Earnings Call Transcript - FC Q1 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to Q1 2025 Franklin Covey Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Derek Hatch, Corporate Controller. Please go ahead.

Derek Hatch, Corporate Controller

Hello, everyone, and thanks so much for joining us today. We're glad to have the opportunity to talk with you today. Participating on the call this afternoon are Paul Walker, our Chief Executive Officer; Steve Young, our Chief Financial Officer; Jennifer Colosimo, President of the Enterprise Division; Sean Covey, President of the Education Division; and Holly Procter, our Chief Revenue Officer. As we get started, I'd like to remind everyone that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management's current expectations and are subject to various risks and uncertainties, including, but not limited to, the ability of the company to grow revenues, the acceptance of and renewal rates for our subscription offerings, including the All Access Pass and the Leader in Me memberships; the ability of the company to hire productive sales and other client-facing professionals; general economic conditions; competition in the company's targeted marketplace; market acceptance of new offerings or services and marketing strategies; changes in the company's market share; changes in the size of the overall market for the company's products; changes in the training and spending policies of the company's clients; and other factors identified and discussed in the company's most recent annual report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond our control or influence, any one of which may cause future results to differ materially from the company's current expectations, and there can be no assurance the company's actual future performance will meet management's expectations. These forward-looking statements are based upon management's current expectations, and we undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of today's presentation, except as required by law. With that out of the way, we'd like to turn the time over to Mr. Paul Walker. Paul?

Paul Walker, CEO

Thank you, Derek. Welcome, everyone. It's great to be with you. Today, I'd like to provide an update on two areas. First, our Q1 performance; and second, the progress we're making on the transformation of our North American enterprise efforts, which we've been referring to as Project Expand and Project Land. With these investments, we'll begin to meaningfully accelerate our revenue growth. First, just a couple of comments about our first quarter performance. Our first quarter revenue grew 1% to $69.1 million compared to $68.4 million in last year's first quarter. This reflects strong growth in education, where sales grew 11%, and flat sales in enterprise, which were essentially in line with what we had hoped and expected as we undertook the transitioning of our sales force to a more powerful go-to-market model in Enterprise North America in the quarter. First quarter adjusted EBITDA was $7.7 million or $8.1 million in constant currency. This is right in line with our expectation and guidance that adjusted EBITDA in constant currency in the first quarter would be between $7.5 million and $8.5 million. This compares with adjusted EBITDA of $11 million in last year's first quarter, primarily reflecting the first quarter share of the $16 million total increase in growth investments we're making this year. As we discussed in November, and we'll address more in a moment, we have transformed our sales structure so that one large group of salespeople will focus exclusively on expanding existing business within our existing clients, while another significant group of salespeople will be hunters focused exclusively on landing new logos. You can see on Slide 4, the investments being made to support these two efforts. These include first, the investment in client expansion, which comprises additional implementation strategists, practice leaders, and consultants to help us achieve significant penetration in our existing All Access Pass-holding clients. The second area of investment is in our new hunting team. It's the hunter salespeople themselves, alongside marketing and lead generation and closing support for those hunting client partners. The third area is investments in sales leadership and sales operations to allow us to scale this whole new structure. The final area involves a slight increase in content and technology. We expect these investments to accelerate our revenue growth from single digits to consistent double-digit levels with a high flow-through of this increased revenue to increases in adjusted EBITDA and cash flow. Our growth investments in the first quarter came in right where we expected them to be. I’d also like to share just a bit more about the results in our Education Division. Revenue in the first quarter grew a significant 11% with the number of contracted Leader in Me schools increasing 58% over last year's first quarter from 52 schools to 82 schools in the first quarter this year. Importantly, we're achieving continued success in making sales to entire districts and even to some states rather than selling only to individual schools. Last year, 74% of our schools that were brought on were part of a district contract, and in a few cases, we're now beginning to engage in statewide opportunities. A notable example of this transition is a new statewide contract in the Southeastern United States. For years, we brought on numerous single schools in this state. After partnering with these schools to achieve strong results in our first quarter, we signed a contract at the state level that will include more than 100 initial schools with many more schools to follow. Secondly, I’d like to provide a deeper dive into our progress on the investments to accelerate our go-to-market efforts. Specifically, I will identify the key leverage points on which the realignment of our sales force is focused. In our earnings call in November, we shared that we were pleased to have substantially achieved the three big strategic initiatives we've undertaken in the previous years. Specifically, first, we've transitioned our entire business model to subscription. Second, we've heavily invested in the technology enablement of all our solutions so that they can be delivered seamlessly across entire organizations in a variety of modalities and in more than 25 languages worldwide, as well as institutionalizing our significant ongoing investments in technology. Third, we've made significant investments to ensure our content and solutions represent the gold standard in our space and have also institutionalized our processes and ongoing investments in content to ensure our solutions continue to define this gold standard. Additionally, we have exciting new additions to our content lineup which we'll be launching in the coming periods, including a new communications suite of offerings, one of our most requested new solution areas, as well as additional leadership solutions to support leaders on their journey from being a new leader to leading an enterprise. Having completed the heavy lifting involved in these important strategic initiatives, we're positioned to leverage their collective impact by accelerating our go-to-market efforts to capture an even greater share of our large total addressable market (TAM). The two key areas of focus and investment in this go-to-market acceleration are: first, focused on increasing client penetration and retention among our existing clients; and second, building a large specialized team of new logo hunting client partners responsible for landing a significantly increasing number of new logos. As noted, we expect the combined impact of these initiatives to result in a significant increase in our sustainable ongoing revenue growth rate from single digits to consistently achieving double-digit growth, generating accelerated levels of adjusted EBITDA and cash flow. Importantly, since almost all our investment dollars are being allocated to client-facing roles and activities, the impact of these investments will be very direct. Over the coming quarters, we will report our progress against the key leading and lagging indicators to track our progress towards achieving consistent double-digit revenue and adjusted EBITDA growth. The impact from these investments will first be seen in increases in the size of our pipelines of opportunities, then in the magnitude of our growth in invoice sales, and finally, in our reported revenues as the invoice sales that have gone onto our books as deferred revenue are recognized over the next 12 months. Given this cycle, we expect our increased investments to begin reflecting an increase in our volume of invoice sales in the back half of fiscal '25, followed by a fundamental shift in our growth curve of reported sales in subsequent quarters. I'd like to provide more detail on the key leverage points for these efforts. First, project expand focuses on achieving penetration within existing clients. Since our conversion to subscription, our average annual revenue per client has grown from approximately $39,000 to $85,000, a 218% increase resulting from the efficacy of our solutions in helping clients achieve their goals. This expansion occurs when organizations using one or more of our solutions for a portion of their population not only renew for that portion but expand their subscription to include the same or additional solutions across their organization. Previously, multiple client partners may have worked with different operating units of the same company, with none responsible for achieving overall penetration throughout the client's organization. Our new go-to-market structure assigns a single client partner to be accountable for expanding the use of our solutions across the client's entire organization. An illustration of this is our work with one of the world's largest food and beverage companies, where we generated around $500,000 a year annually. Under our prior structure, the assigned client partner had little visibility into the broader needs of the parent company. Now, under project expand, that partner is responsible for understanding and meeting the needs of the entire global organization. Over the past 18 months, this client partner identified a large global leadership development initiative driven by the CEO and senior leaders. By developing relationships within the entire organization, our client partner demonstrated how the All Access Pass's collection of best-in-class leadership solutions could meet their global needs. This has become a potential 3-year, $5 million opportunity and partnership. This underscores the significant white space for expansion across our client base; even with our past revenue growth per client, we're only reaching about 10% of these clients' addressable populations. Achieving the penetration we have with this specific client encapsulates the focus of Project Expand. By reducing the number of accounts each of our expansion client partners manages and providing them with access to more implementation strategists, consultants, and practice leader resources, we expect to deliver similar breakthroughs across many clients. The second focus is on winning a significantly increased number of new logos, referred to as Project Land. Since our transition to subscription, we've secured thousands of new client logos. However, even with this success, we are only scratching the surface of our potential. We've categorized the market into four segments based on organization size and assigned our hunting client partner teams accordingly. Here you can see the number of potential clients in each segment that are not yet Franklin Covey clients, highlighting our massive growth potential. We are ramping up our investment in marketing and sales closing support resources to assist our client partners who are now completely focused on winning new logos. Additionally, we are enhancing central sales leadership and sales operations to scale our sales force more rapidly. The transition of our sales force occurred roughly five weeks ago, and we are greatly encouraged by the energy they bring to these focused roles. We initially targeted to have 100% of our new client hunting partners in place by March 1 of this year. I’m pleased to report that as of today, 95% of these partners are already in position. Being months ahead in filling these critical roles will help us ensure we achieve and possibly exceed our new logo targets in fiscal '25, and we’ve already started realizing some important wins. For instance, we recently won one of the five largest banks in America as a new logo. We're collaborating with this bank in developing 2,000 of their leaders, which is just a portion of their thousands of leaders. Under the old selling model, this account would have been assigned to multiple client partners. However, in the new selling model, a single account executive focused on new logos managed the opportunity, aligning their expertise with the requirements of our large enterprise segment clients. This new alignment led to a $350,000 new logo win, about 8 to 9 times our historical average. We supported this sale with new closing resources that worked with our client partners to determine the best solution for the client. This is just one of many deals in our pipeline benefiting from the focused attention of our new logo hunting team and the investment in our closing resources. In conclusion, our goal was to begin the second quarter on December 1 fully transitioned into our new go-to-market structure. I'm pleased to report that we achieved that target. Today, in Enterprise North America, every salesperson is focused 100% on either expanding and retaining existing clients or winning brand-new clients. As we shared, fiscal '25 will be an investment year, and we expect to generate a significant amount of new pipeline and add a lot of new invoiced revenue to our balance sheet, which will be recognized as reported sales in future quarters, ultimately shifting our growth from single digits to consistent double digits. We're excited about our accelerated go-to-market focus and look forward to sharing our progress. Now, with those remarks out of the way, I'd like to turn the time over to Steve to discuss our specific Q1 results in more detail and also share our guidance.

Stephen D. Young, CFO

Thank you, Paul. In Q1, revenue, adjusted EBITDA, cash flows from operating activities, and free cash flow continued to be strong and essentially in line with expectations. Specifically, as shown on Slide 6, in Q1, revenue was $69.1 million, up 1% compared to Q1 last year. Due primarily to growth investments we've discussed and that came in essentially in line with expectations, adjusted EBITDA was $7.7 million compared with $11 million generated last year, and in constant currency, adjusted EBITDA was $8.1 million. Cash flows from operating activities remained strong at $14.1 million compared to $17.4 million last year. This difference was primarily due to our growth investments. Free cash flow for the first quarter was also strong at $11.4 million compared to $13.7 million generated in the first quarter of FY '24. The foundation for increased future growth is being established by the increase in our balance of deferred subscription revenue, which increased 10% from Q1 last year to $95.7 million. We are encouraged by the double-digit increase in our service booking rate in Q4 in Enterprise North America, and importantly, that the strong momentum has continued into this year's first quarter. I'd like to briefly provide more detail on our performance across three key areas of the company: specifically, our Enterprise business in North America, our Enterprise business internationally, and our Education business. I'll start with the Enterprise Division. In FY '24, our Enterprise division generated 73% of the company's overall revenue, with the Education Division generating 26%. For Q1, revenue in our Enterprise Division was down 2%, primarily due to the challenging business environment in Asia. On Slide 7, the results for our Enterprise business in North America, which represented 75% of our total Enterprise Division revenue in FY '24, show that revenue was $40.1 million compared to $40.3 million last year. Subscription revenue in North America for Q1 was $21.8 million compared to $22.5 million in the previous year. The combination of subscription and subscription services revenue in North America was $34.3 million, down 2% compared to the first quarter of last year. Our balance of billed deferred subscription revenue in North America was $41.8 million, down 7% from last year, and our balance of unbilled deferred revenue was $66.5 million, down 13% from last year. The percentage of North America's All Access Passes contracted for multiyear periods increased to 55% from 54% in the first quarter last year. The percentage of invoiced revenue represented by multiyear contracts remained consistent with the previous year's first quarter at 60%. As shown on Slide 8, revenue from our international direct operations, which make up approximately 16% of our total Enterprise Division revenue in FY '24, was $8.2 million, a decrease of $0.5 million primarily due to business in Asia facing challenges. Our international licensee revenue was $3.2 million, a decrease of $200,000 from Q1 last year. Finally, as shown on Slide 9, revenue in our Education business grew 11% to $16.5 million for the quarter and grew 8% over the latest 12 months. Education invoiced amounts grew to $12.2 million in Q1, representing a 43% growth over the previous year. The invoiced amounts for the last 12 months grew 9%. This substantial growth is partly due to a contract with the State Board of Education referenced by Paul in his remarks. Education subscription and subscription services revenue grew 12% to $14.9 million for the quarter and was up 6% for the last year. Education's balance of billed deferred subscription revenue increased 29% or $10 million to $44.2 million, establishing a robust foundation for future growth. Now about cash flow and the balance sheet. As shown on Slide 10, our cash flows from operating activities for Q1 stood at a strong $14.1 million compared to the $17.4 million generated in the same quarter last year, reflecting a decrease in our net income due to the first quarter share of this year's $16 million growth investment. Our free cash flow was $11.4 million for the quarter, compared to $13.7 million from the prior year. In Q1 FY '25, we purchased 146,000 shares of Franklin Covey stock at a cost of $6 million. Since 2021, we have invested approximately $96 million in stock repurchases. We have around $116 million in total liquidity at the end of Q1 FY '25 even after these stock purchases, including $53.3 million in cash and $62.5 million available under our revolving credit agreement. The company remains in a strong position to continue executing our key objectives. Now let me turn to guidance. We are affirming the guidance provided at year-end, expecting revenue in the range of $295 million to $305 million in constant currency. This reflects the expectation that growth will accelerate in the back half of this year as our investments continue to take effect. We also note that a significant portion of that growth will be reported on the balance sheet as deferred subscription revenue and recognized in future quarters as reported revenue. Also consistent with the year-end guidance, which includes $16 million of growth investments, we expect to achieve adjusted EBITDA in the range of $40 million to $44 million in constant currency for the fiscal year. For Q2 FY '25, we expect revenue to be higher than last year, between $61.5 million and $63 million in constant currency. We expect adjusted EBITDA to be between $1.5 million and $2.5 million, also in constant currency, compared to the $7.4 million from last year, with most of the difference stemming from the impact of the second quarter's share of the $16 million in recent growth investments. We recognize that to meet our full-year guidance, we need to achieve accelerated revenue growth in the back half of the year, and we expect this to happen. For context regarding areas of strength supporting our confidence in Enterprise North America in Q1, while subscription invoiced amounts declined from the previous year, more than 100% of this decline was due to five contracts, four of which were timing related, and we anticipate renewing all four this year. Additionally, we are pleased with the Q2 forecast for invoice growth in Enterprise North America and expect to achieve meaningful growth in this important metric in the quarter. We are excited about the significant progress being made in our North American Enterprise growth initiatives. While it is certainly challenging to forecast long-term results, we remain optimistic about our ability to generate increasing revenue and adjusted EBITDA growth in the coming years, ultimately moving from single-digit to consistent double-digit growth rates.

Paul Walker, CEO

Thank you, Steve. Maybe just a final comment here before we open the line to questions. We feel very good about our progress and the path we're pursuing to accelerate our growth in revenue, adjusted EBITDA, and cash flow, and to do this in the coming quarters and as we move into next year and beyond. At the same time, we feel great about our continued increase in our ability to partner with our clients and deliver extraordinary impact. I'm grateful to all of our associates around the world for their efforts, and grateful to each of you as well. With that, we’d now like to invite the operator to open the line for your questions.

Operator, Operator

Today, our first question will come from Alex Paris of Barrington Research.

Alexander Paris, Analyst

I guess the first one would be a little bit more discussion on growth investments. In Q1, revenues were essentially in line with your constant currency guidance for the quarter and adjusted EBITDA on a constant currency basis was right in the middle of that forecasted range. Looking at your guidance for Q2, it looks like adjusted EBITDA will be more significantly below my expectation of $5.9 million and the FactSet consensus of $5.0 million, you were guiding to $1.5 million to $2.5 million. Is that attributable to increased growth investments versus the first quarter? So I guess the question is two parts: Of the $16 million, how much was expended in Q1? And how much do you expect to expend on these growth investments in Q2?

Paul Walker, CEO

Steve, do you want to take that?

Stephen D. Young, CFO

Yes, Alex. We spent a little bit under $3 million in Q1. We expect to spend a little over $4 million in Q2 and then probably fairly evenly about $4.5 million in each of Q3 and Q4, adding up to $16 million. So there was about a million plus, a million couple of hundred thousand additional spending in Q2 versus Q1.

Alexander Paris, Analyst

Got you. And then I think you called out some of the early returns from these initiatives in Q1; you mentioned the new logo example and the increase in deferred subscription revenue, I think. What else can you share with us in terms of early return KPIs, realizing that we're going to see thisもっと substantial in the second half and beyond?

Paul Walker, CEO

Yes, great. Thanks for that caveat as well. From a timing standpoint, to back everybody up for a second, a little over 18 months ago, we initiated some pilots to test this out. We liked what we saw in those pilots, and that gave us the confidence to move forward with the transformation in the go-to-market model that we've been talking about over the last two quarters. Q1 was a quarter of preparation; in fact, it wasn’t until December 1 that we were fully in the new structure. A couple of examples we shared are people who transitioned earlier as part of the pilot and are now in those same roles, remaining either expanders or new logo hunters. We expect this is kind of—this is really the first quarter. So we had two weeks before the holidays, and then the holidays, and so now they’re back and everyone is in their roles. As for KPIs, we expect to see increased marketing and lead generation from the increased investments we’ll be making throughout the year. We anticipate larger new logo pipelines and improved retention of clients and associated revenue. Leading indicators will be lead flow, pipeline, and sales activity, followed by an increase in invoiced revenue growth in the latter half of the year, which will then be reported as revenue in future periods. In terms of early returns, I'd point to the quality of the hires we've been able to bring in. And in fact, perhaps on that note, I'd like to turn it over to Holly Procter to discuss the impressive new logo hunting talent we've attracted.

Holly Procter, Chief Revenue Officer

Yes, sure. Alex, it's great to meet you. I can share a little bit on the speed and quality of the hires we've made so far. So, as Paul mentioned, we've quickly filled the new logo hunting board ahead of schedule. We're excited about the speed, but perhaps most importantly is the quality of candidates we've been able to attract. We brought in sales professionals from leading companies like Zoom, LinkedIn, Udemy, Skillsoft, and EY, which are some of the best brands in the business. They’re eager to hit the ground running and get into their territories. We’re thrilled not only about the speed but also the quality.

Alexander Paris, Analyst

That's great. And in terms of quantity on the hunter side, the target was just to be clear, 44 or so, and then on the farmer side or the expand side, 88 client-facing CPs?

Holly Procter, Chief Revenue Officer

That's correct.

Paul Walker, CEO

Yes, and just a quick note on that to follow up. The 88 on the expanding side, we don't call them farmers because expanding is the objective. Those are the best of the best at client retention and expansion responsible for the 218% expansion in revenue per client we’ve achieved over the years. Now, that’s all they’re focused on. And the 44 on the hunter side, yes, we have 42 or 44 here today.

Alexander Paris, Analyst

And those are the quality hires that, Holly, you were referring to coming from Udemy, LinkedIn, Skillsoft, etc.?

Holly Procter, Chief Revenue Officer

Correct.

Alexander Paris, Analyst

Great. And then just a quick question for Jen. On our last call, we talked about launching 7 Habits 5.0; it had been done shortly before that call. What are the early read-throughs from that product launch or relaunch?

Jennifer Colosimo, President of the Enterprise Division

Thanks, Alex. As you know, we conducted significant marketing in Q1, and we observed considerable growth in registrations for our marketing events, growing about 15%. A key indicator is that we had over 2,000 people attend the 7 Habits events in the U.S. and Canada, along with over 4,000 participants in our webcast. We have strong confidence in this solution. It’s had a notable impact on our booking pace, and our clients are very excited about it. We're also gaining traction with some new prospects.

Operator, Operator

And our next question will be coming from the line of Dave Storms of Stonegate.

David Storms, Analyst

I want to start with a question regarding your total addressable market (TAM) and how you see it per client. If the rough math indicates $85,000 per client—a 10% penetration on average—does that full potential penetration rate only factor in your current offerings? Or does it also include any offerings that may be added in the future? Apologies if I didn't word that correctly.

Paul Walker, CEO

I believe I understand the question. Yes, your math is accurate that on average, across our client base, we're generating $85,000 a year per client. Obviously, that number varies by segment and organization size, but we have achieved that average with about 10% average penetration into those organizations regarding the number of seats for the All Access Pass. The drivers for moving that 10% penetration to higher levels involve a few factors. You asked about content; let me tackle that first. We've been diligently working over the past couple of years to develop solutions that can reach further into client organizations. For example, in the prior version of 'Speed of Trust,' we had a solution geared only to leaders, which limited its audience. In the latest version of 'Speed of Trust,' we created a companion offering designed for broader organizational use. This is just one way we've ensured that our current offerings can scale, as we expect to launch more solutions. We're investing significantly in new solution development, which has doubled recently relative to our revenue. As we transition our sales force, we have a dedicated team focused on expanding our client partnerships to increase penetration from 10% to significantly higher levels. This is crucial, as we have a product set tailored for this expansion.

David Storms, Analyst

That’s incredibly helpful. One more question regarding the expanding capabilities of the landing team: what type of early profile does this allow you to target that may not have been feasible before? Will you be able to go up in size because the landing team has more focus and ability, or down in size due to having more eyes on a type of logo? Is it all of the above? I'm trying to grasp where your focus shifts on the landing side going forward.

Paul Walker, CEO

To be clear, you’re asking about the target companies we’re pursuing and how it may affect average deal size rather than who we recruit as new hunters, right? You're interested in the clients we focus on?

David Storms, Analyst

Correct. I'm asking about potential client wins.

Paul Walker, CEO

Perfect. Holly, do you want to weigh in on that?

Holly Procter, Chief Revenue Officer

Absolutely. First, to provide context: before this transformation, our client partners were organized geographically. Now, we've shifted to segment-based organization, categorized by company size and revenue. Thus, we will not only target larger organizations but will also cater to SMBs with high-velocity sales, larger volumes, and lower price points. For key accounts, we will service the largest global brands where our differentiator is the ability to provide scalable global solutions.

Operator, Operator

And our next question will come from Nehal Chokshi of Northland Capital Markets.

Nehal Chokshi, Analyst

Steve, thank you for the detail on the driver behind the decline in invoice subscription amounts. Do you believe that the timing is in any way correlated to the transition to the hunter-farmer sales model?

Paul Walker, CEO

Steve, do you want to take that one?

Stephen D. Young, CFO

Yes, Nehal. Actually, no, not regarding those deals. The timing issues are tied to specific contracts. For example, one is a large government contract, and its timing is linked to the election and potential government shutdown, which has since been resolved. Hence, that renewal shifted outside of the first quarter. The salesperson assigned remains unchanged. Another example is a significant client we won in Q1 last year, where the contract renewal was always set for Q2 to align with their fiscal year. Therefore, four out of five of those contracts are expected to renew this year, positively impacting our invoiced totals in the coming three quarters.

Nehal Chokshi, Analyst

Great. Okay, fantastic. Steve, could you confirm how many shares you repurchased in the quarter?

Stephen D. Young, CFO

146,000 shares.

Nehal Chokshi, Analyst

So that translates to about $4.5 million.

Stephen D. Young, CFO

$6 million.

Nehal Chokshi, Analyst

Okay. That’s a healthy pace, which we expect to continue going forward, or potentially accelerate?

Stephen D. Young, CFO

While we don't project what we'll do, we notice the same trends you do, and we have a history of buying back shares, so we will consider it.

Nehal Chokshi, Analyst

We're strong believers that the shift to the hunter-farmer model will drive key metrics on churn, hunting, and expansion positively. Of these three metrics, which do you believe will have the most significant impact during this transition?

Paul Walker, CEO

The three metrics—churn, hunting, and expansion—each hold importance. What we should see, and indeed what we're beginning to observe, are early signs of improvement in client retention and revenue churn. We also expect enhanced new client acquisition as these metrics collectively thrive. If we can maintain our service attach rate, which has hovered around 50-60%, we can anticipate significant growth in services aligned with our larger balances of invoice sales.

Nehal Chokshi, Analyst

Great. Has your level of confidence in achieving your fiscal year 2025 guidance changed relative to last quarter's call?

Paul Walker, CEO

I'd say we see it the same way.

Nehal Chokshi, Analyst

The service attach rate appears to have decreased year-over-year in enterprise. Any thoughts on why that might be?

Paul Walker, CEO

The service attach rate for the quarter was 55%, consistent with the same quarter last year.

Nehal Chokshi, Analyst

Okay. I must have that wrong. Sorry about that. Regarding the new logo targets you mentioned in your previous call: can you provide details on what those actual new logo targets are or year-over-year increases you're expecting?

Paul Walker, CEO

Our comment was specifically tied to our targets for new logo hunters, with all in place by March 1. Their early deployment, just a couple of months before the new logo targets, should benefit us significantly.

Operator, Operator

This does conclude today's Q&A session. I would now like to turn the call back over to Paul Walker for closing remarks. Please go ahead.

Paul Walker, CEO

Wonderful. Thank you. Just want to wish everyone a Happy New Year and express my gratitude for joining us today. Thank you for the thoughtful questions and your efforts to understand Franklin Covey, our business, and our future direction. I feel positive about our progress in executing this new set of initiatives. I'm particularly pleased with Sean and the Education team’s achievements in the first quarter and the momentum in that division. We look forward to reporting again at the end of our second quarter. I hope you all have a wonderful rest of your day.

Operator, Operator

This does conclude today's conference call. You may all disconnect.