[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Skillsoft Corp.'s unaudited condensed consolidated financial statements and notes for periods ended July 31, 2025 and 2024 [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) | Metric | July 31, 2025 (in thousands) | January 31, 2025 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Total assets | $969,426 | $1,106,069 | | Total current assets | $252,779 | $332,853 | | Accounts receivable, net | $96,778 | $178,989 | | Deferred revenue | $215,309 | $282,295 | | Total shareholders' equity (deficit) | $42,453 | $93,846 | - Total assets decreased by approximately **$136.6 million** from January 31, 2025, to July 31, 2025, primarily driven by a significant reduction in accounts receivable and deferred revenue[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total revenues | $128,822 | $132,223 | $253,023 | $260,016 | | Operating income (loss) | $(11,830) | $(19,328) | $(30,016) | $(43,160) | | Net income (loss) | $(23,788) | $(39,566) | $(61,837) | $(67,202) | | Basic and diluted EPS | $(2.78) | $(4.84) | $(7.32) | $(8.26) | - Total revenues decreased by **2.6%** for the three months and **2.7%** for the six months ended July 31, 2025, compared to the prior year periods, while net loss significantly improved, decreasing by **39.9%** for the three months and **8.0%** for the six months, reflecting improved operating efficiency[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) | Metric | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income (loss) | $(23,788) | $(39,566) | $(61,837) | $(67,202) | | Foreign currency adjustment, net of tax | $(27) | $64 | $2,946 | $(2,823) | | Total comprehensive income (loss) | $(23,815) | $(39,502) | $(58,891) | $(70,025) | - Total comprehensive loss improved for both the three and six months ended July 31, 2025, compared to the prior year, with a notable positive foreign currency adjustment for the six-month period in 2025[21](index=21&type=chunk) [Unaudited Condensed Consolidated Statements of Shareholders' Equity (Deficit)](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity%20%28Deficit%29) | Metric | January 31, 2025 (in thousands) | July 31, 2025 (in thousands) | | :-------------------------------- | :------------------------------ | :----------------------------- | | Total Shareholders' Equity (Deficit) | $93,846 | $42,453 | | Accumulated (deficit) | $(1,443,386) | $(1,505,223) | | Additional paid-in capital | $1,565,040 | $1,572,538 | | Stock-based compensation (6 months) | N/A | $10,829 | | Net income (loss) (6 months) | N/A | $(61,837) | - Shareholders' equity (deficit) decreased by **$51.4 million** from January 31, 2025, to July 31, 2025, primarily due to the net loss incurred during the period, partially offset by stock-based compensation[29](index=29&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by (used in) operating activities | $13,454 | $3,497 | | Net cash provided by (used in) investing activities | $(9,914) | $(9,195) | | Net cash provided by (used in) financing activities | $(6,533) | $(8,255) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $83 | $(16,380) | | Cash, cash equivalents and restricted cash, end of period | $103,420 | $130,143 | - Net cash provided by operating activities increased significantly to **$13.5 million** for the six months ended July 31, 2025, compared to **$3.5 million** in the prior year, indicating improved operational cash generation[32](index=32&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [(1) Description of Business and Basis of Presentation](index=11&type=section&id=%281%29%20Description%20of%20Business%20and%20Basis%20of%20Presentation) - Skillsoft Corp. operates two reportable segments: Talent Development Solutions (TDS) and Global Knowledge (GK), providing personalized, interactive learning experiences and enterprise-ready solutions[38](index=38&type=chunk) - The company's Class A Common Stock is listed on the New York Stock Exchange under the ticker symbol 'SKIL' since June 14, 2021[38](index=38&type=chunk) [(2) Summary of Significant Accounting Policies](index=11&type=section&id=%282%29%20Summary%20of%20Significant%20Accounting%20Policies) - Skillsoft adopted ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective February 1, 2025, with the impact to be reflected in its fiscal 2026 Form 10-K[44](index=44&type=chunk) - The company is evaluating ASU 2024-03, 'Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,' which will be adopted effective February 1, 2027[46](index=46&type=chunk) [(3) Intangible Assets](index=12&type=section&id=%283%29%20Intangible%20Assets) | Intangible Asset Type | July 31, 2025 Net Carrying Amount (in thousands) | January 31, 2025 Net Carrying Amount (in thousands) | | :-------------------------------- | :--------------------------------------------- | :---------------------------------------------- | | Developed software/courseware | $97,558 | $126,167 | | Customer contracts/relationships | $152,755 | $170,509 | | Trademarks and trade names | $40,409 | $42,217 | | Publishing rights | $7,101 | $11,211 | | Backlog | $286 | $572 | | Skillsoft trademark | $76,545 | $76,545 | | Total intangible assets | $374,654 | $427,221 | - Total net intangible assets decreased by **$52.6 million** from January 31, 2025, to July 31, 2025, primarily due to amortization, while goodwill remained constant at **$317.1 million**[48](index=48&type=chunk)[51](index=51&type=chunk) - Amortization expense for intangible assets was **$63.1 million** for the six months ended July 31, 2025, and no indicators of impairment were found for intangible assets or reporting units[49](index=49&type=chunk)[50](index=50&type=chunk) [(4) Taxes](index=13&type=section&id=%284%29%20Taxes) | Period | Pretax Loss (in thousands) | Tax Benefit (in thousands) | | :-------------------------------- | :------------------------- | :------------------------- | | Three months ended July 31, 2025 | $(24,205) | $(417) | | Six months ended July 31, 2025 | $(63,026) | $(1,189) | | Three months ended July 31, 2024 | $(41,622) | $(2,056) | | Six months ended July 31, 2024 | $(70,841) | $(3,639) | - Skillsoft recorded tax benefits on pretax losses for both periods, with the benefit for the six months ended July 31, 2025, being **$1.2 million**, and is currently evaluating the potential impact of the Tax Reform Act of 2025 (OBBBA) on its financial statements[52](index=52&type=chunk)[54](index=54&type=chunk) [(5) Restructuring](index=13&type=section&id=%285%29%20Restructuring) | Segment | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | | :------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | TDS | $1,613 | $8,883 | $2,629 | $10,014 | | GK | $544 | $2,416 | $874 | $2,252 | | Total | $2,157 | $11,299 | $3,503 | $12,266 | - Total restructuring charges significantly decreased by **80.9%** for the three months and **71.4%** for the six months ended July 31, 2025, compared to the prior year, primarily associated with terminated employees[56](index=56&type=chunk)[57](index=57&type=chunk) - The restructuring liability as of July 31, 2025, was **$2.2 million**, with the majority of planned actions completed, though further evaluations of cost structure may lead to additional actions[58](index=58&type=chunk) [(6) Commitments and Contingencies](index=15&type=section&id=%286%29%20Commitments%20and%20Contingencies) - A derivative lawsuit challenging Skillsoft's acquisition of Codecademy was dismissed on February 7, 2025, and the plaintiff's motion for reargument was denied on March 27, 2025, concluding the matter without liability for Skillsoft[60](index=60&type=chunk) - Management does not anticipate that the outcome of any current legal proceedings or known claims will materially affect Skillsoft's financial position, results of operations, or cash flows, and no material amounts are currently accrued for litigation or indemnifications[61](index=61&type=chunk)[64](index=64&type=chunk) [(7) Long-Term Debt](index=15&type=section&id=%287%29%20Long-Term%20Debt) | Debt Component | July 31, 2025 (in thousands) | January 31, 2025 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Current maturities of long-term debt | $6,404 | $6,404 | | Long-term debt (net) | $571,203 | $573,267 | | Total Term Loans outstanding principal | $585,000 | N/A | | Borrowings under A/R facility | $1,000 | $1,000 | | A/R Agreement interest rate | 6.94% | N/A | - Skillsoft's Term Loan Facility has an outstanding principal balance of **$585.0 million** as of July 31, 2025, maturing on July 16, 2028, with an interest rate of SOFR plus a credit premium of **0.11%** and a **5.25%** margin[163](index=163&type=chunk)[159](index=159&type=chunk) - The company has access to a **$75.0 million** Accounts Receivable Facility, with **$1.0 million** drawn and approximately **$35 million** additional available as of July 31, 2025[168](index=168&type=chunk)[169](index=169&type=chunk) [(8) Shareholders' Equity](index=17&type=section&id=%288%29%20Shareholders%27%20Equity) | Metric | July 31, 2025 | | :-------------------------------- | :------------ | | Authorized common stock shares | 18,750,000 | | Issued common stock shares | 8,972,560 | | Outstanding common stock shares | 8,672,783 | | Share repurchase authorization | $10 million | | Shares repurchased under authorization | None | - Skillsoft's Board authorized a **$10 million** share repurchase program on July 10, 2024, terminating on July 11, 2028, but no common stock had been repurchased under this authorization as of July 31, 2025[72](index=72&type=chunk) - Accumulated other comprehensive income (loss) associated with foreign currency translation adjustments was **$(13.972) million** as of July 31, 2025[73](index=73&type=chunk) [(9) Stock-Based Compensation](index=17&type=section&id=%289%29%20Stock-Based%20Compensation) | Metric | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total stock-based compensation expense | $8,087 | $6,339 | | Unrecognized time-based RSU costs | $24,800 | N/A | | Unrecognized MBRSU costs | $200 | N/A | | Unrecognized PBRSU costs | $5,700 | N/A | | Estimated liability for liability-classified awards | $1,683 | N/A | - Total stock-based compensation expense increased to **$8.1 million** for the six months ended July 31, 2025, from **$6.3 million** in the prior year, with significant unrecognized costs remaining for various RSU types[91](index=91&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk)[87](index=87&type=chunk) - The 2020 Omnibus Incentive Plan and the 2024 Employment Inducement Incentive Award Plan govern equity awards, with **271,187** and **206,250** shares remaining available for issuance, respectively, as of July 31, 2025[74](index=74&type=chunk)[76](index=76&type=chunk) [(10) Revenue](index=21&type=section&id=%2810%29%20Revenue) | Revenue Type/Segment | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total revenues | $253,023 | $260,016 | | TDS: SaaS and subscription services | $188,951 | $188,804 | | GK: Virtual, on-demand and classroom | $52,690 | $60,289 | | United States revenue | $165,535 | $173,332 | | Deferred revenue (end of period) | $216,309 | N/A | | Deferred contract acquisition costs (end of period) | $33,177 | N/A | - Total revenues decreased by **2.7%** for the six months ended July 31, 2025, primarily due to a **12.6%** decline in GK segment revenues, while TDS SaaS and subscription services remained relatively stable[96](index=96&type=chunk) - Deferred revenue as of July 31, 2025, was **$216.3 million**, predominantly from time-based SaaS and subscription services billed in advance[99](index=99&type=chunk) [(11) Fair Value Measurements](index=23&type=section&id=%2811%29%20Fair%20Value%20Measurements) | Asset/Liability | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Cash and cash equivalents | $100,512 | — | — | $100,512 | | Restricted cash | $2,908 | — | — | $2,908 | | Interest rate swaps - asset (liability) | — | $361 | — | $361 | | (Liability)-classified market-based awards | — | $(1,683) | — | $(1,683) | | Total assets (liabilities) recorded at fair value | $103,420 | $(1,322) | — | $102,098 | - Skillsoft recognized a non-cash gain of **$2.1 million** from fair value adjustment of interest rate swaps for the three months ended July 31, 2025, and a non-cash loss of **$(2.1) million** for the six months ended July 31, 2025[105](index=105&type=chunk) - The fair value of Skillsoft's outstanding long-term debt was **$546.6 million** as of July 31, 2025, determined using Level 2 inputs[110](index=110&type=chunk) [(12) Segment Information](index=25&type=section&id=%2812%29%20Segment%20Information) | Segment | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | TDS Revenues | $200,333 | $199,727 | | GK Revenues | $52,690 | $60,289 | | TDS Business unit contribution profit | $139,103 | $137,329 | | GK Business unit contribution profit | $18,570 | $24,349 | | TDS Business unit contribution margin | 69.4% | 68.8% | | GK Business unit contribution margin | 35.2% | 40.4% | - TDS segment revenues increased slightly by **0.3%** for the six months ended July 31, 2025, while GK segment revenues decreased by **12.6%** due to macroeconomic uncertainty and public sector decline[119](index=119&type=chunk)[140](index=140&type=chunk) - TDS business unit contribution profit increased by **1.3%** with a margin improvement of **0.6 percentage points**, whereas GK's contribution profit declined by **23.7%** with a margin decrease of **5.2 percentage points**[119](index=119&type=chunk)[133](index=133&type=chunk) [(13) Net Income (Loss) Per Share](index=27&type=section&id=%2813%29%20Net%20Income%20%28Loss%29%20Per%20Share) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(23,788) | $(39,566) | $(61,837) | $(67,202) | | Basic and diluted EPS | $(2.78) | $(4.84) | $(7.32) | $(8.26) | | Weighted average common shares outstanding | 8,567,973 | 8,180,374 | 8,448,433 | 8,135,353 | - Basic and diluted net loss per share improved to **$(7.32)** for the six months ended July 31, 2025, from **$(8.26)** in the prior year, reflecting a reduced net loss[121](index=121&type=chunk) - Potentially dilutive securities, including warrants, RSUs, and stock options, were not included in the diluted EPS calculation as their effect would be anti-dilutive due to the net losses incurred[122](index=122&type=chunk) [(14) Related Party Transactions](index=29&type=section&id=%2814%29%20Related%20Party%20Transactions) - Skillsoft entered into an agreement in January 2025 to provide off-the-shelf products to Prosus Companies, its largest shareholder, for an aggregate of **$0.8 million** over three years[123](index=123&type=chunk) - The Prosus Commercial Agreement was updated in June 2025 to consolidate and reallocate services, and an additional one-year product agreement for approximately **$69,000** was made in April 2025[123](index=123&type=chunk) [(15) Subsequent Events](index=29&type=section&id=%2815%29%20Subsequent%20Events) - Management concluded that no subsequent events requiring disclosure occurred after the balance sheet date of July 31, 2025, through the filing date of this Form 10-Q[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Skillsoft's financial condition, operations, liquidity, and key accounting estimates for July 31, 2025 and 2024 - Skillsoft empowers organizations and learners with AI-powered, interactive learning experiences, serving over **95 million** learners and **60%** of the Fortune 1000[126](index=126&type=chunk) - The Comprehensive Resource Reallocation Plan (CRRP), announced July 11, 2024, is expected to generate approximately **$45 million** in annualized cost savings, with up to half to be reinvested in strategic growth initiatives[141](index=141&type=chunk) - The company anticipates having sufficient internal and external liquidity to fund operations and anticipated cash needs for at least the next twelve months and the foreseeable future[158](index=158&type=chunk) [General](index=29&type=section&id=General) - Skillsoft leverages AI and a broad ecosystem of partners to deliver personalized, interactive learning experiences, addressing skill gaps, talent retention, and digital transformation for a global community of over **95 million** learners[126](index=126&type=chunk) - The company's unique capabilities include measurable outcomes, technological innovation, blended learning experiences, and enterprise scalability, built to serve the needs of the Global 5000[128](index=128&type=chunk)[129](index=129&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) | Metric (% of Total Revenues) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | 100.0% | 100.0% | 100.0% | 100.0% | | Operating loss | (9.3)% | (14.7)% | (11.9)% | (16.6)% | | Net income (loss) | (18.5)% | (29.9)% | (24.4)% | (25.8)% | - Operating loss as a percentage of total revenues improved from **(14.7)%** to **(9.3)%** for the three months and from **(16.6)%** to **(11.9)%** for the six months ended July 31, 2025, indicating enhanced operational efficiency[130](index=130&type=chunk) - Business unit contribution profit and margin are key non-GAAP financial measures used by the Chief Operating Decision Maker (CODM) to evaluate segment performance and allocate resources[130](index=130&type=chunk) [Revenues](index=33&type=section&id=Revenues) | Revenue Type/Segment | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Dollar Increase (Decrease) | Percent Change | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------- | :------------- | | TDS Revenues | $200,333 | $199,727 | $606 | 0.3% | | GK Revenues | $52,690 | $60,289 | $(7,599) | (12.6)% | | Total subscription revenues | $188,951 | $188,804 | $147 | 0.1% | | Total non-subscription revenues | $64,072 | $71,212 | $(7,140) | (10.0)% | | Total revenues | $253,023 | $260,016 | $(6,993) | (2.7)% | - TDS segment revenues increased slightly by **0.3%** for the six months ended July 31, 2025, driven by efforts to capitalize on the market shift towards talent development[140](index=140&type=chunk) - GK segment revenues declined by **12.6%** for the six months ended July 31, 2025, primarily due to macroeconomic uncertainty, seasonal patterns, and a continued decline in public sector business[140](index=140&type=chunk) [Operating Expenses](index=34&type=section&id=Operating%20Expenses) | Operating Expense | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Dollar Increase (Decrease) | Percent Change | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------- | :------------- | | Total operating expenses | $283,039 | $303,176 | $(20,137) | (6.6)% | | Content and software development | $28,419 | $30,499 | $(2,080) | (6.8)% | | Selling and marketing | $79,200 | $82,976 | $(3,776) | (4.6)% | | General and administrative | $42,419 | $44,704 | $(2,285) | (5.1)% | | Restructuring | $3,503 | $12,266 | $(8,763) | (71.4)% | - Total operating expenses decreased by **6.6%** for the six months ended July 31, 2025, largely due to significant reductions in restructuring costs and the impact of the Comprehensive Resource Reallocation Plan (CRRP)[142](index=142&type=chunk)[141](index=141&type=chunk) - Content and software development expenses decreased by **6.8%**, primarily attributable to productivity gains from leveraging AI and the CRRP, while selling and marketing expenses decreased by **4.6%** due to CRRP and reduced branding initiatives[144](index=144&type=chunk)[145](index=145&type=chunk) [Interest and other](index=37&type=section&id=Interest%20and%20other) | Metric | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Dollar Increase (Decrease) | Percent Change | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------- | :------------- | | Other income (expense), net | $(2,507) | $1,799 | $(4,306) | (239.4)% | | Interest income | $983 | $1,973 | $(990) | (50.2)% | | Interest expense | $(29,358) | $(32,693) | $3,335 | (10.2)% | | Fair value adjustment of interest rate swaps | $(2,128) | $1,240 | $(3,368) | (271.6)% | - Other income (expense), net, saw a significant decrease, primarily due to foreign exchange losses, while interest income decreased by **50.2%** due to lower balances and yields, and interest expense decreased by **10.2%** due to reduced A/R facility borrowings and lower average interest rates[153](index=153&type=chunk) - The fair value adjustment of interest rate swaps resulted in a non-cash loss of **$(2.1) million** for the six months ended July 31, 2025, compared to a gain of **$1.2 million** in the prior year, reflecting changes in the forward-looking yield curve[153](index=153&type=chunk)[154](index=154&type=chunk)[156](index=156&type=chunk) [Provision for (benefit from) income taxes](index=39&type=section&id=Provision%20for%20%28benefit%20from%29%20income%20taxes) | Metric | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Dollar Increase (Decrease) | Percent Change | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------- | :------------- | | Provision for (benefit from) income taxes | $(1,189) | $(3,639) | $2,450 | (67.3)% | | Effective income tax rate | 1.9% | 5.1% | N/A | N/A | - The tax benefit decreased by **67.3%** for the six months ended July 31, 2025, compared to the prior year, with the effective income tax rate at **1.9%**[157](index=157&type=chunk) - The effective income tax rate differed from the U.S. federal statutory rate of **21.0%** primarily due to non-deductible items, foreign rate differentials, changes in unremitted earnings, and valuation allowance adjustments[157](index=157&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | July 31, 2025 (in thousands) | January 31, 2025 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Unrestricted cash and cash equivalents | $100,500 | N/A | | Term Loan Facility outstanding principal | $585,000 | N/A | | A/R Agreement drawn amount | $1,000 | $1,000 | | A/R Agreement additional available | $35,000 | N/A | | Share repurchase authorization | $10,000 | N/A | - Skillsoft had **$100.5 million** in unrestricted cash and cash equivalents as of July 31, 2025, and anticipates sufficient liquidity for the next twelve months and foreseeable future through operating cash flow, cash on hand, and the A/R facility[158](index=158&type=chunk) - Net cash provided by operating activities increased by **284.7%** to **$13.5 million** for the six months ended July 31, 2025, primarily due to enhanced working capital efficiency[172](index=172&type=chunk)[173](index=173&type=chunk) [Contractual and Commercial Obligations](index=42&type=section&id=Contractual%20and%20Commercial%20Obligations) | Obligation Type | Total (in thousands) | Remainder of 2026 (in thousands) | 2027-2028 (in thousands) | 2029-2030 (in thousands) | Thereafter (in thousands) | | :-------------------- | :------------------- | :------------------------------- | :----------------------- | :----------------------- | :---------------------- | | Initial Term Loans | $584,995 | $1,601 | $14,409 | $568,985 | — | | Operating leases | $9,127 | $965 | $3,465 | $2,151 | $2,546 | | Total | $594,122 | $2,566 | $17,874 | $571,136 | $2,546 | - The majority of Skillsoft's contractual obligations, totaling **$585.0 million** for Initial Term Loans, are due in the 2029-2030 fiscal years[178](index=178&type=chunk) [Contingencies](index=42&type=section&id=Contingencies) - Skillsoft is subject to litigation in the ordinary course of business and makes accruals for probable and estimable liabilities, with further details provided in Note 6 to the Interim Financial Statements[179](index=179&type=chunk) [Critical Accounting Estimates](index=43&type=section&id=Critical%20Accounting%20Estimates) - Critical accounting estimates involve significant judgment and uncertainty, including revenue recognition, impairment of goodwill and intangible assets, remaining useful lives of capitalized assets, income tax assets and liabilities, and restructuring charges[181](index=181&type=chunk) - The fair value of indefinite-lived trademark intangible assets is determined using the relief-from-royalty method, which relies on significant estimates and assumptions that could materially affect future impairment charges[192](index=192&type=chunk) - Factors that could lead to goodwill and intangible asset impairment include a prolonged period of reporting units' fair value exceeding market capitalization, lower future profitability expectations, and deterioration in key income approach assumptions[194](index=194&type=chunk) [Recently Issued Accounting Pronouncements](index=45&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) - Information regarding recently issued accounting pronouncements and their potential impact on Skillsoft's financial statements is detailed in Note 2 to the Interim Financial Statements[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Skillsoft's market risk exposures, including interest rate and foreign currency risks, and management strategies are outlined - A hypothetical **100 basis point** increase or decrease in interest rates would result in approximately **$2.9 million** additional or lower pre-tax annual interest expense on long-term debt[200](index=200&type=chunk) - Skillsoft uses two fixed-rate interest rate swap agreements with a combined notional amount of **$300.0 million** to manage exposure to interest rate risk on variable rate debt[200](index=200&type=chunk) - A hypothetical **10%** increase or decrease in current foreign currency exchange rates would impact annual pre-tax income (loss) by approximately **$2.9 million**, though no hedging arrangements are currently in place for foreign currency risk[203](index=203&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms effective disclosure controls and no material changes in internal control over financial reporting for Q2 2025 - Skillsoft's management, with the participation of its principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of July 31, 2025[205](index=205&type=chunk) - There were no material changes in Skillsoft's internal control over financial reporting during the fiscal quarter ended July 31, 2025[206](index=206&type=chunk) - Management acknowledges that any control system has inherent limitations and can provide only reasonable, not absolute, assurance against errors and fraud[207](index=207&type=chunk) [PART II — OTHER INFORMATION](index=47&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 6 – 'Commitments and Contingencies' in the financial statements - Information regarding legal proceedings is incorporated by reference from Note 6 – 'Commitments and Contingencies' in the financial statements[210](index=210&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in Skillsoft's 2025 Annual Report on Form 10-K have occurred - No material changes to the risk factors previously disclosed in Part I, Item 1A of the 2025 Form 10-K have occurred[211](index=211&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - There were no unregistered sales of equity securities and no use of proceeds to report[212](index=212&type=chunk) [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - There were no defaults upon senior securities to report[213](index=213&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to Skillsoft Corp - Mine Safety Disclosures are not applicable to the registrant[214](index=214&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the fiscal quarter ended July 31, 2025 - No director or officer of Skillsoft adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the fiscal quarter ended July 31, 2025[215](index=215&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, agreements, and certifications - The exhibits include the Second Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Warrant Agreement, various offer and letter agreements, and certifications from the Principal Executive and Financial Officers[216](index=216&type=chunk) [SIGNATURES](index=49&type=section&id=SIGNATURES) - The report was duly signed on behalf of Skillsoft Corp. by John Frederick, Chief Financial Officer, on September 9, 2025[220](index=220&type=chunk)

Fiscal 2026 Second Quarter Financial Results Overview [Executive Summary](index=1&type=section&id=executive-summary) Skillsoft achieved Q2 FY26 TDS revenue growth and positive free cash flow, revising full-year guidance due to market softness - Achieved a **fourth consecutive quarter of revenue growth** in the TDS enterprise solution, reinforcing the durability and potential of the core business[4](index=4&type=chunk) - Economic uncertainty continued into Q2, weighing on revenue, primarily due to weaker discretionary demand for live training[4](index=4&type=chunk) - Accelerating execution to reimagine learning, with September announcements introducing AI Innovation based products and a reshaped go-to-market strategy[4](index=4&type=chunk) - Revised full-year revenue guidance range to account for softness in federal and live learning spending[5](index=5&type=chunk) - Generated positive free cash flow year-to-date and remains on track to deliver on adjusted EBITDA and free cash flow targets for the balance of the year[5](index=5&type=chunk) [Fiscal 2026 Second Quarter Select Metrics and Financial Measures](index=1&type=section&id=fiscal-2026-second-quarter-select-metrics-and-financial-measures) Skillsoft reported a 3% year-over-year decrease in total revenue for Q2 FY26, reaching $129 million, with improved GAAP net loss | Metric | Q2 FY26 (Millions) | Q2 FY25 (Millions) | YoY Change | | :----- | :----------------- | :----------------- | :--------- | | Total Revenue | $129 | $132 | -3% | | Talent Development Solutions (TDS) Revenue | $101 | $101 | 0% | | Global Knowledge (GK) Revenue | $28 | $31 | -10% | | GAAP Net Loss | ($24) | ($40) | Improved | | GAAP Net Loss per share | ($2.78) | ($4.84) | Improved | | Adjusted EBITDA | $28 | $28 | 0% | | Adjusted EBITDA Margin | 22% | 21% | +1 pp | | Free Cash Flow (Q2) | ($23) | ($16) | Worsened | | Free Cash Flow (YTD) | $4 | N/A | Positive | [Fiscal 2026 Second Quarter Business Highlights](index=1&type=section&id=fiscal-2026-second-quarter-business-highlights) Key business achievements in Q2 FY26 included positive Free Cash Flow, expanded market reach, and significant growth in technology and AI learners - Achieved positive Free Cash Flow in both the year-to-date and last-twelve-month periods[9](index=9&type=chunk) - Announced availability in AWS Marketplace, simplifying and accelerating the purchasing process[9](index=9&type=chunk) - Expanded reach through partnership with Salesforce to bring Skillsoft CAISY™ agent actions to Agentforce and the Salesforce ecosystem[9](index=9&type=chunk) - Achieved **50% year-over-year increase in technology learners**, **74% increase in AI learners**, and **158% increase in total AI learning hours** on the Skillsoft platform[9](index=9&type=chunk) [Full-Year Fiscal 2026 Financial Outlook](index=1&type=section&id=full-year-fiscal-2026-financial-outlook) Skillsoft revised its full-year fiscal 2026 financial outlook, projecting GAAP Revenue between $510 million and $530 million | Metric | Full-Year Fiscal 2026 Outlook | | :----- | :---------------------------- | | GAAP Revenue | $510 million – $530 million | | Adjusted EBITDA | $112 million – $118 million | [Segment Reporting Changes](index=2&type=section&id=segment-reporting-changes) The company adjusted segment reporting components in Q4 FY25 to enhance transparency and peer comparability - Changes made to segment result components in Q4 FY25 to increase transparency and improve segment comparability to peers[10](index=10&type=chunk) - All prior period comparatives have been recast to conform to the current presentation[10](index=10&type=chunk) Company Information [Webcast and Conference Call Information](index=3&type=section&id=webcast-and-conference-call-information) Skillsoft hosted a conference call and webcast on September 9, 2025, to discuss financial results, with a replay available - Skillsoft hosted a conference call and webcast on September 9, 2025, at 5:00 p.m. Eastern Time to discuss financial results[11](index=11&type=chunk) - A replay of the event will be available for twelve months on the Investor Relations section of Skillsoft's website[11](index=11&type=chunk) [About Skillsoft](index=3&type=section&id=about-skillsoft) Skillsoft empowers organizations and learners with personalized, AI-powered learning experiences to address skill gaps and future-proof workforces - Skillsoft (NYSE: SKIL) empowers organizations and learners with personalized, interactive, AI-powered learning experiences and enterprise-ready solutions[12](index=12&type=chunk) - The platform helps customers solve complex business challenges like bridging skill gaps, improving talent retention, driving digital transformation, and future-proofing the workforce[12](index=12&type=chunk) - Skillsoft is the talent development partner for thousands of organizations, including **60% of the Fortune 1000**, serving over **105 million learners globally**[12](index=12&type=chunk) [Investor and Media Contacts](index=6&type=section&id=investor-and-media-contacts) Contact information for investor relations and media inquiries is provided - Investors can contact Ross Collins or Stephen Poe at SKIL@alpha-ir.com[25](index=25&type=chunk) - Media inquiries can be directed to Cameron Martin at cameron.martin@skillsoft.com[25](index=25&type=chunk) Non-GAAP Financial Measures and Key Performance Metrics [Introduction and Rationale](index=3&type=section&id=introduction-and-rationale) Skillsoft utilizes non-GAAP financial measures and key performance metrics to supplement GAAP information for performance evaluation and comparability - Non-GAAP measures and key performance metrics are used by analysts and investors to evaluate companies and provide insight into U.S. GAAP financial disclosures[13](index=13&type=chunk) - Management uses these measures to assess operating performance, financial leverage, resource allocation, and to provide normalized period-to-period comparisons[13](index=13&type=chunk) - Non-GAAP measures have limitations as analytical tools, are not GAAP presentations, and should not be considered alternatives to GAAP profit/loss or operating cash flows[13](index=13&type=chunk) - Quantitative reconciliations for forward-looking non-GAAP financial measures are not provided due to variability and difficulty in making accurate forecasts[15](index=15&type=chunk) [Key Performance Metric: Dollar Retention Rate (DRR)](index=3&type=section&id=key-performance-metric-dollar-retention-rate-drr) Dollar Retention Rate (DRR) measures the long-term value of customer contracts and the ability to retain and expand revenue from existing customers - DRR represents subscription renewals, upgrades, churn, and downgrades for existing customers divided by their beginning total renewable base[16](index=16&type=chunk) - DRR is used to measure the long-term value of customer contracts and the ability to retain and expand revenue from existing customers[17](index=17&type=chunk) [Non-GAAP Financial Measure Definitions](index=4&type=section&id=non-gaap-financial-measure-definitions) This section defines various non-GAAP financial measures used by Skillsoft, primarily excluding non-cash and discrete items for enhanced comparability [Adjusted Net Income (Loss)](index=4&type=section&id=adjusted-net-income-loss) Adjusted net income (loss) excludes non-cash items, discrete and event-specific costs, and certain accounting income/expenses - Adjusted net income (loss) excludes non-cash items, discrete and event-specific costs not representing normal cash operating expenses, and certain accounting income/expenses[18](index=18&type=chunk) - Exclusions include impairment charges, amortization of acquired intangible assets, acquisition and integration related costs, restructuring charges, transformation costs, system migration costs, long-term incentive compensation expenses, executive exit costs, fair value adjustments, and other (income) expense, net[18](index=18&type=chunk) [Adjusted EBITDA](index=5&type=section&id=adjusted-ebitda) Adjusted EBITDA is defined as net income (loss) with specific exclusions, including amortization, depreciation, and income taxes - Adjusted EBITDA is defined as net income (loss) excluding the same items as adjusted net income (loss), plus additional exclusions[19](index=19&type=chunk) - Additional exclusions for Adjusted EBITDA are amortization of intangible assets (other than those recognized as part of business combination accounting), depreciation expense, and provision for (benefit from) income taxes[19](index=19&type=chunk) [Other Adjusted Operating Measures](index=5&type=section&id=other-adjusted-operating-measures) This section defines other adjusted operating measures including adjusted total operating expenses, free cash flow, and adjusted net leverage - Adjusted total operating expenses exclude depreciation, long-term incentive compensation, system migration, and transformation costs[19](index=19&type=chunk) - Free cash flow is defined as net cash provided by (used in) operating activities less net purchases of property and equipment and internally developed software[19](index=19&type=chunk) - Adjusted net leverage is defined as current maturities of long-term debt, plus borrowings under accounts receivable facility, plus long-term debt, less cash and equivalents and restricted cash, divided by adjusted EBITDA for the preceding twelve-month period[19](index=19&type=chunk) Unaudited Condensed Consolidated Financial Statements [Balance Sheets](index=7&type=section&id=balance-sheets) As of July 31, 2025, Skillsoft reported total assets of $969.4 million, with a decrease in total liabilities and shareholders' equity | Metric (in thousands) | July 31, 2025 | January 31, 2025 | Change | | :-------------------- | :------------ | :--------------- | :----- | | Total assets | $969,426 | $1,106,069 | ($136,643) | | Total liabilities | $927,000 | $1,012,223 | ($85,223) | | Total shareholders' equity (deficit) | $42,453 | $93,846 | ($51,393) | | Accounts receivable, net | $96,778 | $178,989 | ($82,211) | | Deferred revenue (current

Core Insights - Skillsoft (SKIL) is set to release its second-quarter fiscal 2026 results on September 9, after market close, and has consistently surpassed the Zacks Consensus Estimate in the past four quarters with an average earnings surprise of 93.8% [1] Group 1: Q2 Expectations - The Zacks Consensus Estimate for Skillsoft's revenues is $129.2 million, indicating a 2.3% decline compared to the same quarter last year [2][9] - The Talent Development Solutions segment is expected to show revenue growth due to strong AI capabilities and recent product launches, such as the Percipio certification dashboard and Codecademy [4][9] Group 2: Macroeconomic Factors - The U.S. annual inflation rate remained stable at 2.7% in June and July, up from 2.4% in May, but the implementation of tariffs may increase the cost of goods sold, potentially raising inflation and leading to reduced government spending [3] - These macroeconomic conditions are anticipated to negatively impact the Global Knowledge segment, particularly due to a decline in U.S. public sector discretionary live learning spending [3] Group 3: Earnings Prediction Model - The current model does not predict an earnings beat for Skillsoft, as it has an Earnings ESP of 0.00% and a Zacks Rank of 3, indicating a hold position [5][6]

Industry Overview - The Technology Services industry ranks within the top 40% of Zacks Ranked Industries and is expected to outperform the market over the next three to six months [1][8] - The industry is mature with strong demand for services, leading to significant growth in the first half of 2025, which is likely to continue in the second half [1][3] Market Trends - The global shift toward digitization is creating opportunities in markets such as 5G, blockchain, and artificial intelligence (AI) [3] - Companies are rapidly adopting generative AI, machine learning (ML), and data science to gain competitive advantages [3][4] - There is robust demand for multi-cloud-enabled software solutions as businesses transition from legacy platforms to modern cloud-based infrastructure [3] Company Highlights Coherent Corp. (COHR) - Coherent is positioned in the industrial, communications, electronics, and instrumentation markets, offering diversified applications [7] - Expected revenue and earnings growth rates for the current year are 11.5% and 29.3%, respectively, with a 4.1% improvement in the Zacks Consensus Estimate for current-year earnings over the last 30 days [9] Vimeo Inc. (VMEO) - Vimeo provides cloud-based video software solutions, including video hosting, management, and analytics [10][11] - Expected revenue and earnings growth rates for the next year are 6.2% and over 100%, respectively, with no change in the Zacks Consensus Estimate for next-year earnings over the last 60 days [12] Skillsoft Corp. (SKIL) - Skillsoft offers personalized learning experiences and operates in two segments: Talent Development Solutions and Global Knowledge [13][14] - Expected revenue and earnings growth rates for the current year are 1.2% and -157%, respectively, with a 54.8% improvement in the Zacks Consensus Estimate for current-year earnings over the last 60 days [15] Vontier Corp. (VNT) - Vontier focuses on transportation and mobility solutions, operating through three segments: Mobility Technologies, Repair Solutions, and Environmental and Fueling Solutions [16] - Expected revenue and earnings growth rates for the current year are 0.1% and 9%, respectively, with a 2.9% improvement in the Zacks Consensus Estimate for current-year earnings over the last seven days [17] SPX Technologies Inc. (SPXC) - SPX Technologies is a diversified supplier in the HVAC and detection and measurement markets, operating in two segments [18] - Expected revenue and earnings growth rates for the current year are 12.7% and 17%, respectively, with a 3.2% improvement in the Zacks Consensus Estimate for current-year earnings over the last seven days [19]

Core Viewpoint - Skillsoft Corp. (SKIL) has experienced significant selling pressure, resulting in a 30.2% decline over the past four weeks, but analysts anticipate better earnings than previously expected, indicating a potential turnaround for the stock [1]. Group 1: Technical Indicators - The Relative Strength Index (RSI) is utilized to determine if a stock is oversold, with readings below 30 indicating oversold conditions [2]. - SKIL's current RSI reading is 28.35, suggesting that the heavy selling may be exhausting itself and a trend reversal could be imminent [5]. Group 2: Fundamental Indicators - There has been a strong consensus among sell-side analysts to raise earnings estimates for SKIL, leading to a 52.8% increase in the consensus EPS estimate over the last 30 days [7]. - An upward trend in earnings estimate revisions typically correlates with price appreciation in the near term [7]. Group 3: Analyst Ratings - SKIL holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, indicating a strong potential for a turnaround [8].

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