FRANKLIN COVEY CO

Previous wording

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 excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items, including infrequently occurring 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 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 net income, a related GAAP measure, refer to Note 7, Segment Information, to our condensed consolidated financial statements.

Current wording

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 excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items, including infrequently occurring items such as restructuring and impaired asset costs. We reference this non-GAAP measure in our decision making because it provides 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 net income, a related GAAP measure, refer to Note 9, Segment Information, to our condensed consolidated financial statements.

Previous wording

Our consolidated sales for the quarter ended November 30, 2023, exceeded previous expectations and totaled $68.4 million compared with $69.4 million in the first quarter of fiscal 2023. First quarter sales performance included the following:

Current wording

Our consolidated sales for the quarter ended February 29, 2024, were in line with our previous expectations and totaled $61.3 million compared with $61.8 million in the second quarter of fiscal 2023. Second quarter sales performance included the following:

Previous wording

o All Access Pass (AAP) subscription sales grew 13% compared with the first quarter of fiscal 2023 and AAP subscription and subscription services sales grew 5% compared with the prior year. For the rolling four quarters ended November 30, 2023, AAP subscription and subscription services sales increased 6% to $160.0 million compared with $151.0 million for the rolling four quarters ended November 30, 2022. During the first quarter of fiscal 2024, AAP subscription revenue retention levels in the United States and Canada remained strong and were greater than 90%.

Current wording

o Enterprise Division revenues totaled $45.7 million compared with $46.6 million in the second quarter of fiscal 2023. Increased AAP revenues in the quarter were offset primarily by decreased legacy training program sales, decreased subscription services, and reduced international licensee revenues. AAP subscription sales grew 9% compared with the second quarter of fiscal 2023 and AAP subscription and subscription services sales grew 6% compared with the prior year. For the rolling four quarters ended February 29, 2024, AAP subscription and subscription services sales increased 5% to $162.1 million compared with $154.4 million for the rolling four quarters ended February 28, 2023. During the first two quarters of fiscal 2024, AAP subscription revenue retention levels in the United States and Canada remained strong and were greater than 90%.

Previous wording

o Subscription and subscription services sales reached $54.8 million, a 4% increase over the first quarter of fiscal 2023. For the rolling four quarters ended November 30, 2023, subscription and subscription service sales reached a record level of $224.7 million, a $13.6 million, or 6%, increase over the corresponding period of the prior year.

Current wording

o Subscription and subscription services sales reached $50.3 million, a 5% increase over the second quarter of the prior year. For the rolling four quarters ended February 29, 2024, subscription and subscription service sales reached a record level of $227.3 million, a $10.0 million, or 5%, increase over the rolling four quarters ended February 28, 2023.

Previous wording

o The sum of billed subscription and unbilled deferred subscription revenue at November 30, 2023 grew 12%, or over $18 million, to $169.7 million, compared with $151.6 million at November 30, 2022. We continue to be pleased with the growth of multi-year contracts and the overall increase in deferred subscription revenue, which provide a strong base for future sales growth. At November 30, 2023, 54% of our AAP contracts are for at least two years, compared with 48% at November 30, 2022, and the percentage of contracted amounts represented by multi-year contracts increased to 60% from 55% in the first quarter of the prior year.

Current wording

o The sum of billed subscription and unbilled deferred subscription revenue at February 29, 2024 grew 9%, or $13.0 million, to $158.8 million, compared with $145.8 million at February 28, 2023. We continue to be pleased with the growth of multi-year contracts and the overall increase in deferred subscription revenue, which provide a strong base for future sales growth. At February 29, 2024, 56% of our AAP contracts are for at least two years, compared with 50% at February 28, 2023, and the percentage of contracted amounts represented by multi-year contracts increased to 62% from 57% at the end of the second quarter of fiscal 2023.

Previous wording

The following is a summary of consolidated financial highlights from our first quarter of fiscal 2024:

Current wording

The following is a summary of consolidated financial highlights from our second quarter of fiscal 2024:

Previous wording

Sales –Our consolidated sales for the first quarter of fiscal 2024 were essentially even with the prior year at $68.4 million. Increased AAP subscription sales in the first quarter through the Company’s Direct Office segment were offset by decreased add-on services revenue and legacy onsite programs compared with the prior year’s record-breaking add-on services revenue and delivered days. Direct Office sales for the first quarter of fiscal 2024 were $49.2 million compared with $50.2 million in the prior year. International licensee revenues increased 3% compared with the prior year primarily due to increased AAP sales and royalty revenue. Foreign exchange rates had an immaterial impact on the Company’s sales and operating results during the first quarter of fiscal 2024. Education Division revenues increased 3% to $14.7 million compared with $14.4 million in fiscal 2023. This growth was primarily due to increased international royalties and increased membership subscription revenues in the quarter and was partially offset by decreased sales of certain materials which are now included in the Leader in Me membership. We have initiated acorresponding price increase which is expected to more than offset the inclusion of these materials in the membership. Education membership subscription revenue increased 6% compared with the prior year primarily due to increased Annual Membership sales recognized and contracted coaching and training days delivered from new schools engaged in fiscal 2023. During the first quarter of fiscal 2024, the Education Division delivered nearly 200 more training and coaching days than the prior year, which are recognized as they are delivered. Subleasing revenues on our corporate campus decreased $0.5 million due to the expiration of third-party leases during the second half of fiscal 2023.

Current wording

Sales –Our consolidated sales for the second quarter of fiscal 2024 were $61.3 million compared with $61.8 million in the prior year. Direct Office sales for the second quarter of fiscal 2024 were $43.0 million compared with $43.6 million in the prior year. Increased AAP subscription sales in the second quarter through our Direct Office segment were offset by decreased legacy onsite programs and subscription add-on services revenue compared with the prior year. International licensee revenues decreased 6% compared with fiscal 2023 primarily due to decreased royalty revenue. Foreign exchange rates had a $0.3 million unfavorable impact on our sales and a $0.2 million adverse impact on our operating results during the second quarter of fiscal 2024. Education Division revenues increased 3% to $14.6 million compared with $14.2 million in fiscal 2023. This growth was primarily due to increased membership subscription revenues and sales of classroom and related training materials. Education membership subscription and subscription services revenue increased 4% compared with the prior year primarily due to increased Annual Membership revenue from new schools engaged in fiscal 2023. Delivery of contracted training and coaching days remains strong and during the second quarter of fiscal 2024 the Education Division delivered nearly 100 more training and coaching days than the prior year, which are recognized as sales when they are delivered.

Previous wording

At November 30, 2023, we had $87.2 million of deferred subscription revenue on our balance sheet, a 14%, or $10.5 million, increase compared with deferred subscription revenue at November 30, 2022. On November 30, 2023, we had $82.5 million of unbilled deferred revenue compared with $74.9 million of unbilled deferred revenue on November 30, 2022. Unbilled deferred revenue represents business that is contracted but unbilled (primarily from multiyear subscription contracts) and excluded from our balance sheet.

Current wording

At February 29, 2024, we had $86.1 million of deferred subscription revenue on our balance sheet, a 13%, or $9.9 million, increase compared with deferred subscription revenue at February 28, 2023. On February 29, 2024, we had $72.7 million of unbilled deferred revenue compared with $69.7 million of unbilled deferred revenue on February 28, 2023. Unbilled deferred revenue represents business that is contracted but unbilled (primarily from multiyear subscription contracts) and excluded from our balance sheet.

Previous wording

Cost of Sales/Gross Profit – For the quarter ended November 30, 2023, our cost of sales totaled $16.1 million compared with $16.6 million in the first quarter of the prior year. Gross profit for the first quarter of fiscal 2024 was $52.3 million compared with $52.7 million in the first quarter of fiscal 2023. Our gross margin for the first quarter of fiscal 2024 remained strong and increased to 76.4% of sales compared with 76.0% in the prior year. Cost of goods sold and gross profit each decreased primarily due to lower sales as previously described.

Current wording

Cost of Sales/Gross Profit – For the second quarter of fiscal 2024, our cost of sales was consistent with the prior year at $14.5 million. Gross profit for the quarter ended February 29, 2024, was $46.9 million compared with $47.2 million in the corresponding period of fiscal 2023. Our gross margin for the second quarter of fiscal 2024 remained strong and was consistent with the prior year at 76.4% of sales. Cost of goods sold and gross profit each decreased primarily due to sales performance as previously described.

Previous wording

Operating Income, Net Income, and Adjusted EBITDA– Our income from operations for the quarter ended November 30, 2023, was $5.3 million compared with $6.4 million in the prior year, which reflected the above noted factors. Due to the reduced effective income tax rate discussed above, our net income for the first quarter of fiscal 2024 increased 4% to $4.9 million, or $0.36 per diluted share, compared with $4.7 million, or $0.32 per diluted share, in fiscal 2023. Our Adjusted EBITDA for the quarter ended November 30, 2023, was $11.0 million, compared with $11.5 million in the first quarter of the prior year.

Current wording

Operating Income, Net Income, and Adjusted EBITDA– Our income from operations for the quarter ended February 29, 2024, was $1.4 million compared with $2.8 million in the prior year, which reflected the above noted factors. Net income for the second quarter of fiscal 2024 was $0.9 million, or $0.06 per diluted share, compared with $1.7 million, or $0.12 per diluted share, in fiscal 2023. Our Adjusted EBITDA for the quarter ended February 29, 2024, was $7.4 million, compared with $8.2 million in the second quarter of the prior year.

Previous wording

Cash Flows - Our cash flows from operating activities increased to $17.4 million compared with $3.0 million in the first quarter of fiscal 2023. The increase was primarily due to favorable changes in working capital and featured strong collections of accounts receivable.

Current wording

Cash Flows –Our cash flows from operating activities increased to $30.2 million compared with $11.2 million in the first two quarters of fiscal 2023. The increase was primarily due to favorable changes in working capital and featured strong collections of accounts receivable and reduced payments for accounts payable and accrued liabilities.

Previous wording

Purchases of Common Stock – During the first quarter of fiscal 2024, we purchased 408,596 shares of our common stock for $16.3 million, including 251,686 shares withheld for income taxes on stock-based compensation awards and 156,910 shares purchased on the open market under the terms of a Board of Director approved purchase plan (see Note 3, Purchases of Common Stock for Treasury, to our condensed consolidated financial statements).

Current wording

Purchases of Common Stock – During the first two quarters of fiscal 2024, we purchased 460,609 shares of our common stock for $18.4 million, including 251,686 shares withheld for income taxes on stock-based compensation awards and 208,923 shares purchased on the open market under the terms of a Board of Director approved purchase plan (see Note 3, Purchases of Common Stock for Treasury, to our condensed consolidated financial statements).

Previous wording

Liquidity and Financial Position –Even after the purchase of $16.3 million of common stock during the first quarter of 2024, and $51.0 million over the rolling four quarters ended November 30, 2023, our liquidity and financial position remained strong. At November 30, 2023, we had nearly $100 million of available liquidity which consisted of $34.0 million of cash and our undrawn $62.5 million line of credit.

Current wording

Liquidity and Financial Position –Even after the purchase of $18.4 million of common stock during the first two quarters of 2024, our liquidity and financial position remained strong. At February 29, 2024, we had over $103 million of available liquidity which consisted of $40.9 million of cash and our undrawn $62.5 million line of credit.

Previous wording

Further details regarding our results for the quarter ended November 30, 2023 are provided throughout the following management’s discussion and analysis.

Current wording

Further details regarding our results for the quarter and two quarters ended February 29, 2024 are provided throughout the following management’s discussion and analysis.

Previous wording

The Direct Office segment includes our sales personnel that serve clients in the United States and Canada; our directly owned international offices that serve clients in Japan, China, the United Kingdom, Ireland, Australia, New Zealand, Germany, Switzerland, and Austria; and other groups such as our government services office and books and audio sales.

Current wording

The Direct Office segment includes our sales personnel that serve clients in the United States and Canada; our directly owned international offices that serve clients in Japan, China, the United Kingdom, Ireland, Australia, New Zealand, Germany, Switzerland, and Austria; and other groups such as our government services and books and audio department.

Previous wording

For the first quarter of fiscal 2024, our Direct Office segment revenue was $49.2 million compared with $50.2 million in the prior year. Our AAP subscription sales grew 13% compared with the first quarter of fiscal 2023. For the rolling four quarters ended November 30, 2023, AAP subscription and subscription services sales increased 6% to $160.0 million compared with $151.0 million for the rolling four quarters ended November 30, 2022. During the first quarter of fiscal 2024, AAP subscription revenue retention levels remained strong and were greater than 90%. However, subscription sales growth in the first quarter was offset by decreased add-on services and legacy onsite presentation revenue in the Company’s domestic and international offices. Add-on services and days delivered reached record high levels in the first quarter of fiscal 2023. We remain confident that the strength and durability of our AAP offering, our principle-based content, and our subscription business model will help our clients solve difficult issues and will continue to drive growth in future periods. The sum of deferred subscription revenue on our balance sheet combined with unbilled multi-year contracts entered into, increased 12%, or over $18 million, to $169.7 million, compared with $151.6 million at November 30, 2022. We believe the continued increase in invoiced AAP and other subscription sales, which are initially recognized on the balance sheet, provide a strong base for revenue growth in future periods. The fluctuation of foreign exchange rates had an immaterial impact on our Direct Office sales and operating results for the quarter ended November 30, 2023.

Current wording

Sales. For the second quarter of fiscal 2024, our Direct Office segment revenue was $43.0 million compared with $43.6 million in the prior year. During the second quarter, our AAP subscription sales grew 9% compared with the second quarter of fiscal 2023 and AAP subscription and subscription services grew 6% to $37.5 million for the quarter. For the quarter ended February 29, 2024, AAP subscription revenue retention levels remained strong and were greater than 90%. Consistent with the first quarter, subscription sales growth in the second quarter was offset by decreased legacy onsite presentation and subscription add-on services revenue in the Company’s domestic and international offices. Add-on services and days delivered reached record high levels in the first quarter of fiscal 2023 and have trended downward in subsequent quarters. However, our booking pace for the second half of fiscal 2024 is improving and we expect to see subscription services growth later in fiscal 2024. Foreign direct office sales continue to be impacted by weak economic conditions in many of the countries in which we operate, and sales were flat in the second quarter compared with the prior year. We remain confident that the strength and durability of our AAP offering, our principle-based content, and our subscription business model will help our clients solve difficult issues and will continue to drive growth in future periods. The sum of deferred subscription revenue on our balance sheet combined with unbilled multi-year contracts entered into, increased 9%, or $13.0 million, to a second-quarter record $158.8 million, compared with $145.8 million at February 28, 2023. We believe the continued increase in invoiced AAP and other subscription sales, which are initially recognized on the balance sheet, provide a strong base for revenue growth in future periods. The fluctuation of foreign exchange rates had a $0.2 million adverse impact on our Direct Office sales and operating results for the quarter ended February 29, 2024.

Previous wording

Gross Profit. Gross profit decreased primarily due to decreased sales as previously described. Direct Office gross margin remained strong and was 80.3% compared with 79.6% in the prior year. Our Direct Office gross margin improved primarily due to the mix of services and products sold to clients compared with the prior year.

Current wording

Gross Profit. Gross profit decreased primarily due to sales performance as previously described. Direct Office gross margin remained strong and increased to 82.7% of sales compared with 82.1% in the prior year. Our Direct Office gross margin improved primarily due to the mix of services and products sold to clients compared with the prior year.

Previous wording

Sales. International licensee sales are primarily comprised of royalty revenues. In the first quarter of fiscal 2024, our international licensees’ revenue grew 3%, which was primarily attributable to increased AAP sales, royalty revenues, and service sales as certain of our licensee partners had increased sales during the quarter. While we remain optimistic that our licensees’ sales and our corresponding royalty revenues will grow during fiscal 2024, difficult macroeconomic conditions, such as slowing economic growth and regional conflicts may negatively impact our licensees’ operations and our royalty revenues in future periods. Foreign exchange rates had an immaterial impact on international licensee sales and operating results during the quarter ended November 30, 2023.

Current wording

Sales. International licensee sales are primarily comprised of royalty revenues. In the second quarter of fiscal 2024, our international licensees’ revenue decreased by 6%, which was primarily due to an 8% decrease in royalty revenues, and a 7% decrease in our share of AAP revenue during the quarter, which was partially offset by increased licensee support revenues. Licensee royalties declined primarily due to economic challenges and staffing issues in certain of the countries in which our licensees operate. While we remain optimistic that our licensees’ sales and our corresponding royalty revenues will grow during fiscal 2024, difficult macroeconomic conditions, such as slowing economic growth and regional conflicts may negatively impact our licensees’ operations and our royalty revenues in future periods. Foreign exchange rates had a $0.1 million adverse impact on international licensee sales and operating results for the quarter ended February 29, 2024.

Previous wording

SG&A Expense. International licensee SG&A expenses were essentially even with the prior year.

Current wording

SG&A Expense. International licensee SG&A expenses decreased primarily due to cost savings initiatives enacted during the second quarter of fiscal 2024.

Previous wording

Sales. Education Division sales for the quarter ended November 30, 2023, increased 3%, or $0.4 million, compared with the prior year. This growth was primarily due to increased international royalties and increased membership subscription revenues in the quarter and was partially offset by decreased sales of certain materials which are now included in the Leader in Me membership. We have initiated a corresponding price increase which is expected to more than offset the inclusion of these materials in the membership. Education membership subscription revenue increased 6% compared with the prior year primarily due to increased annual membership sales recognized and delivery of contracted coaching and training days from new schools engaged in fiscal 2023. During the first quarter of fiscal 2024, the Education Division delivered nearly 200 more training and coaching days than the prior year, which are recognized as they are delivered. We continue to be pleased with the strength and momentum of our Education Division, which added a record 791 new Leader in Me schools during fiscal 2023. We believe this positive momentum generated in fiscal 2023 and in the first quarter of fiscal 2024 will continue through the remainder of fiscal 2024.

Current wording

Sales. Education Division sales for the quarter ended February 29, 2024, increased 3%, or $0.4 million, compared with the prior year. This growth was primarily due to increased membership subscription revenues in the quarter and increased sales of classroom and training materials. Education subscription and subscription services revenues increased 4% compared with the prior year primarily due to increased annual membership revenue recognized from new schools engaged in fiscal 2023. The delivery of training and coaching days remained strong, and during the second quarter of fiscal 2024 the Education Division delivered nearly 100 more training and coaching days than the prior year, which are recognized in sales as they are delivered. We continue to be pleased with the strength and momentum of our Education Division, which added a record 791 new Leader in Me schools during fiscal 2023. We believe this positive momentum generated in fiscal 2023 and in the first half of fiscal 2024 will continue through the remainder of fiscal 2024. At February 29, 2024, we had over 3,600 schools using the Leader in Me program in the United States and Canada.

Previous wording

Gross Profit. Education Division gross profit increased primarily due to sales growth as previously described. Education segment gross margin remained strong at 63.6% of sales compared with 63.9% in the prior year.

Current wording

Gross Profit. Education Division gross profit increased primarily due to sales growth as previously described. Education segment gross margin remained strong at 59.0% of sales compared with 59.1% in the prior year.

Previous wording

Depreciation –Depreciation expense for the quarter ended November 30, 2023, was $1.1 million compared with $1.2 million in the corresponding quarter of fiscal 2023, and decreased primarily due to the full depreciation of certain assets. We currently expect depreciation expense will total approximately $5.8 million in fiscal 2024. Our estimated depreciation expense is somewhat dependent on leasehold improvements that may be necessary on our corporate campus as we approach the end of the master lease agreement in fiscal 2025. Therefore, our fiscal 2024 depreciation expense may fluctuate from current expectations.

Current wording

Depreciation –Depreciation expense for the second quarter of fiscal 2024 was $0.9 million, compared with $1.0 million in the second quarter of fiscal 2023, and decreased primarily due to the full depreciation of certain assets. We currently expect depreciation expense to total approximately $5.0 million in fiscal 2024. Our estimated depreciation expense is somewhat dependent on leasehold improvements that may be necessary on our corporate campus as we approach the end of the master lease agreement in fiscal 2025. Therefore, our fiscal 2024 depreciation expense may differ from current expectations.

Previous wording

Amortiza tion –Amortization expense during the first quarter of fiscal 2024 was consistent with the prior year at $1.1 million. We currently expect definite-lived intangible asset amortization expense will total $4.2 million during fiscal 2024.

Current wording

Amortiza tion –Amortization expense during the quarter ended February 29, 2024, was consistent with the second quarter of the prior year at $1.1 million. We currently expect definite-lived intangible asset amortization expense will total $4.2 million during fiscal 2024.

Previous wording

Interest Expense – Our interest expense decreased $0.1 million compared with the prior year primarily due to decreased term loan and financing obligation liabilities as payments have been made in the normal course of business.

Current wording

Interest Expense – Our interest expense decreased $0.1 million compared with the second quarter of the prior year primarily due to decreased term loan and financing obligation liabilities as payments have been made in the normal course of business.

Previous wording

SG&A Expense. Direct Office SG&A expense decreased primarily due to decreased associate costs resulting from lower variable compensation resulting from decreased sales in the quarter.

Current wording

SG&A Expense. Direct Office SG&A expense decreased primarily due to decreased associate costs resulting from lower variable compensation resulting from decreased sales in fiscal 2024.

Previous wording

Gross Profit. Gross profit increased primarily due to increased licensee revenues as previously described. Gross margin remained strong at 90.3% compared with 90.8% in the first quarter of fiscal 2023.

Current wording

Gross Profit. Education Division gross profit increased primarily due to sales growth as previously described. Education segment gross margin remained strong at 61.3% compared with 61.5% in fiscal 2023.

Previous wording

Interest Income –Our interest income increased over the first quarter of fiscal 2023 primarily due to increased interest rates.

Current wording

Interest Income –Our interest income increased $0.1 million over the first two quarters of fiscal 2023 primarily due to increased interest rates on our cash balances.

Previous wording

Our income tax expense forthe quarter ended November 30, 2023, was $0.4 million on pre-tax income of $5.3 million, for an effective tax rate of 8.1%, compared with an effective rate of 23.0% in the first quarter of the prior year when we recorded income tax expense of $1.4 million on pre-tax income of $6.1 million.

Current wording

Our income tax provision for the first two quarters of fiscal 2024 was $1.0 million on pre-tax income of $6.7 million, for an effective tax rate of 14.4%, compared with an effective rate of 27.6% through February 28, 2023, when we recorded income tax expense of $2.4 million on pre-tax income of $8.8 million.

Previous wording

Our effective tax rate for the first quarter of fiscal 2024 was lower than the effective rate for the first quarter of fiscal 2023 primarily due to a $3.2 million tax benefit for stock-based compensation deductions in the first quarter of fiscal 2024 exceeding the corresponding expense for book purposes, which was partially offset by $2.1 million of tax expense for the non-deductible portion of stock-based compensation paid to executives. These factors produced a net benefit of $1.1 million or 21% in the first quarter of fiscal 2024.

Current wording

Our effective tax rate for the first two quarters of fiscal 2024 was lower than the effective rate for the first half of fiscal 2023 primarily due to a $3.2 million tax benefit for stock-based compensation deductions in the first quarter of fiscal 2024 that exceeded the corresponding expense for book purposes, which was partially offset by $2.2 million of tax expense for the non-deductible portion of stock-based compensation paid to executives. These stock-based compensation factors produced a net benefit of $1.0 million or 15.1%, in the first two quarters of fiscal 2024.

Previous wording

We currently expect our effective income tax rate for the full fiscal 2024 year to be approximately 30%, including a net benefit of 2% for stock-based compensation, compared with the net benefit of 21% for stock-based compensation recognized in the first quarter.

Current wording

We currently expect our effective income tax rate for the full fiscal 2024 year to be approximately 30%, including a net benefit of 2% for stock-based compensation, compared with the effective rate of 14.4% for the first two quarters of fiscal 2024, including the net benefit of 15.1% for stock-based compensation discussed above.

Previous wording

We paid $0.8 million in cash for income taxes during the first quarter of fiscal 2024. We anticipate that our total cash paid for income taxes over the comingone to two years will be less than our total income tax provision to the extent we are able to utilize net operating loss carryforwards, foreign tax credit carryforwards, and other deferred income tax assets.

Current wording

During the first half of fiscal 2024 we paid $1.6 million of cash for income taxes. We anticipate that our total cash paid for income taxes over the coming one to two years will be less than our total income tax provision to the extent we are able to utilize net operating loss carryforwards, foreign tax credit carryforwards, and other deferred income tax assets.

Previous wording

At November 30, 2023, our cash and cash equivalents totaled $34.0 million, with no borrowings on our $62.5 million revolving credit facility. Of our $34.0 million of cash at November 30, 2023, $12.3 million was held at our foreign subsidiaries. We routinely repatriate cash from our foreign subsidiaries and consider cash generated from foreign activities a key component of our overall liquidity position. Our primary sources of liquidity are cash flows from the sale of services in the normal course of business and available proceeds from our revolving line of credit facility. Our primary uses of liquidity include payments for operating activities, purchases of common stock, debt payments, capital expenditures (including curriculum development), and working capital expansion.

Current wording

At February 29, 2024, our cash and cash equivalents totaled $40.9 million, with no borrowings on our $62.5 million revolving credit facility. Of our $40.9 million of cash at February 29, 2024, $11.6 million was held at our foreign subsidiaries. We routinely repatriate cash from our foreign subsidiaries and consider cash generated from foreign activities a key component of our overall liquidity position. Our primary sources of liquidity are cash flows from the sale of services in the normal course of business and available proceeds from our revolving line of credit facility. Our primary uses of liquidity include payments for operating activities, purchases of common stock, debt payments, capital expenditures (including curriculum development), and working capital expansion.

Previous wording

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 quarter ended November 30, 2023.

Current wording

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 two quarters ended February 29, 2024.

Previous wording

Our primary source of cash from operating activities was the sale of services to our customers in the normal course of business. Our primary uses of cash for operating activities were payments for SG&A expenses, payments for direct costs necessary to conduct training programs, to fund working capital changes, and payments to suppliers for materials used in training manuals sold. Our cash provided by operating activities during the first quarter of fiscal 2024 increased $14.4 million to $17.4 million compared with $3.0 million in the first quarter of the prior year. The difference was primarily attributable to favorable changes in working capital during the first quarter related to strong collections of accounts receivable, less cash used to pay seasonally high year-end accounts payable and accrued liabilities, and a smaller first-quarter change in deferred revenue compared with the prior year. Through November 30, 2023, our collection of accounts receivable remained strong and provided the necessary cash to support our operations, pay our obligations, and make critical investments. We currently anticipate that our cash flows from operating activities will remain strong during the remainder of fiscal 2024.

Current wording

Our primary source of cash from operating activities was the sale of services to our customers in the normal course of business. Our primary uses of cash for operating activities were payments for SG&A expenses, payments for direct costs necessary to conduct training programs, to fund working capital changes, and payments to suppliers for materials used in training manuals sold. Our cash provided by operating activities during the first half of fiscal 2024 increased $19.0 million to $30.2 million compared with $11.2 million in the first two quarters of fiscal 2023. The difference was primarily attributable to favorable changes in working capital during the first two quarters of fiscal 2024 and featured strong collections of accounts receivable, less cash used to pay seasonally high year-end accounts payable and accrued liabilities, and a smaller change in deferred revenue compared with the prior year. Through February 29, 2024, our collection of accounts receivable remained strong and provided the necessary cash to support our operations, pay our obligations, and make critical investments. We currently anticipate that our cash flows from operating activities will remain strong during the remainder of fiscal 2024.

Previous wording

During the first quarter of fiscal 2024, our cash used for investing activities totaled $3.7 million. Our primary uses of cash for investing activities consisted of additional investments in the development of our offerings and purchases of property and equipment in the normal course of business.

Current wording

During the first two quarters of fiscal 2024, our cash used for investing activities totaled $5.5 million. Our primary uses of cash for investing activities consisted of additional investments in the development of our offerings and purchases of property and equipment in the normal course of business.

Previous wording

In the quarter ended November 30, 2023, we spent $2.7 million on the development of our various offerings and related content. We are expecting to launch new and significantly refurbished offerings related to The 7 Habits of Highly Effective People and The Speed of Trust in fiscal 2024. We believe continued investment in our offerings and content is key to future growth and the development of our subscription offerings. We currently expect that our capital spending for curriculum development will total $7.1 million in fiscal 2024.

Current wording

Through February 29, 2024, we spent $3.8 million on the development of our various offerings and related content. We are expecting to launch new and significantly refurbished offerings in fiscal 2024 and we believe continued investment in our offerings and content is key to future growth and the development of our subscription offerings. We currently expect that our capital spending for curriculum development will total $7.1 million in fiscal 2024.

Previous wording

Our purchases of property and equipment in the first quarter of fiscal 2024 consisted primarily of computer software and hardware, and leasehold improvements on our corporate campus. We currently anticipate that our purchases of property and equipment may total as much as $8.0 million in fiscal 2024. Our purchases of property and equipment in fiscal 2024 are highly dependent upon leasehold improvements that may be necessary on our corporate campus as we approach the end of the master lease in fiscal 2025. Therefore, our capital expenditures for property and equipment may fluctuate from current expectations.

Current wording

Our purchases of property and equipment in the first two quarters of fiscal 2024 consisted primarily of computer software and hardware, and leasehold improvements on our corporate campus. We currently anticipate that our purchases of property and equipment may total as much as $8.0 million in fiscal 2024. However, our purchases of property and equipment in fiscal 2024 are highly dependent upon leasehold improvements that may be necessary on our corporate campus as we approach the end of the master lease in fiscal 2025. Therefore, our capital expenditures for property and equipment may differ from current expectations.

Previous wording

During the quarter ended November 30, 2023, our net cash used for financing activities totaled $18.1 million. Our primary use of financing cash was $16.3 million used to purchase shares of our common stock, including $10.3 million used for shares withheld for income taxes on stock-based compensation awards which were distributed during the quarter ended November 30, 2023 (refer to Note 3, Purchases of Common Stock for Treasury, to our condensed consolidated financial statements). We also used $2.1 million of cash for principal payments on our notes payable and financing obligation during the quarter. Partially offsetting these uses of cash were $0.4 million of proceeds from our Employee Stock Purchase Plan participants to purchase shares of stock during the first quarter of fiscal 2024.

Current wording

During the first two quarters of fiscal 2024, our net cash used for financing activities totaled $22.0 million. Our primary use of financing cash was $18.4 million used to purchase shares of our common stock, including $10.3 million used for shares withheld for income taxes on stock-based compensation awards which were distributed during the first quarter (refer to Note 3, Purchases of Common Stock for Treasury, to our condensed consolidated financial statements). We also used $4.2 million of cash for principal payments on our notes payable and financing obligation during the first half of fiscal 2024. Partially offsetting these uses of cash were $0.7 million of proceeds from our Employee Stock Purchase Plan participants to purchase shares of stock during fiscal 2024.

Previous wording

On February 14, 2023, our Board of Directors approved a new plan to purchase up to $50.0 million of our outstanding common stock. The previously existing common stock purchase plan was canceled, and the new common share purchase plan does not have an expiration date. At November 30, 2023, we had $9.8 million remaining on the current purchase authorization.

Current wording

On February 14, 2023, our Board of Directors approved a new plan to purchase up to $50.0 million of our outstanding common stock. The previously existing common stock purchase plan was canceled, and the new common share purchase plan does not have an expiration date. At February 29, 2024, we had $7.7 million remaining on the current purchase authorization.

Previous wording

These material cash requirements are discussed in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, which was filed with the SEC on November 13, 2023 (our Annual Report). During the first quarter of fiscal 2024, there have been no material changes to our expected uses of cash and contractual obligations from those discussed in our Annual Report. However, current economic conditions and other forecasts may change and could alter our expected material uses of cash in future periods. For further information on our material uses of cash and contractual obligations, refer to the information included in our Annual Report.

Current wording

These material cash requirements are discussed in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, which was filed with the SEC on November 13, 2023 (our Annual Report). During the first two quarters of fiscal 2024, there have been no material changes to our expected uses of cash and contractual obligations from those discussed in our Annual Report. However, current economic conditions and other forecasts may change and could alter our expected material uses of cash in future periods. For further information on our material uses of cash and contractual obligations, refer to the information included in our Annual Report.