Release Date: September 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Skillsoft Corp (SKIL, Financial) delivered total company revenue in line with expectations for the quarter.
- The company has fully operationalized its new business unit structure, which is driving improved outcomes.
- Skillsoft Corp (SKIL) has hired key positions, including a Chief Transformation Officer, Chief Analytics Officer, and Senior Vice President of Sales, to strengthen operational execution.
- The company reported improved adjusted EBITDA and margin expansion year over year.
- Skillsoft Corp (SKIL) reaffirmed its full-year guidance, indicating confidence in its strategic initiatives.
Negative Points
- Total company revenue of $132 million was down 6% year-over-year.
- Global Knowledge segment revenue was down 20% year-over-year, impacted by weaker demand trends.
- The LTM dollar retention rate decreased to approximately 98% from 101% in the prior year, driven by budget constraints at some public sector customers.
- GAAP net loss increased to $40 million compared to $32 million in the prior year.
- Free cash flow for the full year is expected to be approximately negative $15 million, inclusive of restructuring charges.
Q & A Highlights
Q: Ron, you mentioned three new hires. Do you have all the executives in place now to implement the operational changes? And will we see results in Q3 or later?
A: (Ronald Hovsepian, CEO) The three new hires help us get the senior team needed to execute our plans. We expect to provide an update on the next call and should have some early directional returns to share.
Q: Rich, considering the impact of the implementations don't kick in until Q3, is that the quarter where free cash flow will trough? Any rough sense of the potential headwinds from the implementation costs?
A: (Richard Walker, CFO) In Q2, there were no impacts to the realized financials. We will benefit from the expense actions identified in the second half of the year. We are reaffirming our full-year guidance, and we expect to redeploy 40% to 50% of the resource work funding back into the business.
Q: Are the cost reductions and restructuring aligning the cost structure to lower potential sales levels in the industry? And how is the global knowledge turnaround progressing?
A: (Ronald Hovsepian, CEO) The cost reductions are not an indication of a structural decline in the talent and development solutions business. We see growth opportunities in TDS and the market data supports this. For Global Knowledge, it's early days, but we see potential in blending virtual and in-classroom learning.
Q: Can you provide more details on the expense discipline and how it aligns with your growth initiatives?
A: (Richard Walker, CFO) Cost of revenue has decreased due to lower instructor and courseware costs. We are proactively managing expenses to prioritize growth initiatives. Our long-term objective is to grow at or above market rates, and we are aligning our resources accordingly.
Q: What are the key areas of focus for the new Chief Transformation Officer and Chief Analytics Officer?
A: (Ronald Hovsepian, CEO) The Chief Transformation Officer will oversee the execution of our operational plan, while the Chief Analytics Officer will drive the implementation of enhanced performance management systems. Both roles are crucial for measuring performance and enhancing data-driven decision-making.
Q: How are you addressing the challenges faced by your public sector customers and SMB customer success transitions?
A: (Richard Walker, CFO) The decrease in our LTM dollar retention rate was driven by budget constraints at some public sector customers and disruptions from transitioning SMB customer success in-house. We believe these are one-time issues and fit within the annual cycle of the business.
Q: Can you elaborate on the collaboration with Microsoft and its impact on your AI learning experiences?
A: (Ronald Hovsepian, CEO) Our collaboration with Microsoft positions Skillsoft to lead large-scale AI transformation. We have launched AI-accelerated programs and AI-driven enhancements in our offerings, which are helping users gain the skills needed to thrive in the age of AI.
Q: What are the expected financial impacts of the resource reallocation initiatives?
A: (Richard Walker, CFO) The resource reallocation initiatives will primarily impact Q3 and Q4. We expect to see benefits from expense actions and are reaffirming our full-year guidance. We will provide more details on the deployment of capital in the next call.
Q: How are you planning to achieve positive free cash flow, and what measures are being taken to improve cash flow management?
A: (Richard Walker, CFO) We have consolidated cash flow management under our Chief Accounting Officer to create a tighter interlock between accounting, finance, and treasury. We are also reporting adjusted free cash flow to provide transparency on the impact of restructuring charges.
Q: Can you provide more details on the customer wins and product innovations mentioned in the call?
A: (Ronald Hovsepian, CEO) We delivered a scalable multilingual solution for a global professional services firm and reconnected with key customers in the cybersecurity and financial services sectors. These wins demonstrate the value we provide and our ability to meet complex customer needs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
