FRANKLIN COVEY CO (FC)

CIK: 0000886206. SIC: 8741 Services-Management Services. Latest 10-K as of: 2025-11-12.

SIC breadcrumb: Services > SIC Major Group 87 > SIC 8741 Services-Management Services

SEC company page: https://www.sec.gov/edgar/browse/?CIK=886206. Latest filing source: 0000886206-25-000085.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-11-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000886206.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000886206.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-147784.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-04-08. Report date: 2026-02-28.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations (Management’s Discussion and Analysis) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management’s current expectations and are subject to various uncertainties and changes in circumstances. Important factors that could cause actual results to differ materially from those described in forward-looking statements are set forth below under the heading “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995.”

We suggest that the following discussion and analysis be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report.

Non-GAAP Measures

This Management’s Discussion and Analysis includes the concept of Adjusted EBITDA, which is a non-GAAP financial measure. We define Adjusted EBITDA as net income or loss excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items such as restructuring costs. We reference this non-GAAP measure in our decision making because it provides supplemental information that facilitates consistent internal comparisons to the operating performance of prior periods and we believe it provides investors with greater transparency to evaluate our operational activities and financial results. For a reconciliation of our reportable segment Adjusted EBITDA to income or loss before income taxes, a related GAAP measure, refer to Note 7, Segment Information, to our unaudited condensed consolidated financial statements.

RESULTS OF OPERATIONS

Overview

Franklin Covey Co., a global leadership and organizational performance company, gives strategy the human edge. Our mission is to “enable greatness in people and organizations everywhere,” and our worldwide resources are organized to help clients achieve breakthrough results and transform how they execute strategy at scale. We believe that our content and services create the connection between capabilities and results. Our business is currently structured around two divisions, the Enterprise Division and the Education Division, which are driven to develop high-performing leaders at all levels of the organization and align people around purpose and priorities. The Enterprise Division consists of our North America and International segments and is focused on selling our offerings to corporations, governments, not-for-profits, and other related organizations. Our Education Division is centered around the principles found in the Leader in Me and is dedicated to helping educational institutions build cultures that will produce great results, including increased student performance, improved school culture, and increased parental and teacher involvement.

For Franklin Covey, fiscal 2025 was a year of transition and transformation as we initiated a new go-to-market and sales strategy in North America. In addition, our fiscal 2025 results of operations were adversely impacted by various macroeconomic factors, including reduced U.S. federal government spending and geopolitical tensions that produced instability in certain regions of the world. This resulted in a reduction of invoiced amounts and net revenue for fiscal 2025, which will continue to impact fiscal 2026 as we recognize a lower base of previously deferred revenue. Despite these headwinds, we have retained the vast majority of our client base and now with the bulk of our revenue-generating transformation investments nearly completed, we believe these efforts are beginning to produce growth in invoiced amounts the first half of fiscal 2026. We view fiscal 2026 to be a year of execution and a return to growth, and believe fiscal 2027 will continue the momentum and provide accelerating and compounding growth and cash flow. We believe the transformative investments made in our Enterprise North America go-to-market strategy plus our continued investments in content and technology position us for meaningful growth in the future.

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During the second quarter of fiscal 2026, we continued to be encouraged by strong growth in Enterprise North America invoiced amounts, which also saw growth in the first quarter. We believe invoiced amounts are a primary lead metric that demonstrates the positive momentum building from our go-to-market investments and which we expect to continue in the second half of fiscal 2026. In the second quarter of fiscal 2026, we were able to translate this operational momentum into improved cash flows and increased Adjusted EBITDA compared with the prior year.

Our consolidated revenue for the quarter ended February 28, 2026, was essentially flat compared with the second quarter of fiscal 2025 at $59.6 million, and reflected the impact of fiscal 2025 conditions as previously described. Foreign exchange rates had a $0.7 million favorable impact on our consolidated revenues and a $0.2 million favorable impact on operating results and Adjusted EBITDA in the second quarter of fiscal 2026. The Company’s revenue performance for the quarter ended February 28, 2026, included the following key metrics:

o
Enterprise Division revenues for the second quarter of fiscal 2026 totaled $41.6 million compared with $43.6 million in the second quarter of the prior year. Enterprise Division revenue performance was impacted by a $2.0 million decrease in North America segment revenues and a $0.1 million increase in International segment revenues. Revenue performance in our North America segment was adversely impacted by canceled government contracts, ongoing geopolitical tensions, and other macroeconomic difficulties, which hampered subscription revenue growth in fiscal 2025 and which now flow through as we recognize previously deferred revenue. Despite these difficult conditions, we were encouraged by continued growth in invoiced amounts in the North America segment in both the first and second quarters of fiscal 2026, which we believe will translate to increased reported revenue in future quarters.

o
Education Division revenues in the second quarter of fiscal 2026 increased $2.4 million, or 16%, to $17.5 million compared with the second quarter of fiscal 2025. The increase was primarily due to increased subscription and subscription-related revenue, increased classroom and training materials sales, and an additional symposium event. Education Division subscription-related revenue increased over the prior year primarily due to the delivery of over 300 more training and coaching days than the prior year. The strong growth in delivery contributed to 16% growth in Education Division subscription and subscription services revenue.

o
Consolidated subscription and subscription services revenues for the second quarter of fiscal 2026 increased to $50.9 million compared with $49.5 million in the second quarter of fiscal 2025. For the quarter ended February 28, 2026, subscription and contractually committed invoiced amounts increased $5.4 million, or 16%, to $39.3 million compared with $33.9 million in the same period of fiscal 2025.

o
Consolidated deferred revenue on February 28, 2026, increased $7.1 million, or 7%, to $101.5 million compared with $94.4 million on February 28, 2025.

o
As of February 28, 2026, 59% of our North America AAP contracts are for at least two years, compared with 55% at February 28, 2025, and the percentage of contracted amounts represented by multi-year contracts was 62% compared with 61% at February 28, 2025.

o
Unbilled deferred revenue on February 28, 2026, increased to $64.9 million compared with $64.5 million on February 28, 2025. Unbilled deferred revenue represents business that is contracted, but unbilled and therefore excluded from our balance sheet.

The following is a summary of other unaudited consolidated financial information from the second quarter of fiscal 2026, which ended on February 28, 2026:

•
Cost of Revenue/Gross Profit – For the quarter ended February 28, 2026, our cost of revenue totaled $14.4 million compared with $13.9 million in the prior year. Gross profit in the second quarter of fiscal 2026 was $45.3 million compared with $45.7 million in the prior year. The decrease in gross profit was primarily due to a slight decrease in our gross margin for the second quarter of fiscal 2026, which remained strong at 75.9% of revenue compared with 76.7% in the prior year. The decrease was primarily due to increased amortization of capitalized curriculum expense and a shift in the mix of services delivered and products sold during the quarter.

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•
Operating Expenses – Our operating expenses for the second quarter of fiscal 2026 totaled $47.3 million and increased $0.1 million compared with the prior year. The increase was primarily due to a $1.5 million increase in restructuring charges, a $1.3 million increase in share-based compensation expense, and a $0.5 million increase in building exit costs which primarily consist of legal expenses. These increases were partially offset by decreased selling, general, and administrative (SG&A) expenses driven by reduced associate costs and other cost reduction efforts. During the second quarter of fiscal 2026, we continued to restructure our business to reduce costs and streamline certain areas of our operations. We incurred $1.5 million of expense for this restructuring activity, which consisted primarily of severance and related costs. In an effort to retain the services of the former principal owner of Strive, which we purchased in a prior year, we agreed to pay the remaining unearned contingent consideration from the purchase of Strive, which was paid in shares of our common stock (Note 4). The additional contingent consideration totaled $1.4 million and was expensed in the second quarter of fiscal 2026.

•
Income Taxes – Our income tax benefit for the quarter ended February 28, 2026, was $0.1 million on a pre-tax loss of $(2.1) million, for an effective benefit rate of 3.9%. In the second quarter of fiscal 2025, our income tax benefit was $0.3 million on a pre-tax loss of $(1.3) million, for an effective benefit rate of 20.2%. The effective tax benefit rate for the second quarter of fiscal 2026 was lower than the effective tax benefit rate in the prior year primarily due to increased non-deductible stock based compensation.

•
Net Income (Loss) and Adjusted EBITDA – For the second quarter of fiscal 2026, we realized a net loss of $(2.0) million, or $(0.17) per share, compared with a net loss of $(1.1) million, or $(0.08) per share, in the second quarter of fiscal 2025, reflecting the factors previously discussed. Our Adjusted EBITDA for the quarter ended February 28, 2026, increased $2.0 million, or 99%, to $4.1 million compared with $2.1 million in the prior year. Foreign exchange rates had a $0.2 million favorable impact on our Adjusted EBITDA for the quarter ended February 28, 2026.

•
Liquidity and Financial Position – Our liquidity and financial position remained strong throughout the first two quarters of fiscal 2026. At February 28, 2026, we had over $76 million of available liquidity which consisted of $13.7 million of cash and our full available $62.5 million line of credit even after using $28.1 million of cash to purchase shares of our common stock for treasury during the first two quarters of fiscal 2026.

Further details regarding our results for the quarter ended February 28, 2026, are provided throughout the following Management’s Discussion and Analysis.

Quarter Ended February 28, 2026 Compared with the Quarter Ended February 28, 2025

Enterprise Division

North America Segment

The North America segment includes ou

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Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2025-11-12. Report date: 2025-08-31.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (Management’s Discussion and Analysis) is intended to provide a summary of the principal factors affecting the results of operations, liquidity and capital resources, and the critical accounting estimates of Franklin Covey Co. (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. Forward-looking statements in this discussion are qualified by

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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.

Non-GAAP Measures

This Management’s Discussion and Analysis includes the concepts of adjusted earnings before interest, income taxes, depreciation, and amortization (Adjusted EBITDA) and “constant currency,” which are non-GAAP measures. We define Adjusted EBITDA as net income excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items such as restructuring charges and building exit costs. 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.

We reference these non-GAAP financial measures in our decision making because they provide supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods, and we believe it provides investors with greater transparency to evaluate operational activities and financial results. For a reconciliation of our segment Adjusted EBITDA to income before income taxes, a related GAAP measure, refer to Note 17 Segment Information to our consolidated financial statements as presented in Item 8 of this Annual Report on Form 10-K.

EXECUTIVE SUMMARY

General Overview

Franklin Covey Co. is a global company focused on individual and organizational performance improvement. Our mission is to “enable greatness in people and organizations everywhere,” and our worldwide resources are organized to help individuals and organizations achieve sustained superior performance at scale through changes in human behavior. We believe that our content and services create the connection between capabilities and results. In the training and consulting marketplace, we believe there are three important characteristics that distinguish us from our competitors.

1.World Class Content – Our content is based on timeless principles of human effectiveness and is designed to help people change both their mindset and behavior. When our content is applied consistently in an organization, we believe the culture of that organization will change and improve to enable the organization to get desired results and achieve its own great purposes.

2.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. We believe our expert delivery consultants combined with investments in digital delivery modalities have enabled us to deliver our content to clients in a high-quality learning environment whether those clients are working remotely or in a centralized location.

3.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. Our capabilities allow us to serve a wide range of clients from small locally owned entities to large multinational enterprises.

We have some of the best-known offerings in the training industry, including a suite of individual-effectiveness and leadership-development training content based on the best-selling books, The 7 Habits of Highly Effective People, The Speed of Trust, Multipliers, The 4 Disciplines of Execution, and Trust & Inspire, and proprietary content in the areas of Execution, Sales Performance, Productivity, Customer Loyalty, Leadership, and Education. We believe that our offerings help individuals, teams, and entire organizations transform their results through achieving systematic, sustainable, and

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measurable changes in human behavior. Our offerings are described in further detail at www.franklincovey.com. The information contained in, or that can be accessed through, our website does not constitute a part of this Annual Report on Form 10-K, and the descriptions found therein should not be viewed as a warranty or guarantee of results.

Our fiscal year ends on August 31, and unless otherwise indicated, fiscal 2025, fiscal 2024, and fiscal 2023 refer to the twelve-month periods ended August 31, 2025, 2024, 2023, and so forth.

Key Strategic Objectives

The theme of our fiscal 2026 Company kickoff was, “Deep Roots, Bold Future.” Building on our enduring areas of competitive strength and the significant growth investments we made in fiscal 2025, we plan to focus on the following four strategic objectives that we intend to execute with discipline in fiscal 2026 to help us achieve our vision of helping our clients achieve their missions and strategic objectives.

Clarify our position in the market. FranklinCovey is not just a training company. We believe we are a trusted leadership and performance partner and that our comprehensive solutions can help drive breakthroughs in performance as our clients engage leaders and teams across their organizations to move their strategies forward. In fiscal 2026, our message to potential and current clients is designed to firmly position us in this more strategic, outcomes-oriented place in the market.

Focus and declare who we serve. In fiscal 2026 we intend to significantly increase the precision and impact of our outcome-oriented messaging to our target buyers, namely, senior executive leaders who own the responsibility for achieving strategic outcomes and who can make the spending decisions to do what it takes to achieve them. Our messaging target also includes senior, performance-oriented talent and human resource leaders who serve as internal partners to these executives inside of their organizations. As we increase the effectiveness of our messaging, we expect that we will engage with more significant clients in more strategic ways, driving better results for our clients and for FranklinCovey.

Build and sell like a “solutions leadership” company. A solutions leadership company is differentiated by the strength of its products and services. We intend to increasingly position and package our solutions as integrated offerings that drive collective action and deliver breakthrough results for clients. Our trusted content and frameworks will be more frequently combined with consulting and technology to help clients achieve measurable outcomes at scale—enabling lasting client impact and durable growth for FranklinCovey.

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Model what we teach, internally and visibly. As we pursue our growth strategy, we will heavily use and model our own methodologies and frameworks. This process includes further investments in our already strong culture to increase our ability to execute with even higher trust and accountability as we engage our own leaders and teams in achieving our own breakthrough results.

We believe the pursuit of these strategic priorities will enable us to make more progress toward our mission of enabling greatness in both people and organizations and our vision to impact billions. In addition, we believe that successful implementation of these objectives will provide our associates with additional resources and opportunities for growth and impact in the future and will drive results that are expected to provide return to our shareholders.

Other key factors that influence our operating results include: the number of organizations that are active customers; the scale and duration of our engagements with them; the number of people engaged in our solution implementations within those organizations; the continuation or renewal of existing services contracts, especially subscription renewals; the availability of budgeted spending in our solution areas among our clients and prospective clients, which, in certain content categories, can be significantly influenced by general economic conditions; client satisfaction with our offerings and services; the number and productivity of our international licensee operations; and our ability to manage operating costs necessary to develop and provide meaningful offerings and related products to our clients.

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Fiscal 2025 Financial Overview

Fiscal 2025 was a challenging year as our operations and financial results were adversely impacted by various macroeconomic factors, including threatened or enacted tariffs that have created significant business environment uncertainty, specific actions to reduce U.S. federal government spending, a general weakening of economic conditions both domestically and internationally, and ongoing geopolitical tensions which continue to produce instability in certain regions of the world. While threatened or enacted tariffs have not directly impacted our operations, the uncertainty created by the threatened tariffs have adversely impacted our clients both domestically and internationally. In response to the economic uncertainty, many of our clients and prospective clients have sought to reduce their spending to maintain profitability, which led to delayed decision making, decreased contract expansion, and lower client retention. Despite these challenging macroeconomic issues, we are pleased that the majority of our clients are renewing their All Access Pass subscriptions and Leader in Me memberships. Our solutions are designed to help clients improve their key metrics and manage through difficult and uncertain times. During fiscal 2025, we implemented a new go-to-market strategy in North America, and these initiatives are designed to enable us to systematically drive growth in both the breadth and depth of our client relationships at scale. We believe these initiatives will provide strong growth in amounts invoiced during fiscal 2026, which will then translate into meaningful growth in reported revenue toward the back half of fiscal 2026 and increasing in future periods.

Our consolidated revenue for the fiscal year ended August 31, 2025, totaled $267.1 million, compared with record-high revenues of $287.2 million in fiscal 2024 and reflected the impact of business conditions and macroeconomic challenges previously described. In constant currency, our consolidated revenue was $267.3 million for fiscal 2025. The Company’s revenue performance during fiscal 2025 included the following key metrics:

Enterprise Division revenue in fiscal 2025 totaled $188.1 million compared with $208.1 million in the prior year. Enterprise Division revenue performance was primarily impacted by a $15.8 million decrease in North America segment revenues and a $4.0 million decrease in International Direct Office revenues, which were each adversely impacted by macroeconomic uncertainties, decreased U.S. government spending, and trade tensions from threatened or enacted tariffs. These challenging economic and business conditions adversely impacted new logo sales, expansion activity, and client retention throughout the fiscal year.

For the fiscal year ended August 31, 2025, Education Division revenue increased to $74.6 million compared with $74.2 million in the prior year. Fiscal 2025 revenue growth was primarily attributable to increased coaching and consulting revenue and increased membership subscription revenue, which were partially offset by decreased sales of classroom and training materials, primarily due to a new state-wide initiative and district contracts that included large training materials orders in fiscal 2024. Delivery of training and coaching days remained strong during fiscal 2025 as the Education Division delivered a similar number of training and coaching days when compared with fiscal 2024. Education subscription and subscription services revenues in fiscal 2025 increased 4% compared with the prior year and Education deferred subscription revenue at August 31, 2025, increased 13% over the balance at August 31, 2024.

Consolidated subscription and subscription services revenues for fiscal 2025 totaled $225.9 million compared with $231.8 million in fiscal 2024. For the fiscal year ended August 31, 2025, subscription revenue invoiced was $151.7 million compared with $156.8 million in the prior year.

At August 31, 2025, we had $111.7 million of deferred subscription revenue compared with $107.9 million at August 31, 2024. Our deferred subscription revenue at August 31, 2025 and 2024 includes $5.1 million and $6.7 million, respectively, of deferred subscription revenue that was classified as long-term based on expected recognition. Our unbilled deferred revenue at August 31, 2025 was $72.8 million compared with $75.2 million at the end of fiscal 2024. Unbilled deferred revenue represents business that is contracted, but unbilled and therefore excluded from our balance sheet.

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The following table sets forth our consolidated revenue by division and by reportable segment for the fiscal years indicated (in thousands):

YEAR ENDED

%

%

AUGUST 31,

2025

Change

2024

Change

2023

Enterprise Division:

North America

$

147,609 

(10)

$

163,384 

3

$

157,906

International direct offices

29,344 

(12)

33,327 

(6)

35,359

International licensees

11,111 

(3)

11,436 

(3)

11,819

188,064 

(10)

208,147 

1 

205,084

Education Division

74,618

1 

74,210 

6 

70,318

Corporate and other

4,385 

(10)

4,876 

(5)

5,119 

Consolidated revenue

$

267,067

(7)

$

287,233 

2 

$

280,521 

Gross profit consists of net revenue less the cost of services provided or the cost of goods sold. 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. Gross profit may be affected by, among other things, the mix of services sold to clients, prices of materials, travel, labor rates, changes in product discount levels, and freight costs. Our consolidated cost of revenue in fiscal 2025 totaled $63.5 million compared with $66.2 million in fiscal 2024. Consolidated gross profit for the fiscal year ended August 31, 2025 was $203.6 million compared with $221.1 million in the prior year and decreased primarily due to lower revenue as described above. Our gross margin for fiscal 2025 decreased slightly to 76.2% compared with 77.0% in fiscal 2024 primarily due to changes in the mix of services and products sold during the year.

Our operating expenses in fiscal 2025 totaled $197.9 million, an increase of $9.8 million, compared with $188.0 million in the prior year. The increase was primarily due to a $6.7 million increase in selling, general, and administrative (SG&A) expenses and a $3.7 million increase in restructuring costs. The increase in SG&A expenses was primarily due to a $5.5 million increase in associate expenses primarily related to new personnel, including new sales and sales support personnel hired in connection with the implementation of our new go-to-market strategy in North America; $2.1 million of costs related to the exit from our previous corporate campus, including relocation and litigation expenses; and $1.6 million of increased software subscription costs for new software programs being used in the normal course of business. These increases were partially offset by a $4.3 million decrease in share-based compensation expense resulting from less awards outstanding during the year and the determination that certain performance tranches of long-term incentive awards would not vest. During fiscal 2025, we continued to restructure our sales force in North America and to reduce costs in certain areas of our operations. We incurred $6.7 million of expenses for these restructuring activities in fiscal 2025, which primarily consisted of severance and related costs, compared with $3.0 million in fiscal 2024.

Our effective income tax rate for fiscal 2025 was approximately 49% compared with an effective income tax rate of approximately 29% in fiscal 2024. Our effective tax rate for fiscal 2025 was higher than the statutory tax rate primarily due to an increase in the valuation allowance against our deferred income tax assets in some foreign jurisdictions and non-deductible executive compensation, which were partially offset by the tax differential on foreign income. 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.

Net income for the year ended August 31, 2025 was $3.1 million, or $0.24 per diluted share, compared with $23.4 million, or $1.74 per diluted share, in fiscal 2024. Our Adjusted EBITDA in fiscal 2025 was $28.8 million compared with $55.3 million in fiscal 2024, reflecting the above-noted factors. In constant currency, our fiscal 2025 Adjusted EBITDA was $29.0 million. Adjusted EBITDA and constant currency Adjusted EBITDA are non-GAAP financial measures. For additional information regarding our use of non-GAAP financial measures, see the discussion under the heading Non-GAAP Measures above.

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Further details regarding these items can be found in the comparative analysis of fiscal 2025 with fiscal 2024 as discussed within this Management’s Discussion and Analysis.

Our liquidity, financial position, and capital resources remained strong throughout fiscal 2025. At August 31, 2025, we had $31.7 million of cash, with no borrowings on our $62.5 million revolving credit facility, even after spending $26.4 million on purchases of our common stock and $15.8 million on capital assets during fiscal 2025. At August 31, 2024 we had $48.7 million of cash, and no borrowings on our revolving credit facility. For further information regarding our liquidity and cash flows, refer to the Liquidity and Capital Resources discussion found within this Management’s Discussion and Analysis.

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.

Results of Operations

The following table sets forth, for the fiscal years indicated, the percentage of total sales represented by the line items through income before income taxes in our consolidated income statements. This table should be read in conjunction with the accompanying discussion and analysis, the consolidated financial statements, and the related notes to the consolidated financial statements.

YEAR ENDED

AUGUST 31,

2025

2024

2023

Amounts shown as a percent of total revenue

Revenue

100.0 

100.0 

100.0 

Cost of revenue

23.8 

23.0 

23.9 

Gross profit

76.2 

77.0 

76.1 

Selling, general, and administrative

68.4

61.3 

63.4 

Restructuring costs

2.5 

1.0 

0.2 

Impaired asset

-

0.3 

-

Depreciation

1.5 

1.4 

1.5 

Amortization

1.6 

1.5 

1.6 

Total operating expenses

74.0

65.5 

66.7 

Income from operations

2.2

11.5 

9.4 

Interest income

0.3 

0.4 

0.4 

Interest expense

(0.2)

(0.4)

(0.6)

Income before income taxes

2.3

11.5 

9.2 

FISCAL 2025 COMPARED WITH FISCAL 2024 RESULTS OF OPERATIONS

Enterprise Division

North America Segment

The North America segment includes our personnel that serve clients in the United States and Canada. The following comparative information is for our North America segment in the periods indicated (in thousands):

Fiscal Year Ended

Fiscal Year Ended

August 31,

% of

August 31,

% of

2025

Sales

2024

Sales

Change

Revenue

$

147,609 

100.0 

$

163,384 

100.0 

$

(15,775)

Cost of revenue

25,008 

16.9 

26,964 

16.5 

(1,956)

Gross profit

122,601 

83.1 

136,420 

83.5 

(13,819)

SG&A expenses

95,203

64.5

89,779 

54.9 

5,424

Adjusted EBITDA

$

27,398

18.6

$

46,641 

28.5 

$

(19,243)

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Revenue. In fiscal 2025, our North America segment revenue was $147.6 million compared with $163.4 million in the prior year. North America segment revenues in fiscal 2025 were adversely impacted by the uncertain macroeconomic environment and by canceled or postponed government contracting. During fiscal 2025, North America subscription and subscription service revenues were $131.1 million compared with $138.9 million in fiscal 2024. While we remain optimistic about the future impact of our new North America go-to-market strategy and sales force restructuring, continued economic uncertainty, including threatened or enacted tariffs and continued decreases in governmental spending, including due to the U.S. federal government shutdown, may prevent us from achieving expected sales goals until these conditions stabilize or are resolved. Foreign exchange rates had a $0.2 million adverse impact on North America segment revenues and a $0.1 million adverse impact on operating results during fiscal 2025.

Gross Profit. Gross profit was impacted by lower revenue as described above. North America gross margin remained strong during fiscal 2025 and was 83.1% of revenue compared with 83.5% in the prior year.

SG&A Expense. North America SG&A expenses increased primarily due to associate costs resulting from new sales and sales support personnel primarily related to our new go-to-market strategy and the reorganization of our North America sales force in fiscal 2025.

International Direct Offices

Our directly owned international offices serve clients in Australia, Austria, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom. The following comparative information is for our International Direct Office segment in the periods indicated (in thousands):

Fiscal Year Ended

Fiscal Year Ended

August 31,

% of

August 31,

% of

2025

Sales

2024

Sales

Change

Revenue

$

29,344 

100.0 

$

33,327 

100.0 

$

(3,983)

Cost of revenue

7,738 

26.4 

7,812 

23.4 

(74)

Gross profit

21,606 

73.6 

25,515 

76.6 

(3,909)

SG&A expenses

22,008 

75.0 

22,157 

66.5 

(149)

Adjusted EBITDA

$

(402)

(1.4)

$

3,358 

10.1 

$

(3,760)

Revenue. International Direct Office revenues for fiscal 2025 were adversely affected by ongoing economic uncertainty and geopolitical tensions as previously discussed. Revenues decreased in Japan by 23%, in China by 21%, and in the United Kingdom by 15%, and were reflective of the macroeconomic conditions and their impact on existing and potential clients. Decreases in these offices were partially offset by increased revenue recognized through our new France office and a slight increase in Australia. The fluctuation of foreign exchange rates had a $0.4 million favorable impact on our International Direct Office revenue and a $0.1 million favorable impact on operating results in fiscal 2025. We believe the resolution of multiple international trade issues and improving economic conditions will lead to improved sales performance in future periods. However, the successful resolution of these macroeconomic issues is not within our control and may not generate expected revenue growth at our International Direct Offices in future periods.

Gross Profit. Gross profit in the International Direct Office segment decreased primarily due to reduced revenue as described above. Gross margin for the third quarter of fiscal 2025 was 73.6% of sales compared with 76.6% in the prior year and decreased primarily due to a shift in the mix of services delivered and products sold during fiscal 2025 when compared with fiscal 2024.

SG&A Expenses. International Direct Office SG&A expenses decreased $0.1 million primarily due to cost reduction initiatives enacted to offset the impact of decreased revenue.

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International Licensees Segment

In foreign locations where we do not have a directly owned office, our training and consulting services are delivered through independent licensees. The following comparative information is for our international licensee operations in the periods indicated (in thousands):

Fiscal Year Ended

Fiscal Year Ended

August 31,

% of

August 31,

% of

2025

Sales

2024

Sales

Change

Revenue

$

11,111 

100.0 

$

11,436 

100.0 

$

(325)

Cost of revenue

1,422 

12.8 

1,350 

11.8 

72 

Gross profit

9,689 

87.2 

10,086 

88.2 

(397)

SG&A expenses

4,230 

38.1 

4,352 

38.1 

(122)

Adjusted EBITDA

$

5,459 

49.1 

$

5,734 

50.1 

$

(275)

Revenue. International licensee revenue is primarily comprised of royalties on sales of our content by the licensees. In fiscal 2025, our International Licensees’ revenue decreased primarily due to decreases in our share of AAP revenue and a 2% decrease in royalty revenue. Throughout fiscal 2025, our foreign licensees have encountered ongoing macroeconomic uncertainty and geopolitical instability in the regions where they operate, which have adversely impacted their operations. Foreign exchange rates had an immaterial impact on International Licensee revenues and operating results during fiscal 2025.

Gross Profit. Gross profit decreased primarily due to decreased revenue as previously described. Gross margin remained strong at 87.2% compared with 88.2% in the prior year and declined due to decreased royalty revenue compared with the prior year.

SG&A Expense. International licensee SG&A expenses decreased by $0.1 million compared with the prior year primarily due to cost cutting efforts implemented during fiscal 2025 in response to decreased revenue.

Education Division

Our Education Division is comprised of our domestic and international Education practice operations (focused on sales to educational institutions) and includes our widely acclaimed Leader in Me program. The following comparative information is for our Education Division in the periods indicated (in thousands):

Fiscal Year Ended

Fiscal Year Ended

August 31,

% of

August 31,

% of

2025

Sales

2024

Sales

Change

Revenue

$

74,618

100.0 

$

74,210 

100.0 

$

408

Cost of revenue

26,883 

36.0

26,681 

36.0 

202 

Gross profit

47,735

64.0

47,529 

64.0 

206

SG&A expenses

39,551

53.0

37,718 

50.8 

1,833

Adjusted EBITDA

$

8,184

11.0

$

9,811 

13.2 

$

(1,627)

Revenue. Education Division revenue for fiscal 2025 increased to $74.6 million compared with $74.2 million in fiscal 2024. Fiscal 2025 revenue growth was primarily attributable to increased coaching and consulting revenue and increased membership subscription revenue, which were partially offset by decreased sales of classroom and training materials, primarily due to a new state-wide initiative and district contracts that included large training materials orders in fiscal 2024. These materials orders did not repeat at the same levels in fiscal 2025. Delivery of training and coaching days remained strong during fiscal 2025 as the Education Division delivered a similar number of training and coaching days when compared with fiscal 2024. Education subscription and subscription services revenues in fiscal 2025 increased 4% compared with the prior year and Education deferred subscription revenue at August 31, 2025, increased 13% over the balance at August 31, 2024. Education Division growth during fiscal 2025 was partially offset by changes in foreign exchange rates, which adversely impacted revenue and operating results by $0.4 million. We continue to be pleased with the strength and momentum of our Education Division, which added 624 new The Leader in Me schools in a very challenging funding environment during fiscal 2025. We believe the momentum generated in fiscal 2025 will continue into fiscal 2026, but our expectations may be impacted by a number of factors outside of our control, including available

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funding from governmental agencies in the midst of spending reductions. At August 31, 2025, over 8,000 schools around the world were using The Leader in Me program.

Gross Profit. Education Division gross profit increased primarily due to increased revenue as previously described. Education segment gross margin remained strong and was 64.0% in each of fiscal 2025 and fiscal 2024.

SG&A Expenses. Education SG&A expenses increased primarily due to increased associate expenses from new personnel, changes to compensation plans, and increased commissions on higher revenue.

Other Operating Expense Items

Depreciation – Depreciation expense increased $0.2 million to $4.1 million compared with $3.9 million in the prior year. The increase was primarily due to new capital assets purchased in fiscal 2025. We currently expect depreciation expense will total approximately $4.5 million in fiscal 2026.

Amortization – Amortization expense increased to $4.4 million compared with $4.2 million in fiscal 2024. The increase was primarily due to the reacquisition of license rights for our France operations, which occurred in the first quarter of fiscal 2025. We currently expect definite-lived intangible asset amortization expense will total approximately $3 million during fiscal 2026.

Interest Expense – Our interest expense, which totaled $0.6 million in fiscal 2025, decreased $0.5 million primarily due to reduced term loan debt and a reduced principal balance on our financing obligation (long-term lease on our corporate campus) compared with the prior year.

Income Taxes

Our income tax provision fiscal 2025 totaled $3.0 million on pre-tax income of $6.1 million for an effective income tax rate of 49% compared with income tax expense of $9.6 million on pre-tax income of $33.0 million for an effective tax rate of approximately 29% for the fiscal year ended August 31, 2024. Our effective income tax rate for fiscal 2025 was higher than the statutory tax rate primarily due to tax expense of $1.5 million for increases to the valuation allowance against deferred tax assets in some foreign jurisdictions and $0.9 million related to non-deductible executive compensation, which were partially offset by a $0.5 million benefit in tax differential on foreign income. Our effective income tax rate for fiscal 2024 was higher than the statutory tax rate primarily due to tax expense of $3.2 million for non-deductible executive compensation and a $1.2 million increase in the valuation allowance against our deferred income tax assets, which were partially offset by a $2.6 million benefit for share-based compensation deductions in excess of the corresponding book expense and a $0.5 million benefit in tax differential on income subject to both U.S. and foreign taxes.

On July 4, 2025, the One Big Beautiful Bill Act was enacted, introducing significant amendments to U.S. tax law with varying effective dates. Key provisions relevant to Franklin Covey include the expansion of bonus depreciation, the permanent reinstatement of immediate expensing for research and development costs, and revisions to international tax rules. The legislation did not have a material impact on income tax expense or effective tax rate for fiscal 2025. Franklin Covey will continue to monitor future regulatory guidance and assess any potential impacts in subsequent periods.

We paid $7.7 million in cash for income taxes during fiscal 2025. We anticipate our total cash paid for income taxes over the coming years to approximate our total income tax provision.

LIQUIDITY AND CAPITAL RESOURCES

Introduction

Our cash at August 31, 2025 totaled $31.7 million, with no borrowings on our $62.5 million revolving credit facility. Of our $31.7 million of cash at August 31, 2025, $12.2 million was held outside the U.S. by our foreign subsidiaries. We routinely repatriate cash from our foreign subsidiaries and consider cash generated from foreign activities a key

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component of our overall liquidity position. Our primary sources of liquidity are cash flows from the sale of services and products in the normal course of business and available proceeds from our credit facility. Our primary uses of liquidity include payments for operating activities, purchases of our common stock, capital expenditures (including curriculum development), working capital expansion, debt payments, and potential business acquisitions.

The following table summarizes our cash flows from operating, investing, and financing activities for the past three years (in thousands):

YEAR ENDED

AUGUST 31,

2025

2024

2023

Total cash provided by (used for):

Operating activities

$

28,977

$

60,257

$

35,738

Investing activities

(16,888)

(11,310)

(13,550)

Financing activities

(28,781)

(38,655)

(44,179)

Effect of exchange rates on cash

(273)

141

(296)

Increase (decrease) in cash and

cash equivalents

$

(16,965)

$

10,433

$

(22,287)

Our Current Credit Agreement

On March 27, 2023, we entered into a credit agreement with KeyBank National Association (KeyBank) leading a group of financial institutions (collectively, the Lenders), which replaced our previous 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 previous credit agreement. The remaining $62.5 million is available as a revolving line of credit or for future term loans. We believe the 2023 Credit Agreement provides significant flexibility and financial resources to allow us to grow the business in future periods.

The 2023 Credit Agreement matures on March 27, 2028, and interest rate for borrowings on the 2023 Credit Agreement is based on the Secured Overnight Financing Rate (SOFR) and is a tiered structure that varies according to the Leverage Ratio as defined 2023 Credit Agreement (refer to Note 5, Secured Credit Agreement to our consolidated financial statements for the interest rate structure).

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. 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.

At August 31, 2025 our debt structure was relatively simple and consisted of notes payable to the former owners of Strive Talent, Inc., and obligations for leased office and warehousing space. For further information on our notes payable and leasing obligations, refer to the notes to our consolidated financial statements as presented in Item 8 of this Annual Report on Form 10-K.

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. Our primary uses of cash for operating activities were payments for SG&A expenses, direct costs necessary to conduct training programs, to fund working capital changes, and to suppliers for materials used in training manuals sold. Our cash provided by operating activities during fiscal 2025 was $29.0 million compared with $60.3 million in fiscal 2024. The decrease in cash flows from operating activities was primarily attributable to lower operating

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income in fiscal 2025 as previously discussed, and changes in working capital, including a $5.9 million decrease in taxes payable as we no longer benefit from the utilization of our net operating loss position compared with the prior year. While we expect our cash flows from operating activities to improve in future periods, certain conditions are beyond our control or influence such as general macroeconomic conditions, general business environment uncertainty, further reductions in government spending, and conditions in international locations which impact our financial results at our international direct offices and international licensees.

Cash Flows from Investing Activities and Capital Expenditures

For the fiscal year ended August 31, 2025, our cash used for investing activities totaled $16.9 million. Our primary uses of cash for investing activities consisted of purchases of property and equipment in the normal course of business and additional investments in the development of our content and offerings.

Cash used for purchases of property and equipment during fiscal 2025 totaled $8.3 million and consisted primarily of computer software and hardware, and leasehold improvements at our new headquarters office, which we moved into during the fourth quarter of fiscal 2025. We expect to continue to use cash to pay for the leasehold improvements and furniture during the first half of fiscal 2026. Including the payments for these leasehold improvements, we currently anticipate that our purchases of property and equipment in fiscal 2026 will total between approximately $5 million and $7 million.

During fiscal 2025, we spent $7.6 million on the development of our various offerings and related content. During the first half of fiscal 2025, we launched a significantly refurbished The 7 Habits of Highly Effective People offering and expect to release new and refurbished content in fiscal 2026 and in future years. We believe continued investment in our offerings and content is key to future growth and the development of our business. We currently expect that our capital spending for curriculum development will total between approximately $8 million and $10 million in fiscal 2026.

In the first quarter of fiscal 2025, we reacquired the license rights to sell our content in France for $0.3 million in cash and $0.2 million of forgiven receivables from the former licensee. The operations of the newly opened direct office in France are included in the International Direct Office segment. We look forward to expanding our business and operations in France over the coming years.

Cash Flows from Financing Activities

Our net cash used for financing activities during fiscal 2025 totaled $28.8 million. Our primary uses of financing cash were $26.4 million used to purchase shares of our common stock, which consisted of shares purchased on the open market and shares withheld for income taxes on stock-based compensation awards, and $3.9 million used for principal payments on our financing obligation and notes payable. Partially offsetting these uses of cash for financing activities were $1.5 million of proceeds received from ESPP participants to purchase shares of our common stock during the fiscal year.

On April 18, 2024, our Board of Directors approved a plan to purchase up to $50.0 million of our outstanding common stock. Through May 31, 2025, we purchased $22.1 million of our common stock on this Board authorized plan. On August 11, 2025, the Board of Directors approved a replenishment of the plan to purchase up to $50.0 million of common stock. On August 14, 2025 we initiated a 10b5-1 plan to purchase up to $10.0 million of our common stock through daily transactions. This 10b5-1 plan was completed in the first quarter of fiscal 2026.

Our uses of financing cash during fiscal 2026 will include purchases of our common stock. However, the timing and amount of common stock purchases is dependent on a number of factors, including available resources, and we are not obligated to make purchases of our common stock during any future period.

Sources of Cash and Liquidity

We expect to meet the obligations on our notes payable, pay for projected capital expenditures, and meet other obligations in fiscal 2026 and beyond, from current cash balances, future cash flows from operating activities, and proceeds from our

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available line of credit if necessary. 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. 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. If necessary, we will evaluate all of these options and select one or more of them depending on overall capital needs and the associated cost of capital.

We believe that our existing cash and cash equivalents, cash generated by operating activities, and the availability of external funds as described above, will be sufficient for us to maintain our operations for the next 12 months and into the future. 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. Some of the factors that influence our operations are not within our control, such as general economic conditions and the introduction of new offerings or technology by our competitors. We will continue to monitor our liquidity position and may pursue additional financing alternatives, as described above, to maintain sufficient resources for future growth and capital requirements. However, there can be no assurance such financing alternatives will be available to us on acceptable terms, or at all.

Material Cash Requirements

We do not operate any manufacturing, mining, or other capital-intensive facilities, and we have not structured any special purpose entities, or participated in any commodity trading activities, which would expose us to potential undisclosed liabilities or create adverse consequences to our liquidity. 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. 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. 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. Our subscription service portals require ongoing development, recurring maintenance, security upgrades, and utilize various software applications. In addition, we utilize various software programs to run our business, including applications for customer resource management, general ledger, cybersecurity, spreadsheets, word processing, e-mail, etc. 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. Including capitalized development, we spent approximately $8 million (excluding innovation associate compensation discussed above) for the development and maintenance of our offerings and content in fiscal 2025.

Income Taxes – We are required to pay income taxes in the various jurisdictions where we operate. During fiscal 2025, we paid $7.7 million in cash for income taxes. We believe our use of cash for income taxes in future periods will more closely resemble our income tax provision and will fluctuate based on profitability as we have previously utilized most of our deferred tax assets.

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Contractual Obligations – In addition to the expenses described above, which we believe are required to successfully run our business, we have other longer-term contractual obligations, which require additional cash payments. We have summarized our significant contractual obligations at August 31, 2025 in the following table (in thousands):

Fiscal

Fiscal

Fiscal

Fiscal

Fiscal

Description

2026

2027

2028

2029

2030

Thereafter

Total

Minimum operating lease

payments

$

689

$

1,110

$

887

$

907

$

932

$

5,468

$

9,993

Strive contingent

compensation

770 

-

-

-

-

-

770 

Strive note payable

835 

-

-

-

-

-

835 

Purchase obligations

4,488 

-

-

-

-

-

4,488 

$

6,782

$

1,110

$

887

$

907

$

932

$

5,468

$

16,086

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The significant accounting policies that we used to prepare our consolidated financial statements are outlined primarily in Note 1 and in Note 2 (revenue recognition policies) to the consolidated financial statements, which are presented in Part II, Item 8 of this Annual Report on Form 10-K. Some of those accounting policies require us to make assumptions and use judgments that may affect the amounts reported in our consolidated financial statements. Management regularly evaluates its estimates and assumptions and bases those estimates and assumptions on historical experience, factors that are believed to be reasonable under the circumstances, and requirements under accounting principles generally accepted in the United States of America. Actual results may differ from these estimates under different assumptions or conditions, including changes in economic and political conditions and other circumstances that are not within our control, but which may have an impact on these estimates and our actual financial results.

The following items require the most significant judgment and often involve complex estimates:

Revenue Recognition

We account for revenue in accordance with Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). For the All Access Pass, judgment is required to determine whether the intellectual property and web-based functionality and content are considered distinct and accounted for separately, or not distinct and accounted for together.

We have determined to account for the AAP as a single performance obligation and recognize the associated transaction price ratably over the term of the underlying contract beginning on the commencement date of each contract, which is the date the Company’s platforms and resources are made available to the customer. 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.

Judgment is required to determine the stand-alone selling price (SSP) for each distinct performance obligation in a revenue contract. Where we have more than one distinct performance obligation, we must allocate the transaction price to each performance obligation based on its relative SSP. The SSP is the price which we would sell a promised product or service separately to a customer. In determining the SSP, we consider the size and volume of transactions, price lists, historical sales, and contract prices. We may modify our pricing from time-to-time in the future, which could result in changes to the SSP.

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Stock-Based Compensation

Our shareholders have approved a performance-based long-term incentive plan that provides for grants of stock-based performance awards to certain managerial personnel and executive management as directed by the Organization and Compensation Committee of the Board of Directors. Under the terms of some equity awards, the number of common shares that are vested and issued to participants is variable and is based upon the achievement of specified performance objectives during defined service periods. Due to the variable number of common shares that may be issued under some of our equity awards, we reevaluate our performance-award grants on a quarterly basis and adjust the number of shares expected to be awarded based upon actual and estimated financial results of the Company compared with the performance goals set for the award. Adjustments to the number of shares expected to vest, and to the corresponding compensation expense, are made on a cumulative basis at the adjustment date based upon the new estimated probable number of common shares to be awarded.

The analysis of our performance awards contains uncertainties because we are required to make assumptions and judgments about the timing and/or the eventual number of shares that will vest in each grant. The assumptions and judgments that are essential to the analysis include forecasted sales and operating income levels during the service periods. These forecasted amounts may be difficult to predict over the life of the awards due to changes in our business, such as from the introduction of subscription-based services, or other external factors, such as the recent pandemic, and their impact on our financial results. Events such as these may leave some previously approved performance measures obsolete or unattainable. The evaluation of performance awards and the corresponding use of estimated amounts may produce additional volatility in our consolidated financial statements as we record cumulative adjustments to the estimated service periods and/or number of common shares expected to vest as described above. For example, uncertainties related to macroeconomic factors and prevailing business conditions resulted in a significant reversal of previously recognized performance award stock-based compensation expense in fiscal 2025.

Accounts Receivable Valuation

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Our allowance for credit losses calculation contains uncertainties because the calculation requires us to make assumptions and judgments regarding the collectability of customer accounts, which may be influenced by a number of factors that are not within our control, such as the financial health of each customer. We regularly review the collectability assumptions of our allowance for credit losses calculation and compare them against historical collections. Adjustments to the assumptions may either increase or decrease our total allowance for credit losses and may adversely impact our financial results. 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.

Valuation of Indefinite-Lived Intangible Assets and Goodwill

Intangible assets that are deemed to have an indefinite life and goodwill balances are not amortized, but rather are tested for impairment on an annual basis, or more often if events or circumstances indicate that a potential impairment exists. The Covey trade name intangible asset originated from the merger with the Covey Leadership Center in 1997 and has been deemed to have an indefinite life. This intangible asset is quantitatively tested for impairment using the present value of estimated royalties on trade name related revenues, which consist primarily of training seminars and related products, and international licensee royalties.

Goodwill is recorded when the purchase price for a business acquisition exceeds the estimated fair value of the net tangible and identified intangible assets acquired. Under current accounting guidance, an annual or interim goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

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We tested goodwill for impairment at August 31, 2025 at the reporting unit level using a quantitative approach. Based on the results of this analysis, we determined that it was more likely than not that the fair value of each of our reporting units was more than their carrying values. This determination and the underlying valuation model required judgment to estimate future cash flows and operating results and considered current operating results, expected future operating results, and various other factors such as macroeconomic conditions. Some of these factors are not within our control.

On an interim basis, we consider whether events or circumstances are present that may lead to the determination that goodwill may be impaired. These circumstances include, but are not limited to, the following:

significant underperformance relative to historical or projected future operating results;

significant change in the manner of our use of acquired assets or the strategy for the overall business;

significant change in prevailing interest rates;

significant negative industry or economic trends;

significant change in market capitalization relative to book value; and/or

significant negative change in market multiples of the comparable company set.

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. 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. 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. 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.

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. We use an estimate of undiscounted future net cash flows of the assets over their remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the anticipated future cash flows of the assets, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based upon discounted cash flows over the estimated remaining useful life of the asset. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis, which is then depreciated or amortized over the remaining useful life of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets.

Our impairment evaluation calculations contain uncertainties because they require us to make assumptions and apply judgment in order to estimate future cash flows, forecast the useful lives of the assets, and select a discount rate that reflects the risk inherent in future cash flows. Although we have not made any recent material changes to our long-lived assets impairment assessment methodology, if forecasts and assumptions used to support the carrying value of our long-lived tangible and finite-lived intangible assets change in the future, significant impairment charges could result that would adversely affect our results of operations and financial condition.

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Acquisitions and Contingent Consideration Liabilities

We record acquisitions resulting in the consolidation of an enterprise using the purchase method of accounting. Under this method, the acquiring company records the assets acquired, including intangible assets that can be identified and named, and liabilities assumed based on their estimated fair values at the date of acquisition. The purchase price in excess of the fair value of the assets acquired and liabilities assumed is recorded as goodwill. If the assets acquired, net of liabilities assumed, are greater than the purchase price paid, then a bargain purchase has occurred and the Company will recognize the gain immediately in earnings. Among other sources of relevant information, we use independent appraisals or other valuations to assist in determining the estimated fair values of the assets and liabilities. Various assumptions are used in the determination of these estimated fair values including discount rates, market and volume growth rates, product or service selling prices, cost structures, royalty rates, and other prospective financial information.

Additionally, we are required to reassess the fair value of contingent consideration liabilities resulting from business acquisitions at each reporting period. Although subsequent changes to the contingent consideration liabilities do not affect the goodwill generated from the acquisition transaction, the valuation of expected contingent consideration often requires us to estimate future sales and/or profitability. These estimates require the use of numerous assumptions, many of which may change frequently and lead to increased or decreased operating income in future periods. We did not have any adjustments to the fair value of a contingent liability from a previous business acquisition in fiscal 2025. Business acquisitions in future periods may increase the volatility and amount of these charges. Changes to the fair value of contingent consideration liabilities are recorded as a component of SG&A expenses.

Income Taxes

We regularly evaluate our United States federal and various state and foreign jurisdiction income tax exposures. We account for certain aspects of our income tax provision using the provisions of ASC 740-10-05, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon final settlement. The provisions of ASC 740-10-05 also provide guidance on de-recognition, classification, interest, and penalties on income taxes, accounting for income taxes in interim periods, and require increased disclosure of various income tax items. Taxes and penalties are components of our overall income tax provision.

We record previously unrecognized tax benefits in the financial statements when it becomes more likely than not (greater than a 50% likelihood) that the tax position will be sustained. To assess the probability of sustaining a tax position, we consider all available evidence. In many instances, sufficient positive evidence may not be available until the expiration of the statute of limitations for audits by taxing jurisdictions, at which time the entire benefit will be recognized as a discrete item in the applicable period.

Our unrecognized tax benefits result from uncertain tax positions about which we are required to make assumptions and apply judgment to estimate the exposures associated with our various tax filing positions. The calculation of our income tax provision or benefit, as applicable, requires estimates of future taxable income or losses. During the course of the fiscal year, these estimates are compared to actual financial results and adjustments may be made to our tax provision or benefit to reflect these revised estimates. Our effective income tax rate is also affected by changes in tax law and the results of tax audits by various jurisdictions. Although we believe that our judgments and estimates discussed herein are reasonable, actual results could differ, and we could be exposed to losses or gains that could be material.

We establish valuation allowances for deferred tax assets when we estimate it is more likely than not that the tax assets will not be realized. The determination of whether valuation allowances are needed on our deferred income tax assets contains uncertainties because we must project future income, including the use of tax-planning strategies, by individual tax jurisdictions. Changes in industry and economic conditions and the competitive environment may impact the accuracy of our projections. We regularly assess the likelihood that our deferred tax assets will be realized and determine if

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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.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 to the consolidated financial statements for information on recent accounting pronouncements.

REGULATORY COMPLIANCE

We are registered in states in which we do business that have a sales tax and we collect and remit sales or use tax on sales made in these jurisdictions. Compliance with environmental laws and regulations (including new laws and regulations relating to climate change) has not had a material effect on our operations. We believe we are in compliance with applicable governmental regulations in the United States and the countries in which we operate.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements made by the Company in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 as amended (the Exchange Act). Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “project,” or words or phrases of similar meaning. 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. These, and other forward-looking statements, are subject to certain risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are disclosed from time to time in reports filed by us with the SEC, including reports on Forms 8-K, 10-Q, and 10-K. 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.

The risks included here are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors may emerge and it is not possible for our management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any single factor, or combination of factors, may cause actual results to differ materially from those contained in forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.

The market price of our common stock has been and may remain volatile. Factors such as quarter-to-quarter variations in revenues and earnings or losses and our failure to meet expectations could have a significant impact on the market price of our common stock. In addition, the price of our common stock can change for reasons unrelated to our performance. Due

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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.

Forward-looking statements are based on management’s expectations as of the date made, and the Company does not undertake any responsibility to update any of these statements in the future except as required by law. 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.