SKIL - Skillsoft Reports Financial Results for the First Quarter of Fiscal 2024

• Content & Platform Bookings grew 9% in constant currency.
• Content & Platform Dollar Retention Rate increased three percentage points to 101% on an LTM basis.
• Launched pioneering eight-module generative AI course with record-setting initial enrollments.

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 2024 ended April 30, 2023.

“Skillsoft delivered a strong start to the fiscal year with near double-digit Bookings growth in our Content & Platform segment on a constant currency basis, highlighting the value of our transformative learning solutions,” said Jeffrey R. Tarr, Skillsoft’s Chief Executive Officer. “The strength in this high margin, SaaS-based segment contributed to expanded profitability on an Adjusted EBITDA basis and sets us up well for the year ahead.”

Tarr added, “Continued low unemployment and the proliferation of new technologies is driving organizations to invest in enterprise learning as a strategic priority. Further, we see the rapid rise of Generative AI creating a new imperative for reskilling that will impact nearly every knowledge worker and organization. We’ve spent the last two years assembling an unrivaled collection of assets and believe we are well-positioned to seize the opportunity in front of us.”

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

• Content & Platform segment Bookings grew 9% on a constant currency basis. Total Bookings were down 4% on a constant currency basis due to an 18% constant currency decline in Instructor-Led Training segment Bookings.
• GAAP Revenue of $136 million grew 1%, with 10% growth in Content & Platform segment GAAP Revenue to $99 million, offset by an 18% decline in Instructor-Led Training segment GAAP Revenue to $37 million.
• On a Pro Forma constant currency basis, Content & Platform segment Revenue grew 2%, while total Revenue was down 3% due to a 14% decline in Instructor-Led Training segment Revenue.
• GAAP Net Loss of $44 million compared to a loss of $22 million in the prior year. Adjusted EBITDA from continuing operations of $22 million, up 13% on a Pro Forma constant currency basis and reflecting a margin of 16% of GAAP Revenue.
• Repurchased 4.4 million shares under the Company’s $30 million share repurchase program.
• Ended the quarter with $178 million of cash and cash equivalents.

Fiscal 2024 First 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 108%, up from approximately 101% in the year-ago period.
• Launched a pioneering generative AI course featuring eight modules spanning topics including ChatGPT use cases, practical ethical AI concepts, and ChatGPT prompt engineering, among others.
• Brought to market Codecademy Plus, a new subscription product focused on upskilling and continuous career development, and introduced upgraded features for Codecademy Pro, helping learners gain the necessary skills for entry-level technology careers with real-time coding exercises, professional certifications, and career advice.
• Released our annual Lean Into Learning report, which examines the state of digital learning, as well as the most in-demand skills and competencies for the future of work, and published our 2023 Women In Tech Report, which explores the top challenges and areas of opportunity for women working in the technology industry.
• Recognized in commissioned studies by Forrester Consulting for the benefits and Total Economic Impact™ of the Company’s learning solutions, including a 263% ROI, 274% ROI, and 317% ROI for Skillsoft’s Leadership & Business, Technology & Developer, and Compliance solutions, respectively, over a three-year span.

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:

(1) Growth calculated relative to the comparable prior year period. Pro Forma results are presented as if Codecademy had merged on February 1, 2022. Constant currency results represent current year period local currency amounts translated at prior year foreign exchange rates. Continuing operations excludes SumTotal results for all periods presented as a result of the sale on August 15, 2022.

(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⁾

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 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.

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 and adjusted EBITDA), 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.