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Skillsoft Reports Financial Results for the Second Quarter of Fiscal 2024

  • Delivered year-over-year growth in total Company Bookings and Revenue.
  • Content & Platform segment Bookings increased 7% and Revenue grew 4%.
  • Dollar Retention Rate increased three percentage points to 101% on an LTM basis.
  • Reaffirmed its financial outlook for the full fiscal year-ended January 31, 2024.

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

“Skillsoft executed well in the quarter, delivering improved top-line performance with growth in both Bookings and Revenue,” said Jeffrey R. Tarr, Skillsoft’s Chief Executive Officer. “In our primarily SaaS-based Content & Platform segment, Bookings increased 7%, Revenue growth accelerated to 4%, and LTM Dollar Retention Rate came in at 101%, up from 98% in the year-ago period, driven by our investments in platform, content and go-to-market.”

Tarr added, “The reskilling revolution is impacting nearly every company and industry around the globe, as organizations seek to enable their talent to succeed in an increasingly dynamic era marked by digital transformation, occupational disruption, and now the emergence of generative AI. We believe these structural shifts are unlocking new long-term growth opportunity for Skillsoft as we enable organizations to grow and thrive with a future-fit workforce that is skilled and ready for the jobs of tomorrow.”

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

  • Total Bookings grew 4% led by 7% growth in the Content & Platform segment, partially offset by a 1% decline in Instructor-Led Training segment Bookings.
  • GAAP Revenue of $141 million grew under 1%, with 4% growth in Content & Platform segment GAAP Revenue to $103 million, offset by a 9% decline in Instructor-Led Training segment GAAP Revenue to $38 million.
  • GAAP net loss of $32 million compared to a GAAP net loss of $121 million in the prior year. GAAP net loss per share of $0.20 compared to a GAAP net loss per share of $0.74 in the prior year.
  • Pro forma Adjusted Net Loss of $29 million compared to a pro forma Adjusted Net Loss of $24 million in the prior year. Pro forma Adjusted Net Loss per share of $0.18 compared to a pro forma Adjusted Net Loss per share of $0.14 in the prior year.
  • Adjusted EBITDA from continuing operations of $25 million, reflecting a margin of 18% of GAAP revenue.
  • Ended the quarter with $148 million of cash and cash equivalents.

Fiscal 2024 Second 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 98% in the year-ago period.
  • Released a beta version of Skillsoft CAISY™ (Conversion AI Simulator), an innovative generative AI-based tool for simulating business and leadership conversational skills through experiential, active learning.
  • Launched a ChatGPT Learning Journey, the first in a series of generative AI courses designed to equip organizations and the workforce with the skills required to use the technology productively and ethically.
  • Announced significant enhancements to our Codecademy technology skilling solution, including an expanded content library of more than 6,000 courses covering the most in-demand technology skills, new interactive learning and practice formats, and access to more than 500 Skill Benchmarks to assess, index, and track workforce skills development.
  • Released our C-Suite Perspectives report, revealing a pressing skills crisis in critical areas of business, including cybersecurity, data science, and artificial intelligence, and providing C-level leaders with a roadmap to help them build agile, future-fit teams through transformative learnings.

Full-Year Fiscal 2024 Financial Outlook (2)

The following table reflects Skillsoft’s reaffirmed financial outlook for the full-year fiscal 2024 ended January 31, 2024, based on current market conditions, expectations, and assumptions:

Bookings

 

 

$610 million to $640 million

GAAP revenue

 

 

$555 million to $585 million

Adjusted EBITDA

 

 

$100 million to $105 million

(1)

 

Growth calculated relative to the comparable prior year period unless otherwise noted.

(2)

 

See “Non-GAAP Financial Measures and Key Performance Metrics” below for the definitions of our key operational and non-GAAP metrics and how they are calculated and more information regarding the fact that the Company is unable to reconcile forward-looking non-GAAP measures without unreasonable efforts. We have provided at the back of this release reconciliations of our historical non-GAAP financial measures to the comparable GAAP measures.

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

 

 

 

 

 

Change

 

 

 

 

Change

 

Three Months Ended

 

 

Constant

Six Months Ended

 

 

Constant

 

July 31,

Change

Currency

July 31,

Change

Currency

 

 

2023

 

 

2022

 

Dollar

Percent

%

 

2023

 

 

2022

 

Dollar

Percent

%

Bookings (4)

 

 

 

 

 

 

 

 

 

 

Continuing operations:

 

 

 

 

 

 

 

 

 

 

Content & Platform

$

83,123

 

$

77,380

 

$

5,743

 

7%

 

7%

$

147,655

 

$

137,526

 

$

10,129

 

7%

 

8%

Instructor-Led Training

 

46,058

 

 

46,493

 

 

(435

)

(1)%

 

(1)%

 

89,994

 

 

102,158

 

 

(12,164

)

(12)%

 

(10)%

Total bookings

$

129,181

 

$

123,873

 

$

5,308

 

4%

 

4%

$

237,649

 

$

239,684

 

$

(2,035

)

(1)%

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP revenue

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

Content & Platform

$

103,188

 

$

98,753

 

$

4,435

 

4%

 

4%

$

201,761

 

$

188,539

 

$

13,222

 

7%

 

8%

Instructor-Led Training

 

37,999

 

 

41,821

 

 

(3,822

)

(9)%

 

(9)%

 

74,980

 

 

86,874

 

 

(11,894

)

(14)%

 

(12)%

Total

$

141,187

 

$

140,574

 

$

613

 

0%

 

0%

$

276,741

 

$

275,413

 

$

1,328

 

0%

 

2%

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma revenue (4)

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

Content & Platform

$

103,188

 

$

98,753

 

$

4,435

 

4%

 

4%

$

201,761

 

$

196,597

 

$

5,164

 

3%

 

3%

Instructor-Led Training

 

37,999

 

 

41,821

 

 

(3,822

)

(9)%

 

(9)%

 

74,980

 

 

86,874

 

 

(11,894

)

(14)%

 

(12)%

Total pro forma revenue

$

141,187

 

$

140,574

 

$

613

 

0%

 

0%

$

276,741

 

$

283,471

 

$

(6,730

)

(2)%

 

(1)%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

$

(31,999

)

$

(121,499

)

$

89,500

 

NA

 

NA

$

(76,223

)

$

(143,142

)

$

66,919

 

NA

 

NA

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma Non-GAAP operating expenses (4)

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma Non-GAAP costs of revenues

$

40,047

 

$

34,704

 

$

5,343

 

15%

 

16%

$

77,623

 

$

73,169

 

$

4,454

 

6%

 

8%

Pro forma Non-GAAP content and software development expenses

 

15,556

 

 

15,402

 

 

154

 

1%

 

2%

 

29,862

 

 

33,867

 

 

(4,005

)

(12)%

 

(11)%

Pro forma Non-GAAP selling and marketing expenses

 

40,560

 

 

39,925

 

 

635

 

2%

 

1%

 

84,403

 

 

81,402

 

 

3,001

 

4%

 

4%

Pro forma Non-GAAP general and administrative expenses

 

19,596

 

 

17,958

 

 

1,638

 

9%

 

9%

 

37,797

 

 

42,768

 

 

(4,971

)

(12)%

 

(11)%

Total pro forma Non-GAAP operating expenses

$

115,759

 

$

107,989

 

$

7,770

 

7%

 

7%

$

229,685

 

$

231,206

 

$

(1,521

)

(1)%

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjusted net income (loss) & adjusted EBITDA (4)

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjusted net income (loss)

$

(29,441

)

$

(23,703

)

$

(5,738

)

NA

 

NA

$

(59,494

)

$

(35,202

)

$

(24,292

)

NA

 

NA

Pro forma adjusted net income (loss) per share

$

(0.18

)

$

(0.14

)

$

(0.04

)

NA

 

NA

$

(0.37

)

$

(0.23

)

$

(0.14

)

NA

 

NA

Pro forma adjusted EBITDA

$

25,428

 

$

32,585

 

$

(7,157

)

(22)%

 

(22)%

$

47,056

 

$

52,265

 

$

(5,209

)

(10)%

 

(9)%

Pro forma adjusted EBITDA % of pro forma revenue

 

18

%

 

23

%

 

 

 

 

17

%

 

18

%

 

 

 

_______________

(3)

 

See "Non-GAAP Financial Measures and Key Performance Metrics" below for the definitions of our key operational and non-GAAP metrics and how they are calculated.

(4)

 

For the six months ended July 31, 2022, the unaudited Pro Forma financial information is presented in accordance with Regulation S-X, Article 11 to enhance comparability for all periods by including operating results for Codecademy as if the merger had closed on February 1, 2022.

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 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 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 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 the 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 resulted 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 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.

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 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 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.

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except number of shares)

 

 

 

July 31,

2023

 

January 31,

2023

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

147,927

 

 

$

170,359

 

Restricted cash

 

 

4,918

 

 

 

7,197

 

Accounts receivable, net of allowance for credit losses of approximately $225 and $221 as of July 31, 2023 and January 31, 2023, respectively

 

 

110,499

 

 

 

183,592

 

Prepaid expenses and other current assets

 

 

49,014

 

 

 

44,596

 

Total current assets

 

 

312,358

 

 

 

405,744

 

Property and equipment, net

 

 

7,244

 

 

 

10,150

 

Goodwill

 

 

457,967

 

 

 

457,744

 

Intangible assets, net

 

 

667,875

 

 

 

738,066

 

Right-of-use assets

 

 

9,277

 

 

 

14,633

 

Other assets

 

 

23,353

 

 

 

16,350

 

Total assets

 

$

1,478,074

 

 

$

1,642,687

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt

 

$

6,404

 

 

$

6,404

 

Borrowings under accounts receivable facility

 

 

40,092

 

 

 

39,693

 

Accounts payable

 

 

14,139

 

 

 

18,338

 

Accrued compensation

 

 

24,587

 

 

 

34,325

 

Accrued expenses and other current liabilities

 

 

30,145

 

 

 

41,474

 

Lease liabilities

 

 

3,883

 

 

 

4,198

 

Deferred revenue

 

 

224,143

 

 

 

280,676

 

Total current liabilities

 

 

343,393

 

 

 

425,108

 

 

 

 

 

 

Long-term debt

 

 

579,639

 

 

 

581,817

 

Warrant liabilities

 

 

1,109

 

 

 

4,754

 

Deferred tax liabilities

 

 

68,123

 

 

 

73,976

 

Long-term lease liabilities

 

 

10,357

 

 

 

11,947

 

Deferred revenue - non-current

 

 

2,440

 

 

 

1,778

 

Other long-term liabilities

 

 

10,081

 

 

 

11,551

 

Total long-term liabilities

 

 

671,749

 

 

 

685,823

 

Commitments and contingencies

 

 

 

 

Shareholders’ equity:

 

 

 

 

Shareholders’ common stock - Class A common shares, $0.0001 par value: 375,000,000 shares authorized and 160,467,809 shares issued and outstanding at July 31, 2023, and 163,655,881 shares issued and outstanding at January 31, 2023

 

 

14

 

 

 

14

 

Additional paid-in capital

 

 

1,535,648

 

 

 

1,521,574

 

Accumulated deficit

 

 

(1,048,416

)

 

 

(972,193

)

Treasury shares

 

 

(10,891

)

 

 

(2,845

)

Accumulated other comprehensive income (loss)

 

 

(13,423

)

 

 

(14,794

)

Total shareholders’ equity

 

 

462,932

 

 

 

531,756

 

Total liabilities and shareholders’ equity

 

$

1,478,074

 

 

$

1,642,687

 

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Three

Months

Ended

 

Three

Months

Ended

 

Six

Months

Ended

 

Six

Months

Ended

 

 

July 31,

2023

 

July 31,

2022

 

July 31,

2023

 

July 31,

2022

Revenues:

 

 

 

 

 

 

 

 

Total revenues

 

$

141,187

 

 

$

140,574

 

 

$

276,741

 

 

$

275,413

 

Operating expenses:

 

 

 

 

 

 

 

 

Costs of revenues

 

 

40,467

 

 

 

34,998

 

 

 

78,291

 

 

 

73,008

 

Content and software development

 

 

17,863

 

 

 

19,693

 

 

 

34,898

 

 

 

36,026

 

Selling and marketing

 

 

40,411

 

 

 

41,848

 

 

 

86,338

 

 

 

81,410

 

General and administrative

 

 

25,085

 

 

 

26,367

 

 

 

50,381

 

 

 

55,711

 

Amortization of intangible assets

 

 

39,221

 

 

 

45,200

 

 

 

77,466

 

 

 

84,758

 

Impairment of goodwill

 

 

 

 

 

70,475

 

 

 

 

 

 

70,475

 

Acquisition-related costs

 

 

937

 

 

 

8,452

 

 

 

2,328

 

 

 

21,764

 

Restructuring

 

 

2,501

 

 

 

4,323

 

 

 

7,719

 

 

 

8,279

 

Total operating expenses

 

 

166,485

 

 

 

251,356

 

 

 

337,421

 

 

 

431,431

 

Operating income (loss)

 

 

(25,298

)

 

 

(110,782

)

 

 

(60,680

)

 

 

(156,018

)

Other income (expense), net

 

 

(934

)

 

 

80

 

 

 

(1,309

)

 

 

1,132

 

Fair value adjustment of warrants

 

 

793

 

 

 

6,846

 

 

 

3,645

 

 

 

16,952

 

Fair value adjustment of hedge instruments

 

 

6,935

 

 

 

(15,065

)

 

 

7,205

 

 

 

(15,065

)

Interest income

 

 

871

 

 

 

10

 

 

 

1,516

 

 

 

170

 

Interest expense

 

 

(16,255

)

 

 

(11,470

)

 

 

(32,191

)

 

 

(23,007

)

Income (loss) before provision for (benefit from) income taxes

 

 

(33,888

)

 

 

(130,381

)

 

 

(81,814

)

 

 

(175,836

)

Provision for (benefit from) income taxes

 

 

(1,889

)

 

 

(3,065

)

 

 

(6,273

)

 

 

(25,402

)

Income (loss) from continuing operations

 

 

(31,999

)

 

 

(127,316

)

 

 

(75,541

)

 

 

(150,434

)

Gain (loss) on sale of business

 

 

 

 

 

 

 

 

(682

)

 

 

 

Income (loss) from discontinued operations, net of tax

 

 

 

 

 

5,817

 

 

 

 

 

 

7,292

 

Net income (loss)

 

$

(31,999

)

 

$

(121,499

)

 

$

(76,223

)

 

$

(143,142

)

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Ordinary – Basic and diluted - continuing operations

 

$

(0.20

)

 

$

(0.78

)

 

$

(0.47

)

 

$

(0.98

)

Ordinary – Basic and diluted - discontinued operations

 

 

 

 

 

0.04

 

 

 

 

 

 

0.05

 

Ordinary – Basic and diluted

 

$

(0.20

)

 

$

(0.74

)

 

$

(0.47

)

 

$

(0.93

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Ordinary – Basic and diluted

 

 

160,098

 

 

 

164,089

 

 

 

160,836

 

 

 

153,442

 

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

 

 

 

 

Six Months

Ended

 

Six Months

Ended

 

 

July 31,

2023

 

July 31,

2022

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

(76,223

)

 

$

(143,142

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

Share-based compensation

 

 

14,955

 

 

 

16,915

 

Depreciation and amortization

 

 

2,761

 

 

 

3,897

 

Amortization of intangible assets

 

 

77,466

 

 

 

91,103

 

Provision for credit loss expense (recovery)

 

 

4

 

 

 

113

 

Provision for (benefit from) income taxes – non-cash

 

 

(6,913

)

 

 

(36,535

)

Non-cash interest expense

 

 

1,024

 

 

 

1,053

 

Non-cash lease and property and equipment impairment charges

 

 

4,808

 

 

 

 

Gain (loss) on sale of business

 

 

682

 

 

 

 

Fair value adjustment of warrants

 

 

(3,645

)

 

 

(16,952

)

Impairment of goodwill and intangible assets

 

 

 

 

 

70,475

 

Unrealized (gain) loss on derivative instrument

 

 

(7,205

)

 

 

15,065

 

Change in assets and liabilities, net of effects from acquisitions:

 

 

 

 

Right-of-use assets

 

 

145

 

 

 

1,977

 

Accounts receivable

 

 

73,172

 

 

 

82,783

 

Prepaid expenses and other current assets

 

 

(520

)

 

 

(7,492

)

Accounts payable

 

 

(4,241

)

 

 

(2,559

)

Accrued expenses, including long-term

 

 

(17,379

)

 

 

(23,066

)

Lease liabilities

 

 

(1,081

)

 

 

96

 

Deferred revenues

 

 

(55,825

)

 

 

(66,734

)

Net cash provided by (used in) operating activities

 

 

1,985

 

 

 

(13,003

)

Cash flows from investing activities:

 

 

 

 

Purchase of property and equipment

 

 

(3,406

)

 

 

(3,528

)

Internally developed software - capitalized costs

 

 

(5,951

)

 

 

(5,721

)

Sale of SumTotal, net of cash transferred

 

 

(5,137

)

 

 

 

Acquisition of Codecademy, net of cash received

 

 

 

 

 

(198,633

)

Net cash used in investing activities

 

 

(14,494

)

 

 

(207,882

)

Cash flows from financing activities:

 

 

 

 

Shares repurchased for tax withholding upon vesting of restricted stock-based awards

 

 

(881

)

 

 

(1,718

)

Payments to acquire treasury stock

 

 

(8,046

)

 

 

 

Proceeds from issuance of term loans, net of fees

 

 

 

 

 

157,088

 

Proceeds from accounts receivable facility, net of borrowings

 

 

399

 

 

 

(39,154

)

Principal payments on Term loans

 

 

(3,202

)

 

 

(3,202

)

Net cash provided by (used in) financing activities

 

 

(11,730

)

 

 

113,014

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(472

)

 

 

(4,646

)

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

 

 

(24,711

)

 

 

(112,517

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

177,556

 

 

 

168,923

 

Cash, cash equivalents and restricted cash, end of period

 

$

152,845

 

 

$

56,406

 

Supplemental disclosure of cash flow information:

 

 

 

 

Cash and cash equivalents

 

$

147,927

 

 

$

43,344

 

Restricted cash

 

 

4,918

 

 

 

5,300

 

Cash attributable to discontinued operations

 

 

 

 

 

7,762

 

Cash, cash equivalents and restricted cash, end of period

 

$

152,845

 

 

$

56,406

 

SKILLSOFT CORP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three

Months

Ended

 

Three

Months

Ended

 

Six

Months

Ended

 

Six

Months

Ended

 

 

July 31,

2023

 

July 31,

2022

 

July 31,

2023

 

July 31,

2022

Revenues, as reported

 

$

141,187

 

 

$

140,574

 

 

$

276,741

 

 

$

275,413

 

 

 

 

 

 

 

 

 

 

Net income (loss), as reported

 

$

(31,999

)

 

$

(121,499

)

 

$

(76,223

)

 

$

(143,142

)

 

 

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

 

 

 

 

 

(5,817

)

 

 

 

 

 

(7,292

)

Gain (loss) on sale of business

 

 

 

 

 

 

 

 

682

 

 

 

 

Impairment of goodwill and intangible assets

 

 

 

 

 

70,475

 

 

 

 

 

 

70,475

 

Acquisition-related costs

 

 

937

 

 

 

8,452

 

 

 

2,328

 

 

 

21,764

 

Restructuring

 

 

2,501

 

 

 

4,323

 

 

 

7,719

 

 

 

8,279

 

Foreign currency impact

 

 

1,225

 

 

 

 

 

 

1,694

 

 

 

(1,171

)

Fair value adjustment of warrants

 

 

(793

)

 

 

(7,066

)

 

 

(3,645

)

 

 

(16,952

)

Fair value adjustment of hedge instruments

 

 

(6,935

)

 

 

15,065

 

 

 

(7,205

)

 

 

15,065

 

Stock-based compensation expense

 

 

5,831

 

 

 

10,017

 

 

 

14,955

 

 

 

18,510

 

Transformation costs

 

 

323

 

 

 

1,746

 

 

 

1,450

 

 

 

2,597

 

System migration costs

 

 

403

 

 

 

2,352

 

 

 

1,070

 

 

 

3,964

 

Tax impact of non-GAAP adjustments

 

 

(934

)

 

 

(1,751

)

 

 

(2,319

)

 

 

(3,143

)

Adjusted net income (loss) from continuing operations

 

 

(29,441

)

 

 

(23,703

)

 

 

(59,494

)

 

 

(31,046

)

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

15,384

 

 

 

11,460

 

 

 

30,675

 

 

 

22,837

 

Expense (benefit from) income taxes, excluding tax impacts above

 

 

(955

)

 

 

(1,314

)

 

 

(3,954

)

 

 

(22,259

)

Depreciation

 

 

1,219

 

 

 

942

 

 

 

2,363

 

 

 

2,360

 

Amortization of intangible assets

 

 

39,221

 

 

 

45,200

 

 

 

77,466

 

 

 

84,758

 

Adjusted EBITDA from continuing operations

 

$

25,428

 

 

$

32,585

 

 

$

47,056

 

 

$

56,650

 

 

 

 

 

 

 

 

 

 

GAAP operating margin %

 

 

(17.9

)%

 

 

(78.8

)%

 

 

(21.9

)%

 

 

(56.6

)%

Amortization of intangible assets

 

 

27.9

%

 

 

32.1

%

 

 

28.1

%

 

 

30.8

%

Impairment of goodwill and intangible assets

 

 

0.0

%

 

 

50.1

%

 

 

0.0

%

 

 

25.6

%

Acquisition-related costs

 

 

0.7

%

 

 

6.0

%

 

 

0.8

%

 

 

7.9

%

Restructuring

 

 

1.8

%

 

 

3.1

%

 

 

2.8

%

 

 

3.0

%

Stock-based compensation expense

 

 

4.1

%

 

 

7.1

%

 

 

5.4

%

 

 

6.7

%

Transformation costs

 

 

0.2

%

 

 

1.2

%

 

 

0.5

%

 

 

0.9

%

System migration costs

 

 

0.3

%

 

 

1.7

%

 

 

0.4

%

 

 

1.4

%

Depreciation

 

 

0.9

%

 

 

0.7

%

 

 

0.9

%

 

 

0.9

%

Other

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

Adjusted EBITDA margin %

 

 

18.0

%

 

 

23.2

%

 

 

17.0

%

 

 

20.6

%

SKILLSOFT CORP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - continued

(in thousands, unaudited)

 

 

 

 

 

 

 

Three Months Ended

July 31,

 

Six Months Ended

July 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

GAAP costs of revenues

 

$

40,467

 

 

$

34,998

 

 

$

78,291

 

 

$

73,007

 

Depreciation

 

 

(182

)

 

 

(278

)

 

 

(333

)

 

 

(752

)

Stock-based compensation

 

 

(238

)

 

 

(16

)

 

 

(335

)

 

 

(29

)

Codecademy pro forma (1)

 

 

 

 

 

 

 

 

 

 

 

943

 

Non-GAAP costs of revenues

 

 

40,047

 

 

 

34,704

 

 

 

77,623

 

 

 

73,169

 

 

 

 

 

 

 

 

 

 

GAAP content and software development

 

 

17,863

 

 

 

19,693

 

 

 

34,898

 

 

 

36,024

 

Depreciation

 

 

(141

)

 

 

(81

)

 

 

(191

)

 

 

(201

)

Stock-based compensation

 

 

(1,763

)

 

 

(1,858

)

 

 

(3,775

)

 

 

(3,433

)

System migration

 

 

(403

)

 

 

(2,352

)

 

 

(1,070

)

 

 

(3,964

)

Codecademy pro forma (1)

 

 

 

 

 

 

 

 

 

 

 

5,441

 

Non-GAAP content and software development

 

 

15,556

 

 

 

15,402

 

 

 

29,862

 

 

 

33,867

 

 

 

 

 

 

 

 

 

 

GAAP selling and marketing

 

 

40,411

 

 

 

41,848

 

 

 

86,338

 

 

 

81,409

 

Depreciation

 

 

(412

)

 

 

(181

)

 

 

(679

)

 

 

(453

)

Stock-based compensation

 

 

667

 

 

 

(1,742

)

 

 

(1,014

)

 

 

(3,219

)

Transformation

 

 

(106

)

 

 

 

 

 

(242

)

 

 

 

Codecademy pro forma (1)

 

 

 

 

 

 

 

 

 

 

 

3,665

 

Non-GAAP selling and marketing

 

 

40,560

 

 

 

39,925

 

 

 

84,403

 

 

 

81,402

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

 

 

25,085

 

 

 

26,367

 

 

 

50,381

 

 

 

55,715

 

Depreciation

 

 

(484

)

 

 

(402

)

 

 

(1,160

)

 

 

(954

)

Stock-based compensation

 

 

(4,497

)

 

 

(6,401

)

 

 

(9,831

)

 

 

(11,829

)

Transformation

 

 

(508

)

 

 

(1,606

)

 

 

(1,593

)

 

 

(2,559

)

Codecademy pro forma (1)

 

 

 

 

 

 

 

 

 

 

 

2,395

 

Non-GAAP general and administrative

 

 

19,596

 

 

 

17,958

 

 

 

37,797

 

 

 

42,768

 

 

 

 

 

 

 

 

 

 

Total GAAP operating expenses

 

 

123,826

 

 

 

122,906

 

 

 

249,908

 

 

 

246,155

 

Depreciation

 

 

(1,219

)

 

 

(942

)

 

 

(2,363

)

 

 

(2,360

)

Stock-based compensation

 

 

(5,831

)

 

 

(10,017

)

 

 

(14,955

)

 

 

(18,510

)

System migration

 

 

(403

)

 

 

(2,352

)

 

 

(1,070

)

 

 

(3,964

)

Transformation (2)

 

 

(614

)

 

 

(1,606

)

 

 

(1,835

)

 

 

(2,559

)

Codecademy pro forma (1)

 

 

 

 

 

 

 

 

 

 

 

12,444

 

Total Non-GAAP operating expenses

 

$

115,759

 

 

$

107,989

 

 

$

229,685

 

 

$

231,206

 

_______________

(1)

For the six months ended July 31, 2022, the unaudited pro forma financial information is presented in accordance with Regulation S-X, Article 11 to enhance comparability for all periods by including operating results for Codecademy as if the merger had closed on February 1, 2022.

(2)

This line item does not agree to the amounts reflected on preceding table due to certain transformation expenses not being reflected in GAAP operating expenses.

SKILLSOFT CORP.

PRO FORMA REVENUE

(in thousands)

 

 

 

Three Months Ended

July 31,

 

Six Months Ended

July 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue, as reported

 

$

141,187

 

 

$

140,574

 

 

$

276,741

 

 

$

275,413

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjustments

 

 

 

 

 

 

 

 

 

 

 

 

Revenue from acquisitions (1)

 

 

 

 

 

 

 

 

 

 

 

8,058

 

Pro forma revenue (2)

 

$

141,187

 

 

$

140,574

 

 

$

276,741

 

 

$

283,471

 

_______________

(1)

 

Revenue from acquisitions for the six months ended July 31, 2022 only includes Codecademy's revenue for the period from February 1, 2022 to April 4, 2022 as its post-acquisition revenue is included in the GAAP revenue.

(2)

 

Pro forma revenue is presented in Note 3 "Business Combinations" of the Notes to Unaudited Condensed Consolidated Financial Statements included in our Form 10-Q to be filed with the SEC for the quarterly period ended July 31, 2023 in accordance with Regulation S-X, Article 11.

SKILLSOFT CORP.

PRO FORMA ADJUSTED NET INCOME (LOSS)

(in thousands)

 

 

 

 

 

 

 

Three Months Ended

July 31,

 

Six Months Ended

July 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Adjusted net income (loss) from continuing operations (1)

 

$

(29,441

)

 

$

(23,703

)

 

$

(59,494

)

 

$

(31,046

)

 

 

 

 

 

 

 

 

 

Pro forma adjustments

 

 

 

 

 

 

 

 

Adjusted net income (loss) from acquisitions (2)

 

 

 

 

 

 

 

 

 

 

 

(4,156

)

Pro forma adjusted net income (loss)

 

$

(29,441

)

 

$

(23,703

)

 

$

(59,494

)

 

$

(35,202

)

Pro forma adjusted net income (loss) per share

 

$

(0.18

)

 

$

(0.14

)

 

$

(0.37

)

 

$

(0.23

)

_______________

(1)

 

See RECONCILIATION OF NON-GAAP FINANCIAL MEASURES within this press release for more details.

(2)

 

Adjusted net income (loss) from acquisitions for the six months ended July 31, 2022 only includes Codecademy's adjusted net income (loss) for the period from February 1, 2022 to April 4, 2022 as its post-acquisition adjusted net income (loss) is included in the adjusted net income (loss) from continuing operations.

SKILLSOFT CORP.

PRO FORMA ADJUSTED EBITDA

(in thousands)

 

 

 

 

 

 

 

Three Months Ended

July 31,

 

Six Months Ended

July 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Pro forma adjusted EBITDA

 

 

 

 

 

 

 

 

Adjusted EBITDA from continuing operations (1)

 

$

25,428

 

 

$

32,585

 

 

$

47,056

 

 

$

56,650

 

 

 

 

 

 

 

 

 

 

Pro forma adjustments:

 

 

 

 

 

 

 

 

Adjusted EBITDA from acquisitions (2)

 

 

 

 

 

 

 

 

 

 

 

(4,385

)

Pro forma adjusted EBITDA

 

$

25,428

 

 

$

32,585

 

 

$

47,056

 

 

$

52,265

 

Pro forma adjusted EBITDA % of pro forma revenue

 

 

18

%

 

 

23

%

 

 

17

%

 

 

17

%

_______________

(1)

 

See RECONCILIATION OF NON-GAAP FINANCIAL MEASURES within this press release for more details.

(2)

 

Adjusted EBITDA from acquisitions for the six months ended July 31, 2022 includes Codecademy's adjusted EBITDA for the period from February 1, 2022 to April 4, 2022 as its post-acquisition adjusted EBITDA is included in the adjusted EBITDA from continuing operations.

SKILLSOFT CORP.

FREE CASH FLOW RECONCILIATION

(in thousands)

 

 

 

 

 

Six Months Ended

July 31,

 

 

 

2023

 

 

 

2022

 

Free cash flow reconciliation

 

 

 

 

Net cash provided by (used in) operating activities

 

$

1,985

 

 

$

(13,003

)

Purchase of property and equipment

 

 

(3,406

)

 

 

(3,528

)

Internally developed software - capitalized costs

 

 

(5,951

)

 

 

(5,721

)

Total free cash flow

 

$

(7,372

)

 

$

(22,252

)

 

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