Skillsoft Reports Financial Results for the Third Quarter of Fiscal 2024

• Delivered strong improvements in Adjusted EBITDA and Free Cash Flow
• Grew Content & Platform segment Revenue 3% and increased LTM Bookings 4%
• Increased LTM Dollar Retention Rate three percentage points to 101%

Skillsoft Corp. (NYSE:SKIL) ("Skillsoft" or the "Company"), a leading platform for transformative learning experiences, today announced its financial results for the third quarter of fiscal 2024 ended October 31, 2023.

"Skillsoft delivered another quarter of growth in our core SaaS-based Content & Platform segment while showing meaningful improvement in Adjusted EBITDA and Free Cash Flow," said Jeffrey R. Tarr, Skillsoft's Chief Executive Officer. "I am proud of our progress seizing the opportunity represented by generative AI, with innovative new solutions like Skillsoft CAISY™ and generative AI Aspire Learning Journeys. We are extending our leadership position in helping enterprises succeed in a skills-centric economy, while enabling knowledge workers to thrive in a world that's being reshaped by rapid technological change."

Fiscal 2024 Third Quarter Select Metrics and Financials from Continuing Operations ⁽¹⁾⁽²⁾

• Grew LTM Content & Platform segment Bookings 4% compared to the prior year LTM period.
• Instructor-Led Training segment Bookings were flat sequentially and declined 4% compared to the prior year.
• GAAP Revenue of $139 million was flat to prior year, with 3% growth in Content & Platform segment GAAP Revenue to $101 million, offset by a 9% decline in Instructor-Led Training segment GAAP Revenue to $38 million.
• GAAP net loss of $28 million compared to a GAAP net loss of $528 million in the prior year. GAAP net loss per share of $3.45 compared to a GAAP net loss per share of $64.29 in the prior year.
• Pro forma Adjusted Net Loss of $23 million compared to a pro forma Adjusted Net Loss of $49 million in the prior year. Pro forma Adjusted Net Loss per share of $2.82 compared to a pro forma Adjusted Net Loss per share of $5.96 in the prior year.
• Adjusted EBITDA from continuing operations of $30 million, reflecting a margin of 21% of GAAP revenue, up from 20% in the prior year.
• Ended the quarter with $130 million of cash and cash equivalents.

Fiscal 2024 Third Quarter Business Highlights

• LTM Content & Platform Dollar Retention Rate was approximately 101% in the quarter, up from approximately 98% in the year-ago period. Quarterly Content & Platform Dollar Retention Rate was approximately 99%, up from approximately 96% in the year-ago period.
• Announced the general availability of Skillsoft CAISY™ (Conversation AI Simulator), an innovative AI-powered skills trainer for the enterprise, delivering coaching at scale that allows employees to practice crucial business conversations to develop interpersonal and leadership skills.
• Launched new generative AI Aspire Learning Journeys, which offer multi-modal learning paths that promote AI literacy, and generative AI Skill Benchmarks, which assess learner proficiency and provide personalized learning recommendations that deepen AI mastery and application.
• Recognized with two Training Magazine Network Choice Awards in the Leadership Development and Learning Portal categories, confirming Skillsoft's market leadership in empowering enterprises with the talent-driven competitive edge required to thrive.
• Received multiple awards for leadership and innovation in the Instructor-Led Training business, including recognition as AWS' 2023 North American Training Partner of the Year, Cisco's 2023 Global Learning Partner of the Year and Digital Acceleration Partner of the Year, Red Hat EMEA's Training Reseller of the Year and Certified Training Partner of the Year, and VMware's Partner Delivery Excellence Award in the MEA region.

"Our performance in the third quarter reflected our commitment to delivering profitable growth, with approximately 500 basis points of Adjusted EBITDA margin expansion since the first quarter," said Richard G. Walker, Skillsoft's Chief Financial Officer. "As we take a more measured view of our Instructor-Led Training segment for the remainder of the year, we now expect to deliver Bookings and Revenue approximately at the bottom of our full-year outlook. We believe our continuous focus on strong profitability will allow us to deliver Adjusted EBITDA at the top of the outlook."

Key Operational Metrics and non-GAAP Financial Measures ⁽³⁾ (in thousands, except per share amounts)

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 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 high-quality content, an AI-enabled platform that is personalized and connected to customer needs, and a broad ecosystem of partners, Skillsoft drives continuous growth and performance for employees and their organizations by overcoming critical skills gaps, unlocking human potential, and transforming the workforce. Learn more at www.skillsoft.com.

Non-GAAP Financial Measures And Key Performance Metrics

We track the 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 have provided at the back of this release reconciliations of our historical non-GAAP financial measures to the comparable GAAP measures. 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.

We disclose the following non-GAAP financial measures and key performance metrics in this press release because we believe these non-GAAP financial measures and key performance metrics provide meaningful supplemental information.

• Bookings - Bookings in any particular period represents the dollar value of 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 accompanying services, to our platform. Bookings are adjusted and presented on a pro forma basis as if Codecademy had merged on February 1, 2022, to enhance comparability.
• Pro forma revenue – Pro forma revenue is defined as GAAP revenue adjusted in accordance with Regulation S-X, Article 11 as if Codecademy had merged on February 1, 2022, to enhance comparability. Pro forma revenue is reconciled to the reported GAAP revenue for all periods presented.
• 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.
• Adjusted net income (loss) - Adjusted net income (loss) is defined as GAAP net income (loss) excluding non-cash items, discrete and event-specific costs that do not represent normal, recurring, cash operating expenses necessary for our business operations, and certain accounting income and/or expenses that management believes are necessary to enhance the comparability and are useful in assessing our operating performance, include the following (including the related tax effects):
  • Stock-based compensation expense – Non-cash expense associated with stock-based compensation.
  • Restructuring charges – Severance costs and the abandonment of right-of-use assets resulting from the acquisition integration process and cost saving initiatives.
  • Fair value adjustments – Mark-to-market adjustments of warrants and hedge instruments.
  • Foreign currency impact – Unrealized and realized foreign exchange gains or losses due to fluctuations in currency exchange rates.
  • Acquisition and integration related costs – Non-recurring costs incurred to effectuate an acquisition, including contingent compensation expenses, and integration related costs.
  • Transformation costs – Non-recurring costs incurred to transform our operations through significant strategic non-ordinary course transactions.
  • System migration costs – Non-recurring costs of temporary resources needed for the migration of content and customers from our legacy system to a global platform.
  • Income from discontinued operations – Income from discontinued operations that do not reflect our current operating performance.
  • (Gain) loss on sale of business - gain or loss on non-routine sale of business.
  • Impairment charges - non-cash goodwill, intangible or other asset impairment charges.
• Adjusted EBITDA - Adjusted EBITDA is defined as adjusted net loss excluding interest expense or income, benefit from or provision for income taxes, depreciation and amortization expense.
• Non-GAAP operating expenses – GAAP operating expenses, less depreciation, stock-based compensation, system migration costs, transformation costs, other non-cash charges and pro forma adjustments, as applicable.
• Pro forma adjusted net income (loss) – Pro forma adjusted net income (loss) is defined as adjusted net income (loss) adjusted in accordance with Regulation S-X, Article 11 as if Codecademy had merged on February 1, 2022, to enhance comparability.
• Pro forma adjusted net income (loss) per share – Pro forma adjusted net income (loss) per share is defined as adjusted net income (loss) defined above divided by weighted average common shares outstanding.
• Pro forma adjusted EBITDA – Pro forma adjusted EBITDA is defined as adjusted EBITDA adjusted in accordance with Regulation S-X, Article 11 as if Codecademy had merged on February 1, 2022, to enhance comparability.
• Pro forma adjusted EBITDA % of pro forma revenue – Pro forma adjusted EBITDA % of pro forma revenue is defined as pro forma adjusted EBITDA defined above as a percentage of pro forma revenue defined above.

Reclassifications

Certain amounts reported in prior years have been reclassified to conform to the presentation in the current year. These reclassifications had no effect on total assets, total liabilities, total stockholders' equity, or net income (loss) for the prior year.

Cautionary Notes Regarding 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, revenue, adjusted EBITDA, and free cash flow), our product development and planning, our sales pipeline, future capital expenditures, share repurchases, financial results, the impact of regulatory changes, existing and evolving business strategies and acquisitions and dispositions, demand for our services, competitive strengths, the benefits of new initiatives, growth of our business and operations, and 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", "project", "forecast", "seek", "outlook", "target", "goal", "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, and we caution you against unduly relying on these forward-looking statements.

Factors that could cause or contribute to such differences include those described under "Part I - Item 1A. Risk Factors" in our Form 10‑K for the fiscal year ended January 31, 2023. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements included in our other periodic filings with the Securities and Exchange Commission. The forward-looking statements contained in this document represent our estimates only as of the date of this filing and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements, or otherwise.

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 purposes 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 current 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.