Welcome to the Q3 2019 Franklin Covey Earnings Conference Call. My name is Daryl, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Derek Hatch. Mr. Hatch, you may begin.

Thank you, Daryl. On behalf of the management of Franklin Covey, I would like to welcome everyone to our conference call this afternoon. Before we begin, I’d 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 stabilize and grow our revenues and the acceptance of and renewal rates of the All Access Pass, the ability of the company to hire productive sales professionals, general economic conditions, competition in the company’s targeted marketplace, market acceptance of new products or services and marketing strategies, changes in the company’s market share, changes in the size of the overall market for the company’s product -- 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 influence or -- and control, anyone of which may cause future results to differ materially from the company’s current expectations, and there can be no assurance that the company’s 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 current events or circumstances after the date of today’s presentation, except as required by law. With that out of the way, I would like to turn the time over to Bob Whitman, our Chairman and Chief Executive Officer. Bob?

Derek, thank you so much. Good afternoon, everyone. We really appreciate you joining us today. Hope your summers are off to a good start. Those of you who live in places that are having summer, most of the countries not. We are really pleased with our third quarter results, pleased they were strong and better than expected. We’re building on our robust year-to-date performance, we are on a great trajectory to achieve significant growth in adjusted EBITDA and cash flow in fiscal ’19, and we believe also to establish the foundation for a very strong fiscal 2020 and in the coming years beyond. Specifically, as you can see in slide three, and we have said that we expect to grow reported adjusted EBITDA in constant currency from $11.9 million in fiscal ‘18 to between $18 million and $22 million in fiscal ‘19, which represents 50% to 80% -- 85% growth, and then to grow adjusted EBITDA between $26 million and $31 million in fiscal ‘20 and between $35 million and $40 million in fiscal ‘21. We have also talked about our -- some of the increased adjusted EBITDA plus the change in deferred getting in the range of $30 million to $34 million this year, the range of $38 million to $42 million next year, and $47 million to $52 million the following year. And importantly, the net cash generated we expect to really which is a very close cousin to cash flow from operating activities, very closely tracked reported adjusted EBITDA, and again be between $18 million and $22 million this year and then $26 million to $31 million next year and $35 million to $40 million in fiscal ‘21. So we have high expectations and our strong third quarter and year-to-date performance has moved us rapidly up the…

Hey. Thanks. Thank you, Bob. Good afternoon, everyone. Our specific guidance for fiscal ‘19 as you know was that in constant currency adjusted EBITDA would increase from $11.9 million in fiscal 2018 to a range of between $18 and $22 million in FY19, representing a year-over-year growth of between 50% and 85%. We reaffirm this guidance. We are really pleased that in constant currency adjusted EBITDA, as Bob said, has increased from -- increased $7.6 million year-to-date through the third quarter. We are experiencing very strong momentum in the business, as a result we expect to retain this $7.6 of year-to-date adjusted EBITDA growth and even add a bit to it in the fourth quarter putting our full year adjusted EBITDA essentially right in the middle of our guidance range of $18 million to $22 million, representing year-over-year growth in adjusted EBITDA of approximately 65% to 68%. Specifically, we expect year-over-year adjusted EBITDA to increase by up to $500,000 in the fourth quarter. And this in spite of the fact that almost all of our growth in invoice revenue in the fourth quarter is expected to be subscription sales whose revenue will be recognized over time, but whose cost for marketing and for hiring new client partners as you know will be expensed in the fourth quarter. And a second reason that the adoption of the new topic ASC 606 accounting standard will cost us approximately $1.3 million of adjusted EBITDA in the fourth quarter this year, compared to our fourth quarter of last year. So to conclude we are really excited about our results year-to-date by the expected strength of the fourth quarter and by the significant momentum of the business overall. As a result of this momentum and our strong business model, we not only expect to achieve our guidance for the year, but establish a foundation for very strong results in the future. So, thank you, Bob.

Thanks, Steve. At this point let’s open it for questions. I will ask our operator to open the line. Thanks.

[Operator Instructions] And we do have a question from Alex Paris. Go ahead with your question, Alex.

This is Chris Howe sitting in for Alex. Good afternoon, everyone.

Hi, Chris. How are you?

I am good. Just sorting through my thoughts and notes here, you have mentioned previously about the multi-year contracts trending to 50% over time and on the last call, I believe you mentioned a seven-year contract. As we think of the length of these contracts, can you characterize or break down the mix that you are seeing as you push forward these efforts to accrue more multi-year contracts overtime?

Sure. Thanks. I will ask Paul Walker to talk through.

Hi, Chris. Yeah. So, as we mentioned, we are -- in the last 12 months, multi-year contracts have increased to -- now 29% of our contracts are multi-year. And of course, we are interested in having each of -- one of those be for as many years as possible and you remember accurately the one we talked about last time that was up to seven years. We are seeing a number of these multi-year contracts are not just for two years now but are increasingly becoming three-year contracts. I am not sure that clients will do -- how many clients will do seven years. We will try for that. But we are -- we are really pleased with the momentum. We saw in that slide that Bob showed a minute ago, it was 1% of our contracts two years ago, 15%, and now it’s up to 29%, and we continue to work that. I think what happens is, one, our sales force becomes more comfortable with positioning that right out of the gates. And two, as we are now into our second and third and approaching fourth year renewal cycle to some of these clients, we are now so embedded with them that it makes a lot of sense. The things we are talking about, the journeys we are on with them just will have a multi-year aspect to them and so it makes sense for the client to save a little bit by going multi-year and just to enter into that longer term commitment with us. So we expect that to keep growing.

Okay. That’s great. And then, some more questions here, you mentioned the rep last time that solely targeting multi-year agreements. As you move forward in this transition of the sales force, is that their main focus now or is there still -- are there still other people on the sales force that are not focused on multi-year agreements or are they focused on both, I should say?

I will stay with that. This is Paul again. So our sales force is exclusively focused, first of all, it’s important to note, they are exclusively focused on selling All Access Pass in the Enterprise Division. So that all we sell is the All Access Pass and the related services that go along with it. There are some of our client partners that still have a bit of traditional business that either they are still trying to convert over or those clients will just stay traditional clients of ours, but essentially all of the time and energy and effort is on selling All Access Pass. Within that context, we attempt to position multi-year every time we can, and there are some clients that as this is our first time becoming a client of ours that, that the timing is not right for them to make that kind of commitment, they’ll try this out for a year and they might come back at their first renewal period and then at that point they might go multi-year with us. But yes, everybody selling All Access Pass and we are trying to position multi-year where we can.

Chris, just one of the note, this is Bob -- the nature of the problems, we are helping clients solve when they really get into it as Paul mentioned, they’d recognize, if they are going to try to transform and get lasting behavioral change in the way that their sales force engages clients, say, a major consulting firm or a major technology firm, they recognized that both the journey of getting all of the salespeople across that and then maintain that was coaching and ongoing tools, this is going to be a multi-year journey and it’s a journey that’s worth it because they know what the payback is going to be if you are trying to get 190,000 frontline employees to do better -- and do something better or different every day. So it will drive guest satisfaction, that’s an initiative that they are going to be on forever and you always have a new frontline people, you need to keep it going. And so, the very nature of what we do argues for multi-year contracts is just, as Paul said, in the initial year, they don’t know the extent to which they are going to be engaged in these big journeys. Once they get engaged, it’s a very straightforward thing, if we look, you have to match the contract term to what you are trying to get done and you can save a little in the way -- during the way.

Thank you for the color. I have many questions here, but one more, if I may.

Sure.

As you continue to move towards 2021 and you talked about the higher levels of net cash that are going to be generated, with this additional cash and as you see more of this deferred revenue being recognized. How do you anticipate allocating this cash to investments, repurchases, and/or acquisitions? And in regard to John and Robert Gregory, are there others that present viable candidates for integration into Franklin Covey?

Great. Yeah. Priorities for the utilization cash or kind of in this order, first of all, is investing in the recurring needs of the existing business, and we are just the ongoing investment in keeping all the content fresh, our portals, and everything that go on and that’s the first priority that’s well within our budget to do that, but it’s an ongoing investment that we make every year. The second is the ability to take steps that would grow the business whether it’s new content, it could be an add-on acquisition, it could be the acceleration right now in the growth of the sales force to take some additional capital and those things will all have such a very high payback when you get 100% return in first year, as we said, hiring a new sales person, whatever. That’s our second utilization. The third is that we have utilized a lot of the excess cash flow beyond those two for years in repurchasing shares. Some have asked why we haven’t been active in repurchasing shares in the last quarters. And really if we haven’t -- if we are not active on repurchasing shares in a quarter, it’s due to one of three things. Either one, we are making additional investments in the business which last year we did. We made incremental investments in our new ERP system, in our portal, acquisitions and so forth. We made substantial cash acquisition. So one would be that we just had -- we had unusual requirements in the business. That has not historically been the case. We historically spend about 4% of our revenue in innovation and product development with the All Access Pass. We have moved that up now to 7% a year, but we usually live within that budget. But if we are not buying it could be that we are investing by stocks because we are investing in other parts of the business. So the second is, there may be the time of year where your cash in our late part of our fiscal year because our fourth quarter is so generally significant in terms of revenue and particularly so in education. We invest a lot of money in working capital to fund all those sales in the fourth quarter and usually, so sometimes it’s just that we don’t have a lot of excess cash if we are not buying. The third could be honestly that we may be involved in something or having discussions about something, which could be material to the business and significant enough that we are precluded from buying. But otherwise, any time we think we can earn at least a 20% IRR by investing in our stock, which we have continued to believe is what we can do, we do that and we expect in this coming year that we will have the cash available and the inclination and expectation of doing so. Is that helpful?

Yes. It is. I have more but I will jump back in the queue.

Okay. Thanks.

Thank you for taking my questions.

We are happy .We will look forward to talking to you if you like to. Those are the questions I should say.

And our next question comes from Tim McHugh. Tim, you can go ahead with your question.

Hi, Tim.

Good afternoon. It’s actually Trevor Romeo on for Tim.

Hi, Trevor. How are you?

Thanks for taking the call. I am doing well. How about yourself?

Great. Thanks.

Yeah. So, first question here, so part of your growth strategy involves growing the client partner headcount. I just want to ask in the current labor market, how difficult is it for you to find qualified people for those roles and then along with that, how is your retention trending among the client partner group?

Great. Let me ask Todd Davis, who heads our People Services and who has these five recruitment professionals working with them every day. Todd, will you respond to that?

Yeah. Thanks. I am pleased to join you. So it’s a great question. It’s a part of the key strategy. So we have -- as Bob mentioned, we have a very seasoned recruiting staff particularly for our industry. And so while to your point labor market is certainly becoming more challenging, we have found quite frankly with the All Access Pass model more than before while they are not knocking at the door, we are finding much more interest from seasoned sales people client partners as we call them who are interested in our company for two primary reasons. There are others, but the two primary reasons are the subscription based model where they can actually go in and have the business model so they can actually make a difference, we can make a difference within the client organization and then also I just lost my train of thought -- the two reasons are the model and then the investment that Bob was talking about, just the significant investment and not talking ill of any of our competitors in that, but they are so pleased to be with an organization that is making the financial investment in our offerings and in our solution. So those are the two that come top of mind as we are talking and interviewing quite frankly every day. This recruiting team is pulling together some phenomenal candidates. So, yes, it has become more difficult and we are finding with the direction the company is headed. We are becoming more attractive for those sales people that are in our industry.

Paul, on the retention question, do you want to address that?

Yeah. So, we have -- we think we have pretty good retention -- quite good retention actually, especially given where the labor market is right now and there’s a lot of reasons to join the company who have long tenure here. In fact, some people join us. They come to our sales academies. We run this five-week sales academy. Two of the weeks are in-person here in Salt Lake, our headquarters. That’s something we have been doing this year that’s making a tremendous difference. People come in and they do a tour around our campus and they get to know some of their peers out there, their fellow client partners and one of the common refrains is you have people that have been here a long time. And they say that in a really good way and we feel like that is a really good thing. And so we are -- we do everything we can to retain them, especially the ones we want to retain. We feel good about where we are there, and as Todd mentioned, we are hiring a lot of great people right now.

And I think just in terms of specific metrics, we need to hire about 31 client partners to retain 20 over time.

Yeah.

And so -- and that’s -- we feel that’s a very good retention rate in the business that is heavily commissioned sales where they have to go out and win. And that can that certain if you lose, happens over time.

Yeah.

But we are grateful also that our client partners that we do retain are ramping according to a little bit ahead of the schedule that we have established for them. We keep adding new schools, and tools and marketing efforts and other things to help them succeed. And I think we have got a great group of people who have been here for many, many, many years, and we are meeting not long ago, where we went through some of our senior sales people and some of our top selling people, all of whom have been here more than 12 years. And so we have a good retention, once you get to the ramp, you tend never to leave. So, thanks.

Okay. Great. That’s very helpful. And then, second question, you had some nice gross margin improvement come through on a year-over-year basis this quarter. I know you hadn’t necessarily seen that in the past couple of quarters, despite pretty strong revenue growth. So could you just kind of talk through the drivers of the gross margin improvement other than revenue growth that helped this quarter?

Yeah. I think the first factor is just mix. So as we have more and more subscription revenue as a percentage, we will get that. It was offset in the first couple of quarters this year somewhat by, we had such a significant expansion in our services revenue, addition of services, which we think is important that we are moving that up to now to 47% on top and that it helped down the gross margin expansion a little bit. But given the same mix of services and subscriptions, you will tend to have some just the mix shift change will add to the margins and I think that’s the primary thing. We also have had annual price increases for the All Access Pass and that -- most of that flows through to the increment and well it doesn’t apply to the entire population because people can avoid it if they sign multi-year agreements or that they can do it by signing up, expanding their population or whatever else, despite -- and we want them to do those things. We give them those incentives because they are our folks and we want revenue per client to grow. And if we give up a little bit on the revenue per seat to get revenue per client, that’s something that’s in our favor. But beyond that, I think it’s primarily that there is some price increase for all new sales internally but you doesn’t take advantage of those through a combination of that and the mix shift continues to nudge the gross margin upward offset partially by sort of increases in service sales. And so in any given quarter, you might be flat or whatever we don’t expect to go backwards on this.

Okay. Great. That’s all I have for now. So thank you guys very much for the detail.

Great. Thanks so much. Great questions.

And our next question comes from Jeff Martin. Jeff, you can go ahead with your question.

Thanks. Good afternoon, guys.

Hi, Jeff.

I wanted to touch on the international license partners and also the international offices. Specifically, I wondered how the direct office in China has fared if that’s growing nicely. And then, on the international license side, specifically are they all selling all Access Pass where are they in that process and do you expect some growth acceleration there?

Right. Paul, do you respond to that.

Sure. Hi, Jeff. So I will start with the international direct offices. They had, as Bob mentioned a few minutes ago, really a nice Q3, every office was up in the third quarter, all of the offices are doing well for the year and we expect the opportunity to do well in the fourth quarter. As you know, in our English speaking offices in the U.K. and Australia, they have been selling All Access Pass now essentially as long as we have here in the U.S. and the majority of their business is now All Access Pass are seeing very similar retention metrics, add-on services metrics, multi-year metrics, et cetera. China -- China is actually doing very well, so they had a great quarter. They are not yet selling All Access Pass. They will start in the fall. We have been working -- our technology team has been working, doing great job getting a portal stood up inside China. We do service some clients in China, so we are able to sell global deals and service clients in China, but really to do this in a big way in China we need to have our All Access Pass portal and everything in China to provide good consistent steady access for people there. So China is doing well and All Access Pass is starting to fall. Japan has just come online in the last few months now with All Access Pass. They have sold some and that business is starting to grow for them and so we expect that they will follow a similar trajectory as we have in our English speaking countries. And then as you know, earlier this year we assume the license in Germany, Switzerland and Austria, and they are selling All Access Pass as well. They got…

Okay. That’s helpful. Thanks. I wanted to ask as it pertains to the client partner additions, what’s the balance of mix in terms of ads in North America versus international markets?

It’s about 60/40, 60 U.S., 40 outside of the U.S. I think that’s an opportunity where we will should and will get more aggressive in our International offices. We have got China now and that now that having been part of in Germany as well we have got some big economies there that are now that we have got them in and they are part of our direct operations China now for few years has been in Germany just recently and we get those businesses running exactly how we run them in the other parts of the world where we are direct. There’s an opportunity to add a lot of headcount there and I think we will, but for this upcoming year the mix is about 60/40 and what we expect a higher and probably will be 50/50 for quite a while. We have got a lot of headroom everywhere.

And we think also, Jeff, at this point, and one of the real -- one of the strongest assets we have as a company, most important parts of the company is the leadership group we have and particularly those who had these 16 offices or areas of the world in our direct offices. We had our quarterly leadership meeting two weeks ago and this is a group of seasoned people who on average been with us 16 years, who manage their $10 million to $15 million responsibility in the world and this is an impressive great group. When you look at the four metrics for which they are responsible, every one of them is living within the minimum acceptable level, others have specialties where they are on the high end. But this is a group of people we noticed to run or obtain and we will be able to add these new client partners are being added to those teams now. We have also put some other wrote new roles, which are kind of player coaches that are carrying a quota but also helping to do this. So I think we are better positioned now than we have ever been to be able to feel really confident about adding a lot of new client partners in the coming years, because each of them can take one or two a year and that that allows you to grow quite rapidly. So that’s a big -- that’s a real importance.

Okay. Great. And then my last question is around new content and how quickly that becomes a revenue growth driver and it makes a lot of sense as you are bundling everything into one pass that additional content is going to have a lot more value more quickly than under the old model. I was just curious, as you bring on new content, what kind of ramp do you expect to see out of that versus what you have historically had under the old model?

Yeah. Under the old model, of course, we were able to look specifically to a piece of content and know exactly the revenue it generated, because we sold them separately as you know. Now when it enters as part of the All Access Pass, it’s really the value proposition that is the total ecosystem that we have. And so, the primary ways in which we see impact, one, high -- I mean, we may have already had high retention, we already do have high retention. So it’s hard to say that went up a lot. But where it comes is, there are new jobs to be done, new impact journey this allows us to have, it allow us to go deeper into an organization. And so, if we pick the right content areas, we pick the right problems that we see -- we have seen, for example, Jhana, the usage of Jhana is across the system, about two-thirds of our All Access Pass holders utilize it and when they it, they utilize it frequently, mostly they -- it’s really pervasive and so we can see that usage. Our coaching business has gone up a lot and we had something new like this content from partnership with Liz Wiseman. We expect to be reflected, one, our retention rates will stay high and maybe expand. We will be able to continue to do price increases that will allow us to do things. Third, people will sign more multi-year agreements because that’s one of the things behind them moving toward 50% is there will be an impact journeys that we know they want to be on and we have the content solutions to do it. So, a combination of those factors, we do it within a specific budget, but we don’t look specifically to the economics of that other than that’s part of our 7% spend to add new content. But we are very precise about doing so on jobs that we know need to be done thinking will affect the whole ecosystem. Is that helpful?

That’s helpful. I appreciate it. Thanks guys.

Thanks, Jeff.

And our next question comes from Marco Rodriguez. Marco, you can go ahead with your question.

Hi, Marco.

Good afternoon, guys. Hey. Thanks for taking my questions.

Thank you.

Most of my questions have been asked and answered, so I just have a couple real quick, I guess, housekeeping items. In terms of your guidance, specifically on the CapEx and Cat D [ph] spend for fiscal ‘19. Looks like those numbers kind of come down here since the last guidance. Can you just talk a little bit about that?

Yeah. A lot of our spend on CapEx and Cat D is down in this quarter and year-to-date, just representing one capitalized projects have been completed and when certain CapEx projects have been completed. So that is in the fundamental change and the amount that we, Marco, that we plan to spend in those areas. We are -- we have just had less spending year-to-date than we thought we would have, which means that we will make up a little bit of that in the fourth quarter perhaps and going in to next year. That’s one reason this year is down. And then, the second reason, as Bob mentioned is, in the past we are doing a large ERP project and doing the initial development of our portal both of which were capitalized. So we had higher spending in the past on those items. We have an amount that we plan to spend each year going forward and it just so happens that the timing of projects makes our year-to-date this year a little bit lower than would be a standard run rate.

Okay. I think I understand what you are saying there, but I was mostly referring to the fact that the guidance range for the full fiscal year seemed to have come down versus the prior guidance in Q2 and in the beginning of the year. So that’s just timing?

Yes. Yes. Our view of what we are going to spend on CapEx and Cat D is unchanged from what we have talked about. But as you know, when we have these large capitalized development project, et cetera, the point at which those are capitalized is when we are spending, obviously, those monies on the capitalization and that there are swings in that development. But the swings don’t -- in this case don’t represent a fundamental change in how much we plan to spend in capitalized development or capitalized spending on the portal.

Got it. And then, in terms of the balance sheet, just the cash that you guys have on there right now just taken a look at what you have reported here year-to-date for cash flow from ops and what you had spent here for CapEx and Cat D, cash is pretty flat from the beginning of the year. So I am assuming even paying down per your credit agreements. Has anything else been accelerated to pay that down or are there other expenditures that are happening on the cash flow from financing that is kind of kept things level there?

No. Not necessarily. A fair amount of our cash on our balance sheet is tied up in some foreign operations that we can repatriate or otherwise we would have paid the line of credit down even farther than we have and stuff we are always looking to repatriate cash as quickly as we can to put it to use to reduce interest expense and to use things -- used for things and investing activities refinancing activities, so that we don’t have to borrow against our line. But a lot of our cash and reason why the cash is really kind of flat even though we have paid down our line significantly since the beginning of the year and made our term loan payments is just simply because we can’t repatriate fast enough with local laws and their local means to pay annual income tax payments and things like that.

Got it. And then, last quick question, just maybe, Bob, if you can talk a little bit about an M&A landscape any sort of things you might be looking at in terms of specialized content or things that you think that might be somewhat interesting going forward?

Yeah. Thanks, Marco. For us, we always had a lot of what we have put in the business development initiatives. For us, fewer of them are acquisitions of companies and they are parts of the acquisition of content or capabilities in some cases as you know with John and Robert Gregory we did the more -- most of what we are looking at is either expanding some kind of a capability that won’t be a big branded thing, it will just add a new capability like micro learning with Jhana or assessments or things like that. And so many of the things we are looking at are things that will increase the usage of All Access Pass or expand the ways in which people can get value from the All Access Pass. And so number of those will probably be just license agreements where it won’t turn out to be a real M&A activity, it will be in the form of license. Occasionally we will do something big in the content area like with Liz Wiseman. That’s not a major effort on our product. But we have a couple of those kinds of things that we are working on with. More of the things are capabilities, things that allow usage to increase usage, but we do have a Boyd Roberts who’s here in the room and he heads our business development effort and he’s got a lot on his plate and things we are looking at. But we again think most of these will fall within our normal 7% spend, 7% of revenue spend each year and that’s how that really we are organized to do that responsive.

Got it. Yeah. Understood. Thanks a lot guys. I appreciate your time.

Thank you, Marco.

And our next question comes from Zach Cummins. Zach, you can go ahead with your question.

Great. Thanks. Good afternoon.

Hi, Zach.

Hi. So in terms of the education segment, can you talk about what really drove the strength here in Q3 and then what are really the expectations for growth in that segment as we move into kind of FY20 and beyond?

Yeah. I will turn this one over to Sean Covey and let him respond.

Yeah. Sure. Hi. How are you doing, Zach? Yeah. So third quarter, we had a really strong third quarter, some of that was we had a lot of new contract we signed with schools. This year we are confident we feel good about our fourth quarter, because we feel like we are going to bring in about 50 to 100 new schools over last year. So that shows up -- some of that show up in the third quarter, these are new school that we got signed in the third. Our retention also is stronger than last year. We think -- our retention has always been pretty high in the about 86% to 90% range and we feel like this year will be at least that good if not 1 percentage point to 2 percentage points better that showed up in the third quarter as well. So it was -- we also did a lot of material sales, okay. So when Leader in Me school sign on, we have additional materials they can buy and we did a really good job of that in the third quarter. These are like leadership guides for students and they were extremely high margin as well and that helped the gross margin in the third quarter. So that came in stronger than expected and we put a real focus on that and we find out at least we have updated these over the last year and we are finding that schools like these a lot. So a combination of those things helped in the third. And then, again, the fourth, we feel pretty good about it, because we have got a stronger pipeline so far. The invoice revenue and final stage pipeline revenue for the fourth quarter were up over last year by about…

No. I really appreciate all the color. Thank you for that.

Yeah.

And just one more question for me. Bob, I guess, in terms of attachment rates for add-on services with your All Access Pass offering. Do you anticipate that this is something that can be sustainable as customers start to go in the year two, three, or four of their contracts? Are these add-on services something that are going to be recurring in nature and something that these clients will consider buying on an annual basis?

Yeah. I think that’s been one of the most important factors I didn’t probably emphasize enough is. One of the most encouraging things is that our same client retention rate of revenue, including their past and their services were retaining just over 100% of that. And so, I think, what’s happen is, people actually the services increase as we -- as people get down the road on this, because they recognize they are entrusting us with -- and they are content with more challenging and important problems, one for they really do need to get their behavior change and so I don’t know, Paul, if you want to add anything to that?

But the services we believe are very durable. I don’t know -- we don’t know how high up is, but at least at the current levels we think on a rolling 12 month basis we should be able to maintain what we are doing and that as clients get into their third years and fourth years and fifth years, it’s -- because they are working on things that are important. And so to an earlier question about the M&A pipeline, I think that Marco asked, some of the things we are doing is not M&A, but it’s adding new services and designing new services to exactly meet the needs of people, so when they go through and train a bunch of managers that are coaching build in to the process. So I think right now it has been very durable and expanding. And to the extent we are good at selling and servicing clients, we think it will continue to be strong and expanded, so.

Great. That’s really helpful. Well, thanks again for that and best of luck as you head into Q4.

Thanks very much, Zach.

Other questions?

And we have no more questions at this time.

Okay. Great. Well, we will just conclude and thank each of you for joining today. Again, as I mentioned, it is very exciting time to be part of Franklin Covey. It’s time when really to see the impact that we are having in clients and see the recognition of that by revenue retention, new sales, et cetera. It’s really encouraging. And we look forward to talking with many of you in the coming days and weeks. If you have additional questions, happy to respond and we look forward to a strong fourth quarter and to getting a chance to have this formal discussion in November. Thank you so much.

And thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.