing post-large-state contracts, and Education/International contributions stabilizing. The balance sheet remains solid with about $80 million liquidity and net cash of roughly $16.7 million, and the firm continued its disciplined capital return program, buying back ~582k shares for $10.4 million in Q1 and executing 10b5-1 plans for additional buybacks. Overall, FC presents a compelling optionality story: a transformed ENA go-to-market engine, AI-enabled solution extensions, a healthier deferred revenue position, and a path to meaningful free cash flow and EBITDA expansion starting in FY27.