Skillsoft (US:SKIL)2025-09-09 22:00Financial Data and Key Metrics Changes - Total revenue for the second quarter was $128.8 million, down $3.4 million or 2.6% year over year [16] - Talent Development Solutions (TDS) revenue was $101.2 million, slightly down year over year, while Global Knowledge revenue was $27.6 million, down approximately $2.9 million or 9.6% year over year [15][16] - Adjusted EBITDA for the quarter was $28.3 million, flat compared to last year, with an adjusted EBITDA margin of 22% compared to 21.4% last year [18] - GAAP net loss was $23.8 million, an improvement from a loss of $39.6 million in the prior year [18] - Free cash flow for the quarter was negative $22.6 million, compared to negative $16.1 million in the prior year [19] Business Line Data and Key Metrics Changes - TDS LTM dollar retention rate was 99%, unchanged from the previous quarter, but impacted by churn in the federal business [16] - The decline in the learner product line within TDS masked growth in TDS Enterprise Solutions, which represents more than 90% of the TDS segment [15][16] - Global Knowledge continued to experience softening demand, particularly in North America and the Middle East, due to lower discretionary spending [8][16] Market Data and Key Metrics Changes - The macroeconomic and geopolitical headwinds affected demand, particularly in the public sector in North America and the Middle East [8][16] - The company noted a significant impact from slower demand in North America and geopolitical instability in the Middle East [8][16] Company Strategy and Development Direction - The company is focused on a transformation plan that includes a dual business unit structure and a new AI innovation-based product roadmap [6][8] - Strategic priorities include leveraging existing scale and enhancing customer relationships, with a focus on intelligent learning design and immersive learning experiences [8][10] - The company aims to evolve its product strategy to focus on AI-native design and skills intelligence [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic uncertainty and its impact on revenue, particularly in the public sector [5][8] - The company is adjusting its full-year revenue guidance to $510 million to $530 million, reflecting anticipated continued softness in federal spending [22] - Despite the challenges, management remains confident in the core business's durability and the strategic investments being made [12][22] Other Important Information - The company has achieved $45 million in expense reductions, contributing to profitability and margin expansion [8] - The company is reiterating expectations for adjusted EBITDA of $112 to $118 million for the full year [22] Q&A Session Summary Question: Can you provide additional color on sectors affected by the softer live learning environment? - Management noted that public sector demand was significantly affected in North America and the Middle East, while Europe showed good progress [25][26] Question: Is the softness more macro-driven or competitive? - Management indicated that the softness is primarily macro-driven, with positive bookings in Europe suggesting a recovery path [27][30] Question: How does the adjusted revenue guidance reflect bookings and potential further erosion? - The guidance adjustment was based on first-half performance and anticipated seasonality, with a focus on managing risk [31][32] Question: Is the timeline for returning to growth dependent on macro conditions? - Management believes that while macro conditions have impacted growth, there are still elements within their control to drive recovery [33][36] Question: How is the company managing costs in light of revenue challenges? - The company is focused on efficiency and has made deliberate cuts to fixed costs, rather than relying solely on variable cost adjustments [50][53]