Core Viewpoint - Skillsoft Corp. (SKIL) has been upgraded to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system emphasizes the correlation between changes in earnings estimates and stock price movements, making it a valuable tool for investors [2][3]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to price movements based on their buying or selling actions [3]. Skillsoft's Earnings Outlook - The recent upgrade for Skillsoft indicates an improvement in the company's underlying business, which is expected to positively influence its stock price [4]. - Over the past three months, the Zacks Consensus Estimate for Skillsoft has increased by 46.1%, reflecting analysts' growing confidence in the company's earnings potential [7]. Zacks Rank System - The Zacks Rank system categorizes stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [6]. - Skillsoft's upgrade to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [9].

Financial Data and Key Metrics Changes - Total revenue for Q1 was $124.2 million, down approximately $3.6 million or 2.8% year over year [19] - Adjusted EBITDA was $22.1 million or 17.8% of revenue, up from $18.9 million or 14.8% of revenue in the prior year [21] - GAAP net loss was $38 million compared to $27.6 million in the prior year, with GAAP net loss per share at $4.57 compared to $3.42 [22] - Free cash flow was $26.2 million, an improvement of $15.8 million from $10.4 million in the prior year [23] Business Line Data and Key Metrics Changes - Talent Development Solutions (TDS) revenue was $99.1 million, up 1% year over year [18] - Global Knowledge (GK) revenue was $25.1 million, down approximately $4.7 million or 15.7% year over year, impacted by softer demand in the public sector [18][19] - TDS dollar retention rate for Q1 was 99%, compared to 100% last quarter and 99% one year ago [19] Market Data and Key Metrics Changes - There was a decline in U.S. public sector discretionary live learning spending, while large-scale non-U.S. public sector deals increased [10] - The company is investing in international growth, particularly in sectors like AI, cloud computing, and cybersecurity [11] Company Strategy and Development Direction - The company is focused on executing its transformation plan and driving success for customers and learners [5][8] - A renewed focus on go-to-market strategy is emphasized, with new leadership additions aimed at enhancing brand awareness and demand [6][7] - The company aims to return to top-line growth and deliver continued margin expansion while generating positive free cash flow [16] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic uncertainty leading to lower discretionary spending and elongated decision-making processes [8][16] - Confidence in the business strategy was reinforced by positive feedback from customer events and a strong deal pipeline [15][38] - The outlook for the full fiscal year remains unchanged, with expectations for revenue between $530 million and $545 million [26] Other Important Information - The company is closely monitoring macroeconomic conditions and potential impacts on business [26] - The first quarter is typically the highest seasonal free cash flow quarter, with expectations of cash usage in the second quarter [23][24] Q&A Session Summary Question: What are the underlying KPIs that give confidence in the full-year target? - Management highlighted the growth in TDS and a strong deal pipeline in GK, suggesting potential for improvement if the market stabilizes [30][32] Question: How should we think about the government business and its recent softness? - Management noted that discretionary spending in the U.S. federal sector impacted revenue, but there is positive activity in European public sectors [48][50] Question: What changes or improvements can be expected under the new CFO? - The focus will be on integrating finance into every decision and aligning it with go-to-market strategies to drive growth [54]

Financial Data and Key Metrics Changes - Total revenue for the first quarter was $124.2 million, down approximately $3.6 million or 2.8% year over year [18] - Adjusted EBITDA was $22.1 million or 17.8% of revenue, up from $18.9 million or 14.8% of revenue in the prior year [20] - GAAP net loss was $38 million compared to $27.6 million in the prior year, with GAAP net loss per share at $4.57 compared to $3.42 [21] - Free cash flow improved to $26.2 million compared to $10.4 million in the prior year, reflecting an increase of $15.8 million [22] Business Line Data and Key Metrics Changes - Revenue for Talent Development Solutions (TDS) was $99.1 million, up 1% year over year [17] - Global Knowledge revenue was $25.1 million, down approximately $4.7 million or 15.7% year over year, impacted by softer demand in the public sector [17][18] - TDS dollar retention rate for the first quarter was 99%, compared to 100% last quarter and 99% one year ago [18] Market Data and Key Metrics Changes - There was a decline in U.S. Public sector discretionary live learning spending, while large scale non-U.S. Public sector deals increased [9][10] - The company is investing in international growth, particularly in sectors like AI, cloud computing, and cybersecurity [10] Company Strategy and Development Direction - The company is focused on executing its transformation plan and driving success for customers and learners [5][8] - A renewed focus on go-to-market strategy is emphasized, with new leadership additions aimed at enhancing brand awareness and demand [6][8] - The company aims to return to top-line growth and deliver continued margin expansion while generating positive free cash flow [15][24] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic uncertainty leading to lower discretionary spending and elongated decision-making processes [7][15] - Confidence in the business strategy was reinforced by positive feedback from customer events and a strong deal pipeline [14][36] - The company expects to see most growth in the back half of the fiscal year, contingent on market stabilization [8][24] Other Important Information - The company is closely monitoring macroeconomic conditions and potential impacts on business [24] - The leadership team has been expanded with the addition of a new Chief Marketing Officer to enhance marketing efforts [6] Q&A Session Summary Question: What are you seeing in the underlying KPI or deals that give you confidence in reiterating the full year target? - Management expressed confidence in TDS growth and noted a positive deal pipeline in GK, contingent on market stabilization [30] Question: Is there a component of GK being worse and TDS better in your underlying assumptions? - Management acknowledged that discretionary spending was impacted in Q1, particularly in live learning, but noted improvements in the last month of the quarter [32][33] Question: What is the next phase of the business transformation process? - Management indicated that the focus will shift towards increasing growth rates and enhancing go-to-market strategies [35][36] Question: Can you provide context on the government business and its performance? - Management noted softness in U.S. Federal discretionary spending but observed good activity in European public sectors [47][48] Question: What specific changes or improvements can we expect with the new CFO? - The new CFO emphasized the importance of integrating finance into all business decisions to support go-to-market strategies [52]

Financial Performance - Talent Development Solutions (TDS) revenue grew by 1% to $99.1 million compared to the prior year[27] - Global Knowledge (GK) revenue declined by 16% in Q1 FY2026[31] - Total revenue decreased by 3% year-over-year to $124.2 million in Q1 FY2026[30, 31] - Adjusted EBITDA increased by $3 million, or 17%, year-over-year to $22.1 million in Q1 FY2026[34] - Adjusted EBITDA margin improved by 300 basis points year-over-year to 18% in Q1 FY2026[27, 34] - Free cash flow increased by $15.7 million year-over-year to $26.2 million in Q1 FY2026, driven by working capital timing[33, 34] Business Highlights and Strategy - The company reaffirms its fiscal year 2026 outlook, projecting both revenue and Adjusted EBITDA growth[14] - TDS segment has achieved three consecutive quarters of revenue growth[18] - The company is executing a transformation plan focused on expense reduction, margin expansion, and a return to topline growth[20] - The company estimates a $400 billion market opportunity in talent development, with a shift towards a talent development lifecycle approach[22]

[PART I — FINANCIAL INFORMATION - UNAUDITED](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION%20-%20UNAUDITED) [Item 1. Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) Skillsoft reported Q1 2025 revenues of $124.2 million, a net loss of $38.0 million, and a decrease in total assets to $1.02 billion [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $1.02 billion as of April 30, 2025, driven by reductions in accounts receivable and intangible assets, while liabilities and equity also declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 30, 2025 | January 31, 2025 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $127,841 | $100,766 | | Accounts receivable, net | $95,988 | $178,989 | | Total current assets | $277,837 | $332,853 | | Goodwill | $317,071 | $317,071 | | Intangible assets, net | $401,967 | $427,221 | | **Total assets** | **$1,022,486** | **$1,106,069** | | **Liabilities & Equity** | | | | Deferred revenue (current) | $243,788 | $282,295 | | Total current liabilities | $324,915 | $376,982 | | Long-term debt | $572,232 | $573,267 | | **Total liabilities** | **$959,837** | **$1,012,223** | | **Total shareholders' equity (deficit)** | **$62,649** | **$93,846** | [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Revenues decreased to $124.2 million, operating loss improved to $18.2 million, but net loss widened to $38.0 million due to fair value adjustments Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | | :--- | :--- | :--- | | Total revenues | $124,201 | $127,793 | | Total operating expenses | $142,387 | $151,625 | | Operating income (loss) | $(18,186) | $(23,832) | | Net income (loss) | $(38,049) | $(27,636) | | Net income (loss) per share (Basic and diluted) | $(4.57) | $(3.42) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to $31.3 million, while investing and financing activities used $5.1 million and $2.0 million respectively, ending with $130.9 million cash Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $31,298 | $14,937 | | Net cash provided by (used in) investing activities | $(5,134) | $(4,517) | | Net cash provided by (used in) financing activities | $(1,953) | $(4,252) | | Net increase (decrease) in cash | $27,595 | $3,081 | | Cash, cash equivalents and restricted cash, end of period | $130,932 | $149,604 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail the company's segment structure, significant financial balances, legal proceedings, share repurchase authorization, and recent management changes - The company operates through two reportable segments: Talent Development Solutions (TDS) and Global Knowledge (GK)[36](index=36&type=chunk) - A derivative lawsuit challenging the Codecademy acquisition was dismissed in February 2025, with the dismissal becoming final[53](index=53&type=chunk) - The Board authorized a **$10 million** share repurchase program, but no shares were repurchased as of April 30, 2025[66](index=66&type=chunk) - John Frederick was appointed as the new Chief Financial Officer effective May 15, 2025[113](index=113&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 2.8% revenue decline driven by the GK segment, offset by TDS growth, and a 6.1% decrease in operating expenses due to cost savings, while maintaining sufficient liquidity - A comprehensive resource reallocation plan (CRRP) generated approximately **$45 million** in annualized cost savings[132](index=132&type=chunk) - The GK segment revenue declined **15.7%** year-over-year, while the TDS segment revenue increased **1.1%** year-over-year[131](index=131&type=chunk) - The company expects current cash, operating cash flow, and available credit to fund operations for at least the next twelve months[150](index=150&type=chunk) [Results of Operations](index=31&type=section&id=MD%26A_Results_of_Operations) Total revenue decreased to $124.2 million, driven by a 15.7% decline in GK segment revenue, while operating expenses fell 6.1%, leading to an improved operating loss but a wider net loss Segment Revenue and Contribution Profit (in thousands) | Segment | Metric | Q1 2026 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | :--- | | **TDS** | Revenues | $99,148 | $98,075 | 1.1% | | | Business unit contribution profit | $68,479 | $66,458 | 3.0% | | **GK** | Revenues | $25,053 | $29,718 | (15.7)% | | | Business unit contribution profit | $8,603 | $11,153 | (22.9)% | Operating Expense Changes (in thousands) | Expense Category | Q1 2026 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | | Cost of revenues | $32,247 | $34,471 | (6.5)% | | Selling and marketing | $39,609 | $42,292 | (6.3)% | | General and administrative | $22,952 | $25,309 | (9.3)% | | **Total operating expenses** | **$142,387** | **$151,625** | **(6.1)%** | [Liquidity and Capital Resources](index=39&type=section&id=MD%26A_Liquidity_and_Capital_Resources) The company maintains $127.8 million in cash, supported by a $586.6 million term loan and a $75.0 million A/R facility, with operating cash flow increasing to $31.3 million - The company has an outstanding principal balance of **$586.6 million** on its Initial Term Loans, maturing in July 2028[151](index=151&type=chunk)[155](index=155&type=chunk) - The company has access to a **$75.0 million** Accounts Receivable Facility, with **$1.0 million** drawn as of April 30, 2025[160](index=160&type=chunk)[161](index=161&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2026 | Q1 2025 | | :--- | :--- | :--- | | Net cash from operating activities | $31,298 | $14,937 | | Net cash from investing activities | $(5,134) | $(4,517) | | Net cash from financing activities | $(1,953) | $(4,252) | [Critical Accounting Estimates](index=43&type=section&id=MD%26A_Critical_Accounting_Estimates) Critical accounting estimates involve significant judgment in revenue recognition, valuation and impairment testing of intangible assets and goodwill, and accounting for income taxes - Revenue recognition requires judgment in allocating transaction prices for contracts with multiple performance obligations[175](index=175&type=chunk) - Impairment testing of goodwill and intangible assets relies on significant estimates, and changes could lead to future impairment charges[183](index=183&type=chunk)[184](index=184&type=chunk) - Accounting for income taxes involves significant estimates for deferred tax assets and uncertain tax positions[186](index=186&type=chunk)[187](index=187&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from interest rate and foreign currency fluctuations, with hypothetical changes impacting pre-tax interest expense by $2.9 million and pre-tax income by $3.0 million respectively - A **100 basis point** change in interest rates would impact annual pre-tax interest expense by approximately **$2.9 million**[191](index=191&type=chunk) - The company uses interest rate swaps on a notional amount of **$300.0 million** to manage interest rate risk[191](index=191&type=chunk) - A **10%** change in foreign currency exchange rates would impact annual pre-tax income by approximately **$3.0 million**[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of April 30, 2025, with no material changes to internal control over financial reporting - Disclosure controls and procedures were concluded to be effective as of April 30, 2025[196](index=196&type=chunk) - No material changes to internal control over financial reporting were identified during the quarter[197](index=197&type=chunk) [PART II — OTHER INFORMATION](index=28&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings, including the dismissal of a stockholder derivative lawsuit, is incorporated by reference from Note 6 - Legal proceedings information is incorporated by reference from Note 6 – "Commitments and Contingencies"[201](index=201&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the previously disclosed Annual Report on Form 10-K - No material changes to risk factors were disclosed from the 2025 Form 10-K[202](index=202&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[203](index=203&type=chunk) [Item 5. Other Information](index=28&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[206](index=206&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and new employment agreements

Revenue Performance - Total revenue for the first quarter of fiscal 2026 was $124 million, down 3% from the prior year[9]. - Talent Development Solutions (TDS) revenue was $99 million, up 1% from the prior year, marking the third consecutive quarter of growth for this segment[9][10]. - Global Knowledge (GK) revenue was $25 million, down 16% from the prior year[9]. - Total revenues for the three months ended April 30, 2025, were $124,201, a decrease of 5.0% compared to $127,793 for the same period in 2024[29]. - Total revenues for Q1 2025 were $124,201, a decrease of 2.5% from $127,793 in Q1 2024[32]. - Talent Development Solutions revenue was $99,148 in Q1 2025, slightly up from $98,075 in Q1 2024, with a contribution margin of 69.1%[34]. - Global Knowledge revenue decreased to $25,053 in Q1 2025 from $29,718 in Q1 2024, with a contribution margin of 34.3%[34]. Financial Losses and Income - GAAP net loss was $38 million, compared to a net loss of $28 million in the prior year, with a net loss per share of $4.57[9]. - Net loss for the three months ended April 30, 2025, was $(38,049), compared to a net loss of $(27,636) in the same period of 2024, reflecting a 37.5% increase in losses[29]. - The company reported a basic and diluted net income (loss) per share of $(4.57) for the three months ended April 30, 2025, compared to $(3.42) for the same period in 2024[29]. - The net income margin for Q1 2025 was (30.6)%, compared to (21.6)% in Q1 2024, highlighting ongoing challenges[32]. Cash Flow and Financial Health - Free cash flow for the quarter was $26 million, significantly up from $10 million in the prior year[9]. - The company anticipates the second quarter to be the lowest free cash flow quarter as working capital normalizes[6]. - Net cash provided by operating activities for the three months ended April 30, 2025, was $31,298, compared to $14,937 for the same period in 2024, reflecting a 109.5% increase[31]. - Free cash flow for Q1 2025 was $26,164, significantly higher than $10,420 in Q1 2024, indicating improved cash generation[41]. - Adjusted free cash flow (levered) for Q1 2025 was $31,144, compared to $13,502 in Q1 2024, demonstrating strong financial health[41]. Operational Efficiency - Adjusted EBITDA was $22 million, reflecting a margin of 18% of revenue, compared to $19 million and 15% in the prior year[9]. - Adjusted EBITDA for Q1 2025 increased to $22,131, up 16.3% from $18,898 in Q1 2024[32]. - Total GAAP operating expenses decreased to $108,910 in Q1 2025 from $117,578 in Q1 2024, reflecting cost management efforts[36]. - Adjusted total operating expenses for Q1 2025 were $102,070, down from $108,895 in Q1 2024, indicating improved operational efficiency[36]. Company Outlook and Recognition - The company reaffirmed its fiscal 2026 outlook, expecting GAAP revenue between $530 million and $545 million and Adjusted EBITDA between $112 million and $118 million[8]. - Skillsoft was recognized as "Most Dedicated to Employee Growth" in the Digiday WorkLife Awards, emphasizing its commitment to employee development[10]. - Skillsoft CAISY™, an AI-powered coach, is now available in over 40 languages, enhancing the company's product offerings[10]. Balance Sheet Highlights - Cash and cash equivalents as of April 30, 2025, were $127,841, up from $100,766 as of January 31, 2025, indicating a 26.9% increase[27]. - Total assets decreased to $1,022,486 as of April 30, 2025, from $1,106,069 as of January 31, 2025, representing a decline of 7.6%[27]. - Total current liabilities decreased to $324,915 as of April 30, 2025, from $376,982 as of January 31, 2025, a reduction of 13.8%[27]. - Deferred revenue as of April 30, 2025, was $243,788, down from $282,295 as of January 31, 2025, a decrease of 13.6%[27]. - Total shareholders' equity (deficit) decreased to $62,649 as of April 30, 2025, from $93,846 as of January 31, 2025, a decline of 33.2%[27].

Core Viewpoint - The market anticipates Skillsoft Corp. (SKIL) to report a year-over-year increase in earnings despite lower revenues when it releases its quarterly results for the period ending April 2025 [1] Earnings Expectations - The earnings report is expected on June 9, 2025, with a consensus estimate of a quarterly loss of $2.65 per share, reflecting a year-over-year change of +22.5%. Revenues are projected to be $123.5 million, down 3.4% from the previous year [3][2] Estimate Revisions - The consensus EPS estimate has been revised 10.51% higher in the last 30 days, indicating a reassessment by analysts [4] Earnings Surprise Prediction - The Zacks Earnings ESP model shows that the Most Accurate Estimate matches the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%. The stock currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat [12] Historical Performance - Skillsoft has a history of beating consensus EPS estimates, having done so in the last four quarters. In the most recent quarter, it exceeded expectations by delivering a surprise of +202.93% [13][14] Conclusion - While Skillsoft does not appear to be a strong candidate for an earnings beat, investors should consider other factors before making decisions regarding the stock ahead of the earnings release [17]

Group 1: Earnings Performance - Skillsoft Corp. reported quarterly earnings of $2.11 per share, exceeding the Zacks Consensus Estimate of a loss of $2.05 per share, and showing improvement from a loss of $3.09 per share a year ago, resulting in an earnings surprise of 202.93% [1] - The company has surpassed consensus EPS estimates in all four of the last quarters [2] - Skillsoft's revenues for the quarter ended January 2025 were $133.75 million, surpassing the Zacks Consensus Estimate by 4.22%, although this represents a decline from year-ago revenues of $137.54 million [2] Group 2: Stock Performance and Outlook - Skillsoft shares have declined approximately 28.7% since the beginning of the year, compared to a decline of 8.8% for the S&P 500 [3] - The future performance of Skillsoft's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is -$2.48 on revenues of $132.23 million, and for the current fiscal year, it is -$7.11 on revenues of $539.99 million [7] Group 3: Industry Context - The Technology Services industry, to which Skillsoft belongs, is currently ranked in the top 27% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Revenue for the fourth quarter was $133.8 million, down approximately 2.8% year-over-year, while total revenue for the full year was $531 million, down approximately 4% year-over-year [35][51] - Adjusted EBITDA for the fourth quarter was $29.9 million, representing 22% of revenue, up from $28.3 million or 21% of revenue in the prior year [41] - The company reported a gap net loss of $31.1 million in the fourth quarter, compared to a gap net loss of $245.3 million in the prior year [42] Business Line Data and Key Metrics Changes - Talent Development Solutions (TDS) revenue was $102.8 million in the fourth quarter, up 1% year-over-year, and $405.5 million for the full year, essentially flat to FY24 [31] - Global Knowledge revenue was $30.9 million in the fourth quarter, down approximately 13% year-over-year, with full-year revenue of $125.4 million, down approximately 15% year-over-year [34] Market Data and Key Metrics Changes - The company reported a dollar retention rate (DRR) of 105% for the fourth quarter, leading to a full-year DRR of 100%, a 200 basis point improvement from the previous quarters [8][33] - The market served by the company is estimated to be over $400 billion, with a focus on the talent development lifecycle within the enterprise market segment [12][13] Company Strategy and Development Direction - The transformation strategy focuses on two key objectives: fixing the basics and investing to grow, with a targeted shift of up to 20% of resources into the enterprise market segment [10][11] - The company aims to return to growth in FY26 while generating positive free cash flow, with a commitment to drive at least $45 million in annualized expense reduction [15][16] Management's Comments on Operating Environment and Future Outlook - Management is closely monitoring the macroeconomic environment and potential impacts of evolving government policies, but has not seen any material impact on business so far [7][62] - The company expects revenue for FY26 to be between $530 million and $545 million, with adjusted EBITDA of $112 million to $118 million [51][52] Other Important Information - The company generated $17.7 million in cash flow from operations in Q4, resulting in free cash flow of $13.2 million, compared to $5.4 million in the prior year [46] - Total gross debt was $581 million at the end of Q4, down from approximately $591 million at the end of Q3, with a reduction in gross debt leverage from six times to 5.3 times [50] Q&A Session Summary Question: Impact of recent tariff news on customer base - Management noted that as a federal contractor, they have not seen any material impact due to their preparedness and collaboration with federal agencies [62][63] Question: Guidance for growth in FY26 - The outlook reflects current business operations, acknowledging a fluid environment that may impact future performance [71][72] Question: Margin improvement in EBITDA guidance - Management indicated that while revenue is expected to grow, margin expansion may not be significant in the near term due to various factors affecting profitability [74][75] Question: Dynamics of large deal activity - The company reported strong performance in securing large deals, with significant contributions from top customers [88][109] Question: Global Knowledge margin contribution decline - Management attributed the decline to a mix issue and indicated plans to improve the margin profile in FY26 [110][112] Question: Durability of dollar retention rate improvements - Management expressed confidence in the durability of the DRR improvements, supported by long-term contracts and ongoing resource shifts [116][121] Question: Seasonality of the business - Management confirmed that Q1 is typically the smallest quarter, and this seasonality is expected to continue in FY26 [124][125]

Financial Data and Key Metrics Changes - Revenue for the fourth quarter was $133.8 million, down approximately 2.8% year-over-year, while total revenue for the full year was $531 million, down approximately 4% year-over-year [35][51] - Adjusted EBITDA for the fourth quarter was $29.9 million, representing 22% of revenue, up from $28.3 million or 21% of revenue one year ago [41] - The company reported a gap net loss of $31.1 million in the fourth quarter, compared to a gap net loss of $245.3 million in the prior year [42] Business Line Data and Key Metrics Changes - Talent Development Solutions (TDS) revenue was $102.8 million in the fourth quarter, up 1% year-over-year, and $405.5 million for the full year, essentially flat to FY24 [31] - Global Knowledge revenue was $30.9 million in the fourth quarter, down approximately 13% year-over-year, with full-year revenue of $125.4 million, down approximately 15% year-over-year [34] Market Data and Key Metrics Changes - The company reported a dollar retention rate (DRR) of 105% for the fourth quarter, bringing the last 12 months DRR to 100% [8][33] - The market served by the company is estimated to be over $400 billion, with a focus on the talent development lifecycle within the enterprise market segment [12][13] Company Strategy and Development Direction - The transformation strategy focuses on two key objectives: fixing the basics and investing to grow, with a targeted shift of up to 20% of resources into the enterprise market segment [10][11] - The company aims to return to growth in FY26 while generating positive free cash flow [16][52] Management's Comments on Operating Environment and Future Outlook - Management is closely monitoring the macroeconomic environment and potential impacts of evolving government policies [7] - The company remains committed to its targets of returning to top-line growth and margin expansion in FY26 [16][52] Other Important Information - The company achieved $45 million in annualized expense reduction in FY25, with 40% to 50% of these savings reinvested back into the business [15][16] - The company generated $17.7 million in cash flow from operations in Q4, resulting in free cash flow of $13.2 million, compared to $5.4 million in the prior year [46] Q&A Session Summary Question: Impact of recent tariff news on customer base - Management noted no material impact from recent tariff news, as they are well-prepared and have been working closely with federal agencies [62][63] Question: Growth outlook for FY26 - The outlook reflects current business operations, acknowledging a fluid environment that may impact future performance [71][72] Question: Margin improvement in EBITDA guidance - Management indicated that while revenue is expected to grow, margin improvement will be modest, with a focus on leveraging earnings growth [74][76] Question: Go-to-market transformation progress - Management reported positive feedback from large deals and ongoing adjustments in sales strategy, with a focus on deploying resources effectively [88][91] Question: Engagement with AI-driven tools - Early indicators show strong customer engagement with AI-driven tools, with a notable percentage hiring professional services for implementation [99][100] Question: Global Knowledge margin contribution decline - Management attributed margin decline to a mix issue and expects improvements as the business stabilizes and product offerings expand [110][112] Question: Durability of dollar retention rate improvements - Management expressed confidence in the durability of the DRR improvements, supported by long-term contracts and ongoing resource shifts [116][121] Question: Seasonality of business and future guidance - Management confirmed that Q1 is typically the smallest quarter, and seasonality patterns are expected to continue into FY26 [124][126]