FRANKLIN COVEY CO

Previous wording

This Management’s Discussion and Analysis includes the concepts of Adjusted EBITDA and constant currency, which are non-GAAP financial 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 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 measures in our decision making because they provide 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 operational activities and financial results. For a reconciliation of our reporting segment Adjusted EBITDA to net income, a related GAAP measure, refer to Note 7, Segment Information, to our unaudited condensed consolidated financial statements.

Current wording

This Management’s Discussion and Analysis includes the concepts of Adjusted EBITDA and constant currency, which are non-GAAP financial measures. 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. 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 measures in our decision making because they provide 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 operational activities and financial results. For a reconciliation of our reporting segment Adjusted EBITDA to net income, a related GAAP measure, refer to Note 7, Segment Information, to our unaudited condensed consolidated financial statements.

Previous wording

o Our consolidated subscription and subscription services revenues reached $55.8 million, a 2% increase over $54.8 million in the first quarter of fiscal 2024. For the first quarter of fiscal 2025, subscription revenue invoiced was equal to the first quarter of the prior year at $24.7 million.

Current wording

o Consolidated subscription and subscription services revenues for the second quarter of fiscal 2025 were $49.5 million compared with $50.3 million in the second quarter of fiscal 2024. For the quarter ended February 28, 2025, subscription revenue invoiced was $33.9 million compared with $34.6 million in the prior year.

Previous wording

o Consolidated deferred subscription revenue as of November 30, 2024, increased 10% to $95.7 million compared with $87.2 million at November 30, 2023. At November 30, 2024, 55% of our AAP contracts are for at least two years, compared with 54% at November 30, 2023, and the percentage of contracted amounts represented by multi-year contracts was equal with the first quarter of the prior year at 60%.

Current wording

o Consolidated deferred subscription revenue at February 28, 2025, increased 10% to $94.4 million compared with $86.1 million at February 29, 2024. At February 28, 2025, 55% of our AAP contracts are for at least two years, compared with 56% at February 29, 2024, and the percentage of contracted amounts represented by multi-year contracts was 61% compared with 62% as of February 29, 2024.

Previous wording

o Unbilled deferred subscription revenue at November 30, 2024, was $73.0 million compared with $82.5 million at November 30, 2023. Unbilled deferred revenue represents business that is contracted, but unbilled and therefore excluded from our balance sheet.

Current wording

o Unbilled deferred subscription revenue at February 28, 2025, was $64.5 million compared with $72.7 million at February 29, 2024. Unbilled deferred revenue represents business that is contracted, but unbilled and therefore excluded from our balance sheet.

Previous wording

The following is a summary of other consolidated financial highlights from the quarter ended November 30, 2024:

Current wording

The following is a summary of other unaudited consolidated financial information from the second quarter of fiscal 2025, which ended on February 28, 2025:

Previous wording

Cost of Revenue/Gross Profit – For the first quarter of fiscal 2025, our cost of revenue was $16.4 million compared with $16.1 million in the prior year. Gross profit for the quarter ended November 30, 2024, was $52.7 million compared with $52.3 million in the same quarter of fiscal 2024. The increase in gross profit was primarily due to increased revenue as described above. Our gross margin for the first quarter of fiscal 2025 remained strong and was 76.3% of revenue compared with 76.4% in fiscal 2024.

Current wording

Cost of Revenue/Gross Profit – For the quarter ended February 28 2025, our cost of revenue totaled $13.9 million compared with $14.5 million in the prior year. Gross profit for the second quarter of fiscal 2025 was $45.7 million compared with $46.9 million in the prior year. The decrease in gross profit was primarily due to revenue performance as described above. Our gross margin for the second quarter of fiscal 2025 remained strong and increased to 76.7% of revenue compared with 76.4% in the corresponding quarter of the prior year.

Previous wording

Operating Expenses – Our operating expensesfor the quarter ended November 30, 2024, increased $4.3 million compared with the prior year, which was primarily due to a $3.0 million increase in selling, general, and administrative (SG&A) expenses and a $1.4 million increase in restructuring expenses (refer to Note 5 –Restructuring Coststo our unaudited condensed consolidated financial statements). These increases were partially offset by decreased depreciation expense compared with fiscal 2024. The increase in SG&A expenses was primarily due to increased associate costs related to new personnel, including new sales and sales support personnel hired in connection with the restructuring of our North America sales force, compensation increases, and benefits; and from advertising and promotional costs primarily related to the launch of our new The 7 Habits of Highly Effective People offering, which occurred during the first quarter of fiscal 2025.

Current wording

Operating Expenses – Our operating expensesfor the second quarter of fiscal 2025 increased $1.8 million compared with the prior year, which was primarily due to a $4.3 million increase in selling, general, and administrative (SG&A) expenses, which were partially offset by a $1.7 million decrease in restructuring costs, and a $0.9 million decrease in impaired asset charges. The increase in SG&A expenses was primarily due to increased associate costs related to new personnel, including new sales and sales support personnel hired in connection with the restructuring of our North America sales force, compensation increases, and benefits.

Previous wording

Operating Income, Net Income, and Adjusted EBITDA– Primarily as a result of increased operating expenses discussed above, our income from operations for the quarter ended November 30, 2024, was $1.5 million compared with $5.3 million in the prior year. Net income for the first quarter of fiscal 2025 was $1.2 million, or $0.09 per diluted share, compared with $4.9 million, or $0.36 per diluted share, in the first quarter of fiscal 2024. Our Adjusted EBITDA for the quarter ended November 30, 2024, was in line with expectations and totaled $7.7 million compared with $11.0 million in the first quarter of fiscal 2024. In constant currency, our Adjusted EBITDA for the first quarter of fiscal 2025 was $8.1 million.

Current wording

Operating Income (Loss), Net Income (Loss), and Adjusted EBITDA– Primarily as a result of reduced revenue and increased operating expenses as discussed above, our results of operations for the quarter ended February 28, 2025, were a loss of $(1.5) million compared with income of $1.4 million in the second quarter of fiscal 2024. For the second quarter of fiscal 2025, we realized a net loss of $(1.1) million, or $(0.08) per share, compared with net income of $0.9 million, or $0.06 per diluted share, in the same quarter of fiscal 2024. Our Adjusted EBITDA for the quarter ended February 28, 2025, was in line with previously announced expectations and totaled $2.1 million compared with $7.4 million in the second quarter of fiscal 2024. In constant currency, our Adjusted EBITDA for the second quarter of fiscal 2025 was $2.6 million.

Previous wording

Liquidity and Financial Position –Our liquidity and financial position remained strong throughout the first quarter of fiscal 2025. At November 30, 2024, we had over $115 million of available liquidity which consisted of $53.3 million of cash and our undrawn $62.5 million line of credit.

Current wording

Liquidity and Financial Position –Our liquidity and financial position remained strong throughout the second quarter of fiscal 2025. At February 28, 2025, we had over $100 million of available liquidity which consisted of $40.4 million of cash and our full undrawn $62.5 million line of credit.

Previous wording

Revenue. North America segment revenue for the first quarter of fiscal 2025 was essentially flat compared with the prior year. These results were in line with our expectations as we transition the sales force in North America to a more focused structure that is expected to accelerate sales growth in future periods. During the first quarter of fiscal 2025, our AAP subscription plus subscription services revenues totaled $41.0 million compared with $41.6 million in the prior year. However, rolling four quarter AAP subscription and subscription service revenues grew by 3%, to $164.2 million compared with the same period ended November 30, 2023. We remain optimistic about the expected results of our North America sales force restructuring and associated growth initiatives as our new North America sales force structure is now in place with sales and sales-related hiring activities ahead of plan.

Current wording

Revenue. For the quarter ended February 28, 2025, North America segment revenue was $34.5 million compared with $35.5 million in the prior year. Our second quarter results were generally in line with our expectations as we implemented our new go-to-market strategy and transitioned the sales force in North America to a more focused structure. However, North America segment revenues for the quarter were adversely impacted by canceled or postponed government contracting and other U.S. government actions which led to an uncertain business environment. During the second quarter of fiscal 2025, our AAP subscription plus subscription services revenues totaled $36.1 million compared with $37.5 million in the prior year. Rolling four quarter AAP subscription and subscription service revenues grew to $162.8 million compared with $162.1 million for the same period ended February 29, 2024. We remain optimistic about the expected results of our new North America go-to-market strategy and sales force restructuring as our new North America sales force structure is in place and began executing on their directives in the second quarter.

Previous wording

Revenue. International Direct Office revenues in the first quarter of fiscal 2025 were adversely impacted by decreased sales through our operations in Asia and by weak economic conditions in other countries in which we operate. First quarter revenues in China decreased by 18% and revenues in Japan decreased by 16% compared with the prior year, primarily due to ongoing macroeconomic and other issues in these countries. These decreases were partially offset by a 20% increase in sales through our Australia office, by $0.2 million of revenue from our new France office, and by favorable exchange rates. The fluctuation of foreign exchange rates had a $0.2 million favorable impact on our International Direct Office revenue and an insignificant impact on operating results in the first quarter of fiscal 2025. In future periods, we intend to invest in our International Direct Office operations to realign sales efforts similar to the initiatives in the North America segment and we believe these efforts will generate increased revenues through this segment. However, the success of these efforts may be hampered by macroeconomic and other conditions that are out of our control and may not produce the expected growth in revenue.

Current wording

Revenue. International Direct Office revenues for the quarter ended February 28, 2025, were adversely impacted by ongoing economic disruptions and geopolitical tensions in Asia and by uncertain business and economic conditions in Europe. Second quarter revenues decreased in China by 35%, in Japan by 19%, in the United Kingdom by 17%, and in our Germany Switzerland, and Austria operations by 11% compared with the same period in fiscal 2024. These decreases were partially offset by increased sales through our Australia office and by revenue from our new France office. The fluctuation of foreign exchange rates had a $0.2 million adverse impact on our International Direct Office revenue and an insignificant impact on operating results in the second quarter of 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 out of our control and may not generate revenue growth in future periods.

Previous wording

Revenue. International licensee revenue is primarily comprised of royalties on sales of our content by the licensees. In the first quarter of fiscal 2025, our international licensees’ revenue decreased by 7%, or $0.2 million, which was primarily due to decreased services revenue and a $0.1 million decrease in our share of AAP revenue. Licensee royalty revenues were essentially flat compared with the prior year. While we remain optimistic that our licensees’ sales and our corresponding royalty revenues will grow in future periods, continued difficult macroeconomic conditions, such as slowing economic growth and regional conflicts, and operating challenges may negatively impact our licensees’ operations and reduce growth compared with our expectations. Foreign exchange rates had an immaterial impact on international licensee revenues and operating results during the first quarter of fiscal 2025.

Current wording

Revenue. International licensee revenue is primarily comprised of royalties on sales of our content by the licensees. For the quarter ended February 28, 2025, our international licensees’ revenue increased by 2%, which was primarily due to increased licensee royalty revenues. While we remain optimistic that our licensees’ sales and our corresponding royalty revenues will grow in future periods, continued difficult macroeconomic conditions, such as geopolitical trade tensions and economic uncertainty, may negatively impact our licensees’ operations and reduce growth compared with our expectations. Foreign exchange rates had a $0.1 million adverse impact on international licensee revenues and operating results for the quarter ended February 28, 2025.

Previous wording

Revenue. Education Division revenue for the quarter ended November 30, 2024, increased 11%, or $1.6 million, compared with the first quarter of the prior year. First quarter revenue growth was primarily due to increased sales of classroom and training materials, due in part to a new initiative with a state that began in the first quarter of 2025, increased coaching and consulting revenue, and increased membership subscription revenues resulting from new schools which started The Leader in Me during fiscal 2024. Training and materials revenue increased $0.7 million over the prior year, which included $0.4 million of classroom and training materials from the new state-wide initiative. The delivery of training and coaching days remained strong during the first quarter of fiscal 2025 as the Education Division delivered approximately 100 more training and coaching days than in the prior year. Training and coaching days are recognized as revenue when they are delivered. Education subscription and subscription services revenues in the first quarter of fiscal 2025 increased 12% compared with the prior year. We continue to be pleased with the strength and momentum of our Education Division, which added 728 new The Leader in Me schools during fiscal 2024. We believe the momentum generated in fiscal 2024 and in the first quarter of fiscal 2025 will continue through the remainder of fiscal 2025. At November 30, 2024, nearly 3,800 schools were using The Leader in Meprogram in the United States and Canada.

Current wording

Revenue. For the quarter ended February 28, 2025, Education Division revenue increased 3%, or $0.4 million, compared with the second quarter of fiscal 2024. Revenue growth in the second quarter was primarily due to increased coaching and consulting revenue, increased membership subscription revenues resulting from new schools which started The Leader in Me during fiscal 2024, and sales of classroom and training materials. Education Division growth was partially offset by foreign exchange rates, which had a $0.1 million adverse impact on revenue and a $0.3 million adverse effect on operating results for the second quarter of fiscal 2025. The delivery of training and coaching days remained strong during the second quarter of fiscal 2025 as the Education Division delivered approximately 70 more training and coaching days than in the prior year. Training and coaching days are recognized as revenue when they are delivered. Education subscription and subscription services revenues in the second quarter of fiscal 2025 increased 5% compared with the same period of the prior year. We continue to be pleased with the strength and momentum of our Education Division, which added 728 new The Leader in Me schools during fiscal 2024. We believe the momentum generated in fiscal 2024 and in the first half of fiscal 2025 will continue through the remainder of fiscal 2025. At February 28, 2025, over 3,800 schools were using The Leader in Meprogram in the United States and Canada or are contracted to begin using the program later this fiscal year.

Previous wording

Gross Profit. Education Division gross profit increased primarily due to revenue growth as previously described. Education segment gross margin remained strong and was consistent with the prior year at 63.2% of sales compared with 63.6% in the prior year.

Current wording

Gross Profit. Education Division gross profit increased primarily due to revenue growth as previously described. Education Division gross margin remained strong and increased to 61.9% compared with 59.1% in the prior year primarily due to a change in the mix of services and products sold during the quarter.

Previous wording

Depreciation –Depreciation expense for the quarter ended November 30, 2024, was $1.0 million, compared with $1.1 million in the first quarter of fiscal 2024. The decrease was primarily due to the full depreciation of certain capital assets. We currently expect depreciation expense to total approximately $3.5 million in fiscal 2025.

Current wording

Depreciation –Depreciation expense for the quarter ended February 28, 2025, was $1.0 million, compared with $0.9 million in the second quarter of the prior year. The increase was primarily due to new capital assets added in late fiscal 2024 and the first half of fiscal 2025.

Previous wording

Interest Expense – Our interest expense decreased $0.2 million compared with the first quarter of fiscal 2024 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 by $0.2 million compared with the second quarter of fiscal 2024 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. North America SG&A expenses increased primarily due to associate costs resulting from new sales and sales support personnel (primarily related to the restructuring of the North America sales force), compensation increases, and benefit costs, as well as increased advertising and promotional costs from the first quarter fiscal 2025 launch of our refreshed The 7 Habits of Highly Effective People offering.

Current wording

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 restructuring of our North America sales force), compensation increases, and benefit costs, as well as increased advertising and promotional costs from the launch of our refreshed The 7 Habits of Highly Effective People offering in the first quarter of fiscal 2025.

Previous wording

Gross Profit. Gross profit in the International Direct Office segment decreased primarily due to reduced revenue as previously described. Gross margin for the first quarter of fiscal 2025 was 74.2% of sales compared with 75.8% in the prior year. The decline in gross margin was primarily due to a shift in the mix of services delivered and products sold during the quarter when compared with the prior year.

Current wording

Gross Profit. Gross profit in the International Direct Office segment decreased primarily due to reduced revenue as described above. Gross margin for the first half of fiscal 2025 remained strong and was 73.9% of sales compared with 75.8% in the prior year. The fluctuation in gross margin was primarily due to changes in the mix of services delivered and products sold compared with the prior year.

Previous wording

SG&A Expenses. International Direct Office SG&A expenses increased primarily due to increased bad debt expense, increased associate costs from new personnel, and increased advertising and marketing expense related to the launch of the new The 7 Habits of Highly Effective People offering in the first quarter of fiscal 2025.

Current wording

SG&A Expenses. International Direct Office SG&A expenses increased primarily due to increased bad debt expense, increased associate costs from new personnel, and increased advertising and marketing expense related to the launch of the new The 7 Habits of Highly Effective People offering, which occurred in the first quarter of fiscal 2025.

Previous wording

Gross Profit. Gross profit decreased due to licensee revenue performance as previously described. International licensee gross margin was generally consistent with the first quarter of the prior year at 89.4% compared with 90.0% in fiscal 2024.

Current wording

Gross Profit. Gross profit decreased due to lower licensee revenue compared with the prior year. However, International Licensee gross margin remained strong and increased to 88.9% in the first half of fiscal 2025 primarily due to increased royalties in the mix of revenue.

Previous wording

SG&A Expense. International licensee SG&A expenses increased primarily due to the allocation of increased shared services costs (benefits, people services, information systems, etc.) compared with the prior year.

Current wording

SG&A Expense. International licensee SG&A expenses for the first half of fiscal 2025 increased primarily due to the allocation of increased shared services costs (benefits, people services, information systems, etc.) compared with fiscal 2024.

Previous wording

Amortiza tion –Amortization expense for the first quarter of fiscal 2025 was equal to the first quarter of the prior year at $1.1 million. We currently expect definite-lived intangible asset amortization expense will total $4.4 million during fiscal 2025.

Current wording

Amortiza tion –Amortization expense for the first two quarters of fiscal 2025 was $2.2 million compared with $2.1 million in the prior year. The slight increase was primarily due to the reacquisition of license rights for France, which occurred in the first quarter of fiscal 2025. We currently expect definite-lived intangible asset amortization expense will total approximately $4.4 million during fiscal 2025.

Previous wording

Our income tax expense forthe quarter ended November 30, 2024, was $0.4 million on pre-tax income of $1.6 million, for an effective tax rate of 25.6%, compared with an effective rate of 8.1% in the first quarter of fiscal 2024 when we recorded income tax expense of $0.4 million on pre-tax income of $5.3 million.

Current wording

Our income tax provision for the first two quarters of fiscal 2025 was $0.1 million on pre-tax income of $0.2 million, for an effective tax rate of 56.1%, compared with an effective rate of 14.4% through February 29, 2024, when we recorded income tax expense of $1.0 million on pre-tax income of $6.7 million.

Previous wording

We paid $0.7 million in cash for income taxes during the first quarter of fiscal 2025. We anticipate our total cash paid for income taxes over the coming years to approximate our total income tax provision.

Current wording

During the first half of fiscal 2025 we paid $6.0 million of cash for income taxes, most of which related to our fiscal 2024 income tax liability. We anticipate our total cash paid for income taxes over the coming years to approximate our total income tax provision on an annual basis.

Previous wording

At November 30, 2024 we had over $115 million of available liquidity, which consisted of $53.3 million in cash combined with our undrawn $62.5 million revolving credit facility. Of our $53.3 million of cash at November 30, 2024, $13.1 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 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, working capital expansion, capital expenditures (including curriculum development), and debt and leasing payments.

Current wording

At February 28, 2025 we had over $100 million of available liquidity, which consisted of $40.4 million in cash combined with our undrawn $62.5 million revolving credit facility. Of our $40.4 million of cash on February 28, 2025, $14.5 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 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, working capital expansion, capital expenditures (including curriculum development), and debt and leasing payments.

Previous wording

In fiscal 2023, we entered into a new credit agreement (the 2023 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. The 2023 Credit Agreement matures on March 27, 2028, and interest on any draws upon the line of credit is due and payable on the last day of each month. For term loan borrowings, interest is due and payable when the term loan principal payments are due and payable. The 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 in the 2023 Credit Agreement.

Current wording

In fiscal 2023, we entered into a new credit agreement (the 2023 Credit Agreement) with KeyBank National Association leading a group of financial institutions, 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. The 2023 Credit Agreement matures on March 27, 2028.

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, 2024.

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 28, 2025.

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 2025 remained strong and was $14.1 million compared with $17.4 million for the quarter ended November 30, 2023. The difference was primarily attributable to lower operating income in the first quarter of fiscal 2025 as previously discussed. Through

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, 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 the first half of fiscal 2025 was $12.8 million compared with $30.2 million in the first half of fiscal 2024. The decrease in cash flows from operating activities was primarily attributable to lower operating income in the first two quarters of fiscal 2025 as previously discussed, working capital activity, and cash payments made for income taxes. While we expect our cash flows from operating activities to improve in the second half of fiscal 2025, certain conditions are beyond our control or influence such as general macroeconomic conditions, further reductions in government spending, and business conditions in international locations which impact our financial results at our international direct offices and our international licensees.

Previous wording

During the quarter ended November 30, 2024, our cash used for investing activities totaled $2.8 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 half of fiscal 2025, our cash used for investing activities totaled $5.0 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 first quarter of fiscal 2025, we spent $1.4 million on the development of our various offerings and related content. During the quarter ended November 30, 2024, we launched a significantly refurbished The 7 Habits of Highly Effective People offering and expect to release additional/refurbished content in fiscal 2025 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 $9.3 million in fiscal 2025.

Current wording

In the first two quarters of fiscal 2025, we spent $2.4 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 additional/refurbished content in the second half of fiscal 2025 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 approximately $8.3 million in fiscal 2025.

Previous wording

Our purchases of property and equipment during the first quarter of fiscal 2025 totaled $1.0 million and consisted primarily of computer software and hardware. We currently anticipate that our purchases of property and equipment will total $5.3 million in fiscal 2025.

Current wording

Our purchases of property and equipment during the first half of fiscal 2025 totaled $2.3 million and consisted primarily of computer software and hardware. During the third quarter of fiscal 2025 we are moving our corporate offices to a new location and will use cash for leasehold improvements to build out and furnish the new office space. Including the spending for these leasehold improvements, we currently anticipate that our purchases of property and equipment will total approximately $8.7 million in fiscal 2025.

Previous wording

In the first quarter of fiscal 2025, we reacquired the license rights to France for $0.3 million in cash and $0.2 million of forgiven receivables from the former licensee. Our operations in France were previously conducted by an independent 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.

Current wording

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.

Previous wording

For the quarter ended November 30, 2024, our net cash used for financing activities totaled $6.6 million. Our primary uses of financing cash were $6.0 million used to purchase shares of our common stock, which consisted entirely of shares withheld for income taxes on stock-based compensation awards distributed during the first quarter, and $1.0 million used for principal payments on our financing obligation relating to our corporate headquarters lease. Partially offsetting these uses of cash for financing activities were $0.3 million of proceeds received from our Employee Stock Purchase Plan participants to purchase shares of common stock during the first quarter of fiscal 2025.

Current wording

For the two quarters ended February 28, 2025, our net cash used for financing activities totaled $15.9 million. Our primary uses of financing cash were $14.7 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 (Note 3), and $1.9 million used for principal payments on our financing obligation. Partially offsetting these uses of cash for financing activities were $0.7 million of proceeds received from our ESPP participants to purchase shares of common stock during the first half of fiscal 2025.

Previous wording

On April 18, 2024, our board of directors approved a 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.

Current wording

On April 18, 2024, our Board of Directors approved a 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 28, 2025, we had $36.2 million remaining on the current common share purchase authorization.

Previous wording

Our uses of financing cash during fiscal 2025 are expected to include required payments on our financing obligation, and may 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.

Current wording

Our uses of financing cash during fiscal 2025 are expected to include required payments on our financing obligation and notes payable, and may 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.

Previous wording

We expect to meet the obligations on our notes payable, service our existing financing obligation, pay for projected capital expenditures, and meet other obligations in fiscal 2025 and beyond from current cash balances and future cash flows from operating activities. Going forward, we will 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 the 2023 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.

Current wording

We expect to pay the liabilities from our financing obligation and notes payable, pay for projected capital expenditures, and meet other obligations in fiscal 2025 and beyond from current cash balances and future cash flows from operating activities. Going forward, we will 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 the 2023 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.

Previous wording

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, 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.

Current wording

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 at least the upcoming 12 months. 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, 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, business conditions in international locations, geopolitical tensions in Asia and North America, 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.

Previous wording

These material cash requirements are discussed in more detail in Part II, 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, 2024, which was filed with the SEC on November 12, 2024 (our Annual Report). During the quarter ended November 30, 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 Part II, 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, 2024, which was filed with the SEC on November 12, 2024 (our Annual Report). During the quarter and two quarters ended February 28, 2025, 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.

Previous wording

Our consolidated financial statements were prepared in accordance with GAAP. For information on our critical accounting policies, see “Critical Accounting Estimates” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report. Please refer to those disclosures for further information regarding our uses of estimates and critical accounting policies. There have been no significant changes to our previously disclosed estimates or critical accounting policies.

Current wording

Our consolidated financial statements were prepared in accordance with GAAP. For information on our critical accounting policies, see “Critical Accounting Estimates” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report. Refer to those disclosures for further information regarding our uses of estimates and critical accounting policies. There have been no significant changes to our previously disclosed estimates or critical accounting policies.

Previous wording

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 revenue levels and financial results, our financial performance during fiscal 2025, future training and consulting revenue, expected increases in add-on subscription services revenue and delivered training and coaching days, anticipated renewals of subscription offerings, our ability to hire sales professionals, 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 revenues, future compliance with the terms and conditions of our line of credit, the ability to borrow on our line of credit, expected collection 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 our Annual Report on Form 10-K for the fiscal year ended August 31, 2024, entitled “Risk Factors.” In addition, such risks and uncertainties may include unanticipated developments in any one or more of the following areas: cybersecurity risks; inflation and other macroeconomic risks; litigation; unanticipated costs or capital expenditures; delays or unanticipated outcomes relating to our strategic plans; dependence on existing products or services; the rate and consumer acceptance of new product introductions, including the All Access Pass; 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 ad…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 revenue levels and financial results, our financial performance during fiscal 2025, future training and consulting revenue, expected increases in add-on subscription services revenue and delivered training and coaching days, anticipated renewals of subscription offerings, our ability to hire sales professionals, 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 revenues, future compliance with the terms and conditions of our line of credit, the ability to borrow on our line of credit, expected collection 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 our Annual Report on Form 10-K for the fiscal year ended August 31, 2024, entitled “Risk Factors.” In addition, such risks and uncertainties may include unanticipated developments in any one or more of the following areas: cybersecurity risks; inflation and other macroeconomic risks; litigation; unanticipated costs or capital expenditures; delays or unanticipated outcomes relating to our strategic plans; dependence on existing products or services; the rate and consumer acceptance of new product introductions, including the All Access Pass; 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;