Franklin Covey Co. (NYSE:FC) Q3 2023 Earnings Call Transcript

That’s both, kind of a mantra, but it’s also a way of behaving. And so, every quarter we have some nice win backs of clients that, for some reason, weren’t able to renew. In fact, we talked in the second quarter about a client, a large client that wasn’t able to renew with an IT consulting services for a very large global company that wasn’t able to renew in the fourth quarter. They were unsure about what this year would look like for them. They didn’t renew, but they did renew in the second quarter this year and significantly expanded the size of their subscription with us. And so, we hope and expect and are doing everything we can to make that the case for any client that we lose and particularly a couple of those big ones in Q2.

Alex Paris: Good to hear. Good to hear. Thanks. And then still on the enterprise business, in your prepared comments, Paul, you mentioned that China performed better. China and Japan were obviously a drag in the first half of the fiscal year. Together, they represented 52% of international sales. You did mention Japan specifically, but maybe just a little overview on what’s going on in China and Japan quarter-over-quarter?

Paul Walker : Thank you. We were pleased. Japan and China behaved like we thought they would in the third quarter. So, you’ll recall, we talked in the second quarter about the fact that they were – they had been a drag and continued through the first two quarters of this year to be a drag and we anticipated and still do that. They kind of net-net overall, are providing a bit of a drag on overall reported growth this year. And that we kind of gave guidance around that in Q2. That said, in Q3, China strengthened significantly. We’ve seen this now 3x with them. China has kind of had a 3x in and out of COVID experience. And each time they’ve come back out, the business has responded and grown rapidly. That happened again in the third quarter, and we expect that they’ll have meaningful growth in the fourth quarter.

They will not be to the level we thought they would have been for this full-year, fiscal 2023, but they are growing back meaningfully like we expected they would start to do at some point in the year, just is happening a little bit later in the year. And so both China and Japan are back on a nice growth trajectory on a year-over-year basis and expect that they’ll contribute meaningfully in the fourth quarter and as we move into next year.

Alex Paris: Great. And then just a quick question for Sean, I believe, on the Education Division in the summer. The summer is a very important period for renewals and that, sort of thing in that business? I know you’re focused significantly on districts rather than just focusing on schools. Maybe a little update and color there, what you’re seeing in the early renewal season.

Sean Covey: Sure. Hi Alex, how are you?

Alex Paris: Good. How are you?

Sean Covey: So yes, we’re excited about the summer. So generally, we feel really good about it. We have a lot of schools and districts coming on right now. I think what the strength of our growth so far this year and going into the fourth quarter, we feel like our solution is like perfectly designed for the challenges that schools are facing right now. So, a lot of mental wellness amongst teachers, as well as students, learning loss, test scores are the lowest they’ve been in a long time. And so, being able to help overcome those learning loss problems. Teacher turnover is a big issue. Whole student development instead of just academics, looking at the whole students. So all those things are – we’re perfectly designed to deliver well on those.