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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2026


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-11107

FRANKLIN COVEY CO.

(Exact name of registrant as specified in its charter)


Utah		87-0401551
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

13907 South Minuteman Dr., Suite 500 Draper, Utah		84020
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (801) 817-1776

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.05 Par Value	FC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer	☒
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

11,293,873 shares of common stock, $0.05 par value per share, as of June 30, 2026

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		Page

Part I.	Financial Information	3

Item 1	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes In Shareholders’ Equity	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29

Part Ii.	Other Information	30

Item 1.	Legal Proceedings	30
Item 1.A	Risk Factors	30
Item 2.	Unregistered Sales Of Equity Securities And Use Of Proceeds	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		32

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share amounts)


		May 31,				August 31,
		2026				2025
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$		11,972		$		31,698
Accounts receivable, less allowance for credit losses of $2,091 and $2,929			50,285				68,415
Inventories			5,804				5,165
Prepaid expenses and other current assets			23,745				24,199
Total current assets			91,806				129,477

Property and equipment, net			12,557				14,324
Intangible assets, net			31,843				34,551
Goodwill			31,220				31,220
Deferred income tax assets			242				231
Other long-term assets			30,342				33,109
	$		198,010		$		242,912

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable	$		-		$		823
Accounts payable			6,424				8,780
Deferred revenue			92,950				106,534
Customer deposits			20,027				16,327
Accrued liabilities			20,728				24,828
Total current liabilities			140,129				157,292

Other liabilities			10,921				14,718
Deferred income tax liabilities			4,024				3,991
Total liabilities			155,074				176,001

Shareholders’ equity:
Common stock, $0.05 par value; 40,000 shares authorized, 27,056 shares issued			1,353				1,353
Additional paid-in capital			229,260				230,251
Retained earnings			124,086				126,272
Accumulated other comprehensive loss			(1,170	)			(1,032	)
Treasury stock at cost, 15,756 shares and 14,565 shares			(310,593	)			(289,933	)
Total shareholders’ equity			42,936				66,911
	$		198,010		$		242,912

See notes to condensed consolidated financial statements

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FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except per-share amounts)


		Quarter Ended							Three Quarters Ended
		May 31,				May 31,				May 31,				May 31,
		2026				2025				2026				2025
		(unaudited)								(unaudited)
Revenue	$		67,807		$		67,121		$		191,499		$		195,819
Cost of revenue			17,710				15,799				47,755				46,040
Gross profit			50,097				51,322				143,744				149,779

Selling, general, and administrative			43,263				46,232				132,882				138,468
Restructuring costs			696				4,739				5,650				6,723
Building exit costs			143				444				1,272				498
Depreciation			1,185				1,012				3,424				2,979
Amortization			614				1,098				1,971				3,294
Income (loss) from operations			4,196				(2,203	)			(1,455	)			(2,183	)

Interest income			24				211				169				765
Interest expense			(54	)			(135	)			(241	)			(470	)
Income (loss) before income taxes			4,166				(2,127	)			(1,527	)			(1,888	)
Income tax benefit (provision)			(1,081	)			718				(659	)			584
Net income (loss)	$		3,085		$		(1,409	)	$		(2,186	)	$		(1,304	)

Net income (loss) per share:
Basic and diluted	$		0.27		$		(0.11	)	$		(0.19	)	$		(0.10	)

Weighted average number of common shares:
Basic			11,260				12,891				11,630				13,028
Diluted			11,451				12,891				11,630				13,028

COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$		3,085		$		(1,409	)	$		(2,186	)	$		(1,304	)
Foreign currency translation adjustments, net of income taxes of $0, $0, $0, and $0			(8	)			149				(138	)			(95	)
Comprehensive income (loss)	$		3,077		$		(1,260	)	$		(2,324	)	$		(1,399	)

See notes to condensed consolidated financial statements

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FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Three Quarters Ended
		May 31,				May 31,
		2026				2025
		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$		(2,186	)	$		(1,304	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			5,395				6,273
Amortization of capitalized curriculum costs			4,078				3,269
Stock-based compensation			5,591				5,730
Deferred income taxes			33				12
Amortization of right-of-use operating lease assets			640				392
Gain on license obligation restructuring			(338	)			-
Changes in assets and liabilities:
Decrease in accounts receivable, net			18,096				36,253
Increase in inventories			(640	)			(42	)
Decrease in prepaid expenses and other assets			4,329				2,429
Decrease in accounts payable and accrued liabilities			(4,105	)			(9,931	)
Decrease in deferred revenue and customer deposits			(12,022	)			(15,756	)
Decrease in income taxes payable/receivable			(734	)			(7,662	)
Decrease in other long-term liabilities			(661	)			(624	)
Net cash provided by operating activities			17,476				19,039

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(3,920	)			(4,050	)
Curriculum development costs			(5,079	)			(4,095	)
Reacquisition of license rights			-				(324	)
Net cash used for investing activities			(8,999	)			(8,469	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit borrowings			11,677				-
Payments on line of credit borrowings			(11,677	)			-
Payments on notes payable			(835	)			(835	)
Principal payments on financing obligation			-				(2,890	)
Purchases of common stock for treasury			(28,118	)			(22,991	)
Proceeds from sales of common stock held in treasury			876				1,103
Net cash used for financing activities			(28,077	)			(25,613	)
Effect of foreign currency exchange rates on cash and cash equivalents			(126	)			87
Net decrease in cash and cash equivalents			(19,726	)			(14,956	)
Cash and cash equivalents at the beginning of the period			31,698				48,663
Cash and cash equivalents at the end of the period	$		11,972		$		33,707

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$		429		$		7,050
Cash paid for interest			202				428

Non-cash investing and financing activities:
Acquisition of property and equipment and capitalized curriculum financed by accounts payable	$		1,079		$		751
Consideration for reacquired license rights from liabilities of seller			-				168
Acquisition of right-of-use operating lease assets for operating lease liabilities			310				6,256
Acquisition of content rights financed by accrued liabilities and other liabilities			-				678

See notes to condensed consolidated financial statements

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FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands and unaudited)


															Accumulated
	Common			Common			Additional								Other			Treasury				Treasury
	Stock			Stock			Paid-In				Retained				Comprehensive			Stock				Stock
	Shares			Amount			Capital				Earnings				Loss			Shares				Amount
Balance at August 31, 2025		27,056	$		1,353	$		230,251		$		126,272		$		(1,032	)		(14,565	)	$		(289,933	)
Issuance of common stock from treasury								(2,353	)										136				2,643
Purchases of common shares for treasury																			(624	)			(11,123	)
Stock-based compensation								1,429
Cumulative translation adjustments																(206	)
Net loss												(3,289	)
Balance at November 30, 2025		27,056			1,353			229,327				122,983				(1,238	)		(15,053	)			(298,413	)
Issuance of common stock from treasury								(1,579	)										93				1,847
Purchases of common shares for treasury																			(946	)			(16,988	)
Stock-based compensation								2,664
Unvested stock award								(802	)										40				802
Cumulative translation adjustments																76
Net loss												(1,982	)
Balance at February 28, 2026		27,056			1,353			229,610				121,001				(1,162	)		(15,866	)			(312,752	)
Issuance of common stock from treasury								(1,847	)										111				2,166
Purchases of common shares for treasury																			(1	)			(7	)
Stock-based compensation								1,497
Cumulative translation adjustments																(8	)
Net income												3,085
Balance at May 31, 2026		27,056	$		1,353	$		229,260		$		124,086		$		(1,170	)		(15,756	)	$		(310,593	)

See notes to condensed consolidated financial statements

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FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY –

PRIOR YEAR

(in thousands and unaudited)


															Accumulated
	Common			Common			Additional								Other			Treasury				Treasury
	Stock			Stock			Paid-In				Retained				Comprehensive			Stock				Stock
	Shares			Amount			Capital				Earnings				Loss			Shares				Amount
Balance at August 31, 2024		27,056	$		1,353	$		231,813		$		123,204		$		(768	)		(14,084	)	$		(272,467	)
Issuance of common stock from treasury								(6,707	)										363				7,027
Purchases of common shares for treasury																			(146	)			(5,954	)
Stock-based compensation								2,167
Cumulative translation adjustments																(202	)
Net income												1,181
Balance at November 30, 2024		27,056			1,353			227,273				124,385				(970	)		(13,867	)			(271,394	)
Issuance of common stock from treasury								60											16				295
Purchases of common shares for treasury																			(251	)			(8,704	)
Stock-based compensation								1,346
Unvested stock award								(536	)										27				536
Cumulative translation adjustments																(42	)
Net loss												(1,076	)
Balance at February 28, 2025		27,056			1,353			228,143				123,309				(1,012	)		(14,075	)			(279,267	)
Issuance of common stock from treasury								15											20				414
Purchases of common shares for treasury																			(372	)			(8,333	)
Stock-based compensation								2,217
Cumulative translation adjustments																149
Net loss												(1,409	)
Balance at May 31, 2025		27,056	$		1,353	$		230,375		$		121,900		$		(863	)		(14,427	)	$		(287,186	)

See notes to condensed consolidated financial statements

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FRANKLIN COVEY CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – BASIS OF PRESENTATION

Franklin Covey Co. (hereafter referred to as we, us, our, or the Company) is a global company that gives strategy the human edge. We help clients achieve breakthrough results and transform how they execute strategy at scale. Our Enterprise and Education Divisions develop high-performing leaders at all levels of the organization and align people around purpose and priorities. Through proven, principle-centered frameworks and practices, we build high-trust leaders, teams, and cultures and help organizations translate strategy into consistent execution. Our approach enables lasting, repeatable results by helping clients identify, align, and execute their most important priorities. This approach has been tested and refined through more than 40 years of work with tens of thousands of leaders and organizations. We have some of the best-known solutions in the industry, including a suite of individual-effectiveness and leadership-development training and products based on the best-selling books, The 7 Habits of Highly Effective People, The Speed of Trust, The Leader In Me, and The Four Disciplines of Execution, and proprietary content in the areas of Leadership, Execution, Productivity, Sales Performance, and Educational improvement. Our solutions and offerings are described in further detail at www.franklincovey.com and elsewhere in this report.

The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and results of operations of the Company as of the dates and for the periods indicated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2025, as filed with the SEC on November 12, 2025 (the Annual Report).

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

The results of operations for the quarter and three quarters ended May 31, 2026, are not necessarily indicative of results expected for the entire fiscal year ending August 31, 2026, or for any future periods.

Inventories

Our inventories are stated at the lower of cost or net realizable value, cost being determined using the first-in, first-out method, and were comprised of finished goods at each of the balance sheet dates presented in this report.

Reclassifications

Certain expenses in our fiscal 2025 condensed consolidated statements of operations have been reclassified to conform with the current period presentation. Expenses related to the movement of our corporate headquarters incurred during the third quarter of fiscal 2025, which totaled $0.4 million, and for the three quarters ended May 31, 2025, which totaled $0.5 million, were reclassified from selling, general, and administrative expense to building exit costs.

Accounting Pronouncement Issued Not Yet Adopted

On December 14, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 provides guidance to enhance transparency about income tax information through improvements to income tax disclosures primarily related to the effective income tax rate reconciliation and income taxes paid. This new guidance also includes certain other amendments to improve the

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effectiveness of income tax disclosures. We are currently assessing the anticipated impact of this standard on our consolidated financial statements. The amendments are effective for our annual periods beginning September 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires a public entity to disclose certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization on an annual and interim basis. The guidance in ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The provisions within the update may be applied retrospectively for all periods presented in the financial statements. While we are still evaluating the specific impacts and adoption method, we anticipate this guidance will have a significant impact on our consolidated financial statement disclosures.

On September 18, 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, which amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40. This ASU makes targeted improvements to the accounting for software costs. ASU 2025-06 also supersedes the guidance for website development costs along with the recognition requirements for development costs specific to websites. This guidance is effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the ASU to determine its impact on our financial statements.

NOTE 2 – PURCHASES OF COMMON STOCK

Our purchases of common stock during the first three quarters of fiscal 2026 consisted of shares purchased on the open market and shares withheld for income taxes on stock-based compensation awards. Our stock-based compensation plans allow shares to be withheld to cover statutory income taxes if elected by the award recipient. These shares are valued at the market price on the date the awards were issued. Our fiscal 2026 purchases of common stock through May 31, 2026, consisted of the following (in thousands):


	Shares		Cost
Shares withheld for taxes on stock-
based compensation awards		68	$	1,179
Open market purchases		1,503		26,939
		1,571	$	28,118

On August 14, 2025 we initiated a 10b5-1 plan to purchase up to $10.0 million of our common stock through daily transactions. This 10b5-1 plan was completed in October 2025. On November 17, 2025, we initiated a new 10b5-1 plan to purchase up to $20.0 million of our common stock through daily transactions. This 10b5-1 plan was completed in January 2026. We did not purchase any shares of our common stock on the open market during the third quarter of fiscal 2026.

NOTE 3 – REVENUE

Contract Balances

Our deferred revenue totaled $96.0 million at May 31, 2026, and $111.7 million at August 31, 2025, of which $3.0 million and $5.1 million were classified as components of other long-term liabilities at May 31, 2026 and August 31, 2025, respectively. During the quarter and three quarters ended May 31, 2026, we recognized $42.5 million and $118.0 million of previously deferred revenue.

Deferred revenue primarily consists of billings or payments received in advance of revenue being recognized from subscription services and related professional and other services. Deferred revenue is recognized in revenue as the

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applicable revenue recognition criteria are met. We generally invoice customers in annual installments upon execution of a contract, including contractually committed services. We recognize contractually committed services revenue as the services are delivered. The Leader in Me membership offering is bifurcated into a portal membership obligation and coaching and materials delivery obligations. We have determined that it is appropriate to recognize revenue related to the portal membership over the term of the underlying contract and to recognize revenue from coaching as those services are performed or as materials are shipped. The combined contract amount is recorded in deferred revenue until the performance obligations are satisfied. Any additional coaching or training days which are contracted independent of a Leader in Me membership are recorded as revenue in accordance with our general policy for services and products as described in our Annual Report. During the first three quarters of fiscal 2026, we entered into non-cancelable contracts for the delivery of the All Access Pass (AAP) and related services and materials in the Enterprise Division. These contract amounts are recorded in deferred revenue until the performance obligations are satisfied or until the end of the contract term.

Remaining Performance Obligations

Whenever possible, we enter into multi-year non-cancellable contracts which are invoiced either upon execution of the contract or at the beginning of each annual contract period. Remaining transaction price represents contracted revenue that has not yet been recognized, including unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price is influenced by factors such as inflation, the average length of the contract term, and the ability of the Company to continue to enter into multi-year non-cancellable contracts. At May 31, 2026, we had $157.1 million of remaining performance obligations, including our deferred revenue. The remaining performance obligation does not include customer deposits, as these amounts are generally refundable at the client’s request prior to the satisfaction of the obligation.

Disaggregated Revenue Information

Refer to Note 7, Segment Information, to these unaudited condensed consolidated financial statements for our disaggregated revenue disclosure.

NOTE 4 – STOCK-BASED COMPENSATION

Our stock-based compensation expense was comprised of the following for the periods presented (in thousands):


		Quarter Ended					Three Quarters Ended
		May 31,			May 31,			May 31,			May 31,
		2026			2025			2026			2025
Long-term incentive awards	$		1,222	$		1,741	$		3,284	$		4,270
Strive acquisition compensation			-			160			1,469			525
Unvested stock awards			210			240			670			720
Employee stock purchase plan			65			76			168			215
	$		1,497	$		2,217	$		5,591	$		5,730

During the quarter and three quarters ended May 31, 2026, we issued 110,222 shares and 379,936 shares, respectively, of our common stock under various stock-based compensation arrangements, including shares sold through our employee stock purchase plan (ESPP).

Fiscal 2026 Long-Term Incentive Plan Award

On November 13, 2025, the Organization and Compensation Committee granted a new long-term incentive plan (LTIP) award to our executive officers and other members of management. The fiscal 2026 LTIP award consists of three tranches, one with a time-based vesting condition and two with performance-based vesting conditions as described below:

•

Time-Based Award Shares – 25% of a participant’s fiscal 2026 LTIP award shares vest over a three-year service period. The 2026 LTIP time-based awards step-vest with one-third vesting in each of November 2026, 2027, and 2028. The total number of time-based shares that may be earned by participants in the 2026 LTIP

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award is 76,668 shares (adjusted for forfeitures). The number of shares awarded in this tranche is not variable and will not fluctuate based on financial or performance measures.

•

Performance-Based Award Shares – The remaining 75% of a participant’s fiscal 2026 LTIP award is based on cumulative net revenue and cumulative Adjusted EBITDA achieved over a three-year measurement period consisting of fiscal 2026, fiscal 2027, and fiscal 2028. 70% of the performance-based shares will be earned on cumulative net revenue and 30% of the performance-based shares will be earned on cumulative Adjusted EBITDA. The number of shares that eventually vest to participants in this tranche is variable and may be 50% of the award (minimum award threshold) or up to 175% of the participant’s award (maximum threshold). The number of shares that may be earned for achieving 100% of the performance-based objectives totals 222,755 shares (adjusted for forfeitures). The maximum number of shares that may be awarded in connection with the performance-based tranches of the 2026 LTIP totals 389,805 shares.

Strive Acquisition Amendment

In connection with the fiscal 2021 acquisition of Strive Talent, Inc. (Strive), the former principal owner of Strive was entitled to earn up to approximately $4.2 million of additional consideration based on All Access Pass subscription and subscription services revenue over a five-year measurement period ending on May 31, 2026. These contingent payments were only earned if the former principal owner remained employed through the first four years of the measurement period. In an effort to retain the former principal owner of Strive, the Company and the former principal owner agreed to a modification of the acquisition agreement. In exchange for continued employment through February 27, 2026, the Company agreed to pay the former principal owner of Strive the remaining $1.4 million of unearned contingent consideration. The Company issued 80,434 shares of its common stock under the terms of this modification agreement in the third quarter of fiscal 2026.

Annual Long-Term Incentive Performance and Retention Plan

We have a long-term equity incentive plan for client partners, managing directors, and certain other associates that we believe are critical to our long-term success. The number of shares granted to sales-related roles is generally based on the achievement of specified annual revenue goals while other awards are for an amount determined by the Organization and Compensation Committee of the Board of Directors. These time-based awards are granted after the completion of each fiscal year and vest over a three-year service period, with one-third of the shares vesting on the anniversary of the grant date of each subsequent year. We granted a total of 148,708 unvested share units (adjusted for forfeitures) in fiscal 2026 to participants under the terms of this long-term incentive plan. The compensation cost of these awards is included in the long-term incentive awards category in the preceding table.

Fiscal 2026 Board of Director Unvested Stock Award

Our annual unvested stock award granted to non-employee members of the Board of Directors is administered under the terms of our omnibus incentive plan, and is designed to provide our non-employee directors, who are not eligible to participate in our employee stock purchase plan, an opportunity to obtain an interest in the Company through the acquisition of shares of our common stock as part of their compensation. The annual award is generally granted in January of each year on the same day as our annual shareholders’ meeting. For the fiscal 2026 award, each eligible director received a whole share grant equal to $120,000 with a one-year vesting period. Our Board of Directors unvested stock award activity during the three quarters ended May 31, 2026 consisted of the following:


	Number of Shares				Weighted-Average Grant Date Fair Value Per Share
Unvested stock awards at August 31, 2025		27,336		$		35.12
Granted		40,446				20.77
Forfeited		-				-
Vested		(27,336	)			35.12
Unvested stock awards at May 31, 2026		40,446		$		20.77

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Employee Stock Purchase Plan

We have an ESPP that offers qualified employees the opportunity to purchase shares of our common stock at a price equal to 85% of the average fair market value of our common stock on the last trading day of each fiscal quarter. During the quarter and three quarters ended May 31, 2026, we sold 28,355 shares and 65,892 shares of our common stock to participants in the ESPP.

NOTE 5 – RESTRUCTURING COSTS

First Quarter Restructuring Costs

During the first quarter of fiscal 2026, we expensed $3.4 million for restructuring costs to streamline our organizational structure and reduce ongoing operating costs. The restructuring charge was comprised of severance costs to approximately 45 associates who were impacted by the event. Approximately $2.3 million of the restructuring charge was attributable to the North America segment, $0.4 million was for the International segment, and $0.7 million was for the Education Division. We paid the majority of these severance benefits during the first three quarters of fiscal 2026 and at May 31, 2026, we had $0.1 million of these costs remaining in accrued liabilities on our condensed consolidated balance sheet for this restructuring event.

Long-Term Restructuring Plan

During the second quarter of fiscal 2026, we initiated a long-term restructuring plan that is designed to streamline and simplify our operating model, focus investment in growth areas, improve processes, consolidate and centralize certain functions, and provide organizational focus to realign talent with current and expected business needs. This restructuring plan is expected to span four or five quarters and may incur various costs to implement the organizational and process changes.

In the quarter ended February 28, 2026, we expensed $1.5 million of costs related to the long-term restructuring plan. These costs were comprised primarily of severance and related expenses for 7 employees and are expected to be paid out over the next two quarters. Approximately $1.5 million was attributable to our North America segment and approximately $30,000 was attributable to our International segment. At May 31, 2026, we had $0.3 million remaining in accrued liabilities on our condensed consolidated balance sheet for the second quarter restructuring costs.

During the quarter ended May 31, 2026, we expensed $0.7 million of restructuring costs in connection with the long-term restructuring plan. These costs were primarily for severance and related expenses for 11 employees and are expected to be paid out over the next two quarters. Approximately $0.6 million of the restructuring charge was attributable to our International segment and $0.1 million was attributable to our North America segment. At May 31, 2026, we had $0.1 million included in accrued liabilities on our condensed consolidated balance sheet for these restructuring activities.

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NOTE 6 – EARNINGS (LOSS) PER SHARE

The following schedule shows the calculation of net income (loss) per common share for the periods presented (in thousands, except per-share amounts).


	Quarter Ended							Three Quarters Ended
		May 31,			May 31,				May 31,				May 31,
		2026			2025				2026				2025
Numerator for basic and diluted income per share:
Net income (loss)	$		3,085	$		(1,409	)	$		(2,186	)	$		(1,304	)

Denominator for basic and diluted income per share:
Basic weighted average shares outstanding			11,260			12,891				11,630				13,028
Effect of dilutive securities:
Stock-based compensation awards			191			-				-				-
Diluted weighted average shares outstanding			11,451			12,891				11,630				13,028

EPS Calculations:
Net income (loss) per share:
Basic and diluted	$		0.27	$		(0.11	)	$		(0.19	)	$		(0.10	)

Since we incurred a net loss for the three quarters ended May 31, 2026, no potentially dilutive securities are included in the calculation of net loss per share for that period because their inclusion would be anti-dilutive. The number of dilutive stock-based compensation awards for the three quarters ended May 31, 2026 would have been approximately 154,000 shares. The number of dilutive stock-based compensation awards for the quarter and three quarters ended May 31, 2025 was approximately 72,000 and 116,000, respectively.

NOTE 7 – SEGMENT INFORMATION

Segments

Our revenues are primarily comprised of training and consulting services and our internal reporting and operating structure is currently organized around two divisions: the Enterprise Division, which consists of our North America and International segments, and the Education Division, which is comprised of our Education practice. We have determined that our chief operating decision maker (CODM) continues to be the CEO. Beginning with the first quarter of fiscal 2026, our CODM began to manage our business, allocate resources, and evaluate performance based on changes that were made in the Company’s reporting and management structure. Accordingly, we realigned our reportable segments to those shown below.

Our operations consist of three operating and reportable segments as described below:

•

North America – Our North America segment has a depth of expertise in helping organizations solve problems that require changes in human behavior, including leadership, productivity, execution, trust, and sales performance. We have a variety of principle-based offerings that help build winning and profitable cultures. This segment includes our sales personnel and operations that serve the United States and Canada.

•

International – Our International segment includes the operations of our international direct offices and international licensees. Our international direct offices provide the same offerings and content in countries outside of North America, which includes Australia, Austria, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom. The independently owned international licensees provide our offerings and services in countries where we do not have a directly-owned office. Our licensee network allows us to expand the reach of our services to large multinational organizations as well as smaller organizations in their countries.

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•

Education Practice – Centered around the principles found in the Leader in Me, the Education practice is dedicated to helping educational institutions build a culture that will produce great results. We believe these results are manifested by increases in student performance, improved school culture, decreased disciplinary issues, and increased teacher engagement and parental involvement. This segment includes our domestic and international Education practice operations, including our international education licensees, which are focused on sales to educational institutions such as elementary schools, middle schools, high schools, and colleges and universities.

Our reportable segments reflect the structure of the Company’s internal organization and the financial information the CODM regularly reviews to assess Company performance and allocate resources. The CODM reviews the performance of each segment using internal reports which provide variance analysis of actual results by segment compared to budget, forecast, and the prior year. The primary measurement tool used in segment performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts disclosed by other companies. The prior period segment information has been recast to conform with the new reporting segment presentation described above.

Our operations are not capital intensive and we do not own any manufacturing facilities or equipment. Accordingly, we do not allocate assets to the reportable segments for analysis purposes. Interest expense and interest income are primarily generated at the corporate level and are not allocated. Income taxes are likewise calculated and paid on a corporate level (except for entities that operate in foreign jurisdictions) and are not allocated for analysis purposes.

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Other segment items in the following tables consist primarily of other normal operating expenses such as computer software subscription expense, advertising and promotion costs, travel and entertainment expenses, and necessary overhead costs such as legal and rent and utilities expense (in thousands).


Quarter Ended		North						Education			Segment
May 31, 2026		America			International			Division			Total
Net revenue	$		38,024	$		10,052	$		18,998	$		67,074
Cost of revenue			7,811			2,436			7,062			17,309
Associate costs			20,003			4,593			8,588			33,184
Other segment items			2,462			950			1,663			5,075
Segment Adjusted EBITDA	$		7,748	$		2,073	$		1,685			11,506

Other revenues												733
Less:
Unallocated corporate expenses(1)												3,908
Stock-based compensation												1,497

FRANKLIN COVEY CO 10-Q