Nehal Chokshi: Okay. Great. And then service rates continue to attach €“ the service attach rates to All Access Pass continue to go up in this quarter, as it has been for €“ since the beginning of the pandemic. Can you just, since we are basically 3 years into that trend, go over reasons why this continues to increase?
Paul Walker: Yes. We had a really big subscription quarter in Q1, as you mentioned. I think a couple of factors that are driving this. One, we talked about the nature of the problems we are helping our clients solve. And by definition, these are the complex, thorny €“ we will use the word intractable problems. They have had them forever and they are not easy to solve and therefore, the idea that they are going to be able to solve them without help, that €“ they recognize that they can get further faster with experts. And we represent those experts, at least in the topics that we focus on. And so it’s very attractive to bring our people, and particularly when we are working with more senior leaders in an organization handling topics like strategy execution, sales performance, working on the level of trust that exists among senior leaders and organizations.
It’s natural to have somebody come in from the outside and help facilitate through those topics. So, one driver of those All Access Pass subscription services and our Leader in Me services is that just the nature of the problems we are on lend themselves to let’s get somebody here to help us versus let’s have everybody sit at their computer and just kind of work on stuff on their own, right. You need to bring people together, and it’s nice to have an expert come in the room and help. The second thing that is driving services growth over the past few years, I think in this is that, in some ways, we are the beneficiaries a little bit of what happened during the pandemic. Pre-pandemic, we had the ability to deliver all of €“ almost all of our content live online like we do today.
But back then, we pioneered the use of Adobe’s product, Adobe Connect. We put a new skin on it and we adapted all of our content for that. This was going back €“ we have had this capability for like 10 years, and nobody wanted it. I would say nobody wanted it, but 2% or 3% of our delivery was that way, and the other 97% or 98% was still people wanting to get together in a room with a facilitator. The pandemic hit and that was not possible any longer to get together in a room. And so we had that capability to convene people on Zoom or Microsoft Teams or WebEx or whatever technology you want, and there wasn’t an immediate pickup. In fact, if you tracked our results for a couple of quarters there, where our revenues declined largely because it was during that transition period where clients were trying to get comfortable with that live online as a viable delivery modality.
Well, they did and we were there ready with that capability. And so today, we are dual threat. We are happy to come in and work with an intact team in person around the conference room table or in a conference room, and we are equally happy to get on Zoom and do this in 90-minute chunks. As it turns out, the 90-minute chunks spread out over time, three or four of those cobbled together over a few weeks provides a really nice segmented, spaced approach for learning to happen, and it actually is better for behavior change. And so what’s driven the services growth the last 3 years, I think is the nature of the problems and the fact that live online is a great way for the stuff that we do to be delivered. The impact is still very high. The net promoter scores are very high.
And it’s €“ because it’s denoted in 90-minute chunks, it’s easier for clients to slot them into the seams of the work week or the workday. You don’t have to think about gearing up for, let’s go have an off-site. Everybody is going to leave for two days, have to come back and get caught up on work instead, hey, you need to be on from 1:00 to 2:30 every Wednesday for a few weeks, and we are going to work on this together. And so I think we are benefiting from some of the larger macro trends and changes, people becoming more comfortable with technology and the fact that we have had this great capability for a long time, and now we get to use it.
Nehal Chokshi: Okay, great. And then given the robust results for the November quarter, and especially the 23% year-over-year increase in value of contracts signed for the November quarter, it seems to validate the thesis that Franklin Covey’s revenue will be resilient through recession. And then your anecdotal points about renewals despite layoffs, that all seems to line up really well, so why no-go to the guidance raise, basically?
Paul Walker: Why not address guidance range, yes. It’s €“ we have had a policy for a long time that coming out of the first quarter, we just don’t do that. Our fourth quarter tends to be €“ well, it doesn’t tend to be, it is €“ it’s very large. It’s when a lot happens in education, a lot of things come in there, a lot of our adjusted EBITDA for the year happens late in the year. And so our pattern has been to address guidance at the end of Q2 when we get a little bit closer to the back half of the year. And we intend to look at guidance again and address it in our Q2 call.
Nehal Chokshi: Great. Thank you very much.
Paul Walker: Yes. Thanks Nehal.
Operator: Thank you. Our next question comes from the line of Dave Storms from Stonegate. Your line is open.
Paul Walker: Hi Dave.
Dave Storms: Thank you. How is it going? Thank you for taking my call and congrats on the strong quarter. Just wondering if there is any catalyst for a turnaround that you all are keeping an eye out for in China and Japan? Just looking to €“ wonder when that might turn around?
