FC Franklin Covey Dashboard

Management Discussion

• COVID-19 was first identified in China during December 2019, and subsequently declared a pandemic by the World Health Organization.  Since its discovery, COVID-19 has surfaced in nearly all regions around the world and has resulted in government-imposed travel restrictions and business slowdowns or shutdowns in affected areas.  As a result, COVID-19 has impacted our business globally, including our licensees, through office and school closures.  In particular, these closures impacted our third and fourth quarters of fiscal 2020 as described throughout this Annual Report on Form 10-K for fiscal 2020.
• After strong financial performance during the first two quarters of fiscal 2020, our financial results in the third and fourth quarters of fiscal 2020 were adversely impacted by the COVID-19 pandemic and the resulting closure of offices and educational institutions throughout the United States and in the countries where we operate direct offices and contract with licensee partners to deliver our offerings.  We closed our corporate offices and restricted travel to protect the health and safety of our associates and clients in an effort to slow the spread of the pandemic.  Our international direct offices also followed the same pattern of closures and restrictions on associate travel and delivery of our offerings.  These actions, and similar steps taken by most of our clients, resulted in decreased sales during the third and fourth quarters as previously scheduled onsite events, client-facilitated presentations, and coaching days were postponed or canceled.
• Despite the difficult economic environment in the second half of fiscal 2020, we were pleased with the continued strength of our subscription sales and the quick pivot to delivering content live-online and through our other digital modalities.  Our subscription service clients are able to access content and programs from remote locations, which allows continued engagement of personnel and students during long periods of displacement from normal working or classroom conditions.  To be successful in our industry, it is important to create effective learning environments for our clients and students, and we believe our previous investments in digital and remote delivery modalities are key to surviving and then thriving in the current environment.  According to the Training magazine 2020 Training Industry Report, most companies expect to retain at least some aspects of remote learning after the COVID-19 pandemic is over.  We believe our ability to deliver content and offerings over a broad array of modalities to suit a client’s needs will prove to be a valuable strategic advantage, and we believe these capabilities will accelerate our recovery from the effects of the pandemic and will generate increased opportunities in future periods.  However, our recovery from the COVID-19 pandemic is dependent upon a number of factors, many of which are not within our control, such as the timing of re-opening national, state, and local economies; continuing effects of the pandemic on client operations; and other governmental responses to address the impacts of the pandemic.  We will continue to monitor these developments and their actual and potential impacts on our financial position, results of operations, and liquidity.