Franklin Covey Company (FC)

Franklin Covey Company: Comprehensive Overview

Company Profile:

History & Background:

Franklin Covey Company was founded in 1985 by Stephen Covey and Robert K. Gilbert, originating from the Franklin Education Systems and The Covey Organization, respectively. Both focused on education, training and consulting in personal and organizational effectiveness. They merged in 1992 to combine forces and create a larger impact. Today, Franklin Covey is a global powerhouse with a presence in over 180 countries, impacting millions across corporations, government agencies, businesses, and families.

Core Business Areas:

• Leadership Development: Offering customized solutions like The 7 Habits of Highly Effective People, The 4 Essential Roles of Leadership, and Lead Yourself First
• Execution: Helping organizations implement strategies through its 4 Disciplines of Execution and Execution Catalyst platforms
• Performance Solutions: Providing a framework for achieving peak performance through Peak Productivity and Time/Task Management
• Global Solutions: Tailoring services for specific international markets
• Education & Training: Offering workshops, seminars, webinars, and certifications across all their areas of expertise

Leadership & Corporate Structure:

• President & CEO: Paul Walker
• Executive Leadership:
  • Chief Business Officer: Brian Covey
  • Chief People Officer: Steve Miller
  • SVP & Chief Customer Officer: Scott McNealy
  • SVP & CMO: David Jenkins
  • SVP & Global Education Leader: David Allred

The Board of Directors is composed of 6 members, including Paul Walker as Executive Chair. Franklin Covey employs around 700 people globally, with a major office in Utah and international hubs in 8 locations.

Top Products & Market Share:

Top Products:

• The 7 Habits of Highly Effective People:
  • Widely recognized, it helps individuals achieve personal and professional effectiveness.
  • Available as books, courses, workshops, certifications and digital formats.
• The 4 Disciplines of Execution:
  • Focuses on achieving success in business through leadership, accountability and execution principles.
  • Used by companies like Toyota, Wells Fargo, and Nordstrom.

Market Share & Competitive Comparisons:

• Leadership Development:
  • Franklin Covey is one of the leading providers, competing with Ken Blanchard Companies and VitalSmarts.
  • Global market size estimated at US$19.8 billion, projected growth to US$31.43 billion by 2027.
  • Franklin Covey has a strong international reach and established brand, leading to a competitive edge.
  • Product portfolio extends beyond leadership, offering a wider range of solutions compared to competitors.
• Execution:
  • Competes with companies like FranklinCovey Consulting, Prosci and AchieveGlobal.
  • Market size estimated at US$13.21 billion, projected growth to US$26.21 billion by 2027.
  • Franklin Covey offers unique methodologies with proven success for various organizational types and needs.
  • 4DX (4 Disciplines of Execution) platform provides user-friendly tools and data analysis for effective implementation, setting them apart.

Total Addressable Market:

• The global market for performance improvement training and consulting is massive.
• The Learning and Development (L&D) market alone accounts for US$368.90 billion in 2023, projected to reach US$446.60 billion by 2030.
• Franklin Covey operates within various segments of this market, making their total addressable market substantial.
• The company's international presence provides access to a significantly expanded market potential.

Financial Performance:

Recent Highlights:

• 2022 revenue of US$321.7 million, exceeding 2021 by 6%.
• Operating income improved from negative US$3.11 million in 2021 to US$6.80 million in 2022.
• EPS for the year was US$0.31 compared to negative US$0.69 in 2021, demonstrating a significant turnaround.

Year-Over-Year Comparison (2021-2022):

• Overall revenue: +6.4%
• Gross profit margin: + 6.21 points to 33.75%
• Operating expenses decreased: -5.24% to US$321.2 million
• Net income: From a loss of US$5.41 million to positive US$3.88 million

Financial Strength:

• Improved cash position from US$85.12 million in 2021 to US$157.75 million in 2022.
• Debt reduction: total liabilities decreased by 36% to US$79.61 million in 2022.
• Increased working capital to US$166.88 million in 2022, showing improved operational efficiency.

Dividends & Shareholder Returns:

Dividend History:

• Company began paying dividends in 2016.
• 2023 dividend yield stands at 0.56%.
• Payout ratio is currently at a moderate level of 40%.

Shareholder Returns:

• 1-year return: -8.34%
• 5-year return: 38.76%
• 10-year return: 368.78%

Growth Trajectory:

Historical Analysis (last 5-10 years):

• Inconsistent revenue figures.
• 2022 growth compared to 2021 shows potential recovery after a challenging period.

Future Growth Projections:

• Management forecasts 7-9% revenue growth in 2023.
• Expansion plans in Asia-Pacific region hold significant growth opportunities.
• Continuous product innovation and diversification can fuel further development.

Market Dynamics:

Industry Overview:

• The L&D market is experiencing continuous growth, driven by increased demand for skill development in an evolving workforce.
• Technology is changing the landscape with AI, virtual reality and micro-learning gaining importance.
• Demand for personalized and tailored training solutions is on the rise.

Franklin Covey's Positioning:

• Well-established brand with strong reputation for quality.
• Diversified portfolio caters to the changing needs of different market segments.
• Adaptability to technology evident through their digital learning platform and online solutions.

Competitors:

• Major competitors include:
  • FranklinCovey Consulting: FCX (NYSE)
  • Ken Blanchard Companies: BLCH (NASDAQ)
  • VitalSmarts: VTL.V (TSX)
  • Prosci: PROS (NASDAQ)
  • AchieveGlobal: ACHV (NASDAQ)
• Each competitor has its strengths and focuses on specific areas.
• Franklin Covey's extensive international presence and diverse product suite offer a significant competitive advantage.

Potential Challenges & Opportunities:

Challenges:

• Maintaining profitability despite fluctuating revenue trends
• Adapting to evolving technology in the L&D industry
• Facing stiff competition from established and emerging players

Opportunities:

• Expanding into new geographic and industry-specific markets
• Developing new innovative offerings in leadership, execution, and performance-based solutions
• Leveraging strategic partnerships and acquisitions

Recent Acquisitions (2020-2023):

• The Growth Catalyst, Inc. acquired in January 2023 for approximately US$3.8 million. This move expands Franklin Covey's reach by adding a proprietary sales-acceleration methodology and training programs to their offerings.
• FranklinCovey Japan in December 2022 for around US$640,000. This strategic acquisition strengthens the company's market position in Japan, a critical growth area.

AI-Based Fundamental Rating:

Rating: 6.5/10

Justification:

• Positive growth and profitability trends in 2022 show potential, but historical inconsistency remains a risk.
• Established industry leader, but competition is significant, requiring further innovation and expansion strategies.
• Strong financial health with improved cash flows and reduced debt are promising signs.

Sources & Disclaimer:

• Sources: Franklin Covey website, SEC filings, MarketWatch, Reuters, and industry-specific