Hello, and thank you for standing by. Welcome to Franklin Covey Q1 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Derek Hatch. Sir, you may begin..

Thank you. Hello everyone. On behalf of Franklin Covey, I would like to wish everyone a Happy New Year and hope for a peaceful and prosperous 2024.

Before we begin today's call festivities, I would like to remind everybody 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 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 on 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, our CEO and President..

first, because we have high confidence in the market opportunity before us and our ability to execute it; and second, because we believe repurchasing our stock even as significantly higher than current prices has a very compelling investment thesis.

That being first that we believe that we are and would be purchasing shares at a significant discount relative to the net present value of our expected cash flows. As just noted, we believe that both our recent purchases and our purchases over the years reflect this.

And because we believe that a much smaller than typical percent of the net present value of our company's cash flows is attributable to reliance on the residual exit value of these cash flows, because, one purchasing shares at or near our current market cap provides a high free cash flow yield and we expect free cash flow to grow substantially in the coming years.

The combination of these factors gives us confidence in investing excess cash flow in the business and in share repurchases can generate significant additional value for shareholders in the coming years.

In conclusion, I would just say that we expect the combined power of these three key strengths, the strength of our strategic position, the strength of our revenue-generating engine, and the strength of our business model to continue to generate strong and accelerating growth in revenue, adjusted EBITDA and free cash flow.

And specifically, as noted previously, we believe that the combination of having a lot more billed and unbilled revenue on our balance sheet than ever before, achieving accelerated growth in our subscription revenue, and returning our subscription services attach rate to its historic average will result in adjusted EBITDA increasing to between $54.5 million and $58 million in fiscal '24.

I'd now like to turn some time over to Steve to discuss our results for the first quarter and the latest 12 months in a bit more detail and Steve will also review our guidance.

Steve?.

Thank you, Paul. Good afternoon, everyone. It's a pleasure to be with you today.

I would like to briefly provide more detail on the factors underlying this performance, focusing on results in three key areas of the company, specifically our Enterprise business in North America, the Enterprise business internationally in both our direct offices and licensees, and our Education business, which is also primarily in North America.

As shown on Slide 17, results in our Enterprise business in North America continued to be strong in the first quarter and the latest 12-month periods.

Reported sales in North America, which account for 43% of total Enterprise Division sales were $38.4 million in the first quarter, a level almost equal to the prior year, and this on top of a strong 16% growth achieved in the first quarter of FY '23.

For the latest 12 months, revenue grew 2% on top of 17% growth in the prior year and we are pleased with the result we have achieved in the Enterprise business in North America over the past two years. We expect the beginning in Q3 of FY '24, our year-over-year comparisons will normalize.

Subscription and subscription services sales in North America are even with prior year in the quarter on top of the 20% growth achieved in last year's first quarter. For the latest 12-month, growth was 4% on top of 24% in the prior year. And we are pleased with these growth rates.

Our balance of deferred revenue billed and unbilled in North America continued to be strong, growing 7% in the quarter on top of 25% in last year's first quarter, establishing, as Paul said, a strong foundation for next year's growth.

And the percentage of North America's All Access Pass clients that were for multiyear periods increased to 54% from 48% in the first quarter last year. And the percentage of invoice sales represented by multiyear contracts increased to 60% from 55% in the first quarter last year.

As shown in Slide 18, revenue from our international operations, which account for approximately 17% of our total Enterprise Division revenue, decreased by $0.6 million or 7% in the quarter primarily due to declining legacy which is non-All Access Pass-related sales. Sales in these offices have grown 4% or $1.3 million in the latest 12 months.

Also, on Slide 18, our international licensee partner sales increased 3% in the quarter on top of 9% in last year's first quarter. And for the latest 12 month, sales were up 8% on top of the 15% in the prior year.

Finally, as shown in Slide 19, the results in our Education business, which accounts for approximately 25% of the total company sales, grew 3% for the quarter on top of the 23% growth achieved in the first quarter last year. Sales grew 9% for the latest 12 months on top of 21% latest 12-month growth in the previous year.

Education subscription and subscription services sales were flat in the quarter but strong in the latest 12 months, growing $4.6 million or 8% on top of $11.8 million or 25% last year. Education's balance of deferred subscription revenue billed and unbilled increased 29% in the quarter. Now, just a little bit more about Education.

As you -- the Education Division. As you recall, not many years ago, the Education Division was small and had a traditional service and materials business model.

We are pleased that, as shown on Slide 20, since the launch of the Leader in Me subscription in Education Division, revenue has grown substantially from just over $3 million in its first year to more than $70 million over the latest 12 months.

And the business model has transformed to closely mirror that of Enterprise with approximately 90% of Education revenue now represented by subscription and subscription services revenue, a level that is very similar to that of Enterprise Division.

We also expect that after years of accelerated investment, the Education Division's adjusted EBITDA margins will also expand in FY '24 and beyond. Now a little bit about our cash flows and -- more about cash flows and balance sheet.

As shown on Slide 21, our cash flows from operating activities was $17.4 million at the end of the first quarter compared to $3 million in Q1 last year.

Our free cash flow in the first quarter increased to $13.7 million compared with $0.8 million for the prior year, reflecting the changes in the elements of working capital were very favorable in Q1 this year compared to Q1 last year, particularly referring to accounts receivable, accounts payable, accrued liabilities in deferred revenue.

In Q1, we invested $16.3 million to purchase 409,000 shares. Over the past four quarters, as Paul said, we've invested $51 million to purchase shares.

We ended the quarter still with $96.5 million of total liquidity, including $34 million in cash and $62.5 million available under the revolving credit facility even after investing $16.3 million in stock purchases this quarter.

Compared to Q1 of FY '23, the sum of billed and unbilled deferred subscription revenue increased 12% to almost $170 million, giving us increased visibility into future sales results. The deferred subscription revenue increased 14% to $87 million, while the unbilled deferred revenue increased 10% to $82.5 million.

Adjusted EBITDA in the quarter, as already said, was a strong $11 million. Now guidance. As you know, Franklin Covey's financial strategy is to consistently grow revenue and at the same time experience a high flow-through of that increased revenue to increased adjusted EBITDA and free cash flow.

Consistent with that strategy, we affirm our previously issued guidance for FY '24, that adjusted EBITDA will increase by approximately 17% at the midpoint of the range to between $54.5 and $58 million in constant currency compared to the $48.1 million achieved in FY '23.

This guidance reflects our expectation of achieving low double-digit net sales growth in the back half of the year, stable or improving world economic conditions, strengthening results in our international operations, particularly strong financial results in Q4 in our Education Division, and increased subscription add-on services.

This FY '24 guidance reflects our expectation that we will achieve particularly strong results in Q3 and Q4 of FY '24.

Our second quarter guidance is that adjusted EBITDA will be between $6.2 million and $7.2 million; strong, but lower than last year's very strong adjusted EBITDA of $8.2 million, particularly reflecting a lower service attach rate during the second quarter that is expected to increase during the third and fourth quarters.

In as much as we expect to achieve strong revenue and gross margin, the expectation that the second quarter's adjusted EBITDA performance will be slightly lower than last year is due primarily to our investment in growth this year and benefits in certain accruals last year, like accounts receivable provision.

We expect our second-quarter revenue to be at least even with or to increase slightly over the prior year and could be our highest second-quarter revenue ever achieved. As discussed, this guidance obviously reflects the fact that we expect net sales growth rate to accelerate significantly in Q3 and Q4, as I mentioned.

While many economic and other factors could impact these expectations, we're excited about our future financial position. So, back to Paul..

Thank you, Steve. Thanks for going through that. And again, we feel quite good about the first quarter and about what we see out ahead. And with that, we'd like to open -- ask the operator to open up the line for your questions..

Thank you. [Operator Instructions] Our first question comes from the line of Dave Storms with Stonegate. Your line is open..

Good afternoon. Happy New Year everyone..

Yeah, you too. Thanks, Dave..

Appreciate it. So, looks like calendar year 2023 turned out to be the year without a recession.

But just curious how you see clients reacting after a lot of aggressive belt-tightening the majority of 2023, and if you see any additional bump in demand during calendar '24?.

Yeah, it's a great question. I would say, it did turn out to be the year without a recession, it's interesting times for sure.

I would say that what we're seeing right now is it's been pretty consistent for the last number of months and that our clients, they -- their budget -- they have their budgets, they know their budgets, they're moving forward, they've got their plans. And we feel relatively good about the environment that we're selling into right now.

I think there's -- I feel like there is more certainty in the fact that clients do have budgets and are -- and do have plans they're moving forward with, which you recall we reported in Q2 last year, there was -- some of our clients were a little bit more uncertain at that time, and that seems to have subsided for the most part.

And I think behind all of that though is a driver that in all times particularly times that are may be uncertain or where there is -- where growth is more difficult for companies, they're looking for solutions like those that we provide, right? Right now, people are very focused on, do I have the leadership capability inside of my organization to execute what it is we're trying to execute? Is our culture such that we can attract and retain in a tighter labor market the kind of talent we're going to need? Do we know how to engage people? And can we -- is our organization adaptable and change-ready and can it thrive? And so, those types of challenges that are on the minds of CEOs and leaders inside our clients.

And so, we're fortunate to have the kinds of solutions to those problems. I think that gives us confidence as we move forward here..

Understood. Very helpful. And then just one more, and this might be more for Sean. If I remember correctly, there was some funding that needed to be renewed at the end of 2023 for the Education business. Just wondering if we could get a quick status update on how that all shook out..

Yeah. Can you -- I'm not exactly sure what funding you're referring to..

I believe it was ESSER funding that you mentioned needed to be renewed..

Oh, the ESSER funding. Sure. Okay. Sure. Yeah, well, the ESSER funding, which is the emergency relief funding the government gave out during COVID, that is -- that's been out since COVID began and that's been out -- and it goes until the end of this year. And about two-thirds of it has been spent. So, about a third is remaining.

So, still a lot of spending going on right now, it will be for this year. We have a lot of our schools and districts that have signed up with multi-year contracts using some of this funding. But as we look to next year and when this funding runs out, we fall back on Title I and Title II grants, which had been there for decades and will remain.

And we also, as I shared before, we have a large foundation that's dedicated to starting up Leader in Me districts and schools. That's actually funding and helping schools get started with millions of dollars, and there will be hundreds of schools that will be funded through them. So, yes, so that's where that stands.

Is that responsive to your question?.

Absolutely. No, that's very helpful. I appreciate you shedding some light on that. Okay. Thank you very much, and good luck in the next quarter..

Thanks, Dave..

Yeah, thank you..

Thank you. Please standby for our next question. Our next question comes from the line of Nehal Chokshi with Northland Capital Markets. Your line is open..

Yeah, thank you for the question..

Hi, Nehal..

Hey. And good to hear that you're seeing an inflection, I believe you talked about in, what was it, subscription and invoice bookings, I think. But look, the key thing that I want to key on here is free cash flow. So, in the quarter, you had a -- it looks like a pretty strong cash from operations.

But I just want to make sure that how did that actually perform relative to the expectations at the prior earnings call that you had for this same quarter here -- for the November quarter, I'm sorry?.

Steve, you want to....

Yeah. So, Nehal, as you know, our free cash flow in the first quarter last year was a lot lower than it was this year. During the first part, we did talk in prior quarters about the fact that we expected our free cash flow to rebound significantly, and it did.

And the areas where free cash flow improved was not only related to operations, but also in the working capital balances, accounts receivable, accounts payable, accrued liabilities and deferred revenue had a very positive change in this year's first quarter compared to last year's first quarter.

So, we were very pleased with our free cash flow in the first quarter, and it was good, and it was even more than we expected, because all of those working capital elements that impact cash flow at the end of Q1 were positive in our direction, and all went positive quite a bit. So, we thought it was a very good free cash flow quarter..

Okay. Great. That's helpful. And then, fiscal 4Q was a poor free cash flow quarter. And so, I believe that benefited your fiscal 1Q.

But do you expect these working capital accounts to continue to tilt back favorably as we work through the remainder of fiscal year '24 and therefore, help us think about modeling free cash flow relative to your EBITDA guidance for fiscal year '24?.

Yeah. So, we haven't really, as you know, given free cash flow guidance. The changes in the elements of working capital that were significant in Q1, we expect those changes to remain, but not necessarily change again at those same rates each quarter.

We do expect to have a significant amount of additional key free cash flow this year compared to last year based upon the operations of the business, the cash that comes in from our subscription business and these elements of working capital behaving meaningfully. We expect to have a good free cash flow for the year.

Now, Nehal, I'm sure you remember that last year, our second half of the year as we predicted through -- after Q2, was significantly more than Qs 1 and 2. And we wouldn't expect that amount of increase in the second half of this year compared to the first half, because the first half is going to be a good free cash flow half.

But overall, it will be significantly -- I'm safe in saying without giving an actual forecast that it will be significantly higher than last year..

Okay. I mean, when I look at fiscal year '19 and fiscal year '22, your free cash flow has systemically been above your adjusted EBITDA.

I think what you're trying to signal here while fiscal year '23 was a clear deviation from that fiscal year '19 to fiscal year '22 trend, you expect an improvement from that fiscal year '23 level, but perhaps not quite to the free cash flow to EBITDA ratios that you're achieving in fiscal year '19 to fiscal year '22.

Is that correct?.

Yes. I think in our future years, we will reestablish a clear relationship between adjusted EBITDA and free cash flow that will generally be maintained. But yes, we would model out free cash flow to be a bit lower than adjusted EBITDA..

For fiscal year '24, specifically?.

Yes..

Yes.

And then, how would you think about beyond fiscal year '24 then?.

Again, I think and if you look at the elements of adjusted EBITDA versus the elements of free cash flow, we'll always be -- well, not always because of the elements of working capital move around, but the relationship between adjusted EBITDA and key free cash flow will be that free cash flow will be modeled at a lower level than adjusted EBITDA..

Is that largely because you expect to be saturating on the percent of customers that are going to be paying upfront?.

No. I think the percentage paying upfront will be maintained. It's more like if you just model it out, if you look at adjusted EBITDA and compared to adjusted -- compared to the amounts that are included in adjusted EBITDA compared to free cash flow, you have investment, CapEx and CAPD spending as an example.

So, while the expense for CAPD or CapEx is in depreciation, the expense for CAPD is in cost of sales, but has a delay to it. So, an increase in our spending and the amount we're spending in CapEx and CAPD are amounts that are on the income statement are below adjusted EBITDA.

So, those are the kind of things that just create the theoretical or mathematical difference between them..

Yes. Understood. Moving to a different topic, and then I'll let someone else speak.

But why are you expecting the services attached to remain depressed in Q2? And then, what will drive that improvement in Q3 and Q4?.

Yeah, great question. So, as far as what will drive the improvement in Q3 and Q4, as I mentioned earlier, primarily a couple of factors. One, the delivery of services of coaching and delivery days to schools that signed up late in Q4. Last year, we talked about that last quarter as those roll through and we're able to get those scheduled and delivered.

Much of that delivery happens later in the year with the timing of schools and when they're out for the summer, et cetera. So that's why it would shift into the back half of the year. And then second, we're bringing -- we're excited about three new solutions that are coming out.

We typically see bumps in services delivery for new solutions, and we've launched Leading and Working at the Speed of Trust that launched last month in the end of November, and then 7 Habits 5.0 is coming out late Q3 and early Q4.

And then, Difficult Conversations, which we think is one that our clients will want to utilize a lot of services for, that will be coming out here in the next month or so. So, I think that's what helps shift it in the back half.

As related to the first half, why have they been down? Why were they down a little bit towards the end of last year and the first quarter of this year? One is that we launched a solution a couple of years ago called Unconscious Bias. It's a great solution. We launched it actually prior to some of the events that unfolded in the U.S.

that drove a lot of big DEI initiatives, and we rode a wave for a while there and had a bit of a tailwind because our solution was really good. It was in high demand by our clients, and it was a solution that our clients didn't feel comfortable delivering on that topic themselves. They wanted the expertise.

So, Franklin Covey, somebody coming in from the outside to facilitate that inside the organization for them. The solution is still great today, but the environment has changed quite substantially in the country around that topic. And that has happened late -- started to happen kind of late last year for us and into the first part of this year.

And so, as we talked about that service attach rate going down, a portion of that is related to the demand for that particular solution, which we still love the solution. It's just not quite as in demand. And so that's driven a bit of that. And we kind of anniversary against that here coming out of Q2, which is why Q1 and Q2 were depressed a bit.

Fortunately, because we look at the rest of our portfolio, we don't really have any other solutions like that. That was something we built. We weren't thinking actually we were building it for -- we thought we'd just have it as a general offering. We didn't think it would perform like it performed.

And like I said, unfortunately, there were some circumstances that happened that caused that solution to be in quite high demand and now that demand has come back down. The rest of our solutions around leadership development and trust and strategy execution, we think there's a lot of durability there and great demand for those.

So that's, Nehal, a little bit about why we're positive about Q3, Q4, and a little bit of an explanation for why Q1, Q2 have been a bit soft and Q4 was a bit soft as well..

Okay. Great. Thanks. I'll get back in queue..

Thanks, Nehal..

Thank you. Please standby for our next question. Our next question comes from the line of Jeff Martin with ROTH MKM. Your line is open..

Thanks..

Hi, Jeff..

Good evening, everyone.

How are you doing, Paul?.

Great. Good to hear from you..

Yeah, likewise. So Paul, I wanted to drill down a little bit. There's -- on Slide 28 of your presentation, there's a total contract signed figure, $51.6 million. I was curious if you could give a little bit of insight there. It looks like it was down 23.6% year-over-year. Looking back over time, it looks like that's the first time it's really declined.

So, trying to dig in a little bit and understand what's going on there. Do you think it's more macro environment? Is it something else? Is it that DEI-related headwind? Maybe just help shed some light there..

Yeah. Thanks. Great question. So, not macro-related, not related to the DEI thing I just talked about. It's related to a contract. So, contract -- so we signed a contract in the first quarter of last year. That was -- it was a fantastic contract. It was a large contract for multiple years.

It was a five-year contract for around $10 million that had a lot of services embedded in it as well. And of course, it's contracted, so we only get to count that one time in the contracted number. And then will -- of course, that will flow into our invoice and our reported revenue annually over the next five years.

So, we're thrilled to have gotten the contract. This quarter, we didn't sign another $10 million contract. However, the base of contracts that we did sign this quarter was right what we would have expected and very consistent with what a normal quarter -- a normal Q1 would look like.

So the base, if you'll think of it that way, was very stable and just like what we would have always expected. And last year, we're just comping against this one large contract that was contracted in the first quarter last year. We don't have anything like that, that we're up against in Q2, Q3 or Q4 that I can think of.

And so, I think it is kind of a one-time thing that therefore shows up as a decline here..

Okay.

And then I was just curious if you characterized kind of the sales environment in terms of lead flow, pipeline, conversion, et cetera?.

Yeah. Dave asked a similar question a minute ago. I would say the environment is pretty good. I mean it's -- our clients are -- our solutions are in demand. They're looking to address and wanting to address the types of challenges we're focused on.

We're seeing, as we do during these times, where our execution business, clients, CEOs and C-level leaders are looking to figure out how to execute their strategies as effectively as they can. We're seeing good demand there. We've just launched a new sales performance solution this fiscal year, an upgrade to the one we had.

We're excited about that and the initial interest there. We just, as I mentioned, launched the 3.0 version of Leading at the Speed of Trust, and we created a companion version of that called Working at the Speed of Trust.

We never had a solution -- a trust solution that was geared to the non-management population, and yet trust is one of these topics that you need to run through the entire organization. There's been really good demand for that new solution. And so, I would say we're having great attendance at our marketing events.

You'll recall that we were all live in-person marketing event pre-pandemic. We shifted all the way to live online. And now we're enjoying kind of a dual marketing event structure where we do live -- we do online ones and we do in-person events. They're very well attended.

Client -- people love -- people that are working at home love to get out of their office, come to these live in-person events. There's been great interest there. So, pipeline, pipeline conversion continues to be strong.

I think what's supporting that point is what we've seen here in Q4 and then in Q1 is this growing invoice subscription amounts I talked to a few minutes ago that we're seeing that pick back up after Q2 and Q3 were a bit flattish.

Again, on top of big comps the year before, but even Q4 and Q1 -- Q4 of this last year and Q1 of this year are also on top of pretty good comps as well, and we've seen nice growth in that invoice subscription business. So, we feel good about the general environment and what we're seeing out here and what we're hearing from our clients..

Great. And then just one, something that I discussed with your team earlier in December, was penetration into lower areas of an organization and how that might affect future subscription services-related services attach rates. And maybe you could just give us your view there.

It seems like you are seeing demand there from clients at levels lower in the organization..

Yeah, it's a great question. So, we -- a couple of thoughts I would just say. One, we do talk about the attach rate as a percentage. I think that percentage could go up or down a little bit over time.

And what might cause -- but the dollars themselves will continue to go up, right? The percentage could go down if we -- as we expand to larger and larger populations and they choose to, at the front line, deploy some of our solutions in asynchronous modality ways.

At the same time, the percentage could go up as we do a better job of addressing the leader populations. Again, we've talked before about our penetration rates inside the average customer. We're still 10%, 15%, 20% of the way penetrated even within the leadership population inside the organizations that we face.

And so, I think the attach rate will continue to be strong. I think whether the attach rate, the percentage goes up or not, the dollars will continue to go up because I suspect we'll continue to attach at about the same rate. And I think the rate will be higher in the back half of this year, but that rate will be on an increasing base of subscription.

And we are excited about some of these solutions that we're bringing to market that are built to scale even more broadly across organizations. Again, we're the collective action company trying to create common language, introduce common ways of thinking and behaving and leaders need that. They need to drive that down through the organization.

And so, as we develop these solutions, we want to make sure that we have solutions that are built to do that. But I think services will continue to be an important part and the dollars will continue to increase. I imagine the rates probably stay about where it has been, but that could go up too.

I continue to be pleasantly surprised at the way multi-year contracts, and that rate continues to increase year after year..

Great. Appreciate the insights..

Thanks, Jeff..

Thank you. Please standby for our next question. Our next question comes from the line of Alex Paris with Barrington Research. Your line is open..

Hi, guys.

Can you hear me?.

Yeah. Hi, Alex.

How are you doing?.

Good. I'm doing well. Thanks for asking. Congrats on the strong quarter. I'll be quick, we're late in the call here, and I just have a few cats and dogs to follow up on. First of all, in your prepared comments, you didn't speak to China and Japan. That's been a topic of conversation. It's roughly 50%, as I recall, of international sales.

There've been an improving trend in China coming out of COVID for the third time, I suppose. I just wondered for a little update there..

Yeah. Great question. So, in [indiscernible] things continue to improve there. In Japan, Japan had a relatively nice quarter. As you -- first of all, stepping back, as you know both these areas as they come back out of COVID, we're putting a big focus on making sure that what they're selling is subscription.

So these are kind of the last two parts of the world to convert their businesses from the legacy model to the subscription model. And so -- and that's going well in both of those countries. As that occurs, of course, that depresses reported revenues slightly as more of that revenue goes out on the balance sheet in the form of subscription.

But we are intently working on that with them as they return. Japan almost got back last year to its pre-pandemic high, and we expect that it will get back above that this year. So that's been a long time coming. China has been up and down when they've been in and out of COVID, and that business is coming back as well.

I think we feel relatively generally good about what's happening in both those countries..

Great. Thanks. And then looking back at Q2 of 2023, deep snow, renewals were not quite -- well, I guess the renewal rate was good. The retention rate was consistent with prior quarters. But you did not sign a couple of large clients. I'm wondering about those large clients that didn't renew on a timely basis.

And I know it's your expectation that they come back at some point.

Have they come back yet? And what are you doing to increase the odds that they will come back?.

Good question, good memory. Yeah. So, we have -- to that point, one of them has, one of them hasn't come back. And there were a handful. I don't know if I can give you an exact answer on the hand -- the full handful. We do have -- we have a category of clients we call win backs.

And so, when a client doesn't renew on time, they go into a category of win backs. We have a special effort that we put in place on those clients. And so, we're -- fortunately, we don't have a lot of those, but when we do, we have a process we run because our mantra around here, we throw around is clients for life.

We don't ever want to lose the clients. And so, we take the approach that, well, if we lost them, it's a temporary thing. We're going to get them back. And so, we're doing that on those clients from Q2, and we'll continue to do so..

Great. That's helpful. And then, this was probably for Sean. You had a record year in signing new schools in fiscal 2023. One of the issues in the fourth quarter that contributed to the revenue shortfall was the inability to deliver the services, the onboarding services associated with it.

And then, when you miss it in the summer, when do you get it back? Based on earlier questions, it sounds like you don't get it back until next summer.

Is that right?.

Yeah, that's typically what happens, because professional development usually takes place, most of it takes place during the summer.

So, a new school comes on, there's usually two or three days of professional development per school, right? And if it's too late in the year, then they say, well, we'll do coaching throughout the year as we start the school year, but the professional development that goes deeper with everyone in the same room at the same time, we'll have to delay until next summer.

So that will -- it hurt us last year, it will help us this year. And the momentum across the board is really good. We've got lots of large new contracts in the pipeline. We've got three states talking to us right now about some big deals.

So, we expect that services will we'll have a nice second half of the year for the reason of last year coming in late as well as a really nice building pipeline for this year..

Excellent. Thank you.

So, not only was there a shortfall because of that last year, there'll be a little bit of a doubling up on some of those onboarding activities this coming summer?.

Yeah, I think so. And we're also pushing everyone hard to get in early this year. Nice to bring them on as many schools as we can. It's always better to bring them on sooner than later..

For sure. Okay. Great. And then two last ones. I think the target for this year, Paul, is 40 new client partners and other support roles.

How many did you hire in the first quarter? And is it going to be level loaded, or is it more back half loaded?.

Yeah, it will be a bit back half loaded. So, we ended the first quarter with 300 client partners and then roughly 150 or so of the other client-facing roles, so about the same 450 that we reported on at the end of Q4.

And we are still committed to adding the number for the year, and those will be back loaded, but not all at the very end, they'll come back -- more towards back half of the year..

Okay. And then maybe this one is for Jen. The Impact Platform at the end of -- I think it was end of Q4, you said the vast majority of English-speaking clients are on the platform, but you're in the process of rolling out additional languages.

Where are we in that process? And how penetrated are you with clients now?.

Thanks for asking, Alex. We are thrilled that as of October, we had launched in all of our, what we call core languages and about 25 languages have launched the Impact Platform. It was a really effective launch, and we're seeing more and more of our clients globally move to the Impact Platform.

Obviously, it makes a big difference to our client base in the U.S. as well, because they can deploy scalably in multiple languages. So, deployment went extremely well. There's a couple of our more -- our less used languages that haven't yet deployed, but the majority in what was targeted happened in October..

Great.

And what can we hope for or expect from the rollout of Impact Platform? Is it a higher initial selling price? Is it higher retention rates? Both?.

The primary benefit, I think, is the value proposition that we are changing -- we're driving collective behavior change. So, in terms of the Impact Platform, we always have great content.

We always have the modalities, but having the seamlessness to be able to bring this to an enterprise at scale particularly as many of our buyers don't have a lot of people in the department, and this makes it much more scalable.

What we're seeing with those that have deployed is we're better able to track that behavior change, we can track pre and post, the skills, the movement. One of our latest case studies, the primary thing that the buyers love is the metrics and the ability to scale with lower staff..

Excellent. Very helpful. Thank you very much, and that's all I have for now..

Thanks, Alex..

Thank you. Please standby for our next question. We have a follow-up question from the line of Nehal with Northland Capital Markets. Your line is open..

Yeah, thank you. Paul, at the beginning of your prepared remarks, you talked about how invoice subscription value was flash in fiscal 3Q and 4Q, but [influx is] (ph) up in fiscal 1Q.

What was actually the precise level in fiscal 1Q? And do you expect that to continue to influx up in fiscal 2Q?.

So, your question -- just to make sure I've got your question there, because I cut out just a second on our end. Could you just repeat it one more time? I think it's about invoice subscription levels Q2, Q3 versus Q4, Q1.

Is that your question?.

Yes.

Well, and into Q2 of this fiscal year '24?.

Yeah. Great. Okay. So, invoice subscription levels, U.S./Canada AAP were flattish in Q2 and Q3. If memory serves, they were up about 8% in Q4, and then up around 13% in Q1. And then, we expect that they'll continue to be good in Q2..

Okay. Great.

And then, Steve, real quickly, do you have thoughts on EBITDA for the February quarter?.

EBITDA, I'm sorry, again....

EBITDA for this quarter..

[indiscernible] Yes. So, we talked about adjusted EBITDA being between $6.2 million and $7.2 million..

Okay. Thank you. I missed that.

And what about the currency headwind for the full year on EBITDA?.

Well, our constant -- our impact of currency was insignificant in Q1. If we stayed exact -- if the rates stayed exactly what they are now, we would have some impact through the remainder of the year. But we don't know what's going to happen with the exchange rate, so we don't know what that would be.

That might impact revenue like $1 million if rates stayed exactly as they are now. But there was no -- there was an insignificant impact on adjusted EBITDA and an insignificant impact on sales in Q1..

Awesome. Great. Thank you very much..

Thanks, Nehal..

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Paul for closing remarks..

Okay. Well, thank you, everyone, for joining. Thanks for your great question. Thanks for your -- the time that you take to understand the business and for the thoughts you shared with us. We appreciate you, and hope you have a wonderful evening and a great start to 2024..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect..