Franklin Covey Co (FC) Q3 2021 Earnings Call Transcript

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Franklin Covey Co (FC -1.79%)
Q3 2021 Earnings Call
Jun 30, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the Q3 2021 Franklin Covey Earnings Conference Call. My name is Adrian and I'll be your operator for today's call. [Operator Instructions] Please note this conference is being recorded.

I'll now turn the call over to Derek Hatch, Corporate Controller. Derek Hatch, you may begin.

Derek Hatch -- Corporate Controller, Central Services, Finance

Thank you, Adrian. Good afternoon, ladies and gentlemen. On behalf of Franklin Covey, I would like to welcome you to our conference call to discuss the third quarter fiscal 2021 financial results and hope everyone is having a great summer.

Before we begin this presentation, we'd like to remind everybody that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management's current expectations and are subject to various risks and uncertainties, including, but not limited to, the ability of the company to stabilize and grow revenues; the acceptance of and renewal rates for our subscription offerings, including the All Access Pass and Leader in Me memberships; the duration and recovery from the COVID-19 pandemic; the ability of the company to hire productive sales professionals; general economic conditions; competition in the company's targeted marketplace; market acceptance of new offerings or services and marketing strategies; changes in the company's market share; changes in the size of the overall market for the company's product; 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 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 to Mr. Bob Whitman, our Chairman and Chief Executive Officer. Bob?

Robert A. Whitman -- Chair and Chief Executive Officer

Thanks very much, Derek. Good afternoon, everyone. We're happy to have the opportunity to talk with you today. Really appreciate you joining us. We're pleased to report, as you saw in the press release, that our third quarter results were strong and even stronger than expected. We believe this again reflects the strength, power, quality and durability of our customer value proposition and of the high growth durable subscription business model that we have created.

Just some highlights. As shown on Slide 3, revenue was up 58% in the quarter and it was also greater than fiscal '19's strong third quarter. Gross margin percentage was up 587 basis points. Our operating SG&A as a percentage of sales improved to 63.6%. Adjusted EBITDA increased $12.2 million in the quarter to $8.6 million. Our net cash from operating activities increased 65% to $30.9 million. And we ended the quarter with $51 million in liquidity even after making a major investment in the acquisition of Strive. Steve will [Phonetic] provide a little more detail on each of these key highlights.

Revenue in the third quarter was $58.7 million, which obviously represented a big increase compared to the $37.1 million of revenue in last year's third quarter, which of course was impacted by the COVID pandemic. Importantly though, this $58.7 million of revenue was not only significantly higher than in the last year's third quarter, it was also higher than the $56 million in revenue achieved in the strong third quarter of fiscal '19 pre-pandemic, which itself represented a big increase compared to the $50.5 million revenue achieved in the third quarter of fiscal 2018.

This strong growth was driven primarily by the strength in growth of All Access Pass and also their subscription business in education. In All Access Pass, you see we're in Slide 4, in the third quarter, All Access Pass subscription sales increased 17% to $19.2 million, growth of $2.8 million compared to the third quarter of fiscal 2020. Importantly, this represented a growth of 40% compared to the $13.8 million in All Access Pass sales achieved in the strong third quarter of fiscal 2019.

When you take the subscription plus subscription services, sales grew 43% to $29.7 million in the third quarter compared to $20.8 million in the third quarter of fiscal 2020 but also grew 39% compared to the $21.4 million in All Access Pass subscription and subscription services sales in the third quarter of fiscal 2019.

Our total balance of deferred subscription revenue grew 26% in the third quarter to $55.3 million, an increase of $11.4 million compared to our balance of $43.9 million at the end of last year's third quarter. This represented a very strong growth of 39% compared to our deferred revenue balance of $39.9 million in the third quarter of fiscal '19.

And then, finally, our balance of unbilled deferred revenue grew 23% to $41.3 million in this year's third quarter and grew 74% compared to a $23.7 million balance of unbilled deferred revenue in the third quarter of fiscal '19, reflect -- and this reflects of course a significant ongoing increase in the percentage of our All Access Pass contracts, which are now multiyear. We've talked in the past of having roughly a third of our contracts multiyear, it's now more than 40%. And the 40% of contracts represent 52% of all of our All Access Pass subscription revenue is now in multiyear contracts in North America. And that's really encouraging and exciting that people are seeing that value and that we're already have deferred revenue not just for 2022 fiscal year, but already significant amounts for 2023.

Our revenue growth was strong as we talked about and as shown in Slide 5. The growth of our profitability and cash flow related to this revenue growth was even more significant. Gross margin percentage for the company increased 587 basis points to 78.2% in the third quarter compared to 72.3% in last year's third quarter, 70.8% in the third quarter of fiscal '19 and 69.2% in the third quarter of fiscal '18. Gross margins in the Enterprise Division itself actually grew to 81.5% in the third quarter.

Operating SG&A as a percentage of sales, as I mentioned, declined to 63.6%, representing a significant improvement compared to the third quarter fiscal 2020, was also a level lower than the 65.3% achieved in fiscal 2019 through third quarter and the 68% achieved in the third quarter of fiscal '18. Note that adjusted EBITDA increased to $8.6 million in the third quarter. That's an increase of $12.2 million compared to adjusted EBITDA loss of $3.6 million last year. But it also represents a significant increase compared to the $3.1 million in adjusted EBITDA achieved in the third quarter of fiscal '19 and compared to the $600,000 of adjusted EBITDA achieved in fiscal '18.

Looking at year-to-date, adjusted EBITDA increased to $17.4 million, which is a big increase compared to the $5.4 million in year-to-date adjusted EBITDA through last year's third quarter. It's also big compared to the $7.2 million in year-to-date adjusted EBITDA achieved in a very strong first three quarters of fiscal '19 and the $0.5 million of year-to-date adjusted EBITDA achieved in fiscal '18.

Importantly, adjusted EBITDA for the latest 12 months through the end of this year's third quarter totals $26.3 million, a level which not only substantially exceeds the $18.8 million achieved for the same latest 12-month period last year, but also the $18.6 million in the latest 12-month adjusted EBITDA achieved for the same period in fiscal '19. You'll note that this $26.3 million in the latest 12-month adjusted EBITDA is also well ahead of our existing full-year guidance of $20 million to $22 million of adjusted EBITDA for fiscal 2021 as a whole, so more on -- more on that in a moment.

Our cash flow was also strong with net cash generated in the third quarter increasing to $11 million. That's an increase of $23.2 million compared to negative $12.2 million in net cash generated during the same year-to-date period last year. It was also well ahead of the negative $4.8 million net cash generated for the same year-to-date period in fiscal '18 and the $7.2 million for the same period in '18.

And then, finally, our net cash provided by operating activities increased 65% to $30.9 million through the third quarter. That compared to $18.7 million through that same period last year, $18.6 million in '19 from the same period and $8.6 million in '18. So we ended the quarter with strong liquidity with approximately $51 million even after investing $10.6 million for the acquisition of Strive, which Paul will talk about later in this call. And this liquidity level is up from the $37 million in liquidity we had at the start of the pandemic a year ago even after the investment of Strive. So, we're grateful to be in a strong balance sheet position.

We'll discuss these results more detail in just a moment, but wanted to give you the same context we've provided in the past three quarters. And so you can see what's behind the -- make sure you're understanding each of the components behind this performance.

As you can see in Slide 6, the four trends are as follows: first, as we talked about, All Access Pass sales had continued to achieve strong growth; second, that All Access Pass subscription services sales have continued to grow and are now significantly higher than even their pre-pandemic levels a year ago; third, our international operations have continued to strengthen; and fourth, the performance and trends in our education business have also strengthened substantially both in terms of retention and revenue number of new Leader in Me schools and outlook. Now just a little more detail on each of these key trends. First, as expected, All Access Pass subscription sales, which now account for 82% of enterprise sales in North America continued strong.

As you can see in Chart 1 on Slide 7, total company All Access Pass subscription sales grew 17% in the third quarter to $19.2 million, year-to-date growth is 15% and latest 12-month growth is 14%. The $19.2 million in All Access Pass subscription sales in the third quarter compares to $16.4 million in All Access Pass subscription sales the third quarter of '20, $13.8 million in the third quarter of '19 and $11.1 million in the third quarter of '18.

In addition, as shown in Chart 2 on Slide 7, our All Access Pass deferred revenue balance grew an even more rapid 25.9% in the third quarter to $44.2 million, which represents an increase of 36.8% compared to last year's balance at the end of -- 32.2% balance of deferred revenue at the end of the third quarter of fiscal '19. And that's been broad based across all the key elements, the number of All Access Pass new logos increased 93% in this third quarter of this year compared to last year. Annual revenue retention continued to exceed 90% as shown in Chart 3 on the same slide.

And the sale of multiyear contracts is also strong with our balance of unbilled deferred revenue increasing 25% to $40.5 million compared to $32.4 million in the third quarter of '20. It's up 74% compared to the $23 million balance of unbilled deferred revenue we had at the end of the third quarter of fiscal '19, as you can see in Chart 4.

The second trend relates to these subscription services. Sales of All Access Pass subscription service increased to $10.5 million in the third quarter, making it our highest subscription services quarter ever. This compared to All Access Pass subscription services sales of $4.4 million in the third quarter of fiscal '20, $7.6 million in third quarter of '19 and $5 million in '18, which is shown also in Slide 8.

Also shown -- for the first time, our All Access Pass subscription and subscription services sales exceeded $100 million for the latest 12-month period. That's a big landmark.

Going to Chart 9, talking about subscription services shows the strong booking trend for All Access Pass subscription services, almost all of which have now been being delivered live online. As you can see in Chart 3 on that Slide 9 at the beginning of the pandemic in March of last year, bookings of services delivered live on site that client locations were necessarily canceled. And the year-over-year volume of our services declined with delivered engagements down $6.9 million in North America in the third quarter.

However, with our quick pivot to delivering services live online in the fourth quarter of fiscal 2020, new bookings increased to a level nearly equal to that achieved in the fourth quarter of fiscal '19 just three months into the pandemic. And these strong bookings in turn drove an increase in the dollar volume of services actually delivered.

As a result, instead of being off $6.9 million in the third quarter, the dollar volume of services delivered in the fourth quarter was up only $1.1 million. The same positive trend continued in the first quarter, accelerated in the second quarter and continued through the third quarter where sales and subscription services exceeded by 16%, the highest level ever achieved in any quarter. As shown in Chart 2, again, the vast majority of our subscription services are now delivered to clients live online, meaning their momentum can continue regardless of when and whether certain organizations return to their offices.

Third, as shown on Slide 10, performance in our international operations has continued to strengthen through the third quarter. As previously reported, at the start of the pandemic, we had to reschedule substantially all live onsite training engagements in our international offices as well since these countries are just starting to sell All Access Pass and therefore did not have a strong base of durable subscription revenue to cushion them. Sales in these countries declined significantly compared to the third quarter of fiscal '19.

However, as shown in last year's fourth quarter, while still operating well below the level achieved in the prior year fourth quarter, sequential sales and sales as a percent of the prior year in these countries improved significantly. Year-over-year sales improved further in the first and second quarters. We expect sales to continue to strengthen in the third quarter and we're pleased that they did. The third quarter international sales were ahead of our expectations and just 13% lower than in the third quarter of '19. And a portion of that 13% down is reflecting the fact that we're starting to add more subscription sales in those offices as well, which are going onto the balance sheet rather than onto the income statement.

While there continue to be pandemic-related challenges in Japan and in certain licensee operations, we're pleased with strong rebound overall in our international operations. Importantly, in addition to significant recovery in reported sales shown in Slide 10, our international operations have seen significant increases as I mentioned in All Access Pass deferred revenue.

So finally, on these trends, we've also seen a real strengthening in the performance in overall market trends in our education business in the third quarter. As shown in Slide 11, the strengthening of education's performance includes that the number of Leader in Me schools, which have renewed or are ready to renew their Leader in Me membership increased to 1,921 during the third quarter compared to 1,681 at the same time last year. The number of new Leader in Me schools who have contracted by the end of the third quarter or were in the process of contracting is 90 greater than that achieved by the end of last year's third quarter or 305 schools versus 215.

And in addition to these strong booking performance, education's reported performance also increased significantly in the third quarter. Education's third quarter revenue grew 44.8% over last year's third quarter. They also grew 7.3% compared to fiscal '19's third quarter. This reflects, among other things, the addition of some new large multi-year district contracts that were started during the third quarter. All of which are expected to bring on additional revenue over the coming quarters and years, also includes a substantial increase in number of coaching days.

Our gross profit in the Education Division also improved 1,140 basis points in the quarter from a gross margin of 57.3% to 68.7%. And finally, adjusted EBITDA for the Education Division increased by $2.7 million over last year's third quarter and was also up $1.3 million compared to even fiscal '19's third quarter education. Education in our international licensing network also showed substantial improvements in revenue and adjusted EBITDA during the quarter.

So, conclusion on education, there are also trends in the overall education market, which we expect will help our education business during the remainder of this fiscal year and into the next fiscal year, including the increasing confidence in the educational community that most schools will be open and largely back to normal in the fall of this year. And the three big COVID stimulus bills passed by Congress dedicated nearly $200 billion toward stabilizing budgets in K-12 schools.

So with that overview in detail, I'd like to now ask Steve Young to dive a bit deeper into the performance of the third quarter and go through the financials. Steve?

Stephen D. Young -- Chief Financial Officer and Corporate Secretary

Hey. Thank you, Bob. And good afternoon, everyone. It's nice to be with you. So I'll just jump right in. As shown in Slide 12 and as Bob talked about, our performance for the third quarter was stronger than expected and showed positive momentum on almost every front.

As you know, our adjusted EBITDA for the third quarter was $8.6 million, an increase of $12.2 million compared to last year's third quarter of negative $3.6 million and the amount substantially exceeding our expectation of adjusted EBITDA of between $4 million and $4.5 million. Importantly, this $8.6 million in adjusted EBITDA has also significantly higher than the $3.1 million of adjusted EBITDA achieved in the strong third quarter of FY '19.

As also shown, both year-to-date and last 12 months adjusted EBITDA substantially exceeded that achieved in both FY '20 and FY '19. And our last 12 months' adjusted EBITDA of $26.3 million, as Bob said, substantially exceeds our full year guidance of $20 million to $22 million for FY '21.

Our cash flow and liquidity position also increased significantly. As you can see on Slide 13, our net cash generated year-to-date through the third quarter was $11 million. This was $23.2 million higher than the negative $12.2 million of net cash generated in last year's third quarter and was also higher than the negative $4.8 million in net cash generated in FY '19 and the negative $7.2 million generated in FY '18. This increase in net cash generated reflects strong growth in adjusted EBITDA. And that our balance of billed and unbilled deferred revenue increased by almost $17.1 million or 25% to $96.6 million in the third quarter.

Also as shown in Slide 14, our cash flows from operating activities year-to-date for the three quarters ended in May 31, 2021 increased $12.1 million or 65% to $30.9 million compared to $18.6 million last year -- or $18.7 million last year, $18.6 million through the third quarter of '19 and $8.6 million through the third quarter of '18.

This strong cash flow reflects an additional benefit of our subscription model, specifically that we invoice upfront and collect the cash from invoice amounts even faster than we recognize all of the revenue. With the strong cash flow, we ended the quarter with $51 million in total liquidity compared to $36 million -- which is comprised of cash of $36 million and $15 million of our revolving credit facility still undrawn and available even after, as Bob also said, paying the $10.6 million during this quarter related to the acquisition of Strive.

This was -- this overall good performance was driven by strong revenue growth. As shown in Slide 15, our third quarter revenue was $58.7 million was not only higher than the $37.1 million in last year's third quarter but also higher than the $56 million of revenue achieved in the third quarter of FY '19. This strong revenue growth was driven in part by very strong performance in our North American operations, driven by the continued outstanding performance of the All Access Pass.

Additionally, as shown in Chart 1 of Slide 16, companywide All Access Pass subscription sales grew 17% in the third quarter, 15% year-to-date and 14% even during the last 12 months pandemic period. And in addition to the All Access Pass subscription revenue recognized in the quarter, Chart 2 shows that we also achieved a very strong increase in our balance of All Access Pass deferred revenue, which grew 26% or $9.1 million to $44.2 million in the third quarter.

Our balance of All Access Pass deferred revenue not only grew substantially compared to last year's third quarter, but consistent with many other measures was also 37% or $11.8 million higher than that achieved in the third quarter of FY '19 pre-pandemic. This All Access Pass deferred revenue will be recognized in future periods and helped to accelerate our growth. This significant growth in All Access Pass deferred revenue resulted from: one, strong All Access Pass sales to new logos; two, a continued quarterly and last 12 months revenue retention rate of greater than 90% as shown in Chart 3; and a large number of All Access Pass expansions; and as shown in Chart 4, a significant volume of multiyear All Access Passes.

Sales of All Access Pass subscription sales shown in Slide 16 were also strong in the third quarter, growing 136% compared to last year's third quarter and up 37% compared to the third quarter of FY '19.

Then second, as shown in Slide 17, our strong All Access Pass sales drove significant growth in our gross margin percentage, again, in the third quarter. As shown, our gross margin percentage increased 587 basis points in the third quarter to 78.2%, up from 72.3% in the third quarter of FY '20 and up from 70.8% in the third quarter of FY '19. As also shown, year-to-date, our gross margin percentage increased 514 basis points and has increased 489 basis points for the last 12 months.

In the Enterprise Division, driven by the significant growth in the All Access Pass and related sales, our gross margin percentage increased to 81.5% compared to 78.1% in last year's third quarter, an increase of 340 basis points and an increase of 713 basis points from the 74.3% in gross margin percentage achieved in the third quarter of FY '19.

Third, as shown in Slide 17, our operating SG&A in the third quarter was only 63.6% of revenue. This is a level significantly lower than the 82.1% of revenue in the prior year and also lower than the 65.3% of revenue in the third quarter of FY '19.

Finally, the combination of these factors result in net SG&A growing $8.6 million in the third quarter, an increase, like we said, of $12.2 million. This is a level significantly higher than the expectation of adjusted EBITDA of $4 million to $5 million for the quarter. The strong third quarter also resulted in adjusted EBITDA for the first nine months of FY '21 of $17.4 million and for the last 12 months of $26.3 million.

As you noticed, in all of these, we not only compared to FY '20 but FY '19 because FY '19 was such a good pre-pandemic year. Just wanted to show that we're not only just rebounding from the pandemic, but also growing compared to pre-pandemic numbers. Importantly, as noted, our balance sheet of billed and unbilled deferred revenue, which will add to and be recognized in future quarters, increased to $96.6 million, reflecting growth of $19.3 million or 25% compared to our balance of $77.3 million at the end of last year's third quarter. This large balance of billed and unbilled deferred revenue will help us provide significant stability of and visibility into our future performance.

This strong combination of factors continue to drive our expectation that will achieve high rates of growth in adjusted EBITDA and cash flow in FY '21, FY '22 on an ongoing basis thereafter. So, we're very pleased with the result of the third quarter that is broad based in almost every area doing a little bit better or better than we expected.

So, Bob, turn it back over to you.

Robert A. Whitman -- Chair and Chief Executive Officer

Thanks, Steve. Just a couple of points I'm looking forward. As we've discussed, substantially all our growth [Phonetic] has been driven by growth in All Access Pass subscription and subscription services sales. And the strong growth has continued throughout the pandemic. So we've shown and we expect All Access Pass to continue to drive in the future.

So, given we expect really that substantially all of the company's sales will be subscription and subscription services within three to four years as we mentioned last quarter, thought we'd give you a little background as the three bullet points as to why we think that'll be the case. First, the growth -- we expect All Access Pass subscriptions and subscription sales to continue to increase in our Enterprise Division in North America where those sales already account for 82%.

As shown in Slide 18, All Access Pass subscription and subscription services sales represented only 13% or $13.7 million of total sales in North America in 2016 when we first introduced the All Access Pass. Dramatic sustained compounded growth since then is really in All Access Pass and subscription services sales increasing to $103.2 million for the latest 12 months through this year's third quarter.

From reports that have been sent to us by others achieving $100 million in subscription in service revenue in only five years places us among a relatively elite group of SaaS companies actually with the median time for those who actually make it to $100 million being around nine years.

And as shown on Slide 19, All Access Pass subscription and service sales sales now accounts for 82% of sales in North America with the continued expectation of double digit growth in All Access Pass revenue. And with legacy sales now at very low levels and expected to remain flat or even decline a bit further, we expect All Access Pass and subscription services to increase to more than 90% of total North America enterprise sales over the next few years. So that's the first big engine.

The second major driver to having the business become almost totally subscription and subscription services, the expected conversion of the majority of our international operations to All Access Pass and subscription in the coming years. In addition, the 82% in North America, which we've already there, we've also progressed rapidly in our English speaking direct offices.

As you can see on Slide 19 from having no subscription sales in these offices just five years ago, All Access Pass subscription and subscription service sales for the latest 12 months now accounts for 72% of total sales in the UK and 72% in Australia. Both these offices are well on their way toward the same 90% penetration we expect to achieve in North America. As you know, our largest international direct offices in China and Japan, both of which are in the early stages of conversion to All Access Pass. But importantly, Japan this year will have a third of its sales of All Access Pass subscription and subscription services, and China has now begun selling new contracts -- has entered some new large All Access Pass contracts and will start to be recognized. So I think we expect -- again, international will get to that same level.

And finally, the Education Division, which represents, as you know, 22% of total sales, reported subscription sales already account for 65% of sales for the latest 12 months, and we expect both K-12 and higher ed to continue to advance toward 90% in subscription and subscription services in the coming years.

So, with the combination of all these, we expect the vast majority of the business to reflect the same high-growth, high-margin, high-retention properties of our subscription operations in the coming few years and that's really encouraging.

Now, I'd just like to turn the time to Paul Walker to touch on three factors that we expect will continue to drive this growth and kind of puts underlying it. Paul?

Paul Walker -- President, COO and President Enterprise Division

Thanks, Bob, and hello, everyone. Good afternoon. I'll briefly describe these three factors and then go into just a bit of depth on each. The first factor that we expect will continue to drive this significant growth in our subscription sales and profitability is that the already significant lifetime customer value of our All Access Pass holding organizations will continue to increase.

The second factor is that as we continue to aggressively grow our sales force and our licensee network, the volume of new high lifetime value All Access Pass logos will accelerate.

And third, recent acquisition with Strive and then Jhana, which I recall that we acquired in mid-2017. Together, they're accelerating our ability to address larger and larger population inside new and existing All Access Pass clients, further helping to accelerate the growth of the pass inside those organizations.

And so, just briefly discussing and describing these three in a bit more detail. First, All Access Pass and subscription services revenue will continue to climb and that will drive increasing lifetime customer value. As shown in Slide 20, in our North American operations, All Access Pass has first a relatively large and continually increasing average pass size now at $43,000, which is up from $37,000 just a year ago. Second an annual retention rate greater than 90%, which has been true all the way through the pandemic. And third, subscription services attach rate of 48%, up from just 70% a few years ago.

The combination of revenue from the All Access Pass subscription itself and from attached subscription services totaled approximately $61,000 per Pass holding customer in the third quarter, which was up 13% from $54,000 just a year ago. The blended gross margin on all of this continues to be greater than 85%. And these strong economics are driving a very significant lifetime customer value. And additionally, as Bob mentioned and Steve alluded to earlier, in North America, more than 40% of passes representing 52% of subscription revenue are now under a multiyear contract.

And stepping back from that, just think about that for a minute from where we were a number of years ago. That amount of revenue under contract is set to come in. It is a significant thing for us and for our client partners as well.

The second point -- the second factor, as we've discussed in the past and as shown in Slide 21, we have a lot of headroom for a continued client partner growth. We expect that the continued addition of at least 30 net new client partners each year will drive significant subscription and subscription services growth since almost all these new people have to sell as All Access Pass or in the case of education, Leader in Me subscriptions.

Additionally, we expect significant growth to come from the approximately 120 existing client partners that we've hired over the past few years, who are still in the ramp process. As you all recall, each new client partner that we hire is expected to generate annual revenues in their first year of $200,000, then their second year $500,000, then $800,000 going to $1.1 million and then $1.3 million over their first five years with us. And we define $1.3 million as being fully ramped. And then we, of course, expect their revenues will continue to grow thereafter.

Today, we have approximately 120 client partners in our North American Enterprise and Education divisions, who, depending on their year of hire over the past four years, fall somewhere along this ramp curve. And the natural ramp of these client partners, even net of attrition, normal attrition that we might expect to see, would result in tens of millions of additional dollars of revenue growth in the coming years. And so, the combination of ramping those we have and hiring the net 30 a year, we believe, will generate a significant subscription revenue growth for us.

And then, the third point that I'll touch on briefly is the recent acquisition of Strive, coupled with Jhana, is accelerating our ability to address larger and larger populations. During the third quarter, we were pleased to complete the acquisition of Strive, which will add meaningfully to our technology platform, our strategic capabilities and overall impact. A key benefit resulting from Strive is that it will increase our ability to address ever larger client populations.

The unique combination of Strive's platform, coupled with Franklin Covey's best-in-class content and subscription services, we'll accelerate our ability to help clients predictably achieve employee behavior change at scale. Strive's intuitive social learning platform will enable seamless integration and deployment of Franklin Covey's best-in-class content, our services, technology and metrics to provide highly engaging and impactful learning experiences with maximum impact.

When combined with Jhana, a push-based just-in-time digital coach for leaders and individual contributors, the All Access Pass platform is taking a significant leap forward and its ability to support large scale impact journey roll out for entire organizations, while simultaneously allowing individual learners to focus on their own skill development. And so, for these three reasons and others, we feel very positive about the future of our ability to continue to grow our subscription and subscription services business.

And with that, I'll turn it back to you, Bob.

Robert A. Whitman -- Chair and Chief Executive Officer

And Paul, thanks so much. And I'll turn it to Steve to talk about our guidance and outlook.

Stephen D. Young -- Chief Financial Officer and Corporate Secretary

Okay. Thank you again. So, as you know, in past quarters, we have confirmed our guidance that we expected to generate adjusted EBITDA of between $20 million and $22 million this year. Based on the strong performance in the third quarter and year-to-date and our expectations of a strong fourth quarter, we're glad to now be in a position to adjust that guidance upward.

Our new guidance is that we expect adjusted EBITDA for FY '21 to be between $24.5 million and $26.5 million. The middle of this range would reflect adjusted EBITDA growth of more than 75% compared to the $14.4 million of adjusted EBITDA achieved in last year FY '20.

With our last 12 months adjusted EBITDA through the third quarter already at $26.3 million, if our fourth quarter result is at least the same as last year's strong fourth quarter, our results for the fourth quarter would already be at the -- near the top end of that range. And we do expect to achieve strong growth in revenue in the fourth quarter. However, we're also making some significant growth investments and will incur other costs in the fourth quarter that will partially offset the adjusted EBITDA growth we could otherwise expect from our expected growth in revenue.

These growth investments include the hiring of a significant number of new client partners to position ourselves for strong growth in FY '22 and beyond. Two, some new strategic marketing investments that we expect will broaden our reach. Three, costs associated with the acquisition of Strive. Four, and some other growth investments. We also expect that there will be some extra site coming out of the pandemic cost, including some increased travel and profit-based compensation which will impact cost in the fourth quarter. These additional investments notwithstanding, we still expect the fourth quarter to be a very strong quarter.

As for our outlook for FY '22, '23 and beyond, in past quarters, we have said that we expected adjusted EBITDA in FY '22 to increase to approximately $30 million and adjusted EBITDA in FY '23 to increase further to approximately $40 million. Based on the strong performance in FY '21 to-date and expected through the fourth quarter, we now expect the trajectory of our results in FY '22 and FY '23 will also be somewhat higher than our previous outlook. We expect it to increase and provide more detail on our outlook for future years when we report year-end results in November.

So Bob, that's guidance and outlook. [Speech Overlap]

Robert A. Whitman -- Chair and Chief Executive Officer

Yeah, really are. Great. We feel great about our momentum. Pleased to be in a position to increase our guidance and really excited about the business.

Just before we turn to Q&A, I'd like to thank our absolutely tremendous associates around the world for their continued and unwavering commitment to our mission, to our clients and the excellence in all they do, they're amazing. I would also like to recognize and thank our great leaders. Our top leadership roles are all filled by extremely talented, experienced and committed individuals who have the combination of a long tenure and yet because of the relatively young age many years of strong service still ahead of them. They lead in a way that engages their teams and predictably grows their operations at our overall business strategically, culturally, and financially.

I'm thrilled given the strong results, trends, and strategic position of Franklin Covey's business, we are now prepared to make some key promotions on the executive team that will help to further accelerate our progress, really excited about each of these. Our executive team has functioned as a true partnership for many years and our goal has been to have each leader continue to increase his or her responsibilities while still keeping all members of our executive team kind of on the playing field and contributing in both old and new ways, even as the rules change. That will continue to be the case following key leadership promotions that will take place effective September 1.

First, over the past couple of years. Paul Walker is overseeing substantially all our day-to-day operations and I have focused the majority of my efforts working closely with Paul, Steve and the executive team on our key strategic initiatives, our innovation strategy agenda and on capital transactions. I'm excited personally to now move over one chair at the table in addition to serving as Chairman of the Board, become Executive Chairman of the company, effective September 1. As Executive Chairman, I will continue to work in these same strategic areas in which I have focused over the past few years. As Chairman, I will spend even more time working to ensure that the tremendous capabilities of our remarkable Board are fully utilized.

I am thrilled to announce Paul Walker will become our new CEO, effective September 1. The Board, the executive team and I, all have tremendous confidence and trust in Paul. He's fully prepared for this expanded role. Paul is a completely trusted partner who has tremendous capabilities, instincts and drive, engages everyone to come to the best decisions. He also executes with excellence. The idea that Paul will become our next CEO has been something the Board and I began discussing nearly 10 years ago. With that potential in mind, Paul was first given responsibility for running our central region, then for simultaneously overseeing the central region and our operations in the UK and Ireland, then following all North American operations for the Enterprise Division, then serving as President of the entire Enterprise division, which has been such a strong growth engine and most recently as the company's Chief Operating Officer where he has done an absolutely incredible job including all the way through the pandemic. Over the past six years, Paul and I have worked hand-in-hand every day and most evenings together with the other members of the executive teams launch and grow All Access Pass, what was just an idea to it now generating more than $100 million of subscriptions service revenue on the way to having all Access Pass in the Enterprise Division and leaders in the membership and the Education Division represents substantially all of the company's revenues and operations in the next few years. During this time, Paul led the execution of our strategy to increase client partner hiring, served on all our strategic committees and assumed essentially all other key operational responsibilities. And since September 1, 2020, in his role as Chief Operating Officer, Paul has been effectively running the business day-to-day, so making this transition to CEO was largely a recognition of what he has already been doing and the transition will be seamless.

Some additional great news. Steve Young will remain CFO for at least the next several years, continue to provide that tremendous and consistent knowledge of leadership and influence we all count on. Jennifer Colosimo, President of the Enterprise Division will now assume full responsibility for overseeing the entire Enterprise Division, including not only the US and Canada operations, which achieved tremendous growth under her leadership, but all the Enterprise Division's international operations and we're really excited about Jen's expanded leadership role and have full confidence in her ability. She is an amazing person and an amazing leader. Sean Covey will also continue to lead and service President of the Education Division, which he has done and continues to do so brilliantly and effectively. And really our top 30 other leaders will continue -- at least the top 30, all the top 30 will continue in their roles.

So in conclusion, I'd just say I had the privilege of being associated with the company one way or another since I joined the Board of the company leadership center in '93, became Chairman of the Board of Franklin Covey in '99 following the merger and then was asked sort of be Chairman of the Board and as CEO, which I have done for the past 21 years. In my ongoing role as Chairman of the Board and as a large shareholder and I don't intend to sell any shares, my new role as Executive Chairman, I'll remain involved in our most important strategic decisions, key financial matters and acquisitions and other capital transactions. Mainly I'll do everything I can to help Paul and help Franklin Covey continue to win in any other way that we can think of and I'm excited to remain close partners with Paul and the executive team for many years to come.

These changes along with the strong momentum of the business make it really an exciting time for Franklin Covey. We feel great about our strategy, our business model, our financial position and our leadership bench strength. I love this company. I love my government, our people, our shareholders, our clients, our mission and look forward to continuing this involvement to appreciate more than 1,000 associates and partners around the world and appreciate each of you and your ongoing commitment to Franklin Covey. So with that long thing I'll -- we're excited about these changes.

I'll now open the time for question and answers.

Questions and Answers:

Operator

Thank you. We'll begin the question-and-answer session. [Operator Instructions] And our first question comes from Andrew Nicholas from William Blair. Your line is open.

Andrew Nicholas -- William Blair -- Analyst

Hi, thank you. Good afternoon and congratulations to each of you, Jen, Bob and Paul, on the new roles. I guess to start in terms of the guidance and the guidance change, you touched on the increased spending in the fourth quarter. I was hoping you could spend a little bit more time on exactly what those investments are. I know Steve you listed them, but if we could get maybe a few examples of what those spending initiatives look like. And then relatedly, is there any way to quantify that spend and should we view that as kind of a one-time set of initiatives or are these kind of a multi-quarter spend that you're kind of leaning into growth with.

Robert A. Whitman -- Chair and Chief Executive Officer

Thanks, Andrew. I'll try to give you more context and then invite Paul and Steve to add on. I think there is some in both categories. The general ones that we always do are the continued investment in client partners. It's a little bit more back-end loaded this year because we didn't hire as many in the first half and therefore we're adding more in this back half. So we have more of those folks coming on in the fourth quarter than we might normally have. We are also kind of a one-time expenditure in in some marketing initiatives. We've been working with some firms, these aren't big dollar amounts, I mean but incrementally the combination of the marketing, which is maybe $0.5 million of extra and involve -- really increasing our footprint around the world in thought leadership and some things that we'll be announcing later this year. These are really kind of the outsourced work we've been doing. Our client partners incrementally are adding maybe $0.5 million or so in the fourth quarter. I think the ones that are just more one-time or is it in last year's fourth quarter, we had reserved a bunch for compensation and profit sharing and so forth. Most of our compensation is tied to results and because the overall results for the year were going to be lower because of the pandemic we reverse some of those things in the fourth quarter this year, the offers will be true and so that's more meaningful, couple of million dollars swing between those two. And I think those are the primary, the primary thing is we also have some travel coming back, not a lot, but there is some coming back as offices open and clients expect you to be there and see them and so those expenses will come back a little more than they were in last year's fourth quarter and that will be somewhat ongoing. But basically the thought is that it's possible that the fourth quarter could be higher than the end of our top of our range, but we do have some expenses relating to those areas that we're talking about in the fourth quarter. Is that helpful at all?

Andrew Nicholas -- William Blair -- Analyst

Yes, very much so. Thank you. Maybe for my follow-up switching gears a little bit. I know you touched on it in your prepared remarks, but I was hoping we could spend a little bit more time on Strive. I think more specifically you mentioned the ability to target large groups. Can you flush that out a little bit further.

And then maybe bigger picture question. If you could just kind of go through the top one or two things that Strive brings Franklin Covey that maybe you're most excited about.

Robert A. Whitman -- Chair and Chief Executive Officer

Sure. Paul, would you like to take that?

Paul Walker -- President, COO and President Enterprise Division

Sure. Hi, Andrew. So I would just -- at the beginning, in addition to some of the increases, the costs that we will pick up in the fourth quarter that Bob mentioned, there are some cost related to the integration of Strive as well and getting prepared to come out in our next fiscal year with the Strive in a big way. But to answer your question specifically, so we're very excited about Strive. Strive is a platform upon which we think more, more effectively distribute administer provide access to our solutions to clients. And so if you think in the past, we've had a great platform with All Access Pass, and on that platform we pull in from disparate pieces, we pull in our ability to tap people experienced content, our assessment capability, we pulled genre into that and there is a constellation of resources and services that we provide clients on that platform.

With Strive, they've been out there in the last few years, the start-up focused primarily in the leadership space and they were a content company first, they were a platform company first and they created a platform that's even better than what we had just inside the All Access Pass portal where users -- administrators can deploy content to larger populations. Their focus was on driving behavior change through technology. Our focus is on driving behavior change through the great content and solutions we have. So we marry these two things together and our clients now can say what are the one or two things, it's really the user experience and the outcomes that organizations will achieve as our content now runs on the Strive platform. It will be easier, it will be even more digestible, we'll be able to provide metrics in real time, the engagement will be even higher. Both organizations are trying to deploy something to thousands and also when individuals themselves are going in, working on their own skill development.

So if you think of it as, in a way, kind of like what pellet time did combining the bike the instructor, the live sessions, the metrics, the social aspect of that all into one seamless system, Strive is going to help us bring all of that together in our use case, which is around learning and driving behavior change at scale.

Andrew Nicholas -- William Blair -- Analyst

Perfect. Well, thanks very much and again congrats on the new role.

Paul Walker -- President, COO and President Enterprise Division

Thank you.

Robert A. Whitman -- Chair and Chief Executive Officer

Thanks, Andrew.

Operator

And your next question comes from Jeff Martin from ROTH Capital Partners. Your line is open.

Jeff Martin -- ROTH Capital Partners -- Analyst

Thanks. Good afternoon guys. And Paul, congratulations.

Robert A. Whitman -- Chair and Chief Executive Officer

Hey, Jeff.

Jeff Martin -- ROTH Capital Partners -- Analyst

Well deserved. And Bob, that was a nice way to introduce that too, so compliments to you on what you put together there. Wanted to jump in here, third quarter was an impressive quarter to start out. Was there any particular areas that were stronger than what you had thought maybe new logos may be higher average customer spend. What do you think surprised to the upside in the quarter and what does that implicate for the future.

Robert A. Whitman -- Chair and Chief Executive Officer

Paul, do you want to take that?

Paul Walker -- President, COO and President Enterprise Division

I'll share one or two and then Jen please jump in and Ed to Sean. So Jeff, I think a couple of things that were pleasantly surprising and we had high expectations already but even came in higher, one was new logos. That metric continues to climb forth every quarter. You would recall during the pandemic we reported that actually new logos. That was an area where I wasn't quite sure what was going to happen in the darkest days of the pandemic and new logos really hung in there quite well and we're seeing an acceleration there. And the other as we mentioned, we had a fantastic subscription services quarter and I've had -- the more we get into this, the more I think even as we come out of the pandemic, and certainly some of our clients will want to go back and have us come on-site again in person. I think the fact that the world has shifted and we can do both. We can do live online and live in-person. I think it's going to continue to lead to greater demand for services overall. And so I think there is some of that driving the increase in services business. And then the third leg of that stool is client expansion or retention was great aso in the quarter. So the combination of those things really helped on the revenue side. And of course that business as we talked about it's a high margin business. So we're continually as more and more of the business converts to All Access Pass with the high margins that flow through to the bottom line is driving both revenue and EBITDA. Those would be at least three.

Jen, anything you would add to that on Enterprise and then maybe Sean want to say a word or two about Ed.

Jennifer Colosimo -- President, Enterprise Division

Sure. I think from an Enterprise Division, Jeff, one of the -- Paul mentioned expansion as clients stay with us and they expand and that makes sense and it came definitely to play in this quarter and that typically a client will hire us to do a particular large scale behavior change. And as they complete that, start to see some results, they have the opportunity to work with our implementation specialists, which is very unique in the industry in the way that we provide them to our clients. They work with our implementation specialists to uncover either additional populations to go after the same job to be done or they work at, they see other opportunities that they could utilize what was in their path. And so we are seeing significant expansion and we did, as Paul mentioned, have an increase in new logo. In addition, I think our team, our Franklin Covey team all individual contributors are firing on all cylinders. As Paul mentioned, we have a significant opportunity with those that are in ramp and we are seeing newer client partners find success quicker our sales enablement. So I would also attribute a lot to our people, but also our value proposition of all it is in the All Access Pass, and how that leads to expansion.

Jeff Martin -- ROTH Capital Partners -- Analyst

Great, that's very helpful.

M. Sean Merrill Covey -- President, Education Division

Yeah, hi Jeff, this is Sean.

Jeff Martin -- ROTH Capital Partners -- Analyst

Hey Sean.

M. Sean Merrill Covey -- President, Education Division

Yeah. Hi. Should I --you want me to share a little bit about what's going on in Ed?

Jeff Martin -- ROTH Capital Partners -- Analyst

That would be great.

M. Sean Merrill Covey -- President, Education Division

Yeah. So just to follow up with what Paul and Jen. Similar in education. Retention is stronger than we supposed and not only the number of schools that we're retaining, but also the dollars per retain score, the average amount is increasing. I think a lot of this is because of the market is back to normal. I think people are making decisions again. There's a lot of pent-up demand of people been kind of waiting on the sidelines and see how things are going to turn out. But because everyone feels like things are going to be largely back to normal come fall decisions are being made. So we have got a lot of new schools coming on a lot higher than last year new districts. If you recall, a few sessions ago we talked about [Indecipherable] 4.0 and how it's more district friendly, but we're seeing the results of that now and we're bringing on some really sizable districts, many of them all over the country. That may be a few years ago we weren't prepared to do, and those are coming in starting in the third quarter, so that's helping us quite a bit as well. So between retention new schools and new districts that we're getting to, I think that's what's caused the increase in the third quarter.

Jeff Martin -- ROTH Capital Partners -- Analyst

And is Strive something that will be applied to the Education Division and not just Enterprise. Just curious.

Robert A. Whitman -- Chair and Chief Executive Officer

Yeah. [Speech Overlap] Ultimately, I think it's going to start more on the Enterprise side, but it will start. I think all the innovation there we will be able to be fully utilized at some point in education as well.

Paul Walker -- President, COO and President Enterprise Division

I'll just say one of the great things we get with Strive is also the great people that are adding to our team and we're grateful for that and there is some very, very strong technology oriented people and great people all the way through, so.

Jeff Martin -- ROTH Capital Partners -- Analyst

Great. I look forward to seeing them on that soon. Then my other question centers around kind of your high level growth outlook. I think in the past you've articulated pretty clearly that you view yourself as kind of an 8% perpetual growth business at least for the foreseeable future where subscription sales and add-on sales in the high teens to low 20% growth rate, and as we get to critical mass, it seems like that growth rate is somewhat conservative, you add a technology platform of Strive that addresses a larger population. What's your outlook or what's your view on growth acceleration from that 8% level going forward.

Robert A. Whitman -- Chair and Chief Executive Officer

I think you've identified the factors that would argue for a higher growth rate in the future. I think the combination -- in the past, we knew that the growth of subscription was being offset partially by the decline in the legacy business now that has largely flattened out even the same growth we've been already achieving would mean that it was less drag you'd be a bit higher. So I think we're thinking going forward that we can move into that low, I mean, call it 10% anyway that we can grow 10% or so, we still have some conversion in our international operations that will create some, add more in deferred revenue. But I think it's natural that with the growth rate of our subscription the things you mentioned, it will tend to edge up a bit going forward.

Jeff Martin -- ROTH Capital Partners -- Analyst

Great. Thanks for the time and congratulations on a really strong quarter.

Robert A. Whitman -- Chair and Chief Executive Officer

Thanks so much, Jeff.

Operator

And your next question comes from Marco Rodriguez with Stonegate Capital. Your line is open.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Good afternoon, everybody. Thanks for taking my questions.

Robert A. Whitman -- Chair and Chief Executive Officer

Hey, Marco. Thank you.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Once again, congratulations to everybody with all the promotions and movements, all very well deserved. And I had a couple of quick follow-ups here. Just coming back on the Strive acquisition, the integration aspects. Maybe if you can talk a little bit about that as far as the complexity levels and when you expect to have that fully integrated.

Robert A. Whitman -- Chair and Chief Executive Officer

Paul, would you?

Paul Walker -- President, COO and President Enterprise Division

You want me to talk about that, Bob. Sure.

Robert A. Whitman -- Chair and Chief Executive Officer

Yeah. It would be great.

Paul Walker -- President, COO and President Enterprise Division

Hi, Marco. So Bob mentioned, this team, the team that came with Strive, they came with -- they were the inventors of it. This is an amazing team. In fact it would be fun to do a demo and have a chance to meet some of the key people on that team. So Strive for us will power kind of three use cases if you want to think of them this way. One is when a client has [Indecipherable] say developing first level leaders and they want to take them through our six critical practices content, we'll do that now on this Strive platform, which will do all the things I've talked about a minute ago and I was explaining to Andrew how Strive will benefit the client. So the first thing we're doing right now is we're making all of our content Striveable if you will. So we've been getting it ready, so the assessments all tied together and everything's on that platform. We expect that work to largely be done and ready to go in January.

The second use case for them, so that's one, Franklin Covey when our people are delivering services and we're guiding we're guiding client through that. They've hired us not only for our content, but they want our expertise in delivering the training and doing the coaching. The second use case that will follow that first use case is it is equipping our client facilitators to implement our content like they can today but benefiting from this Strive platform as well. So it's another reason why you want to have the All Access Pass because even if you're not purchasing subscription services from us, you'll get the benefit of an All Access Pass holder from the technology that's their insights drive, which will be inside of our portal.

And then the third use case, which will come along kind of alongside those is this ability for even when you're not on a company-sponsored journey when I haven't been asked by Bob to go through with a cohort of people a leadership development experience, I may have a skill that I feel like I need to address or that my assessment has told me I need to work on public speaking or platform skills, but we have content in the past around more effectively presenting and I can go in and on the Strive platform I can work on those skills myself and rather than just watching a video or page turning some online content to Strive experience will be, it will be back to the [Indecipherable] example much more engaging, and much more focused and has the pieces there to make sure that even if I'm going through by myself, my behavior is more likely to change. There is more accountability built-in, there is social aspects built-in.

And so over the coming months and quarters, Strive needs to be able to do that across all of our content, so that's the primary programing and engineering that goes behind that is getting Franklin Covey content into the Strive platform. I would say it's not a difficult time, it won't happen overnight. It will happen over the next number of months and we'll start to be able to really come out to our clients in January-ish. We're doing some pilot testing with clients in that right now. We were ready to go since we acquired them and we're off on our way on to pilots.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Understood. And then just kind of confirming here. Obviously you brought up the integration cost that will be there for Strive. I'm just trying to understand if those costs will be stripped out of your adjusted EBITDA and then obviously, your guidance or is it inclusive?

Stephen D. Young -- Chief Financial Officer and Corporate Secretary

They are included, Marco.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Got it, OK. And then last quick question for me, just kind of a higher level. It sounds like obviously confidence levels are rising, performance is very good here. Maybe if you can talk a little bit about looking at in the next 12 months what do you think are the greatest opportunities for you to achieve and accelerate growth. And then at the same time, what is the greatest risk that you see out there that you might need to manage.

Robert A. Whitman -- Chair and Chief Executive Officer

I can start and then others can join in. The big opportunity we've seen, I mean people have been apart, they're now coming back together whether that's officer or in their new way of working and there is a lot to get most organizations have to do to get, there is a lot to do, and particularly in building their teams and building their leaders, etc, it's been more difficult for them during this period of time. And so I think the big opportunity is as organizations take on big new opportunities of their own for execution, prices that are trying to build leaders and really get all their teams together, they tend to look for things that where we play where there's collective behavioral changes needed among leaders, building trust in the new environment and new work environment, unconscious bias overcoming that. And all these different ways of working I think is one big opportunity is a category as lots of dimensions. I think that's a big thing. Also you're trying to make a break and operational breakthrough in a new world. We've always done well coming out of a period of disruption in execution and other things and people say, Gosh, I really want to pick something narrow and achieve the big opportunity.

So in opportunity side, I'd say those, Jen or Paul and what else would you add to them.

Jennifer Colosimo -- President, Enterprise Division

Bob, I'll speak to that. I think Bob really spoke to where we have the biggest opportunity with clients as they think about place and location and as well as the space that behavior change in the things that they need for their people. The other one that's been mentioned and Steve mentioned it and we talked about that is I think we have a great opportunity in terms of our thought leadership and our market and our positioning further strengthened by our work of integration of Strive, but many, many opportunities for especially as we look for new logos to soften the beaches and have a new and distinctive message around who we are and what we do and how we can help you with those operational breakthroughs in moving a metric or obtaining collective behavior change. So I'm excited both about what client opportunity is, but also what we have to go after that from a marketing standpoint.

Robert A. Whitman -- Chair and Chief Executive Officer

Right, Jen. I think on the challenge side, Paul are you going to add anything to the opportunity side?

Paul Walker -- President, COO and President Enterprise Division

No, go ahead.

M. Sean Merrill Covey -- President, Education Division

I will just add [Speech Overlap] opportunity side. Sorry. [Speech Overlap]

Robert A. Whitman -- Chair and Chief Executive Officer

Thank you, Sean.

M. Sean Merrill Covey -- President, Education Division

Yeah, sure. Yeah. I think the opportunity of Education is huge right now because Social Emotional Learning, SEL is more popular than ever because of all the mental wellness issues that have come up during COVID, mental health for students and teachers become big issue. We addressed that so well later in May. Combined with the stimulus money of the $200 billion on top of the $50 billion the federal government normally spends this $200 billion will be in the marketplace for 2.5 years. So it's a great opportunity and runway for new clients to join us. So we think there is a real bright future for education because of these trends.

Robert A. Whitman -- Chair and Chief Executive Officer

Great. And then Marco, on your question was that helpful on the one side, on the opportunity side?

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Yeah. That was great.

Robert A. Whitman -- Chair and Chief Executive Officer

Great. I think on the challenge right now, I mean you can worry about a lot of things, but the thing we are spending most of our time worried about is how do we as an organization take advantage of that opportunity in a funny way because everybody every organization in the world has those challenges that we just talked about. We've got great distribution, great content, etc, but how can we stay alert both in terms of delivering bigger and bigger fluctuations, we've talked about that with Strive, but also how do we get the word out and how do we make sure that every person who is in that position can think, Gosh, if I need behavioral changes of scale or I need to accomplish simply requires collective action, how do we make it more automatic for them not just our salespeople to call on them and then let them know but how do we actually help people understand that actually we got this capability at a bigger scale and that's part of what we're investing in this fourth quarter in some new market. I think it's really getting out there and and taking advantage of what is really huge opportunity is -- again we've got the scale and we've got the capabilities I think we need to -- we're trying to figure how to scale it more quickly.

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

Understood. I appreciate the time. That's all I have. Thanks.

Robert A. Whitman -- Chair and Chief Executive Officer

Thanks so much, Marco.

Operator

And that concludes our question-and-answer session. I'll turn the call back over to Bob Whitman for final remarks.

Robert A. Whitman -- Chair and Chief Executive Officer

All right. Well, again, we thank each of you for your great support, guidance, and advice. We hope to continue to received that and we really hope you have all have a great force and we look forward to doing a good job here in the fourth quarter and a good year. So, thank you so much to everyone.

Operator

[Operator Closing Remarks]

Duration: 76 minutes

Call participants:

Derek Hatch -- Corporate Controller, Central Services, Finance

Robert A. Whitman -- Chair and Chief Executive Officer

Stephen D. Young -- Chief Financial Officer and Corporate Secretary

Paul Walker -- President, COO and President Enterprise Division

Jennifer Colosimo -- President, Enterprise Division

M. Sean Merrill Covey -- President, Education Division

Andrew Nicholas -- William Blair -- Analyst

Jeff Martin -- ROTH Capital Partners -- Analyst

Marco Rodriguez -- Stonegate Capital Markets -- Analyst

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