Apr 4, 2019
Operator
Welcome to the Q2 2019 Franklin Covey Earnings Conference Call. My name is Erin, 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 Derek Hatch.
Mr. Hatch, you may begin.
Derek Hatch
Thank you, Erin. Good afternoon, ladies and gentlemen.
On behalf of Franklin Covey Company, I'd like to welcome you to our second quarter earnings presentation this afternoon. Before we begin, I'd like to remind everyone that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based upon management's current expectations and are subject to various risks and uncertainties including but not limited to, the ability of the Company to stabilize and grow revenues, 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 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, anyone 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 today to Mr. Bob Whitman, our Chairman and Chief Executive Officer.
Bob Whitman
Thanks, Derek. Good afternoon, everyone.
We really appreciate you joining us today. As you know, we’ve crossed the bridge in this transition to our subscription business model, and as we’ve said before, we expect to now generate high rates of growth and adjusted EBITDA and cash flow going forward.
To remind you, on slide three, what our expectations have been, we expect our reported adjusted EBITDA to increase from $11.9 million last year to between $18 million and $22 million this year, and that represents growth of 50% to 85% in that range and then increase to between $26 million and $31 million in fiscal ’20, and to between $35 million and $40 million in fiscal ‘21. Reported adjusted EBITDA, plus the change in deferred revenue, we expect to increase to between $30 million and $34 million this year and then to between $38 million and $42 million in fiscal ‘20, and to between $47 million and $52 million in fiscal 2021.
And then, net cash generated, which is very close to reported adjusted EBITDA is expected to increase again in the range of $18 million to $22 million this year, to between $26 million and $31 million next year, and to between $35 million and $40 million in fiscal ‘20. We affirm these expectations.
And there are three things that we hope you’ll take away from today’s call. You can see it in slide four.
First that we achieved strong second quarter results, which were ahead of our expectations. This better-than-expected performance was driven both by higher-than-expected sales and strong gross margins.
The results reflect the growth and impact of high recurring revenue, high margin, high flow through, low capital intensity subscription business model, and we’re really pleased with how that’s moving forward. We’re rapidly climbing at the mountain and are on a strong trajectory to meet our objectives for fiscal 2019 and in the coming years.
Second, this growth is being driven by our subscription-based business model. It’s driving the growth, it’s also driving attractive subscription metrics and compelling economics.
In the second quarter, All Access Pass and related sales grew 33% year-over-year and subscribers grew 29%. For All Access Pass, we’re creating high lifetime customer value, really significant visibility into future revenue, and strategic and structural durability.
We will touch on that. In addition, our key subscription metrics are now putting us in the company of some of the top subscription businesses.
Third takeaway is that we’re continuing to aggressively expand our sales force to take advantage of what we believe is an extraordinary sales force unit expansion opportunity. The economics created by the combination of our high lifetime customer value, the one-year payback period we have for hiring a new salesperson, and the relatively low customer acquisition cost we have relative to initial purchase price, it’s less than 1x the original purchase price.
It’s really creating compelling sales force unit expansion economics. We have a lot of headroom for sales force growth and we are executing on that opportunity.
So, I'd like to just address each of these takeaways in a little more detail starting with takeaway one, our performance. As I noted, we achieved strong second quarter results, which were ahead of our expectations.
This was, as I noted, driven by higher than expected sales and gross margins, and reflects the high flow through, relatively fixed costs, and the low capital intensity model that we've talked about. As you can see on slide six, our revenue growth was strong and very broad-based.
Our reported revenue grew 8.2% in the second quarter, 10.3% year-to-date, and 11% for the latest 12 months. Adjusted for changes in foreign exchange rates, our reported revenue grew 9.6% in the second quarter and 11.4% year-to-date with strong growth in both divisions.
Our balance of billed and unbilled deferred revenue, all related to subscription sales, grew 36% in the quarter, that’s an increase of $17 million compared to last year’s second quarter. Billed deferred revenue or invoiced revenue grew 24% or $7.5 million compared to last year’s second quarter and unbilled deferred revenue grew 61% or $9.5 million compared to last year’s second quarter.
Total contracts signed or contract revenue grew 6.8% in the quarter, 7.4% year-to-date, and 4.5% for the latest 12 months. But, the subscription portion of that grew 23% in the quarter and 27% year-to-date.
Profitability and cash flow metrics also increased significantly as this increased revenue flowed through as expected. As you can see on slide seven, in addition to sales information we’ve talked about, gross profit grew 8% in the quarter, 10% year-to-date, and 13% for the latest 12 months.
Our gross margin percent remained strong at 70.2%, even with accelerated growth in All Access Pass related add-on and support services. As we expected, operating SG&A as a percentage of sales to improve this year, and it has.
Operating SG&A as a percentage of sales improved 346 basis points in the second quarter, coming in at 68.3%, compared to 71.8% in last year’s second quarter and improved 423 basis points year-to-date. Adjusted EBITDA increased $1.6 million to $1 million from the deficit of $700,000 in last year’s second quarter.
There was a little rounding here, but we rounded down for your benefit. At some places, it shows – I think that's $1.7 million, but rounding makes it really 1.6 million.
Year-to-date through the second quarter, adjusted EBITDA increased $4.2 million to $4.1 million and in constant currency has increased $4.8 million year-to-date. For the latest 12 months, adjusted EBITDA increased 48.6% to $16.1 million, that’s growth of $5.3 million compared to the $10.8 million in adjusted EBITDA in the same latest 12-month period last year.
And finally, net cash flow provided by operating activities increased 44.7% in the second quarter to $13.6 million. That's an increase of $4 million compared to $9.4 million in the last year's second quarter.
And now, I’ll just briefly touch on each of the divisions. So, let’s start with the review of the results for the Enterprise Division, which accounted for approximately 80% of our total revenue in the second quarter.
As with the company overall, our revenue in the Enterprise Division was strong and very broad-based. We had strong growth throughout all of the offices in the U.S.
and Canada. We also had strong growth in each of our international direct offices, and we also had growth in our international licensee operations when adjusted for FX.
As you can see in slide eight, also our balance of billed and unbilled deferred -- sorry, reported revenue grew 8.3% in a quarter, 10.3% year-to-date and 13.6% for the latest 12 months. And adjusted for changes in foreign exchange rate, reported revenue actually grew 9.7% in the second quarter and it was growing 11.6% year-to-date.
Our balance of billed and unbilled deferred revenue in the Enterprise Division grew 36.2% in the second quarter with billed deferred revenue growing 20.5%, unbilled deferred revenue growing 65.6%, which is building a lot of contracted but -- it's the revenue that's not yet showing on our balance sheet that will help us in the future quarters. Our contracted revenue grew 9.2% in the second quarter, 10.7% year-to-date and 6.1% for the latest 12 months.
This is driven by contracted All Access Pass and related revenue which was 29% in the quarter and 39% year-to-date. The Enterprise Division, as expected, there's a lot of flow-through of this incremental revenue.
Gross profit increase 8.3% in the second quarter, 9.5% year-to-date, and 16.5%. And of course, it grew more rapidly in constant currency.
Gross margin percentage remained very strong at 75.1%, even with strong growth in All Access Pass add-on support services. Our operating SG&A as a percentage of sales improved 265 basis points in the second quarter, coming in at 65.5% compared to 68.1% in last year’s second quarter and has improved 314 basis points year-to-date.
And finally, adjusted EBITDA increased $3.8 million in the second quarter, which is growth of 50.9% compared to $2.5 million in last year’s second quarter. This reflected flow-through of incremental revenue to incremental adjusted EBITDA of 42.3%.
Adjusted for FX, the growth is even stronger. Adjusted, EBITDA increased to $4.1 million, which is growth of 64% year-to-date to the second quarter -- sorry, for the quarter and then your data, the second quarter adjusted EBITDA increased $9 million, which is growth for 43.4% compared to $6.3 million last year, and again flow through of 36%, which is again higher in constant currency.
Adjusted EBITDA for the latest 12 months grew 47.1% to $21.1 million. That's growth of $6.7 million compared to $14.3 million.
So, stepping back from the expectation, once we’ve got through the major investments that we made last year, that we would achieve strong growth in the Enterprise Division, driven by subscription business that we would have very high gross margins that would flow through the increases in adjusted EBITDA, that we would generate a lot of cash flow, and we're pleased that this is what is occurring. We've got strong pipeline of business.
And of course, our largest quarters are still ahead of us in third and fourth quarter for the Enterprise Division. And we expect to have very strong back half of the year as well.
The Education Division, and we'll turn to that quickly. As you know, the vast majority of the Education Division revenue and adjusted EBITDA is typically recognized in the third and fourth quarters due to budget cycles and to the availability of professional development days in the summer in North America.
And you can see that seasonality -- there's a slide 30 in the appendix that gives you an idea of what the full year looks like. However, the second quarter showed real strength and Education's pipeline of advanced sales opportunities is really strong.
We expect to have a very strong year-over-year growth in late third quarter and particularly in the fourth quarter. As you see in slide 10, revenue growth was 7.7% in the quarter and 10.2% year-to-date.
Reported revenue growth for the latest 12 months was 3.1%. But, excluding the impact of the expiration of this large multiyear education foundation contract from last year's second quarter, which reduced year-over-year revenue, latest 12 months revenue growth for Education Division would have been 11.8%.
And we’re now past the impact of that particular contract and won't need to talk about it in future quarters. Adjusted for changes in foreign exchange, reported revenue grew 9.4% for the Education Division in the second quarter and 11.1% year-to-date.
Balance of billed and unbilled deferred revenue in the Education Division grew 33.5% in the second quarter, billed deferred revenue growing 37.6% and unbilled growing 17.3%. Contracted revenue declined due to the usage of deferred revenue into the repeat -- or the non-repeat of the contract, 11% in the second quarter, 14% year-to-date and 1% for latest 12 months.
Property [ph] billing metrics improved, gross profit increased 5.2% in the second quarter and 11.6% year-to-date, 2.8% for latest 12 months. And excluding the non-repeat of the contract, gross profit grew 10.6% for latest 12 months.
Gross margin was 56%. Operating SG&A as a percentage of sales improved 475 basis points in the second quarter, coming in at 65.4% compared to 70.1% in last year's second quarter and has improved 438 basis points year-to-date so -- on both, for the whole Company the SG&A as a percentage of sales is improving.
SG&A is remaining flat, except for increases in commissions. And adjusted EBITDA for Education was deficit of $900,000 that compares to deficit of $1.2 million in last year's second quarter.
And year-to-date, the second quarter adjusted EBITDA in the Education Division was negative $1.2 million, which is an improvement of $800,000 compared to negative $2 million at year-to-date last year. So, again, we expect -- we have a very strong pipeline in Education and expect a strong second half of the year.
Stepping back for the Company overall, we are really pleased with the Company’s performance for the second quarter and year-to-date. We’re pleased with the momentum this building for the back half of the year and excited that we’ve really gotten a good push up, toward our objectives with again about almost $5 million improvement in adjusted EBITDA year-over-year against our guidance for the year.
Stepping back now, talk about the business, takeaway two. Our subscriptions-based business model is driving this overall growth as well as our attractive subscription metrics and compelling economics.
In the second quarter, All Access Pass and related sales grew 33% year-over-year and our number of paid subscribers, All Access Pass subscribers grew 29%. With All Access Pass, we are creating high life time customer value, also visibility into future revenue and what we believe is really increased strategic and structural durability.
In addition, our key subscription metrics are putting us in the Company’s some of the top subscription businesses. As you can see in the slide 13, All Access Pass and related to sales growth continued to be very strong in the second quarter and year-to-date.
As shown, All Access Pass and related sales in the second quarter grew 33% to $18.3 million and increased $4.5 million compared to $13.7 million in last year’s second quarter. Year-to-date, All Access Pass related sales have grown 42% to $37.5 million, an increase of $11 million compared to $26.5 million last year for the same period.
And for the latest 12 months, All Access Pass related sales have grown 50% to 71.3%, that’s an increase of $24 million compared to $47 million for the same latest 12 months period last year. The value of All Access Pass related contracts signed in the second quarter also increased 28.5% and the balance of deferred revenue billed, grew 21%.
Just as you can see on 14, this growth -- it reflects the continued significant growth in the number of paid All Access Pass subscribers. As you can see, the number of paid All Access Pass subscribers reached 397,000 at the end of the second quarter, that’s an increase of 89,000 or 29% compared to the 308,000 we had a year ago.
And encouraging and exciting for is that the average All Access Pass related revenue per subscriber also increased 17%. So, we’re having both, expansion of revenue per paying customer as well as the number of paying customers that’s driven -- revenue growth is actually even higher than subscriber growth.
In terms of quality metrics, All Access Pass is not only growing rapidly but is achieving key subscription metrics consistent with those being achieved with some of the subscription businesses with most compelling economics and valuations. As you see in slide 15, these metrics include annual recurring revenue or annual revenue retention of more than 90%; add-on services rate of more than 45%, which is highly correlated with high customer retention and expansion; a total revenue retention rate including year-over-year same client subscription and services revenue when you add services, more than 100%; relatively large initial purchase price, which reflects the relative large [ph] size of the populations for which All Access Pass is typically purchased, but this purchase price establishes the foundation for strong unit level economics including reduced customer acquisition cost as a percentage of sales, which is less than one.
Our customer acquisition costs, I mentioned, are attractive, less than one, and the expectation of achieving a $100 million in annual recurring revenue in only approximately four years is really quite aggressive growth. So, we are pleased that the quality metrics are also showing up and staying strong.
So, in slide 16, our lifetime customer value is growing. Combination of the high initial purchase price, strong gross margins, good attachment -- services attachment rate with sticky annual retention is building strong lifetime value.
And this of course is being driven by the effectiveness of our solutions and addressing customers’ most intractable performance challenges, challenges such as successfully executing on a major strategic initiative or achieving high levels of customer loyalty or building high levels of trust on team or throughout the organization, we’re building leaders at all levels who win with all stakeholders. These are challenges.
The solution to which requires change in human behavior at scale. I read the other day a comment by the renowned physicist Richard Feynman, who was quoted as saying, “Physics would be a lot harder if electrons had feelings.”
And that means a lot to us because electrons don’t need to buy into their task or collaborate or communicate clearly or build trust or work together effectively but people in organization certainly do. And so, helping organization successfully address these challenges which require large scale change in human behavior, not just skills where you get people working together, creates customers for life and builds strategic durability.
We are seeing this time-after-time as customers repeat, expand and extend their contracts. To build on customers’ success and reinforce this, we are committed to consistently adding content and capabilities to the All Access Pass to help clients achieve these desired outcomes.
You can see in slide 17, since inception, we've added, to the original offering, 1,200 micro-learning articles and tools, which came through the acquisition of Jhana and subsequent development. Broad coaching capabilities which we initially achieved with the acquisition of Robert Gregory and have been expanded to provide implementation coaching to drive home the capabilities that we are training people on.
We have three new major courses that can be offered in all modalities, live and digital. We’ve localized additional content in 18 languages.
At the end of this month, we’ll be adding our newest major course offering to the All Access Pass, one on Unconscious Bias, which is receiving a lot of advance billing and demand from clients. It’s building a culture that recognizes the -- unleashes the capability of all its people, allowing people to recognize this overcoming unconscious bias and leveraging talents of all people is a big opportunity.
In addition, there are some big organization-wide contracts we’re discussion right now. We’ll also be updating our on-demand digital library, adding another -- and also adding another offering on accountability.
We’re also in the documentation phase now of finishing licensing agreements with really two really significant new thought leaders and authors. We will announce those when they are completed.
Looking forward, we are also working to increase our assessment capabilities, as well as to increase our capabilities in data and analytics. There's a lot going on in our industry and around -- in pockets in that area.
And I think there's some great opportunities for partnerships and licensing agreements in that area. And we're also implementing other technical enhancements to better serve our clients.
So, there's a lot going on there all the time. And the path is getting stronger and stronger at the same time.
Our clients are getting value from -- the significant value from it and repeating and extending. Slide 18, you can see that reflective of this lifetime value is that we have in addition to $55.5 million balance of deferred All Access Pass subscription revenue, the expected net present value of future revenue from All Access Pass contracts is growing rapidly from $115 million in 2016, when we introduced All Access Pass to $355 million at the end of this year’s second quarter.
And we expect to get over the $500 million mark in the next 12 months or so. In addition to that, All Access Pass has two elements that provide, call structural durability.
One is that All Access Pass purchasers contract for and paid a subscription at least a full year in advance, and second, and increasing percentage of pass holders are entering into multi-year contracts. As you can see in slide 19, for latest 12 months, 27% of pass holder organizations entered into multiyear contracts, that's up from just 10% a year ago to trend; going forward, we’ll expect to move that over a third in the coming quarters and move toward 50% in the coming years.
Just one last note on All Access Pass is that on slide 20 to simultaneously achieve top tier growth in subscription related sales we’ve talked about here, the top tiers subscription economic and customer metrics we’ve talked about, and at the same time being top tier rates of growth and adjusted EBITDA in cash flow is a rare combination. And we're grateful for our clients, we’re grateful for our team.
For us, achieving the intersection of these three factors reinforces the prospect also of creating significant increases and value for our customers and our shareholders. Final takeaway number three is that we are continuing to aggressively expand our sales force to take advantage of an extraordinary sales force unit expansion opportunity.
Just again, bullet points. The economics created by the combination of one, this high lifetime customer value; two, the fact that we have a one year payback; three, for hiring and ramping up a new salesperson, we get the cost back including marketing and salary and computers and travel and cover in the first year.
This relatively low customer acquisition cost relative to the initial purchase price provides compelling unit economics, of course when we also have compelling headroom for growth. We have lots of room for growth for executing on this opportunity.
Over the next three years, we expect to add at least 75 net new client partners or sales people to our existing base of 230. In addition, we expect to see 70 -- of our existing 230 sales people, 70 or so well into -- still ramping up and we expect to see 70 of these client partners complete their accelerated ramp-up over the next few years as well.
The combination of these factors is expected to add tens of millions of dollars in additional growth revenue to that already expected to be generated from ongoing sales growth from our 160 fully ramped client partners. The combination of these factors is expected to accelerate our revenue, adjusted EBITDA and cash flow growth.
I think there are three things that put us in a strong position to execute on this unit expansion opportunity. First, as you can see in slide 22, we have a strong track record of successfully hiring and ramping up sales people.
As you can see, since 2012, we've added 110 net new client partners to our direct sales forces, many of which are still in ramp-up. As also shown on that slide, the average revenue ramp-up for these new client partners has followed a great trajectory.
New client partners have averaged more than $200,000 in sales in their first year, more than $500,000 in their second, and then typically reached at least $1.3 million in revenue by their fifth year and then grow beyond that. As I mentioned, All Access Pass strong economics are accelerating the ramp rate for new client partners because they're retaining this -- the revenue that they sell much more than the old model did, our already strong ramp rate is improving.
As a result, the ramp rate for new classes of client partners hired since the beginning of fiscal 2016 is approximately 20% ahead of that historical ramp rate of $200,000, $500,000, $800,000, $1 million, $1.3 million. And we expect that this will continue to provide us some upside on the ramp-up.
With our customer acquisition cost, as we've noted, in All Access Pass has high margins as I noted. We typically break even on approximately $150,000 total first year investment in a new client partner by the end of the first year.
And bullet three, we have a lot of headroom for growth and the number of client partners we can hire. The addressable market for performance improvement in enterprise side is more than $40 billion in the U.S.
alone. We also have a similar opportunity in education.
As you can see in slide 23, of the 55,000 companies just in the U.S. alone, only 11,000 of these have been assigned to our client partners to work with, to meet with.
4,000 of those are active customers. There are 7,000 that have been assigned that are not yet customers.
And we do a lot of things to help those folks become customers. We still have 44,000 unassigned accounts, giving us headroom to add another 400 sales people in the U.S.
alone. There are similar -- in the enterprise business, similar opportunities in the UK, Japan, Australia, Germany, Austria, Switzerland, and now China of course with three direct offices in China.
We have a similar opportunity in education, where there are 150,000. K-12 schools in the U.S.
and Canada of which 47,000 have been assigned out to sales people. We have a remarkable number, 2,700 active schools that leaves a lot of assigned schools that are not yet customers, plus another 103,000 unassigned schools.
So again, we have a big opportunity for growth. And we we've been building infrastructure to do that.
To support and accelerate the sales force expansion, we now have four recruiters on staff who review thousands of resumes and LinkedIn profiles to actually conduct more than 3,000 live and video-based interviews each year to find our 20 to 25 new client partners. In addition, we now have a high intensity five-week sales training school for all new recruits.
We’ve always had some sales academy work and a lot of online work. We now have a very rigorous five weeks sales training school for all recruits.
In addition to these recruitment and training efforts, over the past year or so, we've also significantly expanded, both the volume and breadth of our marketing and global thought leadership efforts, all with the goal of generating or nurturing leads, raising our brand awareness worldwide, and softening the beaches for our sales force. As shown in slide 24, in addition to our collection of bestselling books, prospective clients can access our brand and thought leadership through webcasts and live events or through a weekly subscription-based digital newsletter that features interviews with renowned authors and experts all on the topic of leadership.
We also host a weekly radio program on iHeartRADIO soon to be a national syndication. And our leaders now author recurring columns in Forbes, and in Inc.
magazines, as well as generate ongoing strategic articles, interviews and industry-specific trade publications. We also host multiple weekly podcasts and main stage keynotes at leading conferences including the World Business Forum.
We've always had a strong line-up of what would become bestselling books and have sold more than 44 million books worldwide. This notwithstanding our current book pipeline is actually the most robust in our history.
Next week, we released our newest book, Leading Loyalty: Cracking The Code To Customer Devotion. And we are currently creating works aimed at first level and senior leaders, as well as specific workplace topics, including Unconscious Bias, strategy execution and accountability.
We expect the combination of these recruitment, sales, training, marketing and thought leadership efforts to help us take advantage of the opportunity to accelerate the hiring and successful ramp-up of large numbers of new client partners. So, finally, in conclusion.
These three takeaways you’ve seen. We had a strong second quarter, indicative of the business model that we have been trying to build over the last few years and we expect growth and impact of this high recurring revenue, high margin, high flow through, low capital intensive subscription business model will help us to continue to meet our objectives in 2019 and in the coming years.
Second that the subscription businesses is driving that as we've talked about All Access Pass related sales grew 33% year-over-year and subscribers 29. Finally, the sales force -- having strong offerings that are compelling and connecting with customers, we now are focusing an increased effort on our -- some down this unit expansion.
So with that, I just want to step back and say this is an exciting time to be at Franklin Covey. It is really the -- it's really exciting for all of our people, because the nature of our client engagements is just more profound that we've always had this idea of developing customers for life and having deep, pervasive, ongoing relationships with clients.
What we're doing now is our whole customer engagement process is all exactly aligned against that objective. So, we're excited about it.
We appreciate your support. We appreciate the efforts of our nearly 1,000 associates throughout the world and are excited about our opportunities for continued growth.
So, with that, I'll turn the time over to Stephen Young for our outlook and guidance.
Stephen Young
Thank you, Bob. We are excited about the future and pleased to be able to share some guidance with you this afternoon.
So, as indicated on slide 26, we have said that over the next three years, we expect to achieve significant growth in adjusted EBITDA, net cash generated and adjusted EBITDA plus change in deferred revenue, and we reaffirm those expectations. As Bob said, and as it also shows on slide 26, in constant currency, we do expect adjusted EBITDA will increase from $11.9 million to a range of between $18 million and $22 million this year, which is a growth of 50% to 85%.
Two, we expected the sum of adjusted EBITDA plus the change in deferred revenue on our balance sheet will increase from $23.3 million last year to a range of between $30 million and $34 million this year. And three, that net cash generated, as we define it in the appendix, will increase from $15 million last year to a range of between $18 million and $22 million this year.
And we think those are pretty good growth expectations and we affirm this guidance. With year-over-year growth in adjusted EBITDA of $4.8 million year-to-date in constant currency, we're pleased to have gotten off to a strong start toward achieving the growth reflected in this full-year guidance.
We do expect to retain this $4.8 million of year-to-date adjusted EBITDA growth and add to it in the third quarter. The third quarter's reported adjusted EBITDA in constant currency is expected to be as much as $500,000 higher than the $588,000 in adjusted EBITDA achieved in last year's third quarter.
This guidance allows for some potential impact of the delay and rescheduling of certain government business in the fourth -- through the fourth quarter as a result of the Federal government shutdown. It also provides for the fact that substantially all of the growth in sales in the third quarter is expected to be in subscription sales whereas you know the revenue will be recognized over time.
But the increased sequential cost for marketing and for hiring new clients, partners will be reported in this quarter. So we’re excited about our start.
We're excited about the year, excited about the third quarter. So Bob that’s official guidance.
Bob Whitman
Great. Thanks, Steve.
Alright, at this point -- thanks so much. We'll now open the line up, if we could, pull for the questions.
Operator
[Operator Instructions]. And your first question comes from Tim McHugh with William Blair.
Tim McHugh
I guess first to ask on, digging the margins a little bit I guess, so the improvement this year has been mostly SG&A leverage versus kind of the gross margin being more flattish year-over-year, which is kind of opposite of last year, right? And I guess as talk you about the growth of subscription revenue and the high flow-through of that, I guess why aren't we seeing that in the gross margin?
And then secondly, as sales force hiring starts to ramp up here, do we keep seeing SG&A leverage?
Bob Whitman
Thanks, Tim. On the two questions.
First of all, the principal reason we haven't seen the growth -- same growth in margin percentage this year is our focus. After we acquired the Robert Gregory Company, we recognized that to drive home results, having coaching and other services attached to our training is really a powerful way of driving home change.
We've had an increased mix of services revenue this year that’s been quite significant, where I mean -- we've grown the add-on services revenue both in percentage of a tax rate and dollars, as that’s been the primary thing to just offset what would otherwise have been some additional growth just because of the higher gross margin of the subscription portion. We think it will be stable in this range and probably increase somewhat going forward now.
Now now that we've made that big push, it was kind of a big push, and now it will level off and we should have some continued growth there. But that's the primary thing at work on the gross margins.
Again, we feel really good about the level of gross margins. And particularly on the enterprise side, we’re at 75% blended or so, that is good.
In terms of the sales force leverage, we do believe honestly, Tim that we’ll have the same leverage in the operating model continue, and that's basically because if you look at what will happen is our adding net 20 to 25 sales people a year on average, that group will be on staff for about half the year at $150,000 a person will be adding about a $1.5 million of annualized costs on average for the year. We cover that with revenue and gross margins generated from them.
And so, it’s built into our model. And so, these expectations will have EBITDA growth of these high rates, but with flow through of 45% to 50% already incorporates the idea.
And so, with the high gross margins, generally, the addition of salespeople, because it's relatively flat each year, I mean it’s the 20 to 25 every year for the next five years is what's in our plan, it should keep the leverage I think close to very high. Is that helpful?
Tim McHugh
Yes, that's helpful. And then on a geographic basis, can you talk about I guess to an extent it's smaller than the US, but UK and Europe, I guess the UK given all those political uncertainty there right now, how are client – are you seeing in the same kind of client engagement?
Is there any impact on decision-making and ability for them to think about the longer term …?
Bob Whitman
Paul, do you want to respond to that.
Paul Walker
Yes, sure. Hi, Tim.
So, so far, we're not seeing any challenges there. Of course, there’ some FX impact for us as the pound versus the dollar transitions, but we're -- our business is growing in the UK, has been growing steadily now quarter-over-quarter for quite some time.
And we continue to win new business and expand the work we're doing with current clients. And then Germany is a new thing for us.
As we talked last quarter, we’ve just taken that business back in Germany, Switzerland, and Austria from our licensed partner, but it had nice business in the second quarter there in Germany, and our partners in Europe are also doing well right now. So, we're not seeing anything right now that would indicate that there’s any kind of problem there.
Tim McHugh
Okay, great.
Paul Walker
And just one more note. And All Access Pass continues to do well there also in the UK, it's now -- we're up to -- we’ve converted about 70% of our business now overall in the UK, is now All Access Pass and related.
And so, while they launched at the same time as the US, the English speaking country, they've kind of quickly mirrored what's happened in the US with All Access Pass in terms of percentage of overall business, which I think is helping too because we get the same expansion, retention rates, everything else that comes along with All Access Pass that’s playing out in that part of the world as well for us.
Tim McHugh
Okay, great. And just want to -- kind of numbers one, and [indiscernible] for Steve.
I guess as subscription revenue gets more important here, I want to understand it, so the -- I guess you said it grew 16% to $23 million, I think last quarter you’d said it’s grown 36% to $28 million. So, subscription revenue, I thought there would be steady kind of gradual sequential build to it, so surprised to see it down that much.
I guess, why is there quarterly volatility in the subscription revenue?
Stephen Young
So, Tim, in all of our revenue as you know, we look at a quarter-over-quarter for the prior year just because we think that that growth is more consistent than the sequential growth. And we do have quarter-over-quarter of the prior year significant growth in each quarter.
So …
Bob Whitman
Yes, so Tim, also just sequentially, and there is an exhibit in the back on Slide 32, my eyes – if I can read that number, there that shows …
Tim McHugh
Slide 32?
Bob Whitman
… yes, it shows sequentially subscription sales in the first quarter were 9.7 million, they grew to 15.9 million in the second quarter. So, I think your idea is that we have generally -- last year we had 7.8 million in the first quarter, 13.9 million in the second, 17.3 million in the third, and 30 million in the fourth, and then our first quarter is always smaller a bit.
At least throughout the course of the year, we have had both year-over-year for the quarter and good sequential growth, that page 32 allows you to compare both.
Tim McHugh
But that is sales though, right, that’s not revenue, right? I guess if I’m right, I guess.
If it’s annual subscription, you got such a high renewal rate. I'm just trying to understand why it would have been almost 28 million last quarter and 23 million and change at this quarter.
Is there some services and I guess why would it be down that much sequentially in revenue? I guess to understand the sales.
Bob Whitman
I think you are right, it shouldn’t be like it is, and so maybe I misspoke something last quarter in some way because I think you will see that we expand growth in both, maybe we can …
Tim McHugh
I will follow-up, may be my numbers are up, I'll follow up and.
Bob Whitman
That’s probably -- that’s unlikely.
Stephen Young
No Tim, as you are saying, this schedule on Page 32 is the invoiced amount, the subscription amount and the recorded revenue then as you know is -- brings in the change in deferred revenue on the balance sheet. So we can just go through how that works.
Tim McHugh
Alright, fair enough, thank you.
Bob Whitman
That’s a good question. We hope to better explain it in the future.
Operator
And your next question that comes from Jeff Martin with ROTH Capital. Jeff your line is open.
Jeff Martin
Bob, you talked a little about the add-on services delivery. I was curious if there are common trends and themes that plans are trending towards in terms what types of add-on services on a broad basis throughout the portfolio?
Bob Whitman
So Paul you want to speak to that?
Paul Walker
Sure. Hi, Jeff.
So a couple of broad trends. One is an increasing trend that is coaching as a form of support to reinforcement and so whether somebody participates in acquiring the basic knowledge via an instructor-led session or a completely self-paced online session or a blend of the two, a lot of our clients are increasingly wanted to add coaching on the back of that.
You as a participant of that if you’re a leader you may have individual one-on-one coaching sessions for six or eight weeks to drive home what you’ve learned and to make sure that you are able to apply as a leader with your team or there maybe a group of leaders that go through cohort couching, whether going through this experience together and they couch for six or eight weeks. So that’s a growing trend we see and that’s one of the reasons that we wanted to purchase the Robert Gregory organization and capitalize on that.
That’s a growing one and then we’ve always had a lot of services that come in the form of delivering -- actually helping the client install the actual learning, for example, our 4 Disciplines of Execution Solution. We do some installation upfront there a few days with clients and then they take it themselves from there.
I would say those are probably the two biggest for us. The post delivery training or couching and the actual help in training and facilitating during the installation phase.
Jeff Martin
Okay, that’s helpful. Thanks, Paul.
Bob I wanted to touch on the multiyear contract trending to 50% over time. What gives you comfort that, that is likely to happen and what kind of execution is required to make that happen?
Bob Whitman
So first of all I think the reason why it’s happening is that clients are engaging on challenges they are trying to address or opportunities they are trying to take advantage of, that they recognize upfront or do have a change in the behavior of the organization in one to 12 months period. And so I think the strength -- both the nature of what people utilized in the past, where there are kind of challenges, where they are trying to change hospital system, recently signed up a seven year contract, they said the kind of cultural change we are going to need to drive home, we need to stay on this.
And so the reason people do it is because they’ve got impact journeys we call them where seems they’re trying to accomplish that -- or just extend beyond the year and they recognize if they took one, it’s good to recognize that and sign up for a contract. If they will walk in multiple years, they also get to walk in the price for those subsequent years and actually get a discount on the second year if they do it.
So probably we’re trying to address that they are really serious about addressing challenge and they know it’s going to take an ongoing effort, it makes sense to do it. I think for us having our sales force learn to sell it is one of the big drivers is that recognizing that really kind of all of our clients that prospective that the challenges are going to be ones that are able to drive change to an entire organization and sustain it will take a longer time.
Our sales force historically in the old model wasn’t selling that way in most cases and so they are going to transition there but the thing that gives us confidence and Paul if you want to add to this, is just that the nature -- when we have the multiple impact journeys going within an existing client that extend beyond the duration -- almost all of which extend beyond the duration of the contract itself, it makes perfect sense to talk to those clients about it and we’re just building sales capabilities. We didn't do it at all two years ago.
We did it some last year. And now an increasing percentage of the sales forces have that basic mindset and skill to do it.
And customers really -- we had a brand new salesperson last year, who just decided, she wasn't going to sell anything that multi-year contracts and didn't. And so she met her first year number.
She already had her second year number already, that all of that was going to be retained and had other contracts in place. And I think people are just catching the vision.
So Paul I don’t what you want to add?
Paul Walker
No. You said it well, Bob.
That's great.
Operator
Your next question comes from Marco Rodriguez with Stonegate Capital.
Marco Rodriguez
I was wondering if -- a couple of quick housekeeping items. On Slide 14 your subscription seats.
The 397 for Q2 of this fiscal. Is that enterprise or is it total or what?
Bob Whitman
That just -- I should have spelled it out there, Paul, this is active All Access Pass -- AAP is All Access Pass subscription. So this is enterprise only on Slide 14.
This is the number of paid subscriptions seats in just the enterprise division. It doesn't include any of the seats in education.
Marco Rodriguez
And then in terms of the new course that you guys are getting ready to put out here at the end of the month, the Unconscious Bias. Was that content that you guys have licensed or it’s something you guys create in house?
Bob Whitman
Adam, do you want to speak to this. Adam Merrill who runs our whole Innovations Group has been the lead on this.
Adam Merrill
Yes. Hi Marco.
That is content that we did develop in-house. It originated with some government work we had done a year ago.
We've developed it through that process and kind of a custom work. And then last year, we decided to take this mainstream and went through our normal process of testing and development and we really excited about it.
There's been a lot of interest in this, it’s going to be powerful course.
Marco Rodriguez
And are you guys sort of I guess surveying if you will your customers. Trying to get a better feel as far as what sort of content you guys should be creating or licensing going forward?
Bob Whitman
Marco, I mean last year with implementation specialist, the way we engaged clients, we had $44,000 of face-to-face -- there’s been a voice-to-voice or one-on-one customer discussions last year with just our implementation specialist identifying what are the challenges the organization has, matching up our content to solve them. And in that we collect that data and serve it up and review it in our monthly product development efforts and understand really what are the challenges they're facing, where we might not have everything that would be the full -- the most impactful solution.
And we're utilizing that roadmap written by our clients, as well as stuff we do in the market, generally about 700,000 sales calls, we make a year. We're excited gathering that data and we have a list of 11 problems we're trying to get solved.
We have solutions to eight of them now. There are three others that we are working on that are really -- we know they are significant.
Our clients would like to us to help them solve them, they would hire us to do it if we had them in. And so it gives us a good product development roadmap for the next two or three years.
Marco Rodriguez
And then kind of shifting gears here to the education side of the business. Maybe if you could talk a little bit on the progress that you're making here in terms of the sales strategy kind of changes going direct to the school districts?
Bob Whitman
Great. Sean, would you like to address that?
Sean Covey
Yes, I can. Yes, well, we feel we are making really good progress on those, we have, as you know, there are 15,000 school districts in US and Canada, we're in 800.
So we've got a lot of headroom for growth there. And what we're doing is that we're spending a lot of time training our client partners on how to penetrate into districts.
We're putting our focus on, the best way to expand is, if we have three schools in a district -- three Leader in Me schools in a district, we have 50 schools. Our focus is going on going on -- going to the next 10 schools in that district, instead of going to 10 other schools in new districts.
So our focus is more on districts. We're training around it.
And then what's helping us most I believe is just the research that we have that’s come out over the last year, showing the impact and the efficacy of Leader in Me, on behavior improvements, on academic scores, on attendance and so forth, and this is allowing us to penetrate districts and get into districts that we couldn’t before because we didn't have the data and we didn't have the Castle certification, which we now do. And so this is helping us penetrate in the districts that wouldn't even look at us before because we just didn't have the data.
And the more sophisticated the district, the bigger the district generally, the more data they require. So, I feel like making really good progress, we also have a new model instead of -- traditionally we sold a single Leader in Me school.
We have a new model we launched last year called the district model, Leader in Me district model where we go to a district and we say it's less expensive. You can get to more schools in a more economic manner, where we will certify your own people to run this inside of your district, it’s higher profits for us and the ratio -- the margins are better for us.
It's not as much money per school as we're getting now, but we find it's more sticky. And this new model is going really well.
We have about 50 schools in it right now and we expect to add another 150 to 200 this year in this model. So again, this is one of the big ideas we have for the future and I think it's going to be very key.
I think the most promising thing is our retention rate, where we have -- penetration in districts is much higher, it’s in the mid 90s, compared to high 80s elsewhere, so. Is that helpful?
Operator
Your next question that comes from Zach Cummins with B. Riley FBR.
Zach, your line is open.
Zach Cummins
Just thinking along that, that education beam, so I believe in the last earnings call and a little bit at the Analyst Day you talked about having a little bit more of an elongated business model for the education segment, a little bit of a cheaper upfront cost and maybe attract some more customers to get on to the Leader in Me solution. Can you talk about the rollout of that and kind of the progress and whether you've seen some increased -- I guess increased attention or wanting to adopt that solution here in the education segment?
Bob Whitman
Sean?
Sean Covey
Yes, sure. Yes.
Yes, so we started this last year and I think one of the reasons our gross contracts are down year-over-year is because some of the schools entered into this last year where we basically -- we said over three years at 80,000 to implement and install the Leader in Me. With some of these new models, we have made it less expensive.
It's a same amount $80,000 that is over four to five years. And also the different model I just spoke of is also less expensive way of getting started.
So between the two of them last year, we had -- of our 450 schools that we brought on, we had probably 200 of them go to this new model. We feel like over the long-term, it's going to be really good for us, because we're going to be able to get more schools in.
Our pipeline looks very promising right now. Last year, we brought on, as I mentioned, 447 new schools, we're looking at bringing on over 500 this year in the US and Canada and many more beyond that in other countries.
And so -- and we also think it's going to be stickier down the road, because they're paying less upfront, there we explain to them this is a four year or five years implementation model. Even though they're not signing contracts for that, they're basically agreeing to it.
We find that it's -- once they've kind of set the stage for we're going to do this for four years or five years, they typically stay, the retention rate is helpful. So we feel like it's promising.
This is our second year of doing this. And we think the future -- the key to this is going to be getting more schools, it's all about net new schools, and keeping them -- and keeping that retention rate as high as possible.
So that's that we're making. So we'll continue to have options.
So we still have the traditional recommended model that we've been doing for many years. And last year, we just said we introduced some new models with lower upfront costs, this year we will probably introduce another option as well, that's lower upfront.
Again, with the end in mind of getting several thousand hopefully 5,000, 6,000, 7,000 up to 10,000 schools that are paying their annual membership fee, the subscription fee that we have, and then trying to create some more add-ons from there.
Zach Cummins
Understood, that's helpful context. And then on the enterprise side, you still have 4,000 active customers, but there's still 7,000 that are assigned, but not yet customers.
Can you talk about some of the approaches you take to really get into the door and drive some interest in the All Access Pass?
Bob Whitman
Paul?
Paul Walker
Sure. Yes.
So those -- so backing up for a second, we used to assign geographies out to our sales force. And now we assign out a list of named accounts within a geography so that approximates to where our client partners live.
And you saw there on that slide with about 7,000 of the 11,000 assigned that are on some of -- list -- on the client buyers list but we're not yet doing business with them. And so what we're doing -- I mean that's the primary responsibility of the client partner is to go and prospect and to try to get into those accounts.
So we equip our client partners with sales and marketing tools to do that. And then we're constantly inviting people, decision makers or potential decision makers from those companies to come to our events.
Bob talked about how we're doing increasingly more and more events on key topics like Unconscious Bias or different aspects of leadership. And so we'll invite people to come build events, and we will -- through our thought leadership efforts we’re dripping on them with different pieces of thought leadership from, whether it’d be on sales execution or strategy execution and leadership development.
And so our sales people are out every day trying to prospect into those accounts, as a primary activity mentioned that of theirs. And then those same activities that we're doing on the 40 or so thousand unassigned accounts, we're not just leaving those off to the side and not addressing them at all.
We're trying -- we do attempt to market to the entire addressable market for us in the United States and Canada and then we flow those with lead to our sales people also. We’re just leaving those off to the size of the reserve and we have an officially assigned them to our current sales force if we want to use those as we hire these net new client partners every year and we will find those accounts out at that time.
So we’ve got a robust marketing team and efforts and a big thought leadership effort that Bob mentioned earlier in his remarks as well.
Operator
And our next question comes from Samir Patel. Samir your line is open.
Samir Patel
Hey, Bob. Can you talk -- on the two licensing deals, can you talk about how you think about the ROI?
And then related to that, are these going to be part of versus in addition to the typical content development budget?
Bob Whitman
Yes, it’s -- on the second question, it’s included in our content development budget. We -- historically the company has spent 4%, we got a content development and we’re updating budget of 4% of the prior year’s revenue.
That during the big investment phase over the last couple of years where we’re adding the new portals, new technological capabilities. We moved that up to north of 7%.
And going forward, they will have a budget between 6% and 7%. And so any of these new content partnerships et cetera, fall within that budget.
So we don’t expect to have a lumpy development budget, we’ve got plenty to do, we’ve got lots of content now that’s not -- it’s hardly ever the reason why we’re not winning a deal because we don’t have enough great content. We’re trying to win -- open new avenues.
And so what typically happens is you’re your licensing content -- when you’re signing a multiyear license agreement that has some kind of royalty payment that goes with it, that’s included in that 6% to 7% total product development budget as well as whatever we have to do with that content to build that into course where the actual videos or whatever else, that all fits into budget. So if you can kind look at the revenue going out of the years and know that we will be spending about between 6% and 7% of the prior year’s revenue, the following year, and about half of that will be expensed and about half will be capitalized and run through our -- this is reflected in our gross margins already.
Steve?
Stephen Young
Some of it’s in depreciation as it relates to the course.
Samir Patel
Perfect, that’s all I got, I just want to make sure, and I’m 90% sure you’re not going to tell me but is one of these authors from Colorado?
A - Bob Whitman
One certainly goes to Colorado frequently.
Operator
And your next question comes from Patrick Retzer with Retzer Capital.
Patrick Retzer
You’ve been conspicuously silent on this call both in the hand out and verbally about stock buybacks, you’ve got a long history of doing substantial buybacks, you’re piling up cash on the balance sheet. Do you think we will see or hear anything on buybacks over the balance of the fiscal year?
Bob Whitman
Pat, thanks very much. As you know we have both cash and availability under our credit facility.
For us, we’ve now collected a lot of receivable. We had a good quarter in terms of cash flow beyond the investments we’re making, this is normal levels of investment in the business, that is our number one outset.
That said, the next thing on the list for investment. So we tend to do it sometimes in day by day and other times in larger blocks and -- but yes, it's on there.
Steve if you want to?
Stephen Young
Yes.
Bob Whitman
So, the reason we've been building this up, we believe, honestly, we said, now that we've made the big -- we've had the big investment years, we expect to see to generate lots of excess cash. And given our expectations, we can't see than a better use after investing in the business to return it to shareholders to repurchases.
So that continues to be our strategy.
Operator
And your next question comes from John Lewis. John, your line is open.
John Lewis
So just to go to Slide 17, back to the new content coming on the platform, Unconscious Bias, will you charge an incremental fee to pass holders for that or how will you price that or is that just an additional piece of value that comes with the pass?
Bob Whitman
It’s additional piece of value. We’ve had good price increases every year in All Access Pass.
We had 7% price increase in each of the last -- well 10% the first year, and 7% last year, we will have another -- we expect to have another price increase this fall. So part of the value is that just it's -- we're not trying to do a lot of things outside the pass, everything we're doing would be just to add value to the pass, it allows to -- we hope to continue to increase both the total revenue per pass and per user in the pass.
John Lewis
Okay, that's helpful. You said that there's eight or 11 areas of focus ideally for your All Access Pass and it sounds like your content in general, can you give a broad area of the three areas that you don't have something that you would like to?
Bob Whitman
Yes, I mean, we have the map John and we haven't announced publicly what those are. I’d say just generally out in the world something like change management, one of the biggest and most difficult things to get a whole organization to make a broad change.
And so that's an example of one of those three areas. That’s the kind of thing where we've got plenty of content but organizing it around the framework where we own the entire framework, operating system for doing it, et cetera.
That's an area that is challenging for almost every organization, maybe couple of other big ones that come out into -- it's not like we have never run it through before but we're trying to stay let's really put the full weight of the organization's capabilities and budget behind solving some of these intractable problems. And so what I suspect, we’ll always have headlights out ahead of what we have there aren't just 11 that won’t end there necessarily.
But on the other hand, I think in those 11 it makes up 83% of the real reasons that people for they need scale change in human behavior, we can cover high percentage of all the money being spent in those 11.
John Lewis
I take it the two significant authors are probably outside the Covey your organization, would you -- if you bring these two significant authors onto the All Access Pass and into the Covey family, would those be incremental revenue streams or would those be part of -- how would you….?
Bob Whitman
They'll be part of the All Access Pass, they will just add value to it and yes we've decided not -- we're not going to do with the pass and then have also, there's a new course you can buy it in addition. We have three different levels in the pass.
You can buy a Personal Effectiveness Pass, an All Access Pass, an All Access Pass Plus, which includes additional content. So I mean some of these might -- will go into different tiers adding value to the other tiers but we're not intending to do...
John Lewis
Just two other quick ones on this. Is this like in the next one to three months or without tipping your hand over the next year or what kind of timeframe would you hope to be able to announce these type of deals?
Bob Whitman
Yes, I think in the next quarter likely we’ll at least announce one of them. Whereas they had this parmesan wine, just got to be summer wine before it’s time, we signed the deal before -- these are finally carried, there’s a lot behind.
But we're now in documentation. And I suspect in the next 90 days, we're likely to have one or both concluded.
John Lewis
And you highlight that you guys have I think 44 million books sold on your content today, are these large scale well-known brands with your book sold?
Bob Whitman
Yes.
John Lewis
Okay. Great.
Just to jump to Slide 23. I know and not to pick on the slide, but I think we've seen this slide for a number of years, the 4,000 active customers.
And you guys have talked about headroom for 900 to 1,000 client partners, but at 25 a year, it'll take 30 years to get there. So I guess my question is, what is the path to accelerate and be able to bring your solutions to customers that can use them in a more timely manner?
I mean, how do we -- I mean, it seems obvious, either you need to do more deals, or the size of the deals need to increase. But I guess, the point -- a sharper point on the -- the point is, it seems like you’ll need to get higher average selling price in All Access Pass.
New tools you can add, and I think we've had some emails on Betterworks or Culture Amp. What they're doing or doing something to create more pull demand from your in-customer to really be able to scale it.
I guess how do we how do we get outside of 4,000 customers?
Bob Whitman
Well, first I’d say, geographically obviously just US, we have access to lot more customers to start with, and we have more customers within just US. Second sales force expansion, I don't think honestly that the lack -- I mean, what we're talking about is trying to grow up EBITDA 45% to 50% a year for the next several years.
And so we're not holding back on growth essentially. So for us our target -- and we hope we can attract shareholders who want above everything really high growth in EBITDA and cash flow, and a company that will deploy it in a smart way.
We'd like to accelerate the revenue side, if we just add the 20 to 25 a year, which is not a bad number, we can meet all these growth objectives and more if we do that. So to go beyond this we're building infrastructure that could allow us to get to 30 to 40.
But there are obviously a lot of clients and a lot of other people in the world if you're just not going to reach directly. And so our thought leadership investments are one of those as Paul mentioned, we're not -- probably we not only have 11,000 of the US assigned, we have now started these thought leadership and marketing efforts to reach the other 44,000 so they can raise their hands so that they have a chance to even know a sales person may not otherwise have called them and once they raised their hand they will.
So thought leadership is a way we can do it. We also have the opportunity to do strategic partnerships with people who have different clients, they access some of these clients in different ways.
And so they are actually expanding distribution. For us if we continue to do just what we're doing, we think we can grow EBITDA and cash at these high rates of return if we can do some these additional things which of course we're in discussions about that could accelerate further.
Operator
And there are no more further questions at this time.
Bob Whitman
Okay. Well, thanks to everyone for spending the time with us this afternoon.
Just stepping back, we really are excited about what's happening. And really more than excitement is where -- we -- there's a sense of satisfaction that comes from seeing the transition work, senior sales force ramp up.
We've got a lot of opportunity for us and as John pointed out there's a lot going on out in the world. And we hope that we will be the partner of choice for people who are trying to have an impact, who don't have either the brand, the distribution or the capital that we have.
And as we think it would be plenty of opportunities if there's one of those things out there. That is the key to accelerating revenue, we're in a good place to do it.
And so thanks very much. We look forward to talk to you all individually soon.
Thanks so much.
Operator
Thank you, ladies and gentlemen. This concludes today's conference.
Thank you for participating. You may now disconnect.