Skillsoft (US:SKIL)2025-06-09 20:07PART I — FINANCIAL INFORMATION - UNAUDITED Item 1. Unaudited Financial Statements 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 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 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 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 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 - A derivative lawsuit challenging the Codecademy acquisition was dismissed in February 2025, with the dismissal becoming final53 - The Board authorized a $10 million share repurchase program, but no shares were repurchased as of April 30, 202566 - John Frederick was appointed as the new Chief Financial Officer effective May 15, 2025113 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 savings132 - The GK segment revenue declined 15.7% year-over-year, while the TDS segment revenue increased 1.1% year-over-year131 - The company expects current cash, operating cash flow, and available credit to fund operations for at least the next twelve months150 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 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 2028151155 - The company has access to a $75.0 million Accounts Receivable Facility, with $1.0 million drawn as of April 30, 2025160161 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 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 obligations175 - Impairment testing of goodwill and intangible assets relies on significant estimates, and changes could lead to future impairment charges183184 - Accounting for income taxes involves significant estimates for deferred tax assets and uncertain tax positions186187 Item 3. Quantitative and Qualitative Disclosures about Market Risk 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 million191 - The company uses interest rate swaps on a notional amount of $300.0 million to manage interest rate risk191 - A 10% change in foreign currency exchange rates would impact annual pre-tax income by approximately $3.0 million194 Item 4. Controls and Procedures 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, 2025196 - No material changes to internal control over financial reporting were identified during the quarter197 PART II — OTHER INFORMATION Item 1. Legal Proceedings 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 Item 1A. Risk Factors 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-K202 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None203 Item 5. Other Information 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 quarter206 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and new employment agreements