What changed in FRANKLIN COVEY CO's 10-K — 2024 vs 2025
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Paragraph-level year-over-year comparison of FRANKLIN COVEY CO's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.
+464 added−463 removedSource: 10-K (2025-11-12) vs 10-K (2024-11-12)
Top changes in FRANKLIN COVEY CO's 2025 10-K
464 paragraphs added · 463 removed · 351 edited across 2 sections
- Item 2. Properties+395 / −370 · 291 edited
- Item 1A. Risk Factors+69 / −93 · 60 edited
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
60 edited+9 added−33 removed95 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
60 edited+9 added−33 removed95 unchanged
2024 filing
2025 filing
Biggest changeOur results of operations may be adversely impacted by the costs of persistent and rising inflation if we are unable to pass these costs on to our clients. In recent years, inflation has increased significantly in the United States and in many of the countries where we conduct business.
Biggest changeOur general business strategy may be adversely affected by any such economic downturn, volatile business environment, long-term government shut down, or continued unpredictable and unstable market conditions. 20 Table of Contents Our results of operations may be adversely impacted by the costs of persistent and rising inflation if we are unable to pass these costs on to our clients.
A large portion of our success depends on our ability to generate renewals of our subscription-based offerings, which primarily consist of the AAP and Leader in Me membership, and produce new sales of our offerings and products to both new and existing clients. Currently, the majority of our revenue is generated from subscription-based offerings and related materials sales.
A large portion of our success depends on our ability to generate renewals of our subscription-based offerings, which primarily consist of the AAP and the Leader in Me membership, and produce new sales of our offerings and products to both new and existing clients. Currently, the majority of our revenue is generated from subscription-based offerings and related materials sales.
Schools in the United States benefit from governmental funding initiatives, such as the Elementary and Secondary School Emergency Relief (ESSER) program, which provide additional funding for schools to pursue improvement programs such as our Leader in Me offering. In addition, we partner with charitable organizations to fund Leader in Me programs in many schools across the country.
Schools in the United States benefit from governmental funding initiatives, such as the Elementary and Secondary School Emergency Relief (ESSER) program, which provide additional funding for schools to pursue improvement programs such as our Leader in Me offering. In addition, we partner with charitable organizations to fund the Leader in Me programs in many schools across the country.
Findings from an audit may result in our being required to prospectively adjust previously agreed upon rates for our work, which may adversely affect our future margins. If a governmental client discovers improper activities in the course of audits or investigations, we may become subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions, or debarment from doing business with other agencies of that government. Political and economic factors such as pending elections, the outcome of elections, revisions to governmental tax policies, sequestration, debt ceiling negotiations, and reduced tax revenues can affect the number and terms of new governmental contracts signed.
Findings from an audit may result in our being required to prospectively adjust previously agreed upon rates for our work, which may adversely affect our future margins. If a governmental client discovers improper activities in the course of audits or investigations, then we may become subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions, or debarment from doing business with other agencies of that government. Political and economic factors such as pending elections, the outcome of elections, revisions to governmental tax policies, sequestration, debt ceiling negotiations, and reduced tax revenues can affect the number and terms of new governmental contracts signed.
We may need to raise additional funds through public or private debt offerings or equity financings in order to: Develop new services, programs, or offerings Take advantage of opportunities, including business acquisitions Respond to competitive pressures Going forward, we will continue to incur costs necessary for the day-to-day operation and potential growth of the business and may use our available revolving line of credit facility and other financing alternatives, if necessary, for these expenditures.
We may need to raise additional funds through public or private debt offerings or equity financing in order to: Develop new services, programs, or offerings Take advantage of opportunities, including business acquisitions Respond to competitive pressures Going forward, we will continue to incur costs necessary for the day-to-day operation and potential growth of the business and may use our available revolving line of credit facility and other financing alternatives, if necessary, for these expenditures.
If we were to experience a local or regional disaster or other business continuity event or concurrent events, we could experience operational challenges, in particular depending upon how a local or regional event may affect our human capital across our operations or with regard to particular aspects of our operations, such as key executive officers or personnel.
If we were to experience a local or regional disaster or other business continuity event or concurrent events, then we could experience operational challenges, in particular depending upon how a local or regional event may affect our human capital across our operations or with regard to particular aspects of our operations, such as key executive officers or personnel.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures or to sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures may be unsuccessful, and we may not meet our scheduled debt service obligations.
If our cash flows and capital resources are insufficient to fund our debt service obligations, then we may be forced to reduce or delay investments and capital expenditures or to sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures may be unsuccessful, and we may not meet our scheduled debt service obligations.
Our future success will depend, in part, on the continued service of key executive officers and personnel. The loss of the services of any key individuals could harm our business. Our future success also depends on our ability to identify, attract, and retain additional qualified senior personnel.
Our future success will depend, in part, on the continued service of key executive officers and personnel. The loss of the services of key individuals could harm our business. Our future success also depends on our ability to identify, attract, and retain additional qualified senior personnel.
For example, the delivery of our services is dependent on reliable and relatively inexpensive electricity. If electricity is not readily available or affordable, we may not be able to deliver our products and services and our operating results may be adversely impacted.
For example, the delivery of our services is dependent on reliable and relatively inexpensive electricity. If electricity is not readily available or affordable, we may not be able to deliver our products and services and therefore our operating results may be adversely impacted.
Other sections of this report may include additional risk factors which could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing global environment.
Other sections of this report may include additional risk factors which could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing industry and global environment.
We have directly owned offices that serve clients in Austria, Australia, China, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom. We also have licensed operations in numerous other foreign countries.
We have directly owned offices that serve clients in Austria, Australia, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom. We also have licensed operations in numerous other foreign countries.
Generating new sales of our subscription-based offerings and products, both to new and existing clients, is a challenging, costly, and often time-consuming process. If we are unable to generate new sales, due to competition or other factors, our revenues will be adversely affected. Our subscription contracts are typically for periods of 12 months or longer.
Generating new sales of our subscription-based offerings and products, both to new and existing clients, is a challenging, costly, and often time-consuming process. If we are unable to generate new sales, due to competition, economic uncertainty, or other factors, our revenues will be adversely affected. Our subscription contracts are typically for periods of 12 months or longer.
We expect that our stock price may continue to experience volatility in the future due to a variety of potential factors that may include the following: Fluctuations in our quarterly results of operations and cash flows Overall market volatility Variations between our actual financial results and market expectations Changes in key balances, such as cash and deferred revenues Currency exchange rate fluctuations Unexpected asset impairment charges 19 Table of Contents These factors, among others, may have an adverse effect upon our stock price in the future.
We expect that our stock price may continue to experience volatility in the future due to a variety of potential factors that may include the following: Fluctuations in our quarterly results of operations and cash flows Overall market volatility Variations between our actual financial results and market expectations Changes in key balances, such as cash and deferred revenues Currency exchange rate fluctuations Unexpected asset impairment charges These factors, among others, may have an adverse effect upon our stock price in the future.
The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our customers or our own proprietary information, software, methodologies, and business secrets could result in significant legal and financial exposure, damage to our reputation, or a loss of confidence in the security of our systems, products, and services, which could have a material adverse effect on our business, financial condition, or results of operations.
The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our customers or our own proprietary information, software, methodologies, and business secrets could result in significant 16 Table of Contents legal and financial exposure, damage to our reputation, or a loss of confidence in the security of our systems, products, and services, which could have a material adverse effect on our business, financial condition, or results of operations.
In other cases, we may be forced to expend a significant amount of resources to obtain the requisite legal permits or otherwise be required to forfeit such permits. Moreover, the Chinese government may impose additional regulations regarding our business.
In other cases, we may be forced to spend a significant amount of resources to obtain the requisite legal permits or otherwise be required to forfeit such permits. Moreover, the Chinese government may impose additional regulations regarding our business.
The Company provides ongoing mandatory cybersecurity training for associates that is intended to help them understand cybersecurity risks and comply with our cybersecurity policies. We engage third party professionals to assess our cybersecurity program and to perform audits of portions of our cybersecurity control environment based on risk or where necessary to ensure regulatory compliance.
The Company 23 Table of Contents provides ongoing mandatory cybersecurity training for associates that is intended to help them understand cybersecurity risks and comply with our cybersecurity policies. We engage third party professionals to assess our cybersecurity program and to perform audits of portions of our cybersecurity control environment based on risk or where necessary to ensure regulatory compliance.
These events could result in reputational damage, lost sales, cancellation charges, or markdowns, all of which could have an adverse effect on our business, results of operations, and financial condition. The impacts of climate change and related regulatory responses could adversely affect our business.
These events could result in reputational damage, lost sales, cancellation charges, or markdowns, all of which could have an adverse effect on our business, results of operations, and financial condition. 22 Table of Contents The impacts of climate change and related regulatory responses could adversely affect our business.
Management’s Role in Assessing Cybersecurity Risk and Directing Strategy 23 Table of Contents At the management level, primary responsibility for assessing and managing cybersecurity threats and material risks rests with our Chief Information Officer (CIO), who reports directly to our Executive Vice-President of Operations.
Management’s Role in Assessing Cybersecurity Risk and Directing Strategy At the management level, primary responsibility for assessing and managing cybersecurity threats and material risks rests with our Chief Information Officer (CIO), who reports directly to our Executive Vice-President of Operations.
If governmental funding for school improvement expires or is reduced, or 14 Table of Contents charitable organizations decide not to continue to support Leader in Me schools, our results of operations, cash flows, and financial position may be adversely impacted. We depend on key personnel, the loss of whom could harm our business.
If governmental funding for school improvement expires or is reduced, or charitable organizations decide not to continue to support the Leader in Me programs in schools, our results of operations, cash flows, and financial position may be adversely impacted. We depend on key personnel, the loss of whom could harm our business.
Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements 12 Table of Contents as a prediction of actual results. Further, the disclosure of risks identified below does not imply that the risk has already materialized.
Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Further, the disclosure of risks identified below does not imply that the risk has already materialized.
While these projects are often planned and executed as multi-year projects, the governmental entities usually reserve the right to change the scope of, or terminate, these projects for lack of approved funding, budgetary changes, and other discretionary reasons.
While these projects are often planned and executed as multi-year projects, the governmental entities usually reserve the right to change the 15 Table of Contents scope of, or terminate, these projects for lack of approved funding, budgetary changes, and other discretionary reasons.
If interest rates or other factors existing at the time of refinancing result in higher interest rates upon refinancing, we will incur higher interest expense. Furthermore, if any rating agency changes our credit rating or outlook, 20 Table of Contents our debt and equity securities could be negatively affected, which could adversely affect our financial condition and financial results.
If interest rates or other factors existing at the time of refinancing result in higher interest rates upon refinancing, then we will incur higher interest expense. Furthermore, if any rating agency changes our credit rating or outlook, our debt and equity securities could be negatively affected, which could adversely affect our financial condition and financial results.
Our ability to operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, intellectual property, currency controls, network security, employee benefits, and other matters.
Our ability to operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to, among other things, 21 Table of Contents taxation, import and export tariffs, intellectual property, currency controls, network security, employee benefits, and other matters.
We obtained a new credit agreement in March 2023 (the 2023 Credit Agreement) with a new lender that expires in March 2028. We expect to regularly renew or amend our lending agreement in the future to maintain the availability of this credit facility.
We obtained a credit agreement in March 2023 (2023 Credit Agreement) that expires in March 2028. We expect to regularly renew or amend our lending agreement in the future to maintain the availability of this credit facility.
Violations of these regulations in the conduct of our business could result in fines, criminal sanctions against us or our officers, 21 Table of Contents prohibitions on doing business, and damage to our reputation.
Violations of these regulations in the conduct of our business could result in fines, criminal sanctions against us or our officers, prohibitions on doing business, and damage to our reputation.
We have only a limited ability to protect our intellectual property rights, which are important to our success. Our financial success is partially dependent on our ability to protect our proprietary offerings and other intellectual property. The existing laws of some countries in which we provide services might offer only limited protection of our intellectual property rights.
Our financial success is partially dependent on our ability to protect our proprietary offerings and other intellectual property. The existing laws of some countries in which we provide services might offer only limited protection of our intellectual property rights.
Failure to adapt and improve these areas could have an adverse effect on our business, including our results of operations, financial position, and cash flows. Our use of artificial intelligence technologies may not be successful and may present business, compliance, and reputational risks. We are working to integrate artificial intelligence (AI) technologies in some of our products and processes.
Failure to adapt and improve these areas could have an adverse effect on our business, including our results of operations, financial position, and cash flows. Our use of AI technologies may not be successful and may present business, compliance, and reputational risks. We are working to integrate AI technologies in our offerings and processes.
For more information on cybersecurity risks we face, refer to Part I, Item 1A Risk Factors under the section entitled Cybersecurity and Information Technology Risks , which should be read in conjunction with the information presented in this Item 1C. 24 Table of Contents
For more information on cybersecurity risks we face, refer to Part I, Item 1A Risk Factors under the section entitled Cybersecurity and Information Technology Risks , which should be read in conjunction with the information presented in this Item 1C.
We are unable to control many of these factors, such as the general economy, economic conditions in the industries in which we operate, and competitive pressures. Our cash flows may be insufficient to allow us to pay principal and interest on our indebtedness and to meet our other obligations.
We are unable to control many of these factors, such as the general economy, economic conditions in the industries in which we operate, and competitive pressures. Our cash flow may be insufficient to allow us to pay 19 Table of Contents principal and interest on our indebtedness and to meet our other obligations.
Moreover, our technology platforms will require us to continue cash investments (including business acquisitions) to 18 Table of Contents expand existing offerings, improve the client experience, and develop complementary offerings.
Moreover, our technology platforms will require us to continue cash investments (including business acquisitions) to expand existing offerings, improve the client experience, and develop complementary offerings.
Extreme weather conditions in the areas in which our suppliers, customers, distribution facilities, offices, and headquarters are located could adversely affect our operating results and financial condition.
Extreme weather conditions and natural disasters could negatively impact our operating results and financial condition. Extreme weather conditions in the areas in which our suppliers, customers, distribution facilities, offices, and headquarters are located could adversely affect our operating results and financial condition.
Unauthorized disclosure, loss or alteration of personal, sensitive, or confidential client or employee data or client or end-user systems, whether through systems failure, employee negligence, fraud, or misappropriation could damage our reputation and cause us to lose clients. Legal requirements relating to the collection, storage, handling, and transfer of personal data continue to evolve.
Unauthorized disclosure, loss or alteration of personal, sensitive, or confidential client or employee data or client or end-user systems, whether through systems failure, employee negligence, fraud, or misappropriation could damage our reputation and cause us to lose clients. Global legal requirements relating to the processing of personal data continue to proliferate and evolve.
The steps we take in this regard may not be adequate to prevent or deter infringement or other misappropriation of our intellectual property, and we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights, especially in foreign jurisdictions.
The steps we take to protect our intellectual property may not be adequate to prevent or deter infringement or other misappropriation of our intellectual property, and we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights.
While we have developed an ongoing review process to remove potentially offensive terms or images from our materials, a rapidly changing cultural and social environment may create unfavorable interpretations of language or images faster than we can identify and remediate them.
As a result, some individuals may find some of the content in our materials offensive. While we have an ongoing review process to remove potentially offensive terms or images from our materials, a rapidly changing cultural and social environment may create unfavorable interpretations of language or images faster than we can identify and remediate them.
Any of these factors could have an adverse effect on our business or our results of operations. 15 Table of Contents Cybersecurity and Information Technology Risks The All Access Pass and Leader in Me subscription services are internet-based platforms, and as such we are subject to increased risks of cyber-attacks and other security breaches that could have a material adverse effect on our business.
Cybersecurity and Information Technology Risks The All Access Pass and Leader in Me subscription services are internet-based platforms, and as such we are subject to increased risks of cyber-attacks and other security breaches that could have a material adverse effect on our business.
In addition, our internal audit function regularly meets with the cybersecurity team and is implementing a program to periodically test the control framework and operation of our cybersecurity incident response plan. The results of these tests will be presented directly to the Audit Committee of the Board of Directors.
In addition, our internal audit function regularly meets with the cybersecurity team and periodically tests the control framework and operation of our cybersecurity incident response plan. The results of these tests are presented directly to the Audit Committee of the Board of Directors.
ITEM 1A. RISK FACTORS Our industry and business environment, domestic and international economic conditions, geopolitical circumstances, changing social standards, cybersecurity, and other specific risks may affect our future business decisions and financial performance.
ITEM 1A. RISK FACTORS Our industry and business environment, domestic and international economic conditions, governmental actions, geopolitical circumstances, international relationships, cybersecurity threats, and other specific risks may affect our future business decisions and financial performance.
The inability to import personal data from Europe to the United States or other countries may decrease demand for our products and services as our customers that are subject to such laws may seek alternatives that do not involve personal data transfers out of Europe.
If successful, these measures could impair our ability to import personal data from Europe to the United States or other countries and may thereby decrease demand for our products and services as our customers that are subject to such laws may seek alternatives that do not involve personal data transfers out of Europe or the UK.
If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results may be harmed and we could fail to meet our financial reporting obligations. 22 Table of Contents Extreme weather conditions and natural disasters could negatively impact our operating results and financial condition.
If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results may be harmed and we could fail to meet our financial reporting obligations.
We have implemented a layered cybersecurity program to assess, identify, and manage risks from cybersecurity threats that may have material effects on the confidentiality, integrity, and availability of our information systems, networks, and offerings. Cybersecurity risk is addressed at both management and Board of Director levels as described below.
We have cybersecurity processes, technologies, and controls in place to assist in our efforts to assess, identify, and manage material risks from cybersecurity threats that may impact the confidentiality, integrity, and availability of our information systems, networks, and offerings. Cybersecurity risk is addressed at both management and Board of Director levels as described below.
The new SCCs imposed additional obligations relating to data transfers, including the obligation to conduct a transfer impact assessment and, depending on a party’s role in the transfer and the laws and practices of the destination country, to implement additional security measures, and to update internal privacy practices.
Current regulatory guidance regarding those transfers imposes heightened privacy obligations, including the obligation to conduct a transfer impact assessment and, depending on a party’s role in the transfer and the laws and practices of the destination country, to implement additional security measures, and update internal privacy practices.
We have implemented policies, controls, and procedures, including a team dedicated to data protection, to comply with the requirements of GDPR/UK GDPR and analogous laws. However, these new procedures and controls may not be completely effective in preventing breaches or unauthorized processing of personal data.
In addition, over twenty U.S. states have enacted general consumer data privacy laws since 2018. We have implemented policies, controls, and procedures, including a team dedicated to data protection, to comply with the requirements of these new privacy laws. However, these new procedures and controls may not be completely effective in preventing breaches or unauthorized processing of personal data.
Inflation increases the cost of many aspects of our business, including the cost of our products sold, benefit costs, travel expenses, and associate salaries since we must increase our compensation to retain key personnel.
In recent years, inflation has increased significantly in the United States and in many of the countries where we conduct business. Inflation increases the cost of many aspects of our business, including the cost of our products and materials sold, benefit costs, travel expenses, and associate salaries since we must increase our compensation to retain key personnel.
General Business Risks Unstable market and economic conditions may have serious adverse consequences on our business, financial condition, and operations. The global credit and financial markets have from time to time experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability.
The global credit and financial markets have from time to time experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability.
However, no information security program is perfect, and these efforts may be insufficient to protect sensitive information against illegal activities. We are exposed to additional liabilities from the various data protection laws enacted within the jurisdictions where we operate, as well as a risk of litigation in jurisdictions where there is a private right of action related to violations.
We are exposed to additional risks and liabilities from the various data protection laws enacted within the jurisdictions where we operate, as well as a risk of litigation in jurisdictions where there is a private right of action related to violations.
If the reputation, perception, or image of any of our brands is tarnished or if we receive negative publicity, our financial condition and results of operations could be materially and adversely affected.
If the reputation, perception, or image of any of our brands is tarnished or if we receive negative publicity, our financial condition and results of operations could be materially and adversely affected. We have only a limited ability to protect our intellectual property rights, which are important to our success.
Negative claims or publicity involving us, our culture and values, our products, services and 13 Table of Contents experiences, consumer data, or any of our affiliates could seriously damage our reputation and brand image, regardless of whether such claims are accurate.
Our brand value also depends on our ability to maintain a positive consumer perception of our corporate integrity, purpose, and brand culture. Negative claims or publicity involving us, our culture and values, our products, services and experiences, consumer data, or any of our affiliates could seriously damage our reputation and brand image, regardless of whether such claims are accurate.
Our business depends on renewals of subscription-based offerings and sales of new subscription-based services for a significant portion of our revenue, and our failure to renew at historical rates or generate new sales of such offerings will lead to a decrease in our revenues.
Any one of these circumstances could have an adverse effect on our ability to obtain new business, keep existing clients, and successfully deliver our services. 13 Table of Contents Our business depends on renewals of subscription-based offerings and sales of new subscription-based services for a significant portion of our revenue, and our failure to renew at historical rates or generate new sales of such offerings will lead to a decrease in our revenues.
To protect our intellectual property, we rely upon a combination of confidentiality policies, nondisclosure and other contractual arrangements, as well as copyright and trademark laws.
To protect our intellectual property, we rely upon a combination of confidentiality policies, nondisclosure and other contractual arrangements, as well as copyright and trademark laws. In addition, the rapid growth 14 Table of Contents and utilization of artificial intelligence (AI) may infringe on our trademarked and copyrighted materials.
Under GDPR, fines of up to 20 million Euros or up to 4% of the annual global revenues of the infringer, whichever is greater, could be imposed.
The violation of these laws can result in significant penalties. For example, under the privacy law in the EU and UK, the General Data Protection Regulation (GDPR), fines of up to 20 million Euros or up to 4% of the annual global revenues of the infringer, whichever is greater, could be imposed.
The language, graphics, and examples used in our content and materials may be understood and interpreted differently by individuals based on culture, experience, societal norms, and other factors. As a result, some individuals may find some of the content in our materials offensive.
Through our directly owned offices and international licensees, our content is delivered in numerous countries around the world in different languages and in different cultures. The language, graphics, and examples used in our content and materials may be understood and interpreted differently by individuals based on culture, experience, societal norms, and other factors.
Our inability to transfer personal data to the United States and other countries may decrease the functionality or effectiveness of our products and services, increase costs, and adversely impact our marketing efforts, plans, and activities. Further, in 2021, China adopted the PRC Personal Information Protection Law, or PIPL, and the Data Security Law, or DSL.
Our inability to transfer personal data to the United States and other countries may decrease the functionality or effectiveness of our products and services, increase costs, and adversely impact our marketing efforts, plans, and activities. 17 Table of Contents Our efforts to effectively secure and monitor code, applications, systems, processes, and other data may be insufficient to protect sensitive information against illegal activities.
Such financial guidance is based on assumptions that may not always prove to be accurate and may vary from actual results. If we fail to meet the financial guidance that we provide, or if we find it necessary to revise such guidance during the year, the market value of our common stock could be adversely affected.
If we fail to meet the financial guidance that we provide, or if we find it necessary to revise such guidance during the year, the market value of our common stock could be adversely affected. 18 Table of Contents Our future quarterly operating results are subject to factors that can cause fluctuations in our stock price.
Some terminology, language, or content in our offerings may be deemed offensive by certain individuals due to rapidly changing societal norms, which may cause damage to our brand or reputation. Our mission is to enable greatness in individuals and organizations everywhere regardless of race, religion, gender, or other individual characteristics.
Any of these factors could have an adverse effect on our business or our results of operations. Some terminology, language, or content in our offerings may be deemed offensive by certain individuals due to rapidly changing societal norms, which may cause damage to our brand or reputation.
The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism, or other geopolitical events.
The financial markets and the global economy may also be adversely affected by various factors, including the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism, other geopolitical events , such as war , natural or environmental disasters, international economic instability, public health emergencies, market uncertainty, debt crises and downgrades, embargoes, tariffs, sanctions and other trade barriers, and other governmental trade or market control programs .
To the extent any of these laws include a private right of action, we may also face increased risk of litigation. We strive to employ global best practices in securing and monitoring code, applications, systems, processes, and data, and our data protection practices are regularly reviewed and validated by an external auditing firm.
We strive to employ global best practices in securing and monitoring code, applications, systems, processes, and data, and our data protection practices are regularly reviewed and validated by an external auditing firm. However, no information security program is perfect, and these efforts may be insufficient to protect sensitive information against illegal activities.
The PIPL took effect on November 1, 2021 and the DSL took effect on September 1, 2021. The PIPL and DSL in combination establish comprehensive requirements relating to the collection, use, transfer, security, and other processing of personal information in or from China.
In addition, we are subject to regulations in China relating to the collection, use, transfer, security, and other processing of personal information in or from China.
There can be no assurance that a deterioration in markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment, or continued unpredictable and unstable market conditions.
There can be no assurance that a deterioration in markets and confidence in economic conditions will not occur.
We write and design our content and materials to accomplish this mission and believe that the principles we teach improve lives. Through our directly owned offices and international licensees, our content is delivered in numerous countries around the world in different languages and in different cultures.
Our mission is to enable greatness in individuals and organizations everywhere regardless of race, religion, gender, or other individual characteristics. We write and design our content and materials to accomplish this mission and believe that the principles we teach improve lives.
Our future quarterly operating results are subject to factors that can cause fluctuations in our stock price. Historically, our stock price has experienced significant volatility.
Historically, our stock price has experienced significant volatility.
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Any one of these circumstances could have an adverse effect on our ability to obtain new business and successfully deliver our services.
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In addition, we continue to see jurisdictions around the world make new laws as they revise and enforce their privacy laws.
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Our brand value also depends on our ability to maintain a positive consumer perception of our corporate integrity, purpose, and brand culture.
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In addition, some privacy laws, particularly GDPR, impose restrictions on cross-border transfers of personal data to the United States.
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For example, in May 2018 the General Data Protection Regulation (GDPR) became effective in the European Union (EU) and other countries within the European Economic Area. The GDPR imposes strict requirements on the collection, use, security, and transfer of personal data in and from applicable countries.
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Privacy advocates in the EU and UK have filed lawsuits seeking to impose even more stringent restrictions on cross-border transfers due to concerns about the ability of the U.S. government to compel recipients in the U.S. to provide personal data for national intelligence and law enforcement purposes.
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Although GDPR applies across the European Economic Area, local data protection authorities still have the ability to interpret GDPR, and in some areas to legislate requirements even more stringent than those in the GDPR, which occasionally creates inconsistencies in application on a country-by-country basis.
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Such financial guidance is based on assumptions that may not always prove to be accurate and may vary from actual results.
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Furthermore, with the United Kingdom’s (UK) transition out of the EU as of January 1, 2021, we may encounter additional complexity with respect to data privacy and data transfers to and from the UK under the UK GDPR.
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General Business Risks Adverse resolution of litigation may harm our operating results or financial condition. We are subject to various legal proceedings and claims in the ordinary course of business domestically and internationally. Any litigation can be costly, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict.
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Other countries, such as Brazil, Australia, Canada, Japan, and South Africa, have also enacted data protection laws, some of which are analogous to GDPR and others which have different and additional requirements, which may include data localization.
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An unfavorable resolution of lawsuits could materially harm our business, operating results, or financial condition. For example, on December 20, 2024, our previous headquarters office landlord filed a lawsuit alleging breach of lease for failure to perform certain equipment repairs and replacements.
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In addition, as the laws in certain countries are fairly new, there may not always be sufficient guidance 16 Table of Contents from the applicable regulators, or case law interpreting the laws.
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While we believe that the premises and associated equipment were in sound operating condition, and that no such repairs were warranted or needed and we intend to respond to all claims vigorously, we cannot predict with certainty the outcome of current or future legal proceedings. The outcome of legal proceedings, whether or not meritorious, is inherently uncertain.
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In addition, on July 16, 2020, the Court of Justice of the European Union (CJEU) invalidated the EU-U.S. Privacy Shield, a framework that had enabled companies to transfer data from EU member states to the U.S. On September 8, 2020, the Swiss Federal Data Protection and Information Commissioner followed suit, and announced that the Swiss-U.S.
Added
Defending against claims requires significant management attention and financial resources. We may incur costs through defense expenses, settlements, or adverse judgments. These proceedings could materially harm our business operations, financial results and condition, management focus and resources, and reputation and brand value.
Removed
Privacy Shield Framework was inadequate for personal data transfers from Switzerland to the U.S. The Privacy Shield Framework has now been replaced by the new Data Privacy Framework (DPF) together with a UK Extension to the EU-U.S. DPF and the Swiss-U.S. DPF. The DPF was developed by the U.S.
Added
The costs and distractions of litigation, particularly if claims increase in scope or number, could materially impact our business success and shareholder value. Unstable market and economic conditions may have serious adverse consequences on our business, financial condition, and operations.
Removed
Department of Commerce and the European Commission, UK Government, and Swiss Federal Administration, to provide U.S. organizations with reliable mechanisms for personal data transfers to the U.S. from the EU, UK and Switzerland. The European Commission adopted an adequacy decision for the EU-U.S. DPF on July 10, 2023.
Removed
We have postponed our efforts to become certified under the DPF as several parties have indicated that they will be filing legal challenges to the DPF, so the continued viability of this transfer mechanism remains in some doubt.
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Item 2. Properties
Properties — owned and leased real estate
291 edited+104 added−79 removed158 unchanged
Item 2. Properties
Properties — owned and leased real estate
291 edited+104 added−79 removed158 unchanged
2024 filing
2025 filing
Biggest changeWe recorded no income tax expense in fiscal 2024, income tax expense of $ 0.2 million in fiscal 2023, and an insignificant amount of income tax expense in fiscal 2022 under the GILTI provisions. 73 Table of Contents The significant components of our deferred tax assets and liabilities were as follows (in thousands): AUGUST 31, 2024 2023 Deferred income tax assets: Stock-based compensation $ 3,760 $ 4,222 Net operating loss carryforward 3,447 6,505 Foreign income tax credit carryforward - 4,253 Deferred revenue 2,970 1,677 Capitalized development costs 2,156 1,236 Bonus and other accruals 1,317 1,517 Sale and financing of corporate headquarters 1,041 1,899 Inventory and bad debt reserves 923 1,094 Self-constructed tangible assets 404 - Other 174 458 Total deferred income tax assets 16,192 22,861 Less: valuation allowance ( 2,467 ) ( 1,313 ) Net deferred income tax assets 13,725 21,548 Deferred income tax liabilities: Intangibles step-ups – indefinite lived ( 5,433 ) ( 5,522 ) Intangibles step-ups – finite lived ( 1,873 ) ( 2,541 ) Self-constructed tangible assets - ( 5,476 ) Intangible asset amortization ( 4,217 ) ( 4,189 ) Deferred commissions ( 3,827 ) ( 3,598 ) Unremitted earnings of foreign subsidiaries ( 505 ) ( 521 ) Property and equipment depreciation ( 132 ) ( 80 ) Total deferred income tax liabilities ( 15,987 ) ( 21,927 ) Net deferred income taxes $ ( 2,262 ) $ ( 379 ) Deferred income tax amounts are recorded as follows in our consolidated balance sheets (in thousands): AUGUST 31, 2024 2023 Long-term assets $ 870 $ 1,661 Long-term liabilities ( 3,132 ) ( 2,040 ) Net deferred income tax liability $ ( 2,262 ) $ ( 379 ) 74 Table of Contents Our U.S. federal net operating loss carryforwards were comprised of the following at August 31, 2024 (in thousands): Loss Carryforward Loss Loss Operating Loss Carryforward Expires Deductions Deductions Loss Carried for Year Ended August 31, Amount in Prior Years in Current Year Forward Acquired NOL - Jhana December 31, 2015 2034 $ 1,491 $ ( 1,491 ) $ - $ - December 31, 2016 2035 3,052 ( 909 ) ( 215 ) 1,928 July 15, 2017 2036 1,117 - - 1,117 5,660 ( 2,400 ) ( 215 ) 3,045 Acquired NOL - Strive December 31, 2018 No Expiration 947 ( 947 ) - - December 31, 2019 No Expiration 869 ( 869 ) - - December 31, 2020 No Expiration 1,133 ( 160 ) ( 840 ) 133 April 25, 2021 No Expiration 553 - - 553 3,502 ( 1,976 ) ( 840 ) 686 August 31, 2022 No Expiration 40,996 ( 27,787 ) ( 13,209 ) - $ 50,158 $ ( 32,163 ) $ ( 14,264 ) $ 3,731 We have U.S. state net operating loss carryforwards generated in fiscal 2009 and before in various jurisdictions that expire primarily between September 1, 2024 and August 31, 2029.
Biggest changeWe recorded no income tax expense in each of fiscal 2025 and fiscal 2024, and income tax expense of $ 0.2 million in fiscal 2023 under the GILTI provisions. 73 Table of Contents The significant components of our deferred tax assets and liabilities were as follows (in thousands): AUGUST 31, 2025 2024 Deferred income tax assets: Net operating loss carryforward $ 4,460 $ 3,447 Deferred revenue 3,892 2,970 Capitalized development costs 2,954 2,156 Stock-based compensation 2,457 3,760 Operating lease liabilities 1,509 - Inventory and bad debt reserves 834 923 Bonus and other accruals 774 1,317 Self-constructed tangible assets 547 404 Foreign income tax credit carryforward 384 - Property and equipment depreciation 346 - Sale and financing of corporate headquarters - 1,041 Other 359 174 Total deferred income tax assets 18,516 16,192 Less: valuation allowance ( 3,936 ) ( 2,467 ) Net deferred income tax assets 14,580 13,725 Deferred income tax liabilities: Intangibles step-ups – indefinite lived ( 5,451 ) ( 5,433 ) Intangibles step-ups – finite lived ( 1,291 ) ( 1,873 ) Intangible asset amortization ( 4,218 ) ( 4,217 ) Deferred commissions ( 4,109 ) ( 3,827 ) Operating lease right-of-use assets ( 1,494 ) - Property and equipment depreciation ( 1,157 ) ( 132 ) Unremitted earnings of foreign subsidiaries ( 453 ) ( 505 ) Other ( 167 ) - Total deferred income tax liabilities ( 18,340 ) ( 15,987 ) Net deferred income taxes $ ( 3,760 ) $ ( 2,262 ) Deferred income tax amounts are recorded as follows in our consolidated balance sheets (in thousands): AUGUST 31, 2025 2024 Long-term assets $ 231 $ 870 Long-term liabilities ( 3,991 ) ( 3,132 ) Net deferred income tax liability $ ( 3,760 ) $ ( 2,262 ) 74 Table of Contents Our U.S. federal net operating loss carryforwards were comprised of the following at August 31, 2025 ( in thousands): Loss Carryforward Loss Loss Operating Loss Carryforward Expires Deductions Deductions Loss Carried for Year Ended August 31, Amount in Prior Years in Current Year Forward Acquired NOL - Jhana December 31, 2016 2035 $ 3,052 $ ( 1,124 ) $ ( 215 ) $ 1,713 July 15, 2017 2036 1,117 - - 1,117 4,169 ( 1,124 ) ( 215 ) 2,830 Acquired NOL - Strive December 31, 2020 No Expiration 1,133 ( 1,000 ) ( 133 ) - April 25, 2021 No Expiration 553 - ( 553 ) - 1,686 ( 1,000 ) ( 686 ) - $ 5,855 $ ( 2,124 ) $ ( 901 ) $ 2,830 We have U.S. state net operating loss carryforwards generated in fiscal 2009 and before in various jurisdictions that expire primarily between September 1, 2026 and August 31, 2029.
(also referred to as we, us, our, the Company, FranklinCovey, and Franklin Covey) and subsidiaries. This discussion and analysis should be read together with the accompanying consolidated financial statements and related notes contained in Item 8 of this Annual Report on Form 10-K and the Risk Factors discussed in Item 1A of this Annual Report on Form 10-K.
(also referred to as we, us, our, the Company, FranklinCovey, and Franklin Covey) and subsidiaries. This discussion and analysis should be read together with the accompanying consolidated financial statements and related notes contained in Item 8 and the Risk Factors discussed in Item 1A of this Annual Report on Form 10-K.
Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: the All Access Pass and Leader in Me membership subscriptions, intellectual property licenses, digital online learning, on-site training, training led through certified facilitators, blended learning, and organization-wide transformational processes, including consulting and coaching.
Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: the All Access Pass and Leader in Me membership subscriptions, coaching and consulting, organization-wide transformational processes, intellectual property licenses, digital online learning, on-site training, training led through certified facilitators, and blended learning.
Impairment of Long -Lived Assets Long-lived tangible assets and finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Impairment of Long -Lived Assets Long-lived tangible assets and finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable, but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable, but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
This determination was reached after considering that our web-based functionality and content, in combination with our intellectual property, each represent inputs that transform into a combined output that represents the intended outcome of the AAP, which is to provide a continuously accessible, customized, and dynamic learning and development solution only accessible through the AAP platform.
This determination was reached after considering that our web-based functionality and content, in combination with our intellectual property, each represent inputs that transform into a combined output that represents the intended outcome of the AAP, which is to provide a continuously accessible, customized, and dynamic learning and development solution only accessible through the AAP platform.
As defined in the 2023 Credit Agreement, we are (i) required to maintain a Leverage Ratio of less than 3.00 to 1.00 and a Fixed Charge Coverage Ratio greater than 1.15 to 1.00; and (ii) we are restricted from making certain distributions to stockholders, including repurchases of common stock.
As defined in the 2023 Credit Agreement, we are (i) required to maintain a Leverage Ratio of less than 3.00 to 1.00 and a Fixed Charge Coverage Ratio greater than 1.15 to 1.00; and (ii) we are restricted from making certain distributions to stockholders, including repurchases of common stock.
Global Capability – We have sales professionals in the United States and Canada who serve clients in the private sector, in government, and in educational institutions; wholly owned subsidiaries that serve clients in Australia, New Zealand, China, Japan, the United Kingdom, Ireland, Germany, Switzerland, and Austria; and we contract with independent licensee partners who deliver our content and provide services in approximately 150 countries and territories around the world.
Global Capability – We have sales professionals in the United States and Canada who serve clients in the private sector, in government, and in educational institutions; wholly owned subsidiaries that serve clients in Australia, Austria, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom; and we contract with independent licensee partners who deliver our content and provide services in approximately 150 countries and territories around the world.
Such risks and uncertainties include, but are not limited to, the matters discussed in Item 1A of this Annual Report on Form 10-K for the fiscal year ended August 31, 2024, entitled “Risk Factors.” In addition, such risks and uncertainties may include unanticipated developments in any one or more of the following areas: cybersecurity risks; unanticipated costs or capital expenditures; delays or unanticipated outcomes relating to our strategic plans and initiatives; dependence on existing products or services; the rate and consumer acceptance of new product introductions, including the All Access Pass and Impact Platform; competition; the impact of foreign exchange rates; the number and nature of customers and their product orders, including changes in the timing or mix of product or training orders; pricing of our products and services and those of competitors; adverse publicity; and other factors which may negatively affect our business.
Such risks and uncertainties include, but are not limited to, the matters discussed in Item 1A of this Annual Report on Form 10-K for the fiscal year ended August 31, 2025, entitled “Risk Factors.” In addition, such risks and uncertainties may include unanticipated developments in any one or more of the following areas: cybersecurity risks; unanticipated costs or capital expenditures; delays or unanticipated outcomes relating to our strategic plans and initiatives; dependence on existing products or services; the rate and consumer acceptance of new product introductions, including the All Access Pass and Impact Platform; competition; the impact of foreign exchange rates; the number and nature of customers and their product orders, including changes in the timing or mix of product or training orders; pricing of our products and services and those of competitors; adverse publicity; and other factors which may negatively affect our business.
This market approach method estimates the price reasonably expected to be realized from the sale of the reporting unit based on comparable companies. In developing the discounted cash flow analysis, our assumptions about future revenues and expenses, capital expenditures, and changes in working capital are based on our internal plan and assume a terminal growth rate thereafter.
The market approach method estimates the price reasonably expected to be realized from the sale of the reporting unit based on comparable companies. In developing the discounted cash flow analysis, our assumptions about future revenues and expenses, capital expenditures, and changes in working capital are based on our internal plan and assume a terminal growth rate thereafter.
If, based on events or changing circumstances, we determine it is more likely than not that the fair value of a reporting unit does not exceed its carrying value, we would be required to test goodwill for impairment. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions.
If, based on events or changing circumstances, we determine it is more likely than not that the fair value of a reporting unit does not exceed its carrying value, then we would be required to test goodwill for impairment. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions.
During fiscal 2023 we entered into a new five-year credit agreement which we expect to renew and amend on a regular basis to maintain the long-term borrowing capacity of this credit facility. Additional potential sources of liquidity available to us include factoring receivables, issuance of additional equity, or issuance of debt to public or private sources.
During fiscal 2023 we entered into a five-year credit agreement which we expect to renew and amend on a regular basis to maintain the long-term borrowing capacity of this credit facility. Additional potential sources of liquidity available to us include factoring receivables, issuance of additional equity, or issuance of debt to public or private sources.
Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, which consist of Franklin Development Corp., and our offices that serve clients in Japan, China, the United Kingdom, Ireland, Australia, New Zealand, Germany, Switzerland, and Austria. Intercompany balances and transactions are eliminated in consolidation.
Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, which consist of Franklin Development Corp., and our offices that serve clients in Japan, China, the United Kingdom, Ireland, Australia, New Zealand, Germany, France, Switzerland, and Austria. Intercompany balances and transactions are eliminated in consolidation.
The actual timing, number, and value of common shares purchased under our board-approved plan will be determined at our discretion and will depend on a number of factors, including, among others, general market and business conditions, the trading price of common shares, and applicable legal requirements.
The actual timing, number, and value of common shares purchased under our board-approved purchase plan will be determined at our discretion and will depend on a number of factors, including, among others, general market and business conditions, the trading price of common shares, and applicable legal requirements.
Approximately $ 0.6 million of the capitalized costs were for software and were previously included in property and equipment, and $ 0.3 million was included in capitalized development, which is included in our other long-term assets. The student leadership assessment was being developed solely for use in our Education Division.
Approximately $ 0.6 million of the capitalized costs were for software and were previously included in property and equipment, and $ 0.3 million was included in capitalized development, which is included in our other long-term assets. The student leadership assessment was being developed for use in our Education Division.
In our reports and filings we may make forward- 42 Table of Contents looking statements regarding, among other things, our expectations about future sales levels and financial results, future training and consulting sales activity, expected benefits from restructuring plans and growth initiatives, anticipated renewals of subscription offerings, the impact of new accounting standards on our financial condition and results of operations, the amount and timing of capital expenditures, anticipated expenses, including SG&A expenses, depreciation, and amortization, future gross margins, the release of new services or products, the adequacy of existing capital resources, our ability to renew or extend our line of credit facility, the amount of cash expected to be paid for income taxes, our ability to maintain adequate capital for our operations for at least the upcoming 12 months, the seasonality of future sales, future compliance with the terms and conditions of our line of credit, the ability to borrow on our line of credit, expected collections of accounts receivable, estimated capital expenditures, and cash flow estimates used to determine the fair value of long-lived assets.
In our reports and filings we may make forward-looking statements regarding, among other things, our expectations about future sales levels and financial results, future training and consulting sales activity, expected benefits from restructuring plans and growth initiatives, anticipated renewals of subscription offerings, the impact of new accounting standards on our financial condition and results of operations, the amount and timing of capital expenditures, anticipated expenses, including SG&A expenses, depreciation, and amortization, future gross margins, the release of new services or products, the adequacy of existing capital resources, our ability to renew or extend our line of credit facility, the amount of cash expected to be paid for income taxes, our ability to maintain adequate capital for our operations for at least the upcoming 12 months, the seasonality of future sales, future compliance with the terms and conditions of our line of credit, the ability to borrow on our line of credit, expected collections of accounts receivable, estimated capital expenditures, and cash flow estimates used to determine the fair value of long-lived assets.
However, our ability to maintain adequate capital for our operations in the future is dependent upon a number of factors, including sales trends, macroeconomic activity, our ability to contain costs, levels of capital expenditures, collection of accounts receivable, and other factors.
However, our ability to maintain adequate capital for our operations in the future is dependent upon a number of factors, including sales trends, macroeconomic activity and uncertainty, our ability to contain costs, levels of capital expenditures, collection of accounts receivable, and other factors.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s determination of SSP for these performance obligations, included the following, among others: We tested the effectiveness of internal controls over the determination of SSP. We selected a sample of customer agreements and performed the following: Obtained and read customer contracts and invoices for each selection to evaluate if relevant contractual terms have been appropriately considered by management. Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. Assessed the reasonableness of management’s estimates of stand-alone selling prices for products and services and the allocation of the transaction price to identified performance obligations determined on a relative stand-alone selling basis. Tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements. /s/ Deloitte & Touche LLP Salt Lake City, Utah November 12, 2024 We have served as the Company’s auditor since 2016. 47 Table of Contents FRANKLIN COVEY CO.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s determination of SSP for these performance obligations, included the following, among others: We tested the effectiveness of internal controls over the determination of SSP. We selected a sample of customer agreements and performed the following: o Obtained and read customer contracts and invoices for each selection to evaluate if relevant contractual terms have been appropriately considered by management. o Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. o Assessed the reasonableness of management’s estimates of SSP for products and services and the allocation of the transaction price to identified performance obligations determined on a relative stand-alone selling basis. o Tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements. /s/ Deloitte & Touche LLP Salt Lake City, Utah November 12, 2025 We have served as the Company’s auditor since 2016. 47 Table of Contents FRANKLIN COVEY CO.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Salt Lake City, Utah November 12, 2024 45 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Franklin Covey Co.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Salt Lake City, Utah November 12, 2025 45 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Franklin Covey Co.
Going forward, we will continue to incur costs necessary for the day-to-day operation of the business and may use additional credit and other financing alternatives, if necessary, for these expenditures.
Going forward, we will also continue to incur costs necessary for the day-to-day operation of the business and may use additional credit and other financing alternatives, if necessary, for these expenditures.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 12, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 12, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Other Related Party Transactions We pay an executive officer of the Company a percentage of the royalty proceeds received from the sales of certain books authored by him in addition to his annual salary. During each of the fiscal years ended August 31, 2024, 2023, and 2022, we expensed $ 0.1 million for these royalties.
Other Related Party Transactions We pay an executive officer of the Company a percentage of the royalty proceeds received from the sales of certain books authored by him in addition to his annual salary. During each of the fiscal years ended August 31, 2025, 2024 and 2023, we expensed $ 0.1 million for these royalties.
For example, a 10% increase to our allowance for credit losses at August 31, 2024 would decrease our reported income from operations by approximately $0.3 million. For further information regarding the calculation of our allowance for credit losses, refer to the notes to our financial statements as presented in Item 8 of this Annual Report on Form 10-K.
For example, a 10% increase to our allowance for credit losses at August 31, 2025 would decrease our reported income from operations by approximately $0.3 million. For further information regarding the calculation of our allowance for credit losses, refer to the notes to our financial statements as presented in Item 8 of this Annual Report on Form 10-K.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Franklin Covey Co. and subsidiaries (the “Company”) as of August 31, 2024 and 2023, the related consolidated income statements and statements of comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended August 31, 2024, and the related notes (collectively referred to as the “financial statements”).
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Franklin Covey Co. and subsidiaries (the “Company”) as of August 31, 2025 and 2024, the related consolidated income statements and statements of comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended August 31, 2025, and the related notes (collectively referred to as the “financial statements”).
However, we are permitted to make distributions, including through purchases of outstanding common stock, provided that we are in compliance with the Leverage Ratio and Fixed Charge Coverage Ratio financial covenants before and after such distribution. At August 31, 2024, we believe that we were in compliance with the terms and covenants contained in the 2023 Credit Agreement.
However, we are permitted to make distributions, including through purchases of outstanding common stock, provided that we are in compliance with the Leverage Ratio and Fixed Charge Coverage Ratio financial covenants before and after such distribution. At August 31, 2025, we believe that we were in compliance with the terms and covenants contained in the 2023 Credit Agreement.
Stock- Based Compensation We record the compensation expense for all stock-based payments, including grants of stock options and the compensatory elements of our employee stock purchase plan, in our consolidated income statements and statements of comprehensive income based upon their fair values over the requisite service period. For more information on our stock-based compensation plans, refer to Note 12.
Stock- Based Compensation We record the compensation expense for all stock-based payments, including grants of stock awards and the compensatory elements of our employee stock purchase plan, in our consolidated income statements and statements of comprehensive income based upon their fair values over the requisite service period. For more information on our stock-based compensation plans, refer to Note 12.
The following discussion is a description of the primary factors affecting our cash flows and their effects upon our liquidity and capital resources during the fiscal year ended August 31, 2024. Cash Flows from Operating Activities Our primary source of cash from operating activities was the sale of services and products to our customers in the normal course of business.
The following discussion is a description of the primary factors affecting our cash flows and their effects upon our liquidity and capital resources during the fiscal year ended August 31, 2025. Cash Flows from Operating Activities Our primary source of cash from operating activities was the sale of services and products to our customers in the normal course of business.
In addition, we do not enter into derivative contracts for trading or speculative purposes, nor are we party to any leveraged derivative instrument. During the fiscal years ended August 31, 2024, 2023, and 2022, we were not party to any foreign exchange contracts, interest rate swap agreements, or similar derivative instruments.
In addition, we do not enter into derivative contracts for trading or speculative purposes, nor are we party to any leveraged derivative instrument. During the fiscal years ended August 31, 2025, 2024, and 2023, we were not party to any foreign exchange contracts, interest rate swap agreements, or similar derivative instruments.
ACCOUNTS RECEIVABLE Our trade accounts receivable are recorded at cost less an allowance for estimated credit losses, which is the net amount we expect to collect . We make ongoing estimates relating to the collectability of our accounts receivable and maintain an allowance for credit losses resulting from the inability or unwillingness of our customers to make required payments.
ACCOUNTS RE CEIVABLE Our trade accounts receivable are recorded at cost less an allowance for estimated credit losses, which is the net amount we expect to collect . We make ongoing estimates relating to the collectability of our accounts receivable and maintain an allowance for credit losses resulting from the inability or unwillingness of our customers to make required payments.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed and traded on the NYSE under the symbol “FC.” We did not pay or declare dividends on our common stock during the fiscal years ended August 31, 2024 or 2023.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed and traded on the NYSE under the symbol “FC.” We did not pay or declare dividends on our common stock during the fiscal years ended August 31, 2025 or 2024.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended August 31, 2024, of the Company and our report dated November 12, 2024, expressed an unqualified opinion on those financial statements.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended August 31, 2025, of the Company and our report dated November 12, 2025, expressed an unqualified opinion on those financial statements.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Each of the following amounts may be payable in shares of our common stock or cash at our sole discretion: Contingent Consideration – A maximum of $ 4.2 million may be earned by the former principal owner of Strive over a five-year period ending in May 2026.
(Strive) as potentially payable in shares of our common stock. Each of the following amounts may be payable in shares of our common stock or cash at our sole discretion: Contingent Consideration – A maximum of $ 4.2 million may be earned by the former principal owner of Strive over a five-year period ending in May 2026.
The fair value of shares awarded to the directors was $ 1.0 million in fiscal 2024, and $ 0.7 million in each of fiscal 2023 and fiscal 2022, as calculated on the grant date of the awards. The corresponding compensation cost of each award is recognized over the service period of the award, which is one year.
The fair value of shares awarded to the directors was $ 1.0 million in each of fiscal 2025 and 2024, and $ 0.7 million in fiscal 2023, as calculated on the grant date of the awards. The corresponding compensation cost of each award is recognized over the service period of the award, which is one year.
The balance of interest and penalties included in other long-term liabilities on our consolidated balance sheets was $ 0.4 million at each of August 31, 2024 and 2023. During the next 12 months, we expect an immaterial change in unrecognized tax benefits.
The balance of interest and penalties included in other long-term liabilities on our consolidated balance sheets was $ 0.4 million at each of August 31, 2025 and 2024. During the next 12 months, we expect an immaterial change in unrecognized tax benefits.
(the 2019 Credit Agreement). The 2023 Credit Agreement provides up to $70.0 million in total credit, of which $7.5 million was used to replace the outstanding term loan balance from the 2019 Credit Agreement. The remaining $62.5 million is available as a revolving line of credit or for future term loans.
The 2023 Credit Agreement provides up to $70.0 million in total credit, of which $7.5 million was used to replace the outstanding term loan balance from the previous credit agreement. The remaining $62.5 million is available as a revolving line of credit or for future term loans.
Based on the results of our goodwill impairment analysis during fiscal 2024, we determined that no impairment existed at August 31, 2024, as we determined that it was more likely than not that each reportable operating segment’s estimated fair value exceeded its carrying value.
Based on the results of our goodwill impairment analysis during fiscal 2025, we determined that no impairment existed at August 31, 2025, as we determined that it was more likely than not that each reportable operating segment’s estimated fair value exceeded its carrying value.
However, due to societal changes in perception regarding the collection of student information and potential legal challenges, during the second quarter of fiscal 2024 we determined that it was in the best interest of the Company to suspend further development of the student leadership assessment and impair the associated asset.
However, due to societal changes in perception regarding the collection of student information and potential legal challenges, during fiscal 2024 we determined that it was in the best interest of the Company to suspend further development of the student leadership assessment and impair the associated asset.
We typically invoice our customers annually upon execution of the contract or subsequent renewals. Amounts that have been invoiced are recorded in accounts receivable and in unearned subscription revenue until the transfer of control has occurred and the amount is recognized in revenue.
We typically invoice our customers annually upon execution of the contract or subsequent renewals. Amounts that have been invoiced are recorded in accounts receivable and in deferred subscription revenue until the transfer of control has occurred and the amount is recognized in revenue.
Our effective tax rate for fiscal 2024 was higher than the statutory tax rate primarily due to non-deductible executive compensation and an increase in the valuation allowance against our deferred income tax assets, which were partially offset by benefits for share-based compensation deductions in excess of the corresponding book expense and the tax differential on income subject to both U.S. and foreign taxes.
Our effective rate in fiscal 2024 was higher than statutory rates primarily due to non-deductible executive compensation and an increase in the valuation allowance against our deferred income tax assets in some foreign jurisdictions, which were partially offset by benefits for share-based compensation deductions in excess of the corresponding book expense and the tax differential on income subject to both U.S. and foreign taxes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Franklin Covey Co. (hereafter referred to as we, us, our, or the Company) is a global company specializing in organizational performance improvement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE O F OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Franklin Covey Co. (hereafter referred to as we, us, our, or the Company) is a global company specializing in organizational performance improvement.
Other Assets – Our other assets, including notes receivable, were recorded at the net realizable value of estimated future cash flows from these instruments. Debt Obligations – At August 31, 2024, our debt obligations consisted primarily of a note payable to the former owners of Strive.
Other Assets – Our other assets, including notes receivable, were recorded at the net realizable value of estimated future cash flows from these instruments. Debt Obligations – At August 31, 2025, our debt consisted primarily of a note payable to the former owners of Strive.
FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.
FAIR VA LUE OF FINANCIAL INSTRUMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.
Our cost of revenue includes the direct costs of delivering content onsite at client locations, including presenter costs; amortization of previously capitalized curriculum development costs; content royalties; materials used in the production of training products and related assessments; manufacturing labor costs; and freight.
Our cost of revenue includes the direct costs of delivering content onsite at client locations, including presenter costs; content royalties; materials used in the production of training products and related assessments; amortization of previously capitalized curriculum development costs; and freight.
REVENUE We earn revenue from contracts with customers primarily through the delivery of our All Access Pass (AAP) and the Leader in Me membership subscription offerings, through the delivery of training days and training course materials (whether digitally or in person), and through the licensing of rights to sell our content into geographic locations where the Company does not maintain a direct office.
REVENUE We earn revenue from contracts with customers primarily through the delivery of our All Access Pass (AAP) and the Leader in Me membership subscription offerings, through the delivery of training days and training course materials (whether digitally or in person), and through the licensing of rights to sell our content into geographic locations where the 57 Table of Contents Company does not maintain a direct office.
Our remaining performance obligation represents contracted revenue that has not yet been recognized, including unearned subscription revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price is influenced by factors such as seasonality, the average length of the contract term, and the ability of the Company to continue to enter multi-year non-cancellable contracts.
Our remaining performance obligation represents contracted revenue that has not yet been recognized, including unearned subscription revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price is influenced by factors such as seasonality, the average length of the contract term, and the ability of the Comp any to continue to enter multi-year non-cancellable contracts.
Through August 31, 2024, we have recognized $ 2.2 million of stock-based compensation expense for the Strive contingent consideration payments. Bonus Payments – Approximately $ 1.0 million was payable 18 months following the Closing Date to stockholders and option holders of Strive who were still employed by the Company as of the 18 -month date, subject to certain exceptions.
Through August 31, 2025, we have recognized $ 2.8 million of stock-based compensation expense for the Strive contingent consideration payments. Bonus Payments – Approximately $ 1.0 million was payable 18 months following the Closing Date to stockholders and option holders of Strive who were still employed by the Company as of the 18 -month date, subject to certain exceptions.
Although the corporate headquarters facility was sold and we have no legal ownership of the property, the applicable accounting guidance prohibited us from recording the transaction as a sale since we subleased a significant portion of the property that was sold.
Although the corporate headquarters facility was sold and we had no legal ownership of the property, the applicable accounting guidance prohibited us from recording the transaction as a sale since we subleased a significant portion of the property that was sold.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Based on the fiscal 2024 evaluation of the Covey trade name, we believe the fair value of the Covey trade name substantially exceeds its carrying value. No impairment charges were recorded against the Covey trade name during the periods presented in this report.
Based on the fiscal 2025 evaluation of the Covey trade name, we believe the fair value of the Covey trade name substantially exceeds its carrying value. No impairment charges were recorded against the Covey trade name during the periods presented in this report.
Variations in the fair value of contingent consideration liabilities may result from changes in discount periods or rates, changes in the timing and amount of earnings estimates, and changes in probability assumptions with respect to the likelihood of achieving various payment criteria. Foreign Currency Translation and Transactions The functional currencies of our foreign operations are the reported local currencies.
Variations in the fair value of contingent consideration liabilities may result from changes in discount periods or rates, changes in the timing and amount of earnings estimates, and changes in probability assumptions with respect to the likelihood of achieving various payment criteria. Foreign C urrency Translation and Transactions The functional currencies of our foreign operations are the reported local currencies.
We completed a quantitative assessment of our goodwill as of August 31, 2024 and concluded there were no impairments. We do no t have any accumulated impairment charges against the carrying value of our goodwill.
We completed a quantitative assessment of our goodwill as of August 31, 2025 and concluded there were no impairments. We do no t have any accumulated impairment charges against the carrying value of our goodwill.
In addition, we make 40 Table of Contents certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. The timing and frequency of our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment.
In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. The timing and frequency of our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment.
The Company’s Leader in Me subscription offering contracts often include promises to transfer multiple products or services to a customer that are considered distinct performance obligations that should be accounted for separately. The transaction price is allocated to each performance obligation on a relative standalone selling price (SSP) basis.
The contracts for the Company’s Leader in Me subscription offering often include promises to transfer multiple products or services to a customer which are considered distinct performance obligations and should be accounted for separately. The transaction price is allocated to each performance obligation on a relative standalone selling price (SSP) basis.
Actual future performance and results will differ and may differ materially from that contained in or suggested by forward-looking statements as a result of the factors set forth in this Management’s Discussion and Analysis and elsewhere in our filings with the SEC. 43 Table of Contents ITEM 7A .
Actual future performance and results will differ and may differ materially from that contained in or suggested by forward-looking statements as a result of the factors set forth in this Management’s Discussion and Analysis and elsewhere in our filings with the SEC. ITEM 7A .
The discounted cash flow analysis is derived from valuation techniques in which one or more significant inputs are not observable and constitute Level 3 fair value measures. The determination of the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions.
The discounted cash flow analysis is derived from valuation techniques in which one or more significant inputs are not observable and constitute Level 3 fair value measures. 54 Table of Contents The determination of the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions.
STOCK-BASED COMPENSATION PLANS Overview We utilize various stock-based compensation plans as integral components of our overall compensation and associate retention strategy. Our shareholders have approved various stock incentive plans that permit us to grant performance awards, unvested stock awards, stock options, fully vested stock awards, and employee stock purchase plan (ESPP) shares.
STOCK-BASED COMPENSATION PLANS Overview We utilize various stock-based compensation plans as integral components of our overall compensation and associate retention strategy. Our shareholders have approved various stock incentive plans that permit us to grant performance awards, unvested stock awards, stock options, fully vested stock awards, and sell shares through the employee stock purchase plan (ESPP).
Constant currency is a non-GAAP financial measure that removes the impact of fluctuations in foreign currency 27 Table of Contents exchange rates and is calculated by translating the current period’s financial results at the same average exchange rates in effect during the prior year and then comparing this amount to the prior year.
Constant currency is a non-GAAP financial measure that removes the impact of fluctuations in foreign currency exchange rates and is calculated by translating the current period’s financial results at the same average exchange rates in effect during the prior year and then comparing this amount to the prior year.
Our Leader in Me membership offering is bifurcated into a portal membership obligation and a coaching delivery obligation. We have determined that it is appropriate to recognize revenue related to the portal membership over the term 58 Table of Contents of the underlying contract and to recognize revenue from coaching as those services are performed.
Our Leader in Me membership offering is bifurcated into a portal membership obligation and a coaching delivery obligation. We have determined that it is appropriate to recognize revenue related to the portal membership over the term of the underlying contract and to recognize revenue from coaching as those services are performed.
The Leverage Ratio as defined by the 2023 Credit Agreement is funded debt to adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) and determines the applicable interest rate as shown below: Leverage Ratio Interest Rate Less than 1.00 SOFR plus 1.50 % Between 1.00 and 2.00 SOFR plus 1.75 % Between 2.01 and 2.50 SOFR plus 2.25 % Greater than 2.51 SOFR plus 2.75 % The 2023 Credit Agreement also contains representations, warranties, and certain covenants.
The Leverage Ratio as defined by the 2023 Credit Agreement is funded debt to adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) and determines the applicable interest rate as shown below: Leverage Ratio Interest Rate Less than 1.00 SOFR plus 1.50 % Between 1.00 and 2.00 SOFR plus 1.75 % Between 2.01 and 2.50 SOFR plus 2.25 % Greater than 2.51 SOFR plus 2.75 % 62 Table of Contents The 2023 Credit Agreement also contains representations, warranties, and certain covenants.
Associate compensation expense is included in SG&A expense and consultant compensation is 37 Table of Contents included in our cost of revenue. Our associate costs include variable compensation such as commissions, incentives, and bonuses, and may fluctuate from year-to-year. Information Technology – Our business is reliant on computer software and hardware.
Associate compensation expense is included in SG&A expense and consultant compensation is included in our cost of revenue. Our associate costs include variable compensation such as commissions, incentives, and bonuses, and may fluctuate from year-to-year. Information Technology – Our business is reliant on computer software and hardware.
Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Franklin Covey and subsidiaries (the “Company”) as of August 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Franklin Covey Co. and subsidiaries (the “Company”) as of August 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Shipping revenues associated with product sales are recorded in revenue with the corresponding shipping cost being recorded as a component of cost of revenue. Royalties Our international strategy includes the use of licensees in countries where we do not have a wholly-owned direct office.
Shipping revenues associated with product sales are recorded in revenue with the corresponding shipping cost being recorded as a component of cost of revenue. 58 Table of Contents Royalties Our international strategy includes the use of licensees in countries where we do not have a wholly-owned direct office.
The book values of our financial instruments at August 31, 2024 and 2023 approximated their fair values. The assessment of the fair values of our financial instruments is based on a variety of factors and assumptions.
The book values of our financial instruments at August 31, 2025 and 2024 approximated their fair values. The assessment of the fair values of our financial instruments is based on a variety of factors and assumptions.
Forward-looking statements in this discussion are qualified by the cautionary statement under the heading “Safe Harbor Statement Under the Private Securities Litigation Reform Act Of 1995” contained later in Item 7 of this Annual Report on Form 10-K.
Forward-looking statements in this discussion are qualified by 27 Table of Contents the cautionary statement under the heading “Safe Harbor Statement Under the Private Securities Litigation Reform Act Of 1995” contained later in Item 7 of this Annual Report on Form 10-K.
During the fiscal years ended August 31, 2024 and 2023, we recognized $ 147.9 million and $ 139.0 million of previously deferred subscription revenue. Remaining Performance Obligations When possible, we enter into multi-year non-cancellable contracts which are invoiced either upon execution of the contract or at the beginning of each annual contract period.
We recognized $ 147.9 million of previously deferred subscription revenue during each of the fiscal years ended August 31, 2025 and 2024 . Remaining Performance Obligations When possible, we enter into multi-year non-cancellable contracts which are invoiced either upon execution of the contract or at the beginning of each annual contract period.
During fiscal years ended August 31, 2024, 2023, and 2022, we expensed $ 2.2 million, $ 2.7 million, and $ 2.5 million for services provided under the terms of our warehouse and distribution outsourcing contract. The total amount expensed each year includes freight charges, which are billed to us based upon activity.
During the fiscal years ended August 31, 2025, 2024, and 2023, we expensed $ 2.0 million, $ 2.2 million, and $ 2.7 million for services provided under the terms of our warehouse and distribution outsourcing contract. The total amount expensed each year includes freight charges, which are billed to us based upon activity.
However, we have cash expenditures and are subject to various contractual obligations that are required to run our business. Our material cash requirements include the following: Associate and Consultant Compensation – Associate and consultant compensation is our largest recurring use of cash.
However, we have cash expenditures and are subject to various contractual obligations that are required to run our business. Our material cash requirements include the following: Associate and Consultant Compensation – Associate and consultant compensation is our largest expense and most significant recurring use of cash.
Including capitalized hardware and software, we spent approximately $10 million for information technology software and hardware during fiscal 2024. Content Development – We believe that ongoing investment in our content and offerings is key to our future success. Our innovations group is responsible for the development of new content as well as refreshing and maintaining our existing content.
Including capitalized hardware and software, we spent approximately $16 million for information technology software and hardware during fiscal 2025. Content Development – We believe that ongoing investment in our content and offerings is key to our future success. Our innovations group is responsible for the development of new content as well as refreshing and maintaining our existing content.
Furthermore, our clients, to expend funds in a particular budget cycle, may prepay for services or products which are recorded as customer deposits until the amount is applied to a subscription contract.
Furthermore, our clients, to expend funds in a particular budget cycle, may prepay for services or products whic h are recorded as customer deposits until the amount is applied to a subscription contract.
Other Geographic Information At August 31, 2024, we had wholly owned direct offices that serve clients in Australia, New Zealand, China, Japan, the United Kingdom, Ireland, Germany, Switzerland, and Austria.
Other Geographic Information At August 31, 2025, we had wholly-owned direct offices that serve clients in Australia, New Zealand, China, Japan, the United Kingdom, Ireland, France, Germany, Switzerland, and Austria.
We regularly assess the likelihood that our deferred tax assets will be realized and determine if adjustments to our valuation allowance are necessary. These evaluations may produce additional volatility in our tax provision or benefit, net income or loss, and earnings or loss per share.
We regularly assess the likelihood that our deferred tax assets will be realized and determine if 42 Table of Contents adjustments to our valuation allowance are necessary. These evaluations may produce additional volatility in our tax provision or benefit, net income or loss, and earnings or loss per share.
In determining the SSP, the Company considers the size and volume of transactions, price lists, historical sales, and contract prices. 46 Table of Contents Given the increased extent of audit effort in evaluating management’s judgments in determining SSP, we identified the determination of SSP for the Leader in Me membership offerings as a critical audit matter.
In determining the SSP, the Company considers the size and volume of transactions, price lists, historical sales, and contract prices. 46 Table of Contents Given the increased extent of audit effort in evaluating management’s judgments in determining SSP, we identified the determination of SSP for the Leader in Me subscription offering as a critical audit matter.
The Organization and Compensation Committee of the Board of Directors (the Compensation Committee) has responsibility for the approval and oversight of our stock-based compensation plans. On January 14, 2022, our shareholders approved the Franklin Covey Co. 2022 Omnibus Incentive Plan (the 2022 Plan), which authorized an additional 1,000,000 shares of common stock for issuance as stock-based payments.
The Organization and Compensation Committee of the Board of Directors (the Compensation Committee) has responsibility for the approval and oversight of our stock-based compensation plans. On January 14, 2022, ou r shareholders approved the Franklin Covey Co. 2022 Omnibus Incentive Plan (the 2022 Plan), which authorized 1,000,000 shares of common stock for issuance as stock-based payments.
Due to our relatively low market capitalization, the price of our common stock may also be affected by conditions such as a lack of analyst coverage and fewer potential investors.
Due 43 Table of Contents to our relatively low market capitalization, the price of our common stock may also be affected by conditions such as a lack of analyst coverage and fewer potential investors.
Our compensation plans for associates and delivery consultants include fixed (salaried) and variable elements as well as the cost of benefits, and may fluctuate with sales, financial results, and hiring/retention activity. During fiscal 2024, we expensed approximately $169 million for associate and delivery consultant cash compensation.
Our compensation plans for associates and delivery consultants include fixed (salaried) and variable elements as well as the cost of benefits, and may fluctuate with sales, financial results, and hiring/retention activity. During fiscal 2025, we expensed approximately $172 million for associate and delivery consultant cash compensation.
Included in the ending balance of gross unrecognized tax benefits at August 31, 2024 is $ 1.0 million related to individual states’ net operating loss carryforwards. Interest and penalties related to uncertain tax positions are recognized as components of income tax expense.
Included in the ending balance of gross unrecognized tax benefits at August 31, 2025 is $ 0.6 million related to individual states’ net operating loss carryforwards. Interest and penalties related to uncertain tax positions are recognized as components of income tax expense.
The net accruals and reversals of interest and penalties had an insignificant effect on our income tax expense in fiscal 2024 and increased our income tax expense by $ 0.1 million in each of fiscal 2023 and 2022.
The net accruals and reversals of interest and penalties had an insignificant effect on our income tax expense in fiscal 2025 and 2024 and increased our income tax expense by $ 0.1 million in fiscal 2023.
We received cash proceeds for these shares from ESPP participants totaling $ 1.5 million in each of fiscal 2024 and fiscal 2023; and $ 1.3 million during fiscal 2022. Fully Vested Stock Awards We have a stock-based incentive program that is designed to reward our client partners and training consultants for exceptional long-term performance.
We received cash proceeds for these shares from ESPP participants totaling $ 1.5 million in each of fiscal 2025, 2024, and 2023. Fully Vested Stock Awards We have a stock-based incentive program that is designed to reward client partners and training consultants for exceptional long-term performance.
For a discussion of the results of operations and changes in financial condition for fiscal 2023 compared with fiscal 2022, refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2023 Form 10-K, which was filed with the SEC on November 13, 2023.
For a discussion of the results of operations and changes in financial condition for fiscal 2024 compared with fiscal 2023, refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2024 Form 10-K, which was filed with the SEC on November 12, 2024.
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