Franklin Covey Co (FC) Q2 2026 Earnings Report

Revenue and profitability:
- Q2 2026 revenue: $59.647 million; gross profit: $43.463 million; gross margin: 72.87% (43463000/59647000).
- Operating income: -$0.489 million; operating margin: -0.82%.
- EBITDA: $1.321 million; EBITDA margin: 2.22% (EBITDA/Revenue).
- Net income: -$1.982 million; net margin: -3.32%; EPS: -$0.17.
- Weighted-average shares: 11.422 million.

Balance sheet and liquidity:
- Cash and equivalents: $13.717 million; total current assets: $95.432 million; total assets: $206.489 million.
- Total liabilities: $168.439 million; total stockholders’ equity: $38.050 million.
- Total debt: $0.835 million; net debt: -$12.882 million (net cash).
- Deferred revenue: $97.936 million; unbilled deferred revenue: $64.9 million; balance of billed deferred revenue: $59.3 million (NA) with 59–62% multiyear contracts in NA.

Business momentum and mix:
- Invoiced amounts grew 5% year over year; Enterprise NA invoiced +7% (excluding government contracts +10%); Enterprise International invoiced +7%.
- Education revenue increased 16% with subscription revenue up 19%; Education invoiced amounts were $8.5 million in Q2.
- NA reported revenue was $32.5 million in Q2 (78% of Enterprise), down 6% YoY; NA adjusted EBITDA rose to $5.9 million due to cost discipline.
- International Direct Offices invoiced grew 14% YoY; FX contributed approximately 6 points of growth; Education bookings and outcomes highlighted in the call.

Cash flow and capital allocation:
- Operating cash flow (CFO) year-to-date: $16.4 million; quarterly CFO: $16.3 million.
- Free cash flow (FCF) in Q2: $13.2 million; year-to-date FCF improved meaningfully versus prior-year period.
- Share repurchases: ~922k shares bought in Q2 for $16.5 million; year-to-date ~1.6 million shares for $28.1 million; remaining buyback authorization of $20 million.
- Liquidity: total liquidity > $76 million; cash on hand $13.7 million; $62.5 million revolver fully available.

Guidance and outlook:
- 2026 revenue guidance reaffirmed: $265–$275 million; Adjusted EBITDA guidance reaffirmed: $28–$33 million.
- Back-half revenue is expected to be higher than the first half, with roughly 50–55% of back-half revenue in Q4; 60–65% of full-year adjusted EBITDA expected in Q4, driven by Education contributions and operating leverage.
- Management signaling improved revenue and EBITDA in fiscal 2027 as invoiced growth continues and operating leverage expands, aided by the transformation initiatives completed in 2025–2026.

Synthesis: The QQ2 2026 results reflect a diversified, services-led model showing strength in invoicing and Education demand, coupled with prudent cost management that lifted segment EBITDA in North America despite a narrow reported quarterly loss. Management’s emphasis on AI-enabled transformation, long-duration contracts, and a high-retention, expanding client base supports an investment thesis predicated on accelerated revenue recognition and earnings leverage into fiscal 2027. Investors should note the near-term profitability headwinds (negative quarterly net income) and the sensitivity to macro conditions and government spending, but the cash-flow generation and deleveraging potential alongside a substantial share-repurchase program are meaningful positives. The reaffirmed guidance, coupled with commentary on AI-driven demand and international expansion, suggests a constructive longer-term trajectory if execution remains on track.