Franklin Covey (NYSE: FC) reported Q2 EPS of $0.08, $0.21 better than the analyst estimate of ($0.13). Revenue for the quarter came in at $53.7 million versus the consensus estimate of $54.4 million.

Fiscal 2020 Year-to-Date Financial Results

Consolidated revenue for the first half of fiscal 2020 increased 8% to $112.4 million compared with $104.2 million in the first two quarters of fiscal 2019. Enterprise Division sales increased 6% to $86.5 million compared with $81.5 million for the first two quarters of fiscal 2019, driven by a 25% increase in AAP and related sales. Enterprise Division sales were favorably impacted by a 9% increase in domestic direct office revenues, which were primarily attributable to increased subscription and subscription-related revenues. However, these favorable results were partially offset by significant business disruptions in Asia during the second quarter resulting from the COVID-19 outbreak. Education Division revenues increased 10% to $22.0 million compared with $20.0 million in the first half of fiscal 2019, primarily due to increased Leader in Me subscription revenues. Consolidated gross profit for the first two quarters of fiscal 2020 was $80.7 million compared with $72.1 million in the first two quarters of fiscal 2019. Gross margin for the first half of fiscal 2020 improved 257 basis points to 71.8% of sales compared with 69.2% in the first half of fiscal 2019, reflecting the favorable impact of increased subscription revenues.

Selling, general, and administrative expenses for the first two quarters of fiscal 2019 increased $5.1 million compared with the first half of fiscal 2019, but decreased as a percent of revenue to 67.3% compared with 67.7% in the first half of fiscal 2019. Increased SG&A expense was primarily due to increased commissions on higher sales, new sales and sales related personnel, and a $1.7 million increase in non-cash stock-based compensation expense. The Company’s loss from operations through February 29, 2020 improved significantly to $(0.5) million compared with a loss of $(4.2) million in the first two quarters of fiscal 2019. Adjusted EBITDA for the two quarters ended February 29, 2020 improved 118%, or $4.9 million, to $9.0 million compared with $4.1 million for the first two quarters of fiscal 2019. In constant currency, the Company’s Adjusted EBITDA increased to $9.3 million for the first half of fiscal 2020. Including the impact of a significantly increased tax benefit resulting primarily from the exercise of stock options in the second quarter, the Company reported net income of $0.6 million, or $0.04 per diluted share, for the first two quarters of fiscal 2019, compared with a $(4.9) million loss, or $(.35) per share, in the first half of fiscal 2019.

Fiscal 2020 Outlook

Despite the Company’s strong results for the second quarter, and first half of fiscal 2020, given the meaningful COVID-19 impact experienced to date and the uncertainty and fluidity of the ongoing business and educational institution disruptions resulting from the current situation, investors should no longer rely on the Company’s previously released guidance and assumptions for fiscal 2020. The Company remains confident, however, that once the global economy begins to return to normalcy, the same factors that have driven its growth trajectory this year-to-date, and in recent years, will help the Company to begin to resume accelerated growth.

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