Skillsoft Reports Financial Results for the First Quarter of Fiscal Year 2023

Skillsoft Content Segment Bookings up 22%

Skillsoft Corp. (NYSE: SKIL) (“Skillsoft” or the “Company”), a leading platform for transformative learning experiences, today announced its financial results for the first quarter of fiscal 2023 ended April 30, 2022.

“We reported Q1 results above expectations due to strong Skillsoft Content Segment bookings growth of 22%,” said Jeffery R. Tarr, Skillsoft’s Chief Executive Officer. “I’m pleased that we’ve delivered four consecutive quarters of adjusted revenue growth since returning the Company to public markets a year ago. We also recently completed the first phase of the technical integration of Codecademy into Percipio – our immersive, AI driven learning platform – and are encouraged by our early sales pipeline success.”

Fiscal 2023 First Quarter Select Financials1

  • Delivered strong Skillsoft Content Segment bookings growth of 22% over prior year
  • Skillsoft Content Dollar Revenue Retention to 101%, up 10 percentage points over prior year
  • Delivered GAAP revenue of $164 million, up 79% and GAAP net loss of $22 million
  • Grew Adjusted Revenue2 1% to $170 million with Adjusted2 EBITDA of $33 million

Outlook Commentary

The strength of the Company’s subscription-based Skillsoft Content Segment is being offset by declines in the transactional Global Knowledge segment due to macroeconomic headwinds. As a result, Skillsoft is trending towards the low end of its bookings and revenue outlook ranges for full year fiscal 2023. The Company is taking actions to improve second half Global Knowledge segment revenue results and to deliver its Adjusted EBITDA outlook.

Full Year Fiscal 2023 Outlook3

 

Outlook

 

 

Bookings

$790 million to $825 million

 

 

Adjusted Revenue

$765 million to $790 million

 

 

Adjusted EBITDA

Approximately $167 million

 

 

Skillsoft expects fiscal 2024 Adjusted EBITDA growth of at least low double digits.

Key Operational Metrics and Non-GAAP Financial Measures

Bookings

The following table sets forth unaudited bookings for the three months ended April 30, 2022 and 2021 as if pre-combination Skillsoft and Global Knowledge had been combined and their fiscal quarters had been aligned to end on April 30 and the Skillsoft Content line includes approximately one month of Codecademy for both years:

Three Months
(In thousands) Ended April 30, Change

2022

2021

$ %
Bookings
Skillsoft Content

$51,069

$41,835

$9,234

22%

Global Knowledge

55,665

65,257

(9,592)

-15%

SumTotal

18,742

25,424

(6,682)

-26%

Total Bookings

$125,476

$132,516

($7,040)

-5%

Adjusted Revenue

The following table sets forth unaudited Adjusted Revenue for the three months ended April 30, 2022 and 2021 as if pre-combination Skillsoft and Global Knowledge had been combined and their fiscal quarters had been aligned to end on April 30 and the Skillsoft Content line includes approximately one month of Codecademy for both years:

Three Months
(In thousands) Ended April 30, Change

2022

2021

 

$

%

Adjusted Revenue
Skillsoft Content

$89,786

$85,185

$4,601

5%

Global Knowledge

51,383

54,766

(3,383)

-6%

SumTotal

29,076

29,151

(75)

0%

Total Adjusted Revenue

$170,245

$169,102

$1,143

1%

Dollar Retention Rate

The following table sets forth dollar retention rates (“DRR”) for the last twelve-month (“LTM”) period ended April 30, 2022 and for the three-month periods ended April 30, 2022 and 2021:

April 30
LTM

2022

2021

 

Skillsoft Content

98%

101%

91%

SumTotal

95%

73%

95%

Webcast and Conference Call Information

Skillsoft will host a conference call and webcast today at 5:00 p.m. Eastern Time to discuss its financial results. To access the call, dial (877) 413-9278 from the United States and Canada or (215) 268-9914 from international locations. The live event can be accessed from the Investor Relations section of Skillsoft’s website at investor.skillsoft.com. A replay will be available for six months.

About Skillsoft

Skillsoft (NYSE: SKIL) delivers transformative learning experiences that propel organizations and people to grow together. The Company partners with enterprise organizations and serves a global community of learners to prepare today’s employees for tomorrow’s economy. With Skillsoft, customers gain access to blended, multimodal learning experiences that do more than build skills, they grow a more capable, adaptive, and engaged workforce. Through a portfolio of best-in-class content, a platform that is personalized and connected to customer needs, world-class tech and a broad ecosystem of partners, Skillsoft drives continuous growth and performance for employees and their organizations by overcoming critical skill gaps and unlocking human potential. Learn more at www.skillsoft.com.

NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE METRICS

We track several non-GAAP financial measures and key performance metrics that we believe are key financial measures of our success. Non-GAAP measures and key performance metrics are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies comparable to us, many of which present non-GAAP measures and key performance metrics when reporting their results. These measures can be useful in evaluating our performance against our peer companies because we believe the measures provide users with valuable insight into key components of U.S. GAAP financial disclosures. For example, a company with higher U.S. GAAP net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales. Likewise, excluding the effects of interest income and expense moderates the impact of a company’s capital structure on its performance. However, non-GAAP measures and key performance metrics have limitations as analytical tools. Because not all companies use identical calculations, our presentation of non-GAAP financial measures and key performance metrics may not be comparable to other similarly titled measures of other companies. They are not presentations made in accordance with U.S. GAAP, are not measures of financial condition or liquidity, and should not be considered as an alternative to profit or loss for the period determined in accordance with U.S. GAAP or operating cash flows determined in accordance with U.S. GAAP. As a result, these performance measures should not be considered in isolation from, or as a substitute analysis for, results of operations as determined in accordance with U.S. GAAP.

We do not reconcile our forward-looking non-GAAP financial measures to the corresponding U.S. GAAP measures, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible; and because not all of the information necessary for a quantitative reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure is available to us without unreasonable efforts. For the same reasons, we are unable to address the probable significance of the unavailable information. We provide non-GAAP financial measures that we believe will be achieved, however we cannot accurately predict all of the components of the adjusted calculations and the U.S. GAAP measures may be materially different than the non-GAAP measures.

Annualized Recurring Revenue (“ARR”)

ARR represents the annualized recurring value of all active subscription contracts at the end of a reporting period. We believe ARR is useful for assessing the performance of our recurring subscription revenue base and identifying trends affecting our business.

Dollar Retention Rate (“DRR”)

For existing customers at the beginning of a given period, DRR represents subscription renewals, upgrades, churn, and downgrades in such period divided by the beginning total renewable base for such customers for such period. Renewals reflect customers who renew their subscription, inclusive of auto-renewals for multi-year contracts, while churn reflects customers who choose to not renew their subscription. Upgrades include orders from customers that purchase additional licenses or content (e.g., a new Leadership and Business module), while downgrades reflect customers electing to decrease the number of licenses or reduce the size of their content package. Upgrades and downgrades also reflect changes in pricing. We use our DRR to measure the long-term value of customer contracts as well as our ability to retain and expand the revenue generated from our existing customers.

Bookings

Bookings in any particular period represents orders received during that period and reflects (i) subscription renewals, upgrades, churn, and downgrades to existing customers, (ii) non- subscription services, and (iii) sales to new customers. Bookings generally represents a customer’s annual obligation (versus the life of the contract), and, for the subscription business, revenue is recognized for such bookings over the following 12 months. We use bookings to measure and monitor current period business activity with respect to our ability to sell subscriptions and services to our platform.

Forward Looking Statements

This document includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those laws. All statements, other than statements of historical facts, that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our outlook (including bookings, adjusted revenue, and adjusted EBITDA), our product development and planning, our pipeline, future capital expenditures, financial results, the impact of regulatory changes, existing and evolving business strategies and acquisitions and dispositions, demand for our services and competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, our ability to successfully implement our plans, strategies, objectives, expectations and intentions are forward-looking statements. Also, when we use words such as “may,” “will,” “would,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “projects,” “forecasts,” “seeks,” “outlook,” “target,” “goals,” “probably,” or similar expressions, we are making forward-looking statements. Such statements are based upon the current beliefs and expectations of Skillsoft’s management and are subject to significant risks and uncertainties. All forward-looking disclosure is speculative by its nature.

There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including:

  • our ability to realize the benefits expected from the business combination between Skillsoft, Churchill Capital Corp. II, and Global Knowledge, and other recent transactions, including our acquisitions of Pluma and Codecademy;
  • the impact of U.S. and worldwide economic trends, financial market conditions, geopolitical events, natural disasters, climate change, public health crises, the ongoing COVID-19 pandemic (including any variant), political crises, or other catastrophic events on our business, liquidity, financial condition and results of operations;
  • our ability to attract and retain key employees and qualified technical and sales personnel;
  • our reliance on third parties to provide us with learning content, subject matter expertise, and content productions and the impact on our business if our relationships with these third parties are terminated;
  • fluctuations in our future operating results;
  • our ability to successfully identify, consummate, and achieve strategic objectives in connection with our acquisition opportunities and realize the benefits expected from the acquisition;
  • the demand for, and acceptance of, our products and for cloud-based technology learning solutions in general;
  • our ability to compete successfully in competitive markets and changes in the competitive environment in our industry and the markets in which we operate;
  • our ability to market existing products and develop new products;
  • a failure of our information technology infrastructure or any significant breach of security, including in relation to the migration of our key platforms from our systems to cloud storage;
  • future regulatory, judicial, and legislative changes in our industry;
  • our ability to comply with laws and regulations applicable to our business;
  • a failure to achieve and maintain effective internal control over financial reporting;
  • fluctuations in foreign currency exchange rates;
  • our ability to protect or obtain intellectual property rights;
  • our ability to raise additional capital;
  • the impact of our indebtedness on our financial position and operating flexibility;
  • our ability to meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;
  • our ability to successfully defend ourselves in legal proceedings; and
  • our ability to continue to meet applicable listing standards.

The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For more information, please see the risk factors included in our Form 10-K filed with the SEC for the fiscal year ended January 31, 2022 and our other filings with the SEC.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved. Annualized, pro forma, projected, and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. Additionally, statements as to market share, industry data, and our market position are based on the most currently available data available to us and our estimates regarding market position or other industry data included in this document or otherwise discussed by us involve risks and uncertainties and are subject to change based on various factors, including as set forth above.

Our forward-looking statements speak only as of the date made and we do not undertake to update these forward-looking statements unless required by applicable law. With regard to these risks, uncertainties, and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.

________________________________

1Growth calculated compared to the prior year as if pre-combination Skillsoft and Global Knowledge had been combined and their fiscal quarters had been aligned to end on April 30, 2021 and includes approximately one month of Codecademy for both years.

2Signifies non-GAAP measure. See “Non-GAAP Financial Measures and Key Performance Metrics” in this release.

3See “Non-GAAP Financial Measures and Key Performance Metrics.” The Company is unable to reconcile forward-looking non-GAAP measures without unreasonable efforts.

SKILLSOFT CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
 
April 30, 2022 January 31, 2022
ASSETS
Current assets:
Cash and cash equivalents $

75,571

$

154,672

Restricted cash

5,084

14,251

Accounts receivable, less reserves of approximately $300 and $600 as of April 30, 2022 and January 31, 2022 respectively

127,259

212,463

Prepaid expenses and other current assets

49,903

45,837

Total current assets

257,817

427,223

Property and equipment, net

17,633

18,084

Goodwill

1,179,926

871,504

Intangible assets, net

939,725

869,487

Right of use assets

17,090

19,925

Other assets

15,866

15,725

Total assets $

2,428,057

$

2,221,948

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $

6,404

$

4,800

Borrowings under accounts receivable facility

27,990

74,629

Accounts payable

29,855

25,661

Accrued compensation

33,904

51,115

Accrued expenses and other current liabilities

46,550

51,017

Lease liabilities

5,486

6,895

Deferred revenue

297,447

331,605

Total current liabilities

447,636

545,722

 
Long-term debt

616,463

462,185

Warrant liabilities

18,093

28,199

Deferred tax liabilities

95,065

99,911

Long term lease liabilities

11,711

13,355

Deferred revenue - non-current

1,708

1,248

Other long-term liabilities

11,697

11,430

Total long-term liabilities

754,737

616,328

Commitments and contingencies

Shareholders’ equity:
Shareholders’ common stock - Class A common shares, $0.0001 par value: 375,000,000 shares authorized and 163,760,305 shares issued and outstanding at April 30, 2022 and 133,258,027 shares issued and outstanding at January 31, 2022

14

11

Additional paid-in capital

1,495,820

1,306,146

Accumulated deficit

(268,872)

(247,229)

Accumulated other comprehensive (loss) income

(1,278)

970

Total shareholders’ equity

1,225,684

1,059,898

Total liabilities and shareholders’ equity $

2,428,057

$

2,221,948

 
SKILLSOFT CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
Successor Predecessor (SLH)
Three Months Three Months
Ended Ended
April 30, 2022 April 30, 2021
Revenues:
Total revenues $

163,914

$

91,701

Operating expenses:
Costs of revenues

47,634

24,521

Content and software development

22,773

16,607

Selling and marketing

44,883

28,502

General and administrative

29,720

12,362

Amortization of intangible assets

43,854

34,943

Recapitalization and acquisition-related costs

13,442

1,932

Restructuring

3,985

537

Total operating expenses

206,291

119,404

Operating loss

(42,377)

(27,703)

Other income (expense), net

1,003

(352)

Fair value adjustment of warrants

10,106

Interest income

166

10

Interest expense

(12,281)

(11,449)

Loss before benefit from income taxes

(43,383)

(39,494)

Benefit from income taxes

(21,740)

(2,089)

Net loss

(21,643)

(37,405)

 
Loss per share:
Class A and B – Basic and Diluted (SLH) *

(9.35)

Ordinary – Basic and Diluted (Successor)

(0.15)

*
Weighted average common share outstanding:
Class A and B – Basic and Diluted (SLH) *

4,000

Ordinary – Basic and Diluted (Successor)

142,209

*
 
SKILLSOFT CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
 
Successor Predecessor (SLH)
Three Months Three Months
Ended Ended
April 30, 2022 April 30, 2021
Cash flows from operating activities:
Net loss $

(21,643)

$

(37,405)

Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation

6,898

Depreciation and amortization

2,533

2,419

Amortization of intangible assets

43,854

34,943

Change in bad debt reserve

(320)

(293)

(Benefit from) provision for income taxes – non-cash

(26,434)

(3,355)

Non-cash interest expense

415

335

Fair value adjustment to warrants

(10,106)

Right-of-use asset

2,836

477

Changes in current assets and liabilities, net of effects from acquisitions:
Accounts receivable

84,107

87,373

Prepaid expenses and other current assets

(367)

(2,481)

Accounts payable

2,042

2,781

Accrued expenses, including long-term

(22,768)

(19,422)

Lease liability

(3,053)

(864)

Deferred revenue

(50,112)

(24,832)

Net cash provided by operating activities

7,882

39,676

Cash flows from investing activities:
Purchase of property and equipment

(1,613)

(386)

Internally developed software - capitalized costs

(2,286)

(1,494)

Acquisition of Codecademy, net of cash acquired

(198,633)

Net cash used in investing activities

(202,532)

(1,880)

Cash flows from financing activities:
Shares repurchased for tax withholding upon vesting of restricted stock-based awarded

(309)

Proceeds from issuance of term loans, net of fees

157,088

Principal payments on capital lease obligation

(263)

Proceeds from accounts receivable facility, net of borrowings

(46,639)

(2,876)

Principal payments on Term loans

(1,601)

(1,300)

Net cash provided by (used in) financing activities

108,539

(4,439)

Effect of exchange rate changes on cash and cash equivalents

(2,157)

(140)

Net (decrease) increase in cash, cash equivalents and restricted cash

(88,268)

33,217

Cash, cash equivalents and restricted cash, beginning of period

168,923

74,443

Cash, cash equivalents and restricted cash, end of period $

80,655

$

107,660

Supplemental disclosure of cash flow information:
Cash and cash equivalents $

75,571

$

105,004

Restricted cash

5,084

2,656

Cash, cash equivalents and restricted cash, end of period $

80,655

$

107,660

 

SKILLSOFT CORP.

RECONCILIATION OF NON-GAAP FINANICAL MEASURES

(IN THOUSANDS)

 
For the Three Months Ended April 30, 2022
Skillsoft Corp.

Non-GAAP

Revenue

Adjustments(1)

Combined
Revenues:
Total revenues

$

163,914

 

$

6,331

$

170,245

 

Operating expenses
Cost of revenues

 

47,634

 

 

6,331

 

53,965

 

Content and software development

 

22,773

 

 

-

 

22,773

 

Selling and marketing

 

44,883

 

 

-

 

44,883

 

General and administrative

 

29,720

 

 

-

 

29,720

 

Amortization of intangible assets

 

43,854

 

 

-

 

43,854

 

Recapitalization and acquisition-related costs

 

13,442

 

 

-

 

13,442

 

Restructuring

 

3,985

 

 

-

 

3,985

 

Total operating expenses

 

206,291

 

 

6,331

 

212,622

 

Operating loss:

$

(42,377

)

$

-

$

(42,377

)

Other income (expense), net

 

11,110

 

 

-

 

11,110

 

Interest income

 

165

 

 

-

 

165

 

Interest expense

 

(12,281

)

 

-

 

(12,281

)

Loss before benefit from income taxes

 

(43,383

)

 

-

 

(43,383

)

Benefit from income taxes

 

(21,740

)

 

-

 

(21,740

)

Net loss

$

(21,643

)

$

-

$

(21,643

)

 
EBITDA Computation
Interest expense, net

$

12,116

 

$

-

$

12,116

 

Benefit from income taxes

 

(21,740

)

 

-

 

(21,740

)

Depreciation and amortization

 

46,387

 

 

-

 

46,387

 

EBITDA

 

15,120

 

 

-

 

15,120

 

 
Adjusted EBITDA Computation
Plus: Non-recurring retention and consulting costs

 

1,011

 

 

-

 

1,011

 

Plus: Recapitalization and acquisition-related costs

 

13,442

 

 

-

 

13,442

 

Plus: Restructuring and contract terminations

 

3,985

 

 

-

 

3,985

 

Plus: Integration and migration related

 

1,554

 

 

-

 

1,554

 

Plus: Warrant fair value adjustment and foreign currency

 

(11,007

)

 

-

 

(11,007

)

Plus: Stock-based compensation expense

 

8,492

 

 

-

 

8,492

 

Plus: Other add backs

 

(94

)

 

-

 

(94

)

Adjusted EBITDA

$

32,503

 

$

-

$

32,503

 

 
(1) Non-GAAP revenue adjustments include reseller fees, which are presented on a net basis in GAAP revenue.

SKILLSOFT CORP.

RECONCILIATION OF NON-GAAP FINANICAL MEASURES

(IN THOUSANDS)

 
For the Three Months Ended April 30, 2021
Non-GAAP

Revenue

Adjustments(1)
GK Skillsoft Corp.
Combined Codecademy(2) Proforma
Revenues:
Total revenues

$

46,677

 

$

91,701

 

$

27,963

 

$

166,341

 

$

2,761

$

169,102

Operating expenses
Cost of revenues

 

22,862

 

 

24,521

 

 

8,089

 

 

55,472

 

Content and software development

 

234

 

 

16,607

 

 

-

 

 

16,841

 

Selling and marketing

 

11,007

 

 

28,502

 

 

-

 

 

39,509

 

General and administrative

 

9,000

 

 

12,362

 

 

-

 

 

21,362

 

Amortization of intangible assets

 

1,172

 

 

34,943

 

 

-

 

 

36,115

 

Recapitalization and acquisition-related costs

 

-

 

 

1,932

 

 

-

 

 

1,932

 

Restructuring

 

2,618

 

 

537

 

 

-

 

 

3,155

 

Total operating expenses

 

46,893

 

 

119,404

 

 

8,089

 

 

174,386

 

Operating loss:

$

(216

)

$

(27,703

)

$

19,874

 

$

(8,045

)

Other income (expense), net

 

1,476

 

 

(352

)

 

-

 

 

1,124

 

Interest income

 

-

 

 

10

 

 

-

 

 

10

 

Interest expense

 

(10,070

)

 

(11,449

)

 

-

 

 

(21,519

)

Loss before benefit from income taxes

 

(8,810

)

 

(39,494

)

 

19,874

 

 

(28,430

)

Benefit from income taxes

 

(840

)

 

(2,089

)

 

-

 

 

(2,929

)

Net loss

$

(7,970

)

$

(37,405

)

$

19,874

 

$

(25,501

)

 
EBITDA Computation
Interest expense, net

$

10,070

 

$

11,439

 

$

-

 

$

21,509

 

Benefit from income taxes

 

(840

)

 

(2,089

)

 

-

 

 

(2,929

)

Depreciation and amortization

 

2,590

 

 

37,362

 

 

-

 

 

39,952

 

EBITDA

 

3,850

 

 

9,307

 

 

19,874

 

 

33,031

 

 
Adjusted EBITDA Computation
Plus: Non-recurring retention and consulting costs

 

-

 

 

707

 

 

-

 

 

707

 

Plus: Recapitalization and acquisition-related costs

 

1,393

 

 

1,932

 

 

-

 

 

3,325

 

Plus: Restructuring and contract terminations

 

2,618

 

 

537

 

 

-

 

 

3,155

 

Plus: Integration and migration related

 

-

 

 

779

 

 

-

 

 

779

 

Plus: Warrant fair value adjustment and foreign currency

 

(255

)

 

171

 

 

-

 

 

(84

)

Plus: Impact of fresh-start and purchase accounting

 

-

 

 

18,021

 

 

(19,874

)

 

(1,853

)

Plus: Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

Plus: Other add backs

 

 

(1,578

)

 

 

422

 

 

 

-

 

 

 

(1,156

)

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

6,028

 

 

$

31,876

 

 

$

-

 

 

$

37,904

 

 

 

 

 

 

 

 

 

 
(1) Non-GAAP revenue adjustments include the add back of (i) non-cash deferred revenue fair value adjustments and (ii) reseller fees, which are presented on a net basis in GAAP revenue.
(2) Non-GAAP revenue adjustment includes one month of proforma Codecademy revenue to allow better comparison against the three months ended April 30, 2022.

 

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