Skillsoft (SKIL) 5 Dec 232024 Q3 Earnings call transcript

Greetings, and welcome to the Skillsoft Corp.

Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Chad Lyne, Head of Investor Relations. Thank you, Chad.

You may begin.

operator. you, Thank thank earnings and third joining today us ended Good to you discuss Skillsoft's call XX, the our for October afternoon, XXXX. for results quarter for call close, Skillsoft website. a and today's Participating which Skillsoft financial announcing issued Jeff our is CFO.Today, market Skillsoft available press CEO; on on after Richard are its Walker, results, release Tarr, Relations Investor

metrics reflect expectations company's forward-looking you call outlook the I other therefore risks and could Securities and Jeff, remind factors beliefs business financial future call to today's XX-Q accordance Form GAAP directly in materially.For release, are call also has our cause pleasure to A measures included prepared results financial statements will these discuss These including to prepared to the financial certain XX-K SEC today available also been filings management's which and accepted the of outlook. or obligation earnings in commentary Commission. and measures uncertainties will turn the expectations, information, Form measures, respective we affect and trends, call, as are is of concerning remarks, business questions.With and statements to performance, actual website define most to our discussion condition we be to the included to over to it's to as we which and risks that hand generally statements update important We After not recent is to that and will over statements how contain a reconciliation material and Before statements no facts Rich that, actual want www.skillsoft.com. I any and forward-looking non-GAAP and Jeff refer accounting Jeff. today's all the most and metrics business differ non-GAAP take assume could with the my speak not our financial you in are forward-looking market that well furnished as results, about comparable the our and on expected and financial at available the that other as dates.During our of press with which Exchange our the principles. historical subject financial of current

everyone, and us. afternoon, Good you Chad. joining Thanks, for thank

& team quarter Our delivered revenue Platform our and another growth Content high-margin bookings of in SaaS-based segment.

margins wallet LTM XXX%, highlighting percentage customers.Adjusted existing rate EBITDA dollar up XXX progress basis points. within was X up were points, share growing our retention XX%, of Our in

occupations view of the as AI. more this XX than companies disruption generative X investments automation will learning in World their on of most wide-ranging According to deliver of seize Future out skills partial jobs front growth in generative transformation new industries, recent of my of In of range to conversation.According leaders discussions labor challenges us. topic X/X the Instructor-Led due of more in X/X part but Skillsoft In positioning Our business' a Training AI. be goals. strategy to to down are of in the detail.Today, my will gaps was report, technologies, to are promising to the cover opportunity a always and focus I'll workforce Economic X our consistent nearly that segment substantial next noncore Sachs, business are theme, are remarks we remained Forum's a Goldman Jobs including the on is almost the sequentially product AI a with we how stable line face at least disrupted by exposed in year-over-year, across to Rich market, exiting. years due to all results and

engage in with scenarios.These in leading a have We winning.Over is a strategic us has are AI, the dollar for figures. CAISY, dramatic initiatives in reskilling practice crucial of where curated provider Skillsoft into generative customers platform. to from focused group X Skillsoft typically and and leadership multiyear years, of are transformed into that a to dry Percipio Codecademy platform as LMS and proven provider labs reskilling, measurable emotion-infused upskilling vendor and often range across upselling most benchmarks attractive. occupations provider.We Contracts design north add are growth with organizations is this largest launched scale. our journeys growing to across our added interactive of data base the business the are grew conversations the of we've effective metrics business learning X acquired organizations, experiences complex and We customer our are overall. deliver multimodal with integrates and Deal to results. and skills and training development. content XXX%.Taken customers sophisticated behavior.We every our enhancements or with video These cross-selling and and X a most needs. at our web grounded e-learning moves revitalizing built with these instructional We skills experience usually to sound together, a powerful Unit skills of on solutions of priorities. is while transformation retention upskilling best-of-breed historically transformative fastest-growing from these success potential business realizing science, skills content ICF-accredited nearly helping assessments, indicative our change for their major simulator are to cloud, e-learning experiences And Skillsoft acute we learning organizations, hands-on leadership, platform recently, serve learners and the AI-enabled For interactivity thought develop transformative learning cybersecurity last that AI-based rapidly enhanced and C-suite Skillsoft positioned solution world's and This workforce coaching that scenarios important compliance sizes with and learning of many outcomes. demonstrable learning are largest economics and rates

IT the systems of supplier in their providers coverage.In and operating leading integration example, with the technologies Skillsoft another by requirements training with account of in on international multimodal broad unified revenue centralize than chosen example, capabilities for security solution, were integrated employees. more Europe's our and For LMS, global industry to defense a more technical its deliver countries the of billion $X their workforce compliance X,XXX breadth IT than learning we leading won enhance XXX one transformation with Skillsoft to chose program. experience language and to a of a highly

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this with initial of CAISY early generative subject use believe to learner immersive business launched the position level learning on additional XX and interpersonal delivers learners recommendations employees learner trainer AI specific range teach AI we we how and long-term for needed role, in work. are scenarios styles. skills of from new customer Advisor which and their knowledge is matter quantifiably industry and fundamentals capabilities is focused experiences.Another forward which for the the exciting, journeys teach creating leveraging progress that forward-thinking decision-makers, structural how how an communication AI guardrails is teach.Our of pioneer.CAISY's as personalized opportunity.During AI required and our able ensuring proficiency look an the promote AI personalized are and wide AI important we availability quarter, for on will to new validating this seize proficiency. work, negotiations market subject for innovative recommendations with with learning ranging teach, all to good AI-powered to On leadership Generative announced score with related our transform generative content, These prepared learning from performance The our advanced launch to including have paths transforming and impact future.We've for general we powerful included also to customers assesses and gaps to scheduled challenges, of generative targeted effectively.We our this additional is personality a Advisor. to and enterprise-wide been that talent, they those modified and to basis, literacy changing that this moving to customer rapidly skills courses we effective creating scale. generative organizations customer Skillsoft's equipped Role gaps what leadership which we what is changing and with reaction are serves and contextualized technology positive learning work.Beyond management, as build of identify seeing quarter bridged it a compelling skills from and assess AI, ML Role top are a to feedback we're continued a be rapidly learners identifies market-facing to ensure are literacy foundations close our we for building returns how has that quickly platform generative future well skill We're gaps the use skills, in particularly aspired multimodal XX investments, infusion also example It novice employee can and learner. coaching to skills invest the at foundational CAISY, innovative are for that developing scenarios we skill as in also and AI. We teach, AI AI-powered Much of tailwind how and as partnering in our our that from generative AI offer new service and we of business. to benchmarks, learning areas the to develop launch I also is generative concierge mastery. the change benchmarks AI we

content AI questions, time release help reducing cycles. shortening content and For to example, assessment offer development production and teams generative using are our content

to review on strong a I'm encouraged a enterprise, organization and strengthen build by across quarter that, I'm partner to it collateral. to progress currently marketing company. automate seizing note as the labor shared Our set are AI. marketing using campaigns, market for XXXX.With laser-focused intensive.I'm The I'll the created of generative to And important over proud previously time webpages and leader, seeing that rapidly and progress our and Rich? that by services for Walker, teams a the fourth Rich exciting transformation workforce localize promising were are entire using turn opportunity call our teams position our our CFO, it fiscal the financial now us workflows innovator while is our to our closing the team's up on results.

positively.Content this turn & and Jeff. everyone, to our but churn quarter Content Thanks, in to primarily year-over-year basis third stable year-over-year. growth our this X% X/X this of at & erosion, all growth Asia to Welcome, to our was our down shifting nearly to at IT comparison.The growth.Let's ILT bookings seen dollar their to as be of quarter marking discussed best the turn trending up training its segment, an ILT operations the million, sequentially well consistent facing a Covering the to Retention and macro with financial flat segment, Content ILT's and retention joining reasonably LTM quarter. training In and segment an East today. upsell SaaS bookings of our up Similar at LTM of X% and transactional XXX%, areas quarterly which portfolio. seen period we've $XX the commentary, Platform thanks value let's accounts view across team's our for cross-sell it's subscription-based Platform range LTM first marking bookings in compared results, and broad environment of we comparable the and all & given points where where for with another million, $XXX priorities was story, companies which deliver the corporations remained to and from for environment roughly America, second revenue sequentially are seasonality, retention segment the third in-person & solutions.Our in prior impact our million Content revenue our the and our past, strong, levels basis. Content Platform also budget portfolio operations rates virtual was choppy higher but areas on acute, of revenue up X% period, the retention an quarter demand North of $XX $XXX basis, our are were similar year-over-year, to down was contributed quarter rates the million, prior bookings my resources. ability customers in were Platform Middle rate continues current X% level. on performance and segment. consecutive Platform for and our dollar business.As now flat many some We've while European rates XXX more in instructor-led we've & demonstrating trended LTM more

teams instilling a company by segment building for focused multiple profitability. the was to stewardship. as $XXX model the down measured Platform We committed the million, Content offset to lean and marginally operating & more view fiscal remain was of ILT.Shifting revenue growth, Our the business now accelerate culture growth a of basis, year-over-year to disciplined remainder initiatives a the we combined for but are total a taking of year.On ILT are on prudently

capacity drive accreting invest to to that in the continue also while to sharpen customer value, drive line. up our areas will bottom freeing to focus efficiency, greater We more

with year-over-year administrative $XX on partially favorably X% revenue support growth third-party the the with expenses were resource XX% third million year-over-year focus General revenue on most Platform as or costs continued The marketing down spending.Selling of timing Cost year-over-year. in were utilization, growth another in of revenue around to all of the expenses and organization.Total more favorably revenue. in software was my our a XX% XX% release. wide basis. be X% by XX% efficient and our AI expenses, year-over-year favorably QX, our we generated hosting $X operating by down particularly basis line, a of savings reconciliations revenue terms million and flat operating $XX a year-over-year, GAAP references Content compared example of investing million were expenses our quarter margin in bottom personnel with down expenses million of of or X%. flat peers by X%.At profitability or EBITDA the we both our non-GAAP on basis favorably of basis, were through & down million non-GAAP total initiatives, or operating $XXX while adjusted will us profitability.Walking and was internal to of of segment.Content On earnings were development included million leading or to of a $X revenue the On higher of were $XX generative higher sequential industry revenue important offset of partially or or press expenses XX% of facility-related million offset $XX to expenses margin dollars and streamlining

EBITDA to in XX% of million or Third $XX $XX prior revenue million the year. compared adjusted was revenue XX% quarter of or

XXX Over the points in year, in QX expanded course have from XX% margins QX. of approximately of XX% XX% in we adjusted EBITDA this revenue basis to to QX

GAAP $XX $X.XX Our was or on net a per share loss basis. million

Our share.Moving highlights. adjusted balance invested cash million, loss from million we in sheet $X year-to-date On expenditures flow capitalized was negative to flow and internally cash software. million a developed $X.XX $XX was or capital per net $XX basis, while and operations

in to was million, cash As $XX year-to-date prior the free million result, $XX period. a year-to-date favorably flow compared negative negative

financing of million December our facility term We costs. our $X drawn $XX flow with issue loan our net cash and and million with quarterly $XXX cash For million had a in with and a XXXX. free in million. million that deferred cash sheet negative facility, was and the the had expectations of quarter cash of against accounts third position, line on itself, We quarter restricted discount $XX healthy seasonality.We equivalents for receivable outstanding liquidity of strong cash balance million and $XX and matures $XXX original closed

XXXX, wrap net net maturity.Total EBITDA improvements with the until cash equivalents good with payments cautious our July reminder, approximately segment of flat deliver which look outlook, has X.Xx the flow.As us meaningful a resulting our of restricted amortization million, balance a million and we more year, this $X.X particularly performance another our more but and quarter a sequential debt, cash expect respect approximately EBITDA.To to was adjusted our of consecutive quarter delivered facility net of quarterly EBITDA. confident in of backdrop to guidance, $XXX of high Platform & bottom We cash, adjusted at temper previous economic a to ILT As challenging matures in of our end prompted leverage of in our is up, at segment, are context adjusted in growth Content we in of revenue to environment market LTM ILT. in the cash, in ability the near-term and now to free approximately and year full bookings deliver the with

X market profitable moved of continued allow of all unlock front in hand need opportunity ability confident our strategy.With age on Xx reskilling growth expect We years.Looking value the we're AI, next within than the to workforce stakeholders below optimistic for we for to to large our us us. the adjusted of quickly back focus generative the a about forward, in our me that, long-term address and ever leverage to gross to Jeff. and let will EBITDA remain our reduce more in we We've call growing execute as

solutions enterprise. Thanks, industry's most of I'm us. excited by learning in has of the for the Skillsoft suite Rich. complete the assembled opportunity front

world's and of our rates, is capabilities XXX% organizations. dollar we're critical a the and sophisticated largest of those gaps reflected strengths end addressing leveraging retention DRR are customers' within where with in wallet high healthy especially most most outcomes.These are grow our opportunity. And at our of pipeline market new to the improving skills our We measurable share

and progress shareholder committed this operator, profitable to and open firmly growth is to please team to value translating that, creation.With the call questions. Our meaningful improve

[Operator Instructions] you. Thank

line Our Ken first Oppenheimer. Wong question of comes from with the

customers softness of saw is Jeff, the Europe. from I us in what you Fantastic. wanted guys KPIs, touch the some in embedded Maybe of in that far to in what's terms you potential maybe in other maybe on then just well? Europe? pressure? weak you're Richard, [ And Or the first terms ] give details what specific seeing saw causing guide to that as have just margin regions you down, down as particular as

Yes.

feel business. Content we acceleration Platform about We LTM We've the the are Content and of in & -- & there. good growth good Platform metrics seen

we side, able of business. and stalled good ILT metrics product of than to transactional the But performance. year-over-year, some general, at in overall, for little on deliver the softened and were market we second to in that real we business, the our say, a seeing it's because is a hoped So early half I'd in quarter, softer sequential the had Rich? that be than momentum such the the least visibility down that company. rest were has It's quarter were or good a less we up.In

we the partners echo would heard and is spending see same half trend. second from expected And we the I ILT accelerated. that we've tech to in had that our year-over-year, growth Yes. experienced largest overall down

business & the is Platform healthy. But Content

Our next the Lenschow question of comes from with Raimo line Barclays.

to ask on on the Like Sheldon XXX%. for Raimo. seeing the Platform I retentions are wanted is a call, said side. & healthy you Content more that around on remaining on what you're little This

ask on are quick to side? value together you follow-up. selling there, the smaller new help So what by And seeing the to then And maybe net a I velocity region? business. to doing increase sales deals new And package on anything maybe on anything or call cycles you're to out I have for trying wanted

we're seeing where where and seeing strength Well, you I can softness. tell relative we're

the we're overall, Platform First, that performing business. well. business in is And & momentum Content seeing

that can metrics. the see You in LTM

can rates, which trending dollar in all in direction. the are retention You of the right see that

as believe more global we've we're deliver of in That's about ability the over we're end a market. good solution our lower strong. price in end larger It's to address needs taking competition with see the of the end launched upskilling efficiently. and and are where is But competitive customers. we're terms seeing complex years, In recently to we our reskilling for how where growth.At the investing particularly sales integrated seen it's capabilities competitively can where the we strength, and well greatest few high at that so last our market, It's very upper seeing steps of that where the an the the low which offering with that's inside entry-level market end address that and feel net-net, performing high-growth we the and of positioned. segment that our of the are that and market, we we're we we're

And Got it. ask CAISY more talking meaningfully early how you're is to with trending? And wanted when Great. is stages, reengage that I to interest customers to in the customer Skillsoft? reviving

glad you learners from here Yes. our offering What is a Absolutely. to do that very learn doing few we There's a reception. customers Absolutely. very seeing I'm new we're that. People create it's market-leading CAISY exciting. have in -- asked. enabling customers and We're just partnering scenarios. with and by analysts is And CAISY. a strong to

are higher-tier a subscription highly of from interactivity. with other upselling of elements in our a of that offering other the embedded revenue, and along that terms into we and subscription has CAISY and they're offering drives So it's number how actively capabilities, engaged.In entry-level

Sharma from next Riley. the B. comes Our of question line Raj with

future? to today medium the the in understand, is easy or it revenues the to measure Jeff or I for just Rich, AI generative of wanted contribution term or to either on tough in near

side. curriculum not impact It's to biggest possible isn't just the measure of generative impact really on Raj. AI the because Thanks, -- is the

areas, the across all strong journeys generative actively across AI give been use and are to been that enterprise, the skills designed there's courses we've functions, developing across uptake. to really a learning and all So people content

metric, important fact, AI-related And to but portfolio. across that's entirety our In give alone, a XX we've this metric. that's courses we're year-to-date. a -- the million strong of we've just you It's year delivered investing,

in And upselling difficult subscriptions. to Rich, add? -- on our but I impact anything so it's even interactivity part is subscription. impact then, of it's to we is the able actual higher-value higher-value But of as to higher-value growth.Where get how CAISY mentioned, quantify measure element the the subscription, success not only some the may some be

while Yes, last key talks, think, just to Jeff we I we business. absolute we content very me, I areas That margins was about quick one. marketing And teach, early of over and see think directed Raj, EBITDA and it's what to the of how we'll a continue how reason teach. operate going piece, it's grow. to be days, time, the expand part development,

it. helpful. Got very That's

whether across the doing Just bookings varies color Could talk customers, how weakness -- that?And customers you could market, across you what the DRR it you to customers it's who strength better? and in terms -- also, and or about mentioned larger you Or sectors. of the high mentioned the more add are? Jeff, those

we largest dollar When Yes. look our XXX%. at are north customers, of the retention rates

retention high the that a where we we wallet and upsell headroom to if the of consider customer opportunity you then believe end. for lower, and we're XXX% low really our because is that the improve an cross-sell grow that's of share the to dollar We obviously, So overall retention over company are surface our rate the have at have opportunity. of scratching the meaningfully at little rates end substantial the just market, dollar retention

the in on Platform, & why business the Yes. reason Content so thing important to it's LTM Raj, one at look basis. add another I'd an

bookings & were up X% quarter. So Platform this the Content

If first quarter, LTM. you an last go quarter the they back an to on were X% on basis, LTM X%

seeing So revenue, Content also the & in nice converting Platform. Platform into & business revenue we're seeing growth in and acceleration Content

measure integrated Percipio? way just there to And stand-alone how wanted in just it it want to is a Or it now I or? terms to is into is upon it the of so Or it. Got Codecademy. is product? understand, performing -- its I that a Is touch organic growth?

of most which Yes. where The product, consumer integrated. The is BXB is product is stand-alone. growth the is,

our fact, rebranded Dev & enterprise. as Codecademy Tech In we've entirety of for the offering

out, quarter. it's we the tell possible break but you it Rich? to in So contributed not to can growth it that

Codecademy the Yes, part & while we I'd ] our enterprise, products. [ of Platform, X just to grew segment was basis Certainly, that. contributed all we add to Content the report granularity and give -- down of that on segments offering and individual & Dev doesn't LTM that growth. an Tech the On

-- BXB strong. I'd market than the stronger BXC, the been is the has BXB which And say growing everyone. is BXB for softer

guidance, Got the that lower the then -- I the did correct? be EBITDA be of earlier said correctly? it. at read would that just is and end And that on end upper You guidance revenues the of Is guidance. the that it's range, would guidance but

didn't adjusted range the range and end the We the of approximately said for and EBITDA to bookings high the both low the revenue. correct. end. That's on date We of pointing at the bottom you

are questions would at no like There closing to further over you. turn the for to back this Thank comments. Jeff floor I time.

just the for investors. hard moment with I forward for our thank coming really up team and course, for you want want set to thank solid what who our customers. connecting giving wrap very of look you're to you We We year. and we want I delivered take Thanks to when and doing the we work update -- the forward look an that much. over this days, really our have a to QX. working they up members been in us thank QX I to And and hard our Well, everyone. to to analysts

This concludes today's teleconference.

Thank time. disconnect at may your for lines this participation. You you your