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 or loss excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items such as restructuring and headquarters moving costs. We reference this non-GAAP measure in our decision making because it provides 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 our operational activities and financial results. For a reconciliation of our reporting segment Adjusted EBITDA to net income (loss), 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 concept of Adjusted EBITDA, which is a non-GAAP financial measure. 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 and headquarters moving costs. We reference this non-GAAP measure in our decision making because it provides 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 our operational activities and financial results. For a reconciliation of our reportable segment Adjusted EBITDA to income or loss before income taxes, a related GAAP measure, refer to Note 7, Segment Information, to our unaudited condensed consolidated financial statements.

Previous wording

Franklin Covey Co. is a global company focused on individual and organizational performance improvement. Our mission is to “enable greatness in people and organizations everywhere,” and our worldwide resources are organized to help individuals and organizations achieve sustained superior performance at scale through changes in human behavior. We believe that our content and services create the connection between capabilities and results. Our business is currently structured around two divisions, the Enterprise Division and the Education Division. The Enterprise Division consists of our North America, International Direct Office, and International Licensee segments and is focused on selling our offerings to corporations, governments, not-for-profits, and other related organizations. Our offerings delivered through the Enterprise Division are designed to help organizations and individuals achieve their own great results. Our Education Division is centered around the principles found in The Leader in Me and is dedicated to helping educational institutions build cultures that will produce great results, including increased student performance, improved school culture, and increased parental and teacher involvement.

Current wording

Franklin Covey Co. is a global company focused on individual and organizational performance improvement. Our mission is to “enable greatness in people and organizations everywhere,” and our worldwide resources are organized to help individuals and organizations achieve sustained superior performance at scale through changes in human behavior. We believe that our content and services create the connection between capabilities and results. Our business is currently structured around two divisions, the Enterprise Division and the Education Division. The Enterprise Division consists of our North America and International segments and is focused on selling our offerings to corporations, governments, not-for-profits, and other related organizations. Our offerings delivered through the Enterprise Division are designed to help organizations and individuals achieve their own great results. Our Education Division is centered around the principles found in The Leader in Me and is dedicated to helping educational institutions build cultures that will produce great results, including increased student performance, improved school culture, and increased parental and teacher involvement.

Previous wording

Our consolidated revenue for the third quarter ended May 31, 2025, was $67.1 million, compared with $73.4 million in the third quarter of fiscal 2024 and reflected the impact of conditions previously described. Foreign exchange rates did not have a material impact on our consolidated revenue during the third quarter. The Company’s revenue performance during the third quarter of fiscal 2025 included the following key metrics:

Current wording

Our consolidated revenue for the quarter ended November 30, 2025, was $64.0 million, compared with $69.1 million in the first quarter of fiscal 2025 and reflected the impact of conditions previously described. Foreign exchange rates did not have a material impact on our consolidated revenue during the first quarter of fiscal 2026. The Company’s revenue performance during the quarter ended November 30, 2025, included the following key metrics:

Previous wording

o Education Division revenues in the third quarter of fiscal 2025 were $18.6 million compared with $20.2 million in the prior year. The decrease was primarily due to reduced classroom materials sales. In the third quarter of fiscal 2024, we entered into a new state-wide initiative and other new district-wide initiatives that included large materials orders during the first year of the contracts. Materials orders from these contracts did not repeat at the same level in fiscal 2025. However, decreased materials revenue was partially offset by increased training and coaching revenue and membership subscription revenues. Delivery of training and coaching days remained strong in the third quarter of fiscal 2025 and benefited from higher revenue per day than in same period of the prior year. Education deferred subscription revenue at May 31, 2025, increased 21% over the balance at May 31, 2024.

Current wording

Education Division revenues in the first quarter of fiscal 2026 were $16.1 million compared with $16.5 million in the prior year. The decrease was primarily due to reduced classroom and training materials sales. In the first quarter of fiscal 2025, we entered into a new state-wide initiative that included large materials orders during the first year of the contract. Materials orders from this contract did not repeat at the same level in fiscal 2026. However, decreased materials revenue was partially offset by increased training and coaching revenue and membership subscription revenues as the Education Division delivered over 100 more training and coaching days than in the prior year.

Previous wording

o Consolidated subscription and subscription services revenues for the third quarter of fiscal 2025 were $57.7 million compared with $60.8 million in the third quarter of fiscal 2024. For the quarter ended May 31, 2025, subscription revenue invoiced was $31.7 million compared with $34.5 million in fiscal 2024.

Current wording

Consolidated subscription and subscription services revenues for the first quarter of fiscal 2026 were $52.0 million compared with $55.8 million in the first quarter of the prior year. For the quarter ended November 30, 2025, subscription and contractually committed revenue invoiced was $26.0 million compared with $24.7 million in fiscal 2025.

Previous wording

o Consolidated deferred subscription revenue on May 31, 2025, increased 7% to $89.3 million compared with $83.8 million on May 31, 2024.

Current wording

Consolidated deferred revenue on November 30, 2025, increased 5% to $100.2 million compared with $95.7 million on November 30, 2024.

Previous wording

o As of May 31, 2025, 58% of our AAP contracts are for at least two years, compared with 55% at May 31, 2024, and the percentage of contracted amounts represented by multi-year contracts was 62% compared with 60% as of May 31, 2024.

Current wording

As of November 30, 2025, 58% of our AAP contracts are for at least two years, compared with 55% at November 30, 2024, and the percentage of contracted amounts represented by multi-year contracts was 61% compared with 60% at November 30, 2024.

Previous wording

o Unbilled deferred subscription revenue on May 31, 2025, was $62.0 million compared with $69.4 million on May 31, 2024. Unbilled deferred revenue represents business that is contracted, but unbilled and therefore excluded from our balance sheet.

Current wording

Unbilled deferred revenue on November 30, 2025, was $72.1 million compared with $73.0 million on November 30, 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 unaudited consolidated financial information from the third quarter of fiscal 2025, which ended on May 31, 2025:

Current wording

The following is a summary of other unaudited consolidated financial information from the first quarter of fiscal 2026, which ended on November 30, 2025:

Previous wording

Cost of Revenue/Gross Profit – For the quarter ended May 31, 2025, our cost of revenue totaled $15.8 million compared with $17.2 million in the prior year. Gross profit for the third quarter of fiscal 2025 was $51.3 million compared with $56.2 million in the prior year. The decrease in gross profit was primarily due to decreased revenue as described above. Gross margin for the third quarter of fiscal 2025 remained strong and was 76.5% of revenue compared with 76.6% in the third quarter of fiscal 2024.

Current wording

Cost of Revenue/Gross Profit – For the quarter ended November 30, 2025, our cost of revenue totaled $15.7 million compared with $16.4 million in the prior year. Gross profit for the first quarter of fiscal 2026 was $48.4 million compared with $52.7 million in the prior year. The decrease in gross profit was primarily due to decreased revenue as described above. Gross margin for the first quarter of fiscal 2026 remained strong and was 75.5% of revenue compared with 76.3% in the prior year. The decrease was primarily due to increased fixed costs related to the delivery of consulting days and live seminar presentations in our Education and International segments, combined with lower revenue.

Previous wording

Operating Expenses – Our operating expensesfor the third quarter of fiscal 2025 totaled $53.5 million and increased $5.7 million compared with the prior year, which was primarily due to a $4.0 million increase in restructuring charges and a $1.6 million increase in selling, general, and administrative (SG&A) expenses. During the third quarter of fiscal 2025, we continued to restructure our sales force in the Enterprise Division and to reduce costs in certain areas of our operations. We incurred $4.7 million of expenses for these restructuring activities primarily for severance and related costs. 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 implementation of our new go-to-market strategy and the restructuring of our North America sales force.

Current wording

Operating Expenses – Our operating expenses for the first quarter of fiscal 2026 totaled $52.0 million and increased $0.8 million compared with the prior year, which was primarily due to a $1.5 million increase in restructuring charges and a $0.7 million increase in building exit costs which primarily consist of legal expenses. These increases were partially offset by decreased selling, general, and administrative (SG&A) expenses driven by cost reduction efforts, and decreased stock-based compensation expense. During the first quarter of fiscal 2026, we continued to restructure our business to reduce costs and streamline certain areas of our operations. We incurred $3.4 million of expense for this restructuring activity, which consisted primarily of severance and related costs.

Previous wording

Our income tax benefit for the quarter ended May 31, 2025, was $0.7 million on a pre-tax loss of $(2.1) million, for an effective benefit rate of 33.8%. In the third quarter of the prior year, our income tax provision was $2.6 million on pre-tax income of $8.4 million, reflecting an effective income tax rate of 31.6%. The slightly higher benefit rate in the current quarter is primarily attributable to our expectation that withholding taxes on foreign-source income will remain consistent year-over-year, while pre-tax income is expected to be lower, thus increasing the impact on our effective rate.

Current wording

Income Taxes – Our income tax benefit for the quarter ended November 30, 2025, was $0.3 million on a pre-tax loss of $(3.6) million, resulting in an effective benefit rate of 9.4%. By comparison, our first quarter of fiscal 2025 income tax provision was $0.4 million on pre-tax income of $1.6 million, reflecting an effective income tax rate of 25.6%. The lower effective tax benefit rate in the first quarter of fiscal 2026 is primarily due to a significant decrease in non-deductible executive compensation compared with the first quarter of fiscal 2025.

Previous wording

Net Income (Loss) and Adjusted EBITDA – For the third quarter of fiscal 2025, we realized a net loss of $(1.4) million, or $(0.11) per share, compared with net income of $5.7 million, or $0.43 per diluted share, in the third quarter of the prior year, reflecting the factors previously discussed. Our Adjusted EBITDA for the quarter ended May 31, 2025, exceeded our previously announced expectations and totaled $7.3 million compared with $13.9 million in the third quarter of fiscal 2024. Foreign exchange rates had a $0.5 million favorable impact on our Adjusted EBITDA for the quarter ended May 31, 2025.

Current wording

Net Income (Loss) and Adjusted EBITDA – For the first quarter of fiscal 2026, we realized a net loss of $(3.3) million, or $(0.27) per share, compared with net income of $1.2 million, or $0.09 per diluted share, in the first quarter of fiscal 2025, reflecting the factors previously discussed. Our Adjusted EBITDA for the quarter ended November 30, 2025, totaled $3.7 million compared with $7.7 million in the prior year. Foreign exchange rates had an insignificant impact on our Adjusted EBITDA for the quarter ended November 30, 2025.

Previous wording

Liquidity and Financial Position –Our liquidity and financial position remained strong throughout the third quarter of fiscal 2025. At May 31, 2025, we had over $95 million of available liquidity which consisted of $33.7 million of cash and our full undrawn $62.5 million line of credit even after purchasing $23.0 million of our common stock during the first three quarters of fiscal 2025.

Current wording

Liquidity and Financial Position –Our liquidity and financial position remained strong throughout the first quarter of fiscal 2026. At November 30, 2025, we had $80 million of available liquidity which consisted of $17.5 million of cash and our full undrawn $62.5 million line of credit even after using $10.7 million of cash to purchase shares of our common stock during the first quarter of fiscal 2026.

Previous wording

Revenue. For the quarter ended May 31, 2025, North America segment revenue was $37.1 million compared with $40.6 million in the prior year. North America segment revenues for the quarter were adversely impacted by the uncertain macroeconomic environment and by canceled or postponed government contracting. During the third quarter of fiscal 2025, total Enterprise Division AAP subscription plus subscription services revenues were $39.9 million compared with $42.6 million in the prior year. Rolling four quarter AAP subscription and subscription service revenues were $160.2 million compared with $163.3 million for the corresponding period ended May 31, 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 earlier in fiscal 2025. However, continued economic uncertainty, including threatened or enacted tariffs, may prevent us from achieving expected sales goals in the near term. Foreign exchange rates had an insignificant impact on North America revenues and operating results during the third quarter of fiscal 2025.

Current wording

Revenue. For the quarter ended November 30, 2025, North America segment revenue was $36.3 million compared with $40.1 million in the prior year. North America segment revenues for the quarter were adversely impacted by lower invoiced amounts in prior periods, canceled or postponed government contracting, and ongoing macroeconomic uncertainty. However, we were encouraged by strong growth in North America segment invoiced amounts in the first quarter of fiscal 2026 and believe the new go-to-market strategy is gaining momentum. During the first quarter of fiscal 2026, North America AAP subscription plus subscription services revenues were $32.2 million compared with $36.0 million in the prior year, reflecting the decline in invoiced amounts during fiscal 2025 and decreased services revenues. Rolling four quarter North America AAP subscription and subscription service revenues were $134.6 million compared with $144.5 million for the corresponding period ended November 30, 2024. We remain optimistic about the expected results of our new North America go-to-market strategy as our new North America sales structure is in place and executing on their directives. However, the continued uncertain macroeconomic environment may prevent us from achieving expected sales goals during fiscal 2026. Foreign exchange rates had an insignificant impact on North America revenues and operating results during the first quarter of fiscal 2026.

Previous wording

Gross Profit. Gross profit was impacted by lower revenue as described above. North America gross margin remained strong during the quarter ended May 31, 2025, and increased to 82.9% of revenue compared with 82.3% in the third quarter of fiscal 2024.

Current wording

Gross Profit. Gross profit was impacted by lower revenue as described above. North America gross margin remained strong and relatively flat during the quarter ended November 30, 2025, and was 81.5% of revenue compared with 81.8% in the prior year.

Previous wording

Our directly owned international offices serve clients in Australia, Austria, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom. The following comparative information is for our International Direct Office segment in the periods indicated (in thousands):

Current wording

Our International segment consists of our directly owned international offices and our international licensees that provide our services and products in countries or regions that are not served by a directly owned office. Our directly owned international offices serve clients in Australia, Austria, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom. The following comparative information is for our International segment in the periods indicated (in thousands):

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 three quarters of fiscal 2025 remained strong and was 73.7% of sales compared with 76.4% in fiscal 2024. The fluctuation in gross margin was primarily due to changes in the mix of services delivered and products sold compared with the prior year.

Current wording

Gross Profit. Gross profit in the International segment decreased primarily due to reduced revenue in our China office as previously described. Gross margin for the first quarter of fiscal 2026 was 77.4% of revenue compared with 78.5% in the prior year and decreased primarily due to increased fixed costs related to the delivery of live seminars combined with lower revenue in our China office when compared with fiscal 2025. Excluding China, our International gross margin was 79.5% for the first quarter of fiscal 2026.

Previous wording

SG&A Expenses. International Direct Office SG&A expenses decreased $0.2 million primarily due to cost reduction initiatives enacted to offset the impact of decreased revenue.

Current wording

SG&A Expenses. International SG&A expenses decreased $1.3 million primarily due to cost reduction initiatives enacted to offset the impact of decreased revenue and decreased bad debt expense compared with the prior year.

Previous wording

Our Education Division is comprised of our domestic and international Education practice operations (focused on sales to educational institutions) andincludes our widely acclaimed The Leader in Me program. The following comparative information is for our Education Division in the periods indicated (in thousands):

Current wording

Our Education Division is comprised of our domestic and international Education practice operations (focused on sales to educational institutions) and includes our widely acclaimed The Leader in Me program. The following comparative information is for our Education Division in the periods indicated (in thousands):

Previous wording

Revenue. Education Division revenue for the first three quarters of fiscal 2025 increased 1%, or $0.4 million, compared with the first three quarters of fiscal 2024. Fiscal 2025 revenue growth was primarily attributable to increased coaching and consulting revenue and increased membership subscription revenue, which were partially offset by decreased sales of classroom and training materials, primarily due to a new state-wide initiative and district contracts that included large training materials orders in the third quarter of fiscal 2024. These materials orders did not repeat at the same levels in the third quarter of fiscal 2025. Delivery of training and coaching days remained strong during the first three quarters of fiscal 2025 as the Education Division delivered approximately 70 more training and coaching days than in fiscal 2024. Education subscription and subscription services revenues in the first three quarters of fiscal 2025 increased 4% compared with the prior year and Education deferred subscription revenue at May 31, 2025, increased 21% over the balance at May 31, 2024. Education Division growth during the first three quarters of fiscal 2025 was partially offset by changes in foreign exchange rates, which adversely impacted revenue by $0.2 million and operating results by $0.4 million. 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 over the first three quarters of fiscal 2025 will continue through the remainder of fiscal 2025 as we continue to add new schools. At May 31, 2025, nearly 8,000 schools around the world were using The Leader in Meprogram.

Current wording

Revenue. Education Division revenue for the quarter ended November 30, 2025, decreased 2%, or $0.4 million, compared with the first quarter of the prior year. The decrease in Education Division revenue was primarily due to decreased sales of classroom and training materials, due in part to a new initiative with a state that began in the first quarter of fiscal 2025 that did not repeat at the same level in fiscal 2026, and a symposium event that did not repeat. These declines were partially offset by increased coaching and consulting revenue and increased membership subscription revenues resulting from schools which started The Leader in Me during fiscal 2025. Materials revenue declined $0.7 million over the prior year, which included $0.4 million of classroom and training materials from the state-wide initiative in fiscal 2025. The delivery of training and coaching days remained strong during the first quarter of fiscal 2026 as the Education Division delivered over 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 2026 decreased 2% compared with the same period of the prior year due to decreased materials revenue. Foreign exchange rates had an immaterial impact on Education Division revenue and operating results for the first quarter of fiscal 2026. We continue to be pleased with the strength and momentum of our Education Division, which added 624 new Leader in Me schools in a very challenging funding environment during fiscal 2025. We believe the momentum generated in fiscal 2025 will continue through the remainder of fiscal 2026. At November 30, 2025, over 8,000 schools around the world were using The Leader in Meprogram.

Previous wording

SG&A Expenses. Education SG&A expenses increased primarily due to new personnel and increased commissions on higher sales when compared with the prior year.

Current wording

SG&A Expenses. Education SG&A expenses increased primarily due to increased associate expenses from new personnel, changes to compensation plans, increased commissions on previously deferred revenue, and increases to the allowance for credit losses.

Previous wording

Interest Expense – Our interest expense of $0.1 million decreased by $0.1 million compared with the third 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 – First quarter interest expense of $0.1 million decreased by $0.1 million compared with the first quarter of fiscal 2025 due to decreased debt balances as payments have been made in the normal course of business.

Previous wording

Income Taxes –Our income tax benefit for the quarter ended May 31, 2025, was $0.7 million on a pre-tax loss of $(2.1) million, for an effective benefit rate of 33.8%. In the third quarter of the prior year, our income tax provision was $2.6 million on pre-tax income of $8.4 million, reflecting an effective income tax rate of 31.6%. The slightly higher benefit rate in the current quarter is primarily attributable to our expectation that withholding taxes on foreign-source income will remain consistent year-over-year, while pre-tax income is expected to be lower, thus increasing the impact on our effective rate.

Current wording

Our income tax benefit for the quarter ended November 30, 2025, was $0.3 million on a pre-tax loss of $(3.6) million, for an effective benefit rate of 9.4%. In the first quarter of the prior year, our income tax provision was $0.4 million on pre-tax income of $1.6 million, reflecting an effective income tax rate of 25.6%. Our effective tax benefit rate for the first quarter of fiscal 2026 was lower than the effective rate for the first quarter of fiscal 2025 primarily due to a significant decrease in non-deductible executive compensation in the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.

Previous wording

During the first three quarters of fiscal 2025 we paid $7.1 million of cash for income taxes, most of which related to our fiscal 2024 income tax liability. Over the long term, we expect annual cash tax payments to approximate our annual income tax provision.

Current wording

During the first quarter of fiscal 2026 we paid $0.4 million of cash for income taxes.

Previous wording

At May 31, 2025 we had over $95 million of available liquidity, which consisted of $33.7 million in cash combined with our undrawn $62.5 million revolving credit facility. Of our $33.7 million of cash on May 31, 2025, $13.4 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, opportunistic purchases of our common stock, working capital expansion, capital expenditures (including curriculum development), and debt and lease payments.

Current wording

At November 30, 2025 we had $80 million of available liquidity, which consisted of $17.5 million in cash combined with our undrawn $62.5 million revolving credit facility. Of our $17.5 million of cash on November 30, 2025, $8.6 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, opportunistic purchases of our common stock, working capital expansion, and capital expenditures (including curriculum development).

Previous wording

In fiscal 2023, we entered into a credit agreement (the 2023 Credit Agreement) with KeyBank National Association leading a group of financial institutions. 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

Current wording

We previously entered into a credit agreement (the 2023 Credit Agreement) with KeyBank National Association leading a group of financial institutions. 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 three quarters ended May 31, 2025.

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 quarter ended November 30, 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, 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 three quarters of fiscal 2025 was $19.0 million compared with $38.4 million in the first three quarters of fiscal 2024. The decrease in cash flows from operating activities was primarily attributable to lower operating income in the first three quarters of fiscal 2025 as previously discussed, and an $8.3 million decrease in taxes payable as we no longer benefit from the utilization of our net operating loss position compared with the prior year. While we expect our cash flows from operating activities to improve in future periods, 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 international licensees.

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 quarter of fiscal 2026 was $0.1 million compared with $14.1 million in the first quarter of fiscal 2025. The decrease in cash flows from operating activities was primarily attributable to unfavorable changes in working capital balances, including less cash collected from receivables, and lower operating income in the first quarter compared with the prior year. We expect our cash flows from operating activities will improve in future periods of fiscal 2026; however certain conditions are beyond our control, including ongoing difficulties in the macroeconomic environment and further governmental actions, and our cash flows from operating activities may be less than our expectations.

Previous wording

Through May 31, 2025, our cash used for investing activities totaled $8.5 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.

Current wording

For the quarter ended November 30, 2025, our cash used for investing activities totaled $3.8 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.

Previous wording

In the first three quarters of fiscal 2025, we spent $4.1 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 remainder 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 between approximately $7 million and $9 million in fiscal 2025.

Current wording

In the first quarter of fiscal 2026, we spent $2.0 million on the development of our various offerings and related content. 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 between approximately $8 million and $10 million in fiscal 2026.

Previous wording

Our purchases of property and equipment during the first three quarters of fiscal 2025 totaled $4.1 million and consisted primarily of computer software, hardware, and leasehold improvements at our new headquarters office. We are currently in the process of moving our corporate offices to a new location and will continue to use cash for leasehold improvements to build out and furnish the new office space through the remainder of fiscal 2025. Including the spending for these leasehold improvements, we currently anticipate that our purchases of property and equipment will total between approximately $10 million and $12 million in fiscal 2025.

Current wording

Our cash used for purchases of property and equipment during the first quarter of fiscal 2026 totaled $1.7 million and consisted primarily of leasehold improvements on our new corporate headquarters, and computer software and hardware. We currently anticipate that our purchases of property and equipment will total between approximately $5 million and $7 million in fiscal 2026.

Previous wording

For the first three quarters of fiscal 2025, our net cash used for financing activities totaled $25.6 million. Our primary uses of financing cash were $23.0 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 2), and $3.7 million used for principal payments on our financing obligation and notes payable. Partially offsetting these uses of cash for financing activities were $1.1 million of proceeds received from our ESPP participants to purchase shares of common stock during the first three quarters of fiscal 2025.

Current wording

In the first quarter of fiscal 2026, our net cash used for financing activities totaled $10.4 million. Our primary use of financing cash was $10.7 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 2). Partially offsetting our use of cash for purchasing shares of our common stock for treasury were $0.3 million of proceeds received from our ESPP participants to purchase shares of common stock during the first quarter of fiscal 2026.

Previous wording

Our uses of financing cash during the remainder of 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 the remainder of fiscal 2026 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 except as required by any outstanding 10b5-1 purchase plan.

Previous wording

We expect to pay the liabilities from our leases, 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.

Current wording

We expect to pay the liabilities from our leases and notes payable; pay for projected capital expenditures; and meet other obligations in fiscal 2026 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. We previously entered into a new credit agreement (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

We do not operate any manufacturing, mining, or other capital-intensive facilities, and wehave not structured any special purpose entities, or participated in any commodity trading activities, which would expose us to potential undisclosed liabilities or create adverse consequences to our liquidity. However, we have normal ongoing cash expenditures and are subject to various contractual obligations that are required to run our business. Our material cash requirements include the following:

Current wording

We do not operate any manufacturing, mining, or other capital-intensive facilities, and we have not structured any special purpose entities, or participated in any commodity trading activities, which would expose us to potential undisclosed liabilities or create adverse consequences to our liquidity. However, we have normal ongoing cash expenditures and are subject to various contractual obligations that are required to run our business. Our material cash requirements include the following:

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 and three quarters ended May 31, 2025, there have been no material changes to our expected uses of cash and contractual obligations from those discussed in our Annual Report except for the addition of a leasing arrangement on our new corporate headquarters location as discussed in Note 8 to the financial statements contained herein. 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, 2025, which was filed with the SEC on November 12, 2025 (our Annual Report). During the quarter ended November 30, 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

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, our expectations regarding a new go-to-market strategy and sales force restructuring, 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, expected effective income tax rates, 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 expected impact of the resolution of significant macroeconomic issues and geopolitical tensions, 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 natu…

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 2026, our expectations regarding a new go-to-market strategy, 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, expected effective income tax rates, our ability to maintain adequate capital for our operations for at least the upcoming 12 months, the expected impact of the resolution of significant macroeconomic issues and geopolitical tensions, 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, 2025, entitled “Risk Factors.” In addition, such risks and uncertainties may include unanticipated developments in any one or more of the following areas: cybersecurity risks; 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 ord…

Excerpt shortened here; the source contains the full paragraph.