Robert Whitman - Chairman and Chief Executive Officer Stephen Young - Chief Financial Officer Shawn Moon - Executive Vice President, Global Sales and Delivery Sean Covey - Executive Vice President of Global Solutions and Partnerships and Education Practice Leader Derek Hatch – Corporate Controller

Joe Janssen - Barrington Research Jeff Martin - ROTH Capital Partners Dan Trang - Stonegate Securities

Thanks John. On behalf of Franklin Covey I would like to extend our welcome to you to our earnings call this afternoon to discuss the financial results for the quarter ended June 1st 2013.

Before we get to the entertaining part I would 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 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, any one 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 actual future performance will meet management’s expectations. These forward-looking statements are based on management’s current expectations and we undertake no obligations 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.

I’d also like to call your attention to the information below that describes Regulation G regarding non-GAAP financial measures and are used with the non-GAAP financial measure or adjusted EBITDA. With that out of the way I’d like to turn the time over to Mr.

Bob Whitman, our Chairman and CEO.

Thanks Derek. I’d like to welcome everyone to our fiscal third quarter conference call and appreciate all of you joining us.

As shown in slide 3, over the past years and quarters we’ve been pleased to be able to achieve both significant and consistent growth in revenue, adjusted EBITDA, adjusted EBITDA margin, operating income, net income and net income per share diluted. Well in any given quarter growth may have been higher or flatter on a trailing 12 months basis.

As you can see the growth for the each of these metrics has been strong and consistent. We were pleased to be able to continue these trends in the third quarter and for the trailing four quarters where we achieved growth on all of these metrics.

Some key financial metrics for the third quarter and for the trailing four quarters follow. First, revenue grew 8.7% for the quarter and 9.7% for the trailing four quarters and that was even after the devaluation impact of the Yen in our Japan office.

Adjusted EBITDA grew 8.9% for the quarter and 18.6% for the trailing four quarters. Adjusted EBITDA margin increased to 14% for the quarter and was at 15.8% for the trailing four quarters.

Income from operations grew 19.7% in the quarter and 53.9% for the trailing four quarters. Net income grew 30.6% for the quarter and 34.7% for the trailing four quarters and net income per share diluted increased 44.4% for the quarter.

I’d like to also briefly share some key metrics leading to our progress on our other key strategic objectives. In 2005 Franklin Covey laid out a plan for taking advantage of the huge opportunity which we believed existed in the performance improving industry.

This plan included three elements which have become to be known internally as the three R’s, which are Relevance, Reach and Returns. The financial data just shared provided a brief update on our returns objectives.

So I’d like to now briefly share some headlines regarding our continued progress on our relevance and reach objectives as well. Our relevance objective is about the quality and impact of our solutions.

We’ve made strong progress on this objective over the years and this progress continued during the third quarter. It has several metrics.

First, the quality of our best-in-class solutions provides us with pricing power. As you can see on Slide 4, our gross margins have increased steadily over the past years and quarter.

This trend continued in the third quarter where gross margins increased from 63.3% to 65.6% in the quarter reflecting an increase in the mix of client employed facilitated purchases as well as the improvement in cost of goods sold in our on-site offerings. You can see also for the trailing four quarters, our gross margin percentage increased to 67.2% from 65.2% for the same period a year ago.

Second, we’ve made good progress increasing the flexibility and scalability of our content delivery options showing strong growth in every one of our delivery modalities. As you know, some companies have made delivery modality, for example online delivery or subscription service deliveries their superordinate strategic choice.

Having made that fundamental choice, they then do their best to create good content that could be delivered effectively through that modality. Our strategic approach has had a different focus.

Our first priority has been on the quality of our content as measured by client impact, and then as you can see in slide 5, we utilize various modalities to extend our reach and to increase the stickiness of our content inside client organizations. During the third quarter, delivery increased at each of our delivery modalities.

On-site deliveries increased 12.5% to 2702 training days delivered in this year’s third quarter compared to 2401 training days delivered in the last year’s third quarter. For the trailing four quarters, on-site training days delivered increased 10.9% compared to the same period last year.

These on-site training days, though they represent a smaller percentage of our total business, are often the start of much more pervasive client implementations that often result in clients licensing in-house trainers who then purchase content directly from us. This helps to embed it in their organizations.

The second delivery modality, our licensed, client-employed, in-house trainers, we call them licensed facilitators who are employees of client organizations. Our revenues from that group increased 19.9% to $9.2 million during the quarter and increased 27.3% to $40.6 million for the trailing four quarters.

Technology-assisted delivery is increasing significantly throughout the company. More than 85% of our licensed, client-employed trainers now become certified virtually either online or through our web based delivery.

Approximately 45% of our revenue in our execution practice now includes the purchase of a license to utilize our My4dX software which drives implementation of our execution methodologies.

The third metric we look at is, it relates to relevance, is to continue to have a very high revenue renewal rate, which reflects our impact in client organizations. Approximately 90% of our revenue from one year repeats in the next year and this from the trailing 12 months, it stayed in that range.

Finally, the final metric is we’ve achieved significant growth in all of our practice areas over the past several years. As shown in Slide 6, since we began this initiative, each of our practice has grown and grown significantly.

You can see on that chart, leadership has grown from 32 million to more than 40 million; education from about 3 million to 18 million and so on, but each of our practice areas has grown significantly. If you look at Slide 7, for the quarter, we continued to have significant revenue growth in a number of our practice areas with trust growing 66% during the quarter, education 63%, sales performance 36% reflecting also the integration of the NinetyFive 5 team, and execution growing 7%.

Revenue in our customer loyalty practice decreased 13% in the quarter, reflecting a decline in revenue related to one large contract, which this would be the last quarter that we have that comparison, and it was partially offset by the expansion of two other large clients and two new account wins. Revenue in our leadership practice decreased 14% in the third quarter, reflecting both the emphasis during the quarter on our trust practice.

We had a major marketing initiative tour of the United States, various city tour that emphasized the trust practice in this quarter and the focus of our leadership practice team right now is on the refinements and the pending launch of our new leadership offerings in mid-2014. As previously noted during the third quarter, we completed the purchase of NinetyFive 5, the sales transformation company which is expected to roughly double the size of our sales performance practice and expand our offerings to include the five online sales improvement tools and coaching and we believe this creates strong revenue momentum going into the future.

It’s already starting to, we’ve got some very good wins during this quarter integrating their content with ours and so we’re off to a good start. So that summarizes our reach initiative.

The final of the three R is the Reach initiative which is about significantly increasing the size, capability and productivity of our sales and delivery courses around the world. As many of you know we have hundreds of unfilled sales territories in the US and Canada and in our direct offices in Japan, UK and Australia as well as international account practices.

This provides us with a lot of headroom for continued and accelerating growth. The key metrics we established years ago, by which we measure the success of our reach initiatives include first, continuing to increase the size of our sales force.

Our number of client partners increased from only 48 in 2004 to 130 at the end of fiscal ’12, with almost 70 client partners still in their ramp up. This group of ramping client partners creates embedded future growth as they complete their ramp up in these coming years.

As of the end of the second quarter, our client partner accounts are 137 which should bring our total to approximately 150 active CPs by yearend or shortly thereafter. We’ve also established office by office plans for hiring 30 new client partners in each of the next two years.

So we feel good about our first metric. We are growing the size of our sales force.

The second metric is having new client partner ramp up according to plan. As you can see on slide 8, revenue from ramping client partners during fiscal ’12 exceeded expectations.

These ramping client partners generating $40.5 million in revenue in fiscal ’12 compared to our expectation of $35.8 million. With the addition of the new sales manager position which we implemented this year to focus exclusively on helping new client partners ramp up, we’re also making very good progress in ramping new client partners this year and on retentions and we’ll report further on this in our yearend report.

The third metric is having the productivity of fully ramped client partners continuing to increase. The average revenue per season client partner as we call them seasoned fully ramped up, increased from $816,000 and a little more than $800,000, 816 in fiscal 2004 to more than $1.5 million in fiscal ’12.

These client partners’ productivity has continued to increase this year with the average revenue per season through alumni client partners increasing by double digits through the third quarter. The final metric here is having the productivity of our international licensee partners also continued to increase.

As shown in Slide 9, the growth revenue of our international licensee partners on which we are a loyalty of approximately 15% has increased from 24 million in fiscal 2004 to 82.3 million in the trailing four quarters end of the third quarter. Licensee royalty revenue increased 9.3% in the third quarter and 8.7% in the trailing four quarters.

So hopefully that’s a useful update on each of our strategic objectives. The final thing I’d like to talk about is give some comments on our outlook.

Each of our key momentum indicators continues to be very positive and the momentum in our business continues to be both strong and broad based. I’ll talk about two elements of that.

First, our corporate pipeline of booked days and awarded revenue. As shown in Slide 10, our corporate pipeline of booked days and awarded revenue which as you know is a measure of business already booked or rewarded in our four geographic direct offices in the US and our international account practices and in the government excluding one large contract, grew 6.5 million or 23% in the quarter to 34.2 million as of the end of the third quarter.

This for us is a very important metric because these are booked or contracted business typically delivery in the coming quarter or two quarters. As also shown in Slide 10, this particular government contract, the pipeline associated with which reflects a full year pipeline declined significantly during the quarter, 7.5 million during the quarter.

This decline represents primarily, is primarily rated not to the value of the contract but to a change in the contracting timeframe given this year’s government events for the renewal of the large government contract. Then the one year renewal process for this contract occurred at the end of the third quarter last year and was thus for the whole contract through a full year was included in our pipeline and as of the end of last year’s third quarter.

For this year it’s just the final quarter. This year’s contract renewal process is scheduled to occur in our fiscal first quarter.

So we hope to have back a significant amount of pipeline related to this contract early in our first quarter and see our government business grow again in fiscal 2014.

So overall we’re very encouraged by the strength in our third quarter results and the momentum we’re continuing to see in the business, the continued growth in the size and productivity of our direct sales forces and by the growth in our international licensee partner operations. Despite continued softness in our government business which will extend through the fourth quarter, the overall momentum and trajectory of our business and what we believe it indicates for the coming quarters and for fiscal 2013 as a whole and beyond is very positive in its consequence.

We are reaffirming our fiscal 2013 full year adjusted EBITDA guidance range of between $30 and $32 million with the hope of ending up in the upper half of that range. I’d like to thank each of you for your continuing support and guidance.

And now I’d like to turn the time over to Steve Young, our CFO for some brief remarks. Steve?

Thank you, Bob. Good afternoon, everyone.

It’s nice to be with you. I’m happy to just review a little bit our income statements and a couple of comments about our balance sheet.

First of all our income statement. Revenue as shown in Slide 11 in the three and three-fourths years since the end of fiscal 2009, a time when many in the performance improvement industry have struggled to grow, we are pleased that our revenue has grown from $123 million to $180 million, an increase of more than $57 million or 46%.

During that time period, revenue increased $3.6 million to $44.9 million there in the third quarter, an increase of 8.7% compared to the $41.3 million in revenue achieved in the third quarter of FY 2012. For the trailing four quarters, revenue grew $15.9 million or 9.7%.

The breakout of revenue for each of our channels is shown on slide 12. Adjusted EBITDA increased $500,000 or 8.9% to $6.3 million compared to $5.8 minion in the third quarter of fiscal 2012, which you can see on slide 13.

For the trailing 12 months, Adjusted EBITDA increased $4.5 million to $28.5 million, an 18.6% increase compared to last year. Adjusted EBITDA for both the third quarter and for the trailing 12 months was the best ever for our current business.

Income from operations as shown in Slide 14 increased $0.7 million for the third quarter $4.1 million, a 19.7% increase compared to the third quarter of fiscal 2012. For the trailing four quarter period, income from operations increased $7.1 million to $20.3 million, an increase of 53.9% compared to the same four quarter period last year.

Net income increased $0.5 million for the quarter as you can see in slide 15, a $2.1 million or $0.13 per diluted share, a 30.6% increase compared to the $1.6 million, or $.09 per share in net income achieved in the third quarter of fiscal 2012. For the trailing four quarter period, net income increased $2.6 million to $10 million, a 34.7% increase compared to the same period of last year.

As you can see in slide 16, our net cash generated for the quarter decreased a little bit, $200,000 to $4.8 million, down 4.2% from the net cash generated in the third quarter of FY’12. This reflects an increasing curriculum development cost of about $500,000 and cash paid for taxes which increased about $250,000.

For the trailing four quarters, our net cash generated increased to $22.4 million, an increase of $3.6 million or 19.2% compared to the same period last year. Our Adjusted EBITDA margin also remained very strong for the quarter and expanded significantly for the trailing 12 months.

As shown in slide 17, despite significant year over year staffing investments in new client partners and other sales support people, our Adjusted EBITDA to sales remained a strong 14% for the third quarter. For the trailing four quarters, a flow through of increased revenue to Adjusted EBITDA resulted in an increase in our Adjusted EBITDA as a percentage of sales to 15.8%, up from 14.6% for the same period one year ago and 13.4% for the 12 months prior to that.

So, a reasonable and steady increase in that percentage. We expect continued strong revenue growth and continued high flow through of incremental revenue to Adjusted EBITDA.

We expect our Adjusted EBITDA as a percentage of sales to continue to increase and believe it should reach approximately the 18% on a full year basis within the next year or so. We are particularly pleased that these operating results are being achieved while continuing to make significant ongoing growth investments in the business, including R&D, practice leadership, marketing, hiring new client partners, training consultants and event marketing people and in building, mentoring and training infrastructure for our direct offices.

As well as helping us accelerate our international licensee partner growth. While these investments totaled more than $17 million in the trailing four quarters, we were still able to increase Adjusted EBITDA, our operating income and net income for the same 12 month period.

We should see significant opportunities for continued growth and believe that we’ll be able to continue to make high return in our investments in each of these areas. Over the past three and a half years our revenue has increased approximately $57 million.

Over this same timeframe, over $25 million or 45% of this increased revenue flowed through to Adjusted EBITDA, with Adjusted EBITDA increasing from $3.2 million to $28.5 million over that period. For the trailing four quarters our flow through has been 28.1%.

For the third quarter, our flow through and incremental revenue through incremental Adjusted EBITDA has been 14.2%. this reduction in flow through for the quarter reflects absorption of the increase in hiring and other sales force infrastructure costs necessary to increase the number of annual client partner hires to 30 and to help ensure their ramp up.

We expect our flow through to be a bit higher in the fourth quarter than it was in Q3. We also expect flow through to be significant over the next year or so for us to reach our stated targeted of 18% Adjusted EBITDA for sales.

And now a little bit on the balance sheet. When you look at our balance sheet, you’ll see that our current balance sheet includes preliminary purchase accounting for the NinetyFive 5 acquisition.

As you know, purchase accounting may take up to a year to complete. While we don’t expect to take a year, the current recorded amounts in the balance sheet are preliminary based upon preliminary evaluations and are not final.

You’ll see that the purchase accounting preliminary impacts or primarily impacts intangible assets, goodwill, current liabilities and contingent consideration as you would expect. You’ll also see at the end of Q3 that our cash balance was $8.9 million.

This was a generally expected cash balance considering $3.3 million that we paid in the quarter as acquisition related payments to NinetyFive 5 and CoveyLink will continue to have quarterly acquisition related payments for the next year and potentially for a few two years after that as we expect NinetyFive 5 to do well. Those will be earn-out payments.

So next just a few things that we normally go through. Our product amortization costs for the quarter were $500,000.

We expect it will be approximately $2 million for the year. Depreciation and amortization expense last year was about $5.5 million.

Share-based compensation in the quarter was about $500,000. We expect to be around $2.8 million for the year.

Depreciation and amortization totaled $5.5 million last year. We expect that to be a little less than $6.3 million this year, reflecting the NinetyFive 5 acquisition and some computer additions.

Net interest and discounting cost totaled $600,000 again this quarter. We expect to be a little less than $2.5 million this year.

We now expect our effective tax rate to be a little less than 42% for the year. And as you noticed, our weighted average number of shares, both basic and diluted decreased significantly this quarter to less than 16.5 million shares.

We currently expect our number of shares outstanding will still be less than 16.5 million by yearend. So now with that we’re happy to turn the call over to Shawn Moon and Sean Covey to review our revenue performance in each major channel.

Shawn Moon heads of all our direct offices, our execution trust and sale performance practices. As you know Sean Covey heads our education productivity practice, our international licensee partner network and our innovations group.

So Shawn hit away.

This is Shawn Moon. There are two Shawns so this is Shawn Moon to clarify.

Good afternoon everybody. Revenue in our five direct offices in the US and Canada grew 11% in the third quarter and 14% of the trailing four quarters.

Revenue in our four geographic offices, excluding the government team, grew 12% in the third quarter and 15% for the trailing four quarters. Revenge in our government services region increased $200,000 or 4% in the third quarter.

The government services revenue increased 7% for the trailing four quarters. In our international direct offices, our revenue for the offices in Japan, the UK and Australia declined 8% during the third quarter with the benefit of a 3% increase in revenue in the UK and a 2% increase in revenue in Australia being more than offset by a 15% foreign exchange related decline in revenue in Japan.

In Yen, Japan’s revenues grew 2% actually while their EBITDA grew 21%. For the trailing four quarters revenues in these direct offices decreased $300,000 or 1% after the impact of a 1.6 million Yen related decline.

Without this foreign exchange related decline, revenue for the trailing four quarters in these offices grew $1.3 million or 5%. The investments we’ve made in our US direct offices, including the investments in our sales managers, our marketing and events, our practices et cetera, have resulted in a revenue growth of 14% over the trailing 12 months.

We have started the implementation of these investments in our international direct offices. To talk about the sales performance practice in NinetyFive 5, talk about the revenue with this practice, increased $900,000 or 41% in the third quarter, reflecting an increase from the acquisition of NinetyFive 5.

As you know shortly after the end of our fiscal second quarter, we announced the acquisition of the sales transformation company NinetyFive 5 as a strategic addition to Franklin Covey’s sales performance practice. We belie this acquisition positions Franklin Covey’s sales performance practice to be one of the world’s largest sales enablement company.

Not only does this double the size of our sales performance practice, it also adds the technology based description service component to support and implement Franklin Covey’s award winning sales methodology. Bob talked about that a few minutes ago.

NinetyFive 5 has been a successful licensee Franklin Covey sales and leadership training content for the past six years. So as a consequence the integration of both companies’ methodologies and organizations are expected to be highly synergistic for our clients.

The consideration for these assets purchased consist of $4.2 million, the assumption of certain liabilities with potential earn-out payments up to a maximum of $8.5 million based on cumulative EBITDA. Revenue in our customer loyalty practice decreased 13% in the quarter.

As we mentioned, reflecting a decline in the revenue related to one large contract, partially offset by the expansion of two large clients and two new account wins. Sean Covey, go ahead.

Hello everyone. This is Sean Covey now.

I hope you’re all doing well. So let me report on our royalty revenue from our international licensee partner offices.

Our international licensee partner network as you know is composed of 44 partners that represent over 160 countries and as was mentioned before, they all pay us a 15% royalty on topline revenue. These partners their royalty revenue grew 9.3% in the third quarter and 8.7% for the trailing four quarters, reflecting continued momentum in our licensee partner networks.

This growth reflects our continued penetration in the Asia pacific region, particularly in countries like China, Indonesia, India and Thailand as well as very strong performances in Brazil, in Mexico and Central America and throughout the Middle East region. We’re also very excited about the growth we’re experiencing in Africa from seven new partners that we have signed up during the last year, including new partners in Kenya, Botswana, Uganda and Tanzania.

Our partner network has been one of the most consistent areas for our company, having had strong growth for 14 consecutive quarters. We continue to have significant growth potential in the following three areas as you look at our network.

The first is building untapped markets. We have plans to activate and to build each and every market that we’re in.

there are currently many large markets that we’ve barely touched so far that represent large growth opportunities. This is Russia and France and Italy.

We’re also just beginning operations throughout the African continent and we expect a lot of growth there. Second, growing the sales force.

We’re teaching our partners how to implement best practices around expanding the size and increasing the productivity of their sales forces just as we are doing in our direct offices. And then third, expanding our practices.

We’re helping our partners expand into new practice areas. Today the majority of their business comes from just one practice, the leadership practice and we see a lot of room for growth as they begin to build out the other six practice areas.

So let me just share a few words also about our education practice. Revenue in our education practice increased $1.5 million or 63% in the third quarter and $6.4 million or 52% for the trailing four quarters.

We anticipate rapid growth for the foreseeable future and we’ve now signed up about 1400 schools in our whole school transformation process which we call the Leader in Me. The primary reason for this strong growth is because of the kind of performance results that we’re getting in the schools that are very consistent across the board.

Results such as increased test scores, increased student self-confidence, greater teacher and parent satisfaction, declining discipline referrals and school climates that everyone seems to want to be a part of. Many of the schools find their own funding to pay the Leader in Me process, but we’re also finding lots of other money pouring in to help pay the bill for these schools, including money from foundations, chambers of commerce, larger organizations in the community, higher education institutions and federal grants.

As well, we have now licensed the Leader in Me process to three different entities and three different countries and anticipate many more such partnerships being formed. The work we’re doing in education is very inspiring to our entire company and to our corporate clients and it also helps drive our mission to enable greatness in people and organizations everywhere.

Our objective for the Leader in Me is to get to 10% of the K-through-12 schools in North America, with the hope that we can fundamentally help transform the education system. With that I’ll turn it back to Bob.

We’ll just open it for questions now. John, our operator --

Thank you for taking my call. First question.

If we could -- I appreciate both Seans giving the commentary within the channels. Within sales performance, can you give me an idea, if you exclude the NinetyFive 5, what growth looked like in that section?

Joe, I’ll take it on just or Sean you can. We, without the effect of NinetyFive 5 in the quarter, -- revenue -- year-over-year revenues have been more or less flat for the sales performance practice otherwise, and we would -- as we’ve mentioned at the end of the second quarter, we would expect in the fourth quarter their revenues would have increased without NinetyFive 5.

And so, the dip that we’d had in the first half, we expect it would recover itself without the acquisition in the back half, but with the acquisition, it added some to the third, and it will add more to the fourth.

Yes, I think in the fourth quarter, we’d expect a significant decline in government revenues because with the renewal of the contract in last year’s fourth quarter, it happened right at the end of the third quarter, they made a large upfront payment buying intellectual property rights at the start of the quarter, which is a result of the delayed renewal process that won’t occur in this quarter, and so there are good things happening in the government actually, and I think a lot of good activity that’s going on this quarter to build the pipeline I think independent of that contract, they’ll have some – there will be some really good things this quarter, but with that contract renewal gap, that will affect our fourth quarter. We’ve expected that, and so in our guidance, we’re expecting revenue from that renewal will not occur in the fourth quarter, and we’re not forecasting it for our first quarter, but we hope that with the renewal process that we’ll win the renewal again and that we could have a good surprise in the first quarter.

What was the original contract size on that? Was it $10 million?

It was approximately $10 million. There was an initial stage, Joe, where we were training more than 55,000 leaders.

It started in the fourth quarter of fiscal 2010 and went into the first quarter of fiscal 2011. The first two quarters of that contract were almost $5 million each in those first two quarters, maybe even a little more in those two quarters, and then once the initial surge was down, then there was a decline in revenues, but still substantial as they trained other people.

And then beyond that, the lumpiness just occurred on the renewal dates of that contract, ongoing the absolute size is smaller than that now that that initial phase is over, and we’d expect the renewal to be smaller, a bit kind of in line with what it has been these past 12 months.

And then I just want to switch gears and talk about the sales force and the model here for a second. I heard your comments through Q2.

Did you make any net new hires in Q3?

We made some new hires in Q3. We also – some of the people we hired in Q1, there are some of those who don’t make it.

And so, we haven’t done the exact -- I don’t have the exact analysis of the net. We know where we’re headed.

We’ve just gone through the Redwood Council Meeting where everybody has given their forecast through yearend. So, our confidence that close to yearend and now you have a start date, it might be September 15 through September 20, but approximately at yearned we’ll be in that 150 range that we targeted.

But I think, in the actual quarter, probably had a few net declines of a few client partners, you know net, in the six months and you can then figure out who’s making it, who’s not, and that tends to happen about that time.

And in terms of the success that you have had and that has come really threefold, adding net new client partners aside, you’ve made leaps and jumps here in terms of efficiency as you go through the ramp as well as mature salesmen. Are we approaching a steady state here?

Do you think you can make the efficiency gains going forward, albeit maybe at a slower rate? Let me get your thoughts on that.

Yes. Shawn, why don’t you –

Hi Joe. I think we’re, we are pleased with what we have seen so far with the ramp up of our new client partners.

That’s historically been something that we’ve normally needed to make some progress on. We have gotten certainly better and very pleased with what we have seen so far this year.

We feel like that’s a function of several things including sales management structure as well as I think a tighter sales management process and training development process that has helped each of these guys.

Also important to that, I think Joe is, we’ve added this marketing infrastructure which we’ve talked about in previous calls to do a lot of lead generation. We’ve added support people to, we call test substitutes, so that our sales people who are very valuable on the frontlines aren’t doing a lot of setting their own appointments, et cetera.

So, the amp up this year in marketing expenditures and in regional practice leaders to help close it with the objective of not having a slowing at all in the productivity. In fact, the productivity growth this year of our ramped up client partners has been higher than at any time that I can remember.

I don’t know if it statistically is the highest ever in history, but it might be. Excluding the government business, we’ve had three quarters of growth now.

We’re mid-teens growth in these offices, and it’s split between new client partner ramp up and productivity growth in the alumni group. So, we see that we’ve now made a step up that we should be able to, with more certainly, hire and ramp up people.

We’ve had good results in the past, but to be able to do that at scale and at the same time, we’ve added resources to our best client partners or tough client partners allowing them to accelerate their own business, so we don’t see a slowdown there.

And then, Bob, what are you seeing in the international direct? I know this is relatively new in the early innings of adoption, but are you seeing the same level of ramp in efficiency gains, maybe slightly lower than what you are seeing in the US, just given that you are –?

This is Shawn, Joe. The answer to that is yes, we are seeing the same pattern fall a little bit slower because they haven’t had the entire access to all of the practices, but we’re seeing the same thing.

So as an example, we have accelerated the number of events that we’ve done in the UK, for example, and the pipeline now is associated with those events and the lead generation that comes from those events is allowing new client partners to hit the ground running a little bit faster than they have historically been able to do, and the pipeline is reflecting that. So the answer is yes, we’re seeing the same trends in our international direct offices, and by the way, they have the same plans, aggressive hiring plans that every other office has.

Bob, can you talk about -- you have got a leadership content rollout and update rollout on 7 Habits. Can you kind of help us understand what all is involved in that?

I believe that is midyear next year, and if you expect that to be kind of a driver of resurgence of the leadership practice in terms of its growth trajectory.

I’ll have Sean Covey to talk about the plans for the launch, and then I’ll maybe just respond to the impact to the practices.

Hi Jeff, Sean Covey here. So yeah, this is a major overhaul for us.

We are going to be – right now we’re in the middle of refining the 7 Habits. It’s been such an extraordinary offering for so long.

We want to keep the soul of what we have got in there but make it more timely. And so we’re spending a lot of time and money revamping videos, giving more surround sound, developing mobile applications, online support systems and so forth to make this bigger and better, a new look and feel and more penetration, better implementation inside of companies.

So we think this will take it to the new level. When we redid the 7 Habits eight years ago, there was a big resurgence in adoption and in sales.

We expect the same. We’re expecting to launch this somewhere in the March, April timeframe of next year.

We’re planning on doing a 250 city tour around the world where we will announce and lunch this to existing clients as well as to new clients. Yes, I think we expect a resurgence of the leadership practice.

The 7 Habits is the biggest piece of that practice right now. Internationally it is the biggest product we sell by far outside of the United States.

And so I think we’re well equipped to launch this with a bang to get it into multiple languages very quickly. We’re expecting big things from this.

Jeff, maybe just two other comments. We’ve seen a small decline overall for the yearend leadership practice.

That raises questions well gosh, has lost its power or whatever. We think honestly not.

It’s more related to two things. One is that a significant portion of the large government contract was a leadership development contract.

And so with the decline in the government spending and the timing of this contract, it affects the leadership offering. The second thing is that well the other practices are all out doing these marketing events and launch events which are ongoing.

We’ve not been doing that in the leadership offer. We’ve decided to step back, but the other practices will do all the things they’re doing.

They’ll continue to do that, but when we come out ready for the 250 cities tour, that will be the start of our marketing event, et cetera in that. So it’s the one practice that hasn’t had, well that and customer loyalty don’t have marketing events going on in any scale.

So we think independent of this new product launch there’s a commitment in the leadership practice to be ready for prime time marketing events by mid next year. But the rallying cry will be around the re-launch of our offerings and the addition of new things.

These marketing events are sequenced about six quarters out. So we have a plan that incorporates the timing of when each practice will receive their focus.

And so the 7 Habits launch really is designed to address leadership practice.

That segues into my next question was on the events, I forget what percentage increase in terms of number of events you're having this year versus last, and really wanted to frame a question around what’s your plan for events next year, which practices are given the most emphasis and then how many events next year versus this year, if you have that level of planning out yet.

We’ll be increasing the number of events. This past year we increased the number from around 650 events to in the range of 1000, approximately 1000.

The timing of these things – the way that these events work is people come in to a marketing events are going to be 18 to 20 organizations represented in the event. And then over the next period of time some become prospects, others don’t.

There’s a follow up process of sales cycle that ensues and as a consequence we receive revenue over a period of as much as a year later when there’s a bulge in the four to six month period. There’s ongoing revenues that continues from these events.

And so many of them although the expenses we’ve incurred this year and the reason why we have such large pipelines right now is because these events have generated a lot of activity and prospects in our prospective business pipeline which then will be closed in this quarter, in the first quarter and second quarter and even in the third quarter of next year. So the number of events will be up some, probably 15% next year, but I think the more important thing for us is that we’ve learned a lot this year about refining our targeting, who’s most likely to purchase.

We look at – we’ve standardized the way we run these events. There’s a lot more efficiencies.

So the yield from the events we would expect to be a bigger increase in the number of events as we go into next year. And then really a lot of the impact comes from the events we’ve already been having this year and going on.

For example in the third quarter during – we had all these trust, speed of trust marketing events. Others are ongoing from other practices as well, but we had 30 some odd marketing events during the quarter that generated a couple million dollars of revenue in the quarter.

For the quarter about $7 million in the pipeline opportunities were also generated which will come in over the next one to three quarters.

And then, one more question, if I could. On the facilitator sales, is there any read-through to that in terms of the economy and stabilization of the economy?

And do you expect that to be a trend?

I think there is some – the willingness of organizations to pay to train these licensed facilitators. It’s not a robust thing where people are opening the gates and just throwing money.

But I think it probably is something to do with that. But I think these marketing events, introducing people to the content, giving them the chance to try it out, the large number – there’s a large increase in the number of onsite programs that we’ve held where people get a chance to see what it’s like and then they decide to certify it is something that we think embedding for us having almost $40 million of revenue every year come from renewals of these 12,000 teachers who are buying materials to do their teaching classes inside their companies is a big strategic thing for us because we want to do knowledge transfer, get people invested in the solution and then have them buy just content from us.

And so I think it will continue. It’s been the driver of the business for years.

it will continue to be, but I think the resurgence might be more related to the marketing events and the specific initiatives around new product launches than it is specifically to the economy, although I think there is some improvement.

Hello. This is Dan Trang sitting in for Marco Rodriguez.

Wondering if you could provide us some color on the government business spending patterns in the quarter. And can you discuss the government's thinking on spending for the remainder of the calendar year?

Sure. I’m sorry.

I didn’t get your name.

Dan Trang. I am sitting in for Marco Rodriguez.

Dan, this is Shawn Moon. There’s been an issue here within the federal government with the sequestration and some of the budget challenges, the significant budget challenges.

Those challenges have come in the benefits and stuff two ways. The first is that there actually have been furloughs and other things that have happened with people’s jobs where literally jobs have gone away.

But the bigger challenge that we’ve had frankly is the panic that has ensued. There’s still massive amounts of spending that is available, but people have chosen even when they have had the budget and haven’t had the mandate to stop, they’ve chosen for fear of the optics around it and other things to not do it.

So we have seen some unique challenges in the government spending patterns this year and we anticipate those challenges maintaining over the next several months to the end of the calendar year. The team has responded well to this and has been very, very creative in what they have done in terms of reaching out to the market.

Interestingly we implemented an initiative last quarter with this team that resulted in 1300 additional new facilitators being part of the Franklin Covey facilitation family. And so when budget dollars are loosened up either at yearend or new budget or just new budget parameters, we have a whole big new base of people who will start buying from us.

And we think that will have a significant impact. And there are a number of other things that are happening on that team to respond to the challenges that we have.

The challenges are real and our response to them is really aggressive. Did I answer your question, Dan?

Yes. And I have a follow-up question.

Can you provide any details on specific international clients that have expanded their sales into the other modules?

Yeah. So I can speak to the international direct.

Maybe Sean you may want to talk about our licensees. So just recently – this morning I was having in-depth conversation with our general manage in the UK and he was talking about the response to the NinetyFive 5 acquisition and sales performance practice and what we’re seeing there.

And we’re actually pretty encouraged by the response that the market is giving us on that. We believe that that really is the next opportunity for growth within the international direct offices to get beyond just the leadership practice and the 7 Habits of great leaders’ offerings that we have and expanding to sales performance and our speed of trust in our execution.

We’re on the early stages of that, but as I mentioned in my remarks we are implementing the same strategy, the same process, methodologies and structure in the international direct offices that we have with our direct offices. And the early returns are good.

Our GM in the UK was thrilled with three different pursuits that are very sizeable around our sales performance practice. And all of these are new as a result of the new practice.

So we’re encouraged by that.

I’ll just add a couple of thing. This is Sean Covey.

With our international partners, the new practices, the relatively new practices, their input growth is extraordinary. The execution practice for example has become about 40% of our business in the Latin American countries, South America, Central America, Mexico.

But that’s just starting there and in Asia we’re just starting to penetrate there as well. Sales performance is relatively new global.

This is going to be a great growth opportunity. There’s’ this pent up demand from our partners that are very excited by the partnerships we have with the new expanded practice and the opportunity there.

Our global deal, the global multinational companies we’re working with how, is increasing all the time. This is a great advantage we have being in so many countries and having strong operations everywhere.

We’re getting more competitive with going after and landing big, large multinational contracts. This is an area of focus for us and we want to really leverage the fact that we’ve got such a great penetration in so many countries.

Following up on that, can you describe some of the efforts you made there? You’ve talked about the penetration rates, but just wondering some of the efforts made there and the timeframe it's taken for those moves?

On the sales performance practice, historically that’s been a national accounts practice versus the field support practice. What that means Dan is that they have had their own independent sales force and no one has really been allowed to sell outside that tightly defined practice.

As we look at expanding internationally, we’ve eliminated those internal barriers. So now they’ll get help from the practice to be able to be articulate on this, on the offering deal to deliver it with excellence, but we’ve opened the doors so that anyone can sell it.

So that’s one of the things that we have done to help do that. In the US and Canada in our practices we have a role called the Regional Practice Leader.

This is the liaison between the practice and the sales force. They’re a senior subject matter expert that sits primarily in business development and strategy, account strategy.

That’s been a really critical element in growing the business. And there are some costs associated with that for additional bodies, but that’s been really critical in helping us grow our business within the US direct offices and we’re now carefully – we’re not spending where we can’t spend, but carefully implementing the same structure with the regional practice leaders in our international direct offices to help facilitate business developments.

Another way of looking at this would be to look at just how long it might take to get a decent level of penetration similar to the US and some of our international partner countries. We think it’s going to take five to eight years or so to get execution really going at a good clip like it is in the US.

I think it’s a five to eight year implementation process. We’ll have to do it one country at a time, same as speed to trust.

It’s been doing really well in the US. We’ve done very little internationally.

This is a great growth opportunity. Again I think five to eight, 10 years to really get us to where it needs to be and where it can be.

So it just gives you a lot of hope for the future that we can continue to grow the leadership practice internationally while also growing these new areas. You can see a long runway.

There’s a lot of room for growth for a long period of time as we implement these other practices.

Can I just add a little more color on that? just really quickly, one of the things that we’ve done to sales performance practice is we’ve moved away from just simply instructor led delivery and we’ve created – we have an online self-paced ability modality and we’re just are launching a train the trainer version which we think will increase scale and it will allow our international partners to look after them.

Our dedicated time is up .we’re happy to take additional questions for those who’d like to stay on, if there are just other additional questions.

We’ll just conclude it. Thank you everyone for joining today and for your continued support.

Just maybe make a concluding statement. Again we are grateful to our CU, to our great clients, all of our great associates for what we belie is a tremendous effort in this past quarter and for what they’re about to do this quarter (inaudible) this quarter.

Also just note that we’re getting to the point I think as a company where we always – in our industry there are very, very few organizations that have ever got to as much as $20 million of sales. You know their names in the training industry or the content industry that have got $20 million of sales and it’s a pretty small group.

We now have seven different operations within our company that are at least $20 million operations, whether that’s a practice or offices. And for us $20 million you’ve got a real team, we think can accelerate.

It’s got all their own resources that knows how to run it. And so our goal, whether it’s an international licensee office or a direct office in the UK or Japan or a smaller practice is getting each of these to $20 million.

We think we have a map for doing that just as you saw in that practice slide where they’ve gone from zero or close to zero to $20 million in some of those practices and our offices have gone from $7 million to $20 million. We were getting into a position now where we think we’ve got us a really strong, additionally strong engines pulling the train and our work increasingly is on strengthening those that how do we get the $5 million and $8 million operations to $20 million.

So I think it’s an exciting time for us. Thanks to you for being on today and we’re happy to talk to anybody one of one of course that would like to.

Thanks very much.