Skillsoft Corp. (NYSE: SKIL) (“Skillsoft” or the “Company”), a leading platform for transformative learning experiences, today announced its financial results for the second quarter of fiscal 2023 ended July 31, 2022.

“I am pleased to report our fifth consecutive quarter of Skillsoft subscription content bookings growth,” said Jeffrey R. Tarr, Skillsoft’s Chief Executive Officer. “I’m also pleased the board of directors authorized a share repurchase which reflects the strength of our balance sheet and cash flows along with confidence in our strategy and expectations for the business. We believe acquiring Skillsoft equity is the best use of capital available to us at this time.”

Fiscal 2023 Second Quarter Select Financials from Continuing Operations1

  • Skillsoft Content Segment bookings growth of 5% at constant currency for the quarter, and 12% for the fiscal first half. On a LTM basis Q2 bookings growth for the Content Segment was 9% at constant currency.
  • Skillsoft LTM Content Dollar Revenue Retention of 98%, up 3 percentage points.
  • Global Knowledge Segment bookings decline of 21% at constant currency for the quarter, and 17% for the fiscal first half due in part to a post COVID recovery in the prior year.
  • GAAP revenue of $140.6 million, up 27% compared to the prior year. Adjusted Revenue of $148.4 million, down 5% and down 2% on a constant currency basis due to Global Knowledge results.
  • GAAP net loss of $127.3 million and Adjusted EBITDA of $32.6 million, down 5% and up 1% on a constant currency basis.

Share Repurchase Authorization

The Board of Directors has authorized Skillsoft to repurchase up to $30 million of its Class A common stock. Under the program, Skillsoft may purchase shares in the open market, in private negotiated transactions, or by other means from time to time. The timing and amount of any shares purchased will be based upon a variety of factors, including the share price of Class A common stock, general market conditions, alternative uses for capital, Skillsoft’s financial performance, and other considerations. The share repurchase program does not obligate Skillsoft to purchase any minimum number of shares, and the program may be suspended, modified, or discontinued at any time without prior notice.

Outlook Commentary

We are revising our outlook ranges to reflect the sale of SumTotal, foreign exchange impact, lower fundamentals primarily due to the performance of our transactional Global Knowledge business, and some macro-economic uncertainty.

Full Year Fiscal 2023 Outlook2 ($ in millions)

 

Previous
Outlook

SumTotal
Impact

Foreign
Exchange
Impact

Lower
Fundamentals

Updated
Outlook

 

Bookings

$790 to $825

($127)

($15)

($70)

$580 to $615

 

Adjusted Revenue

$765 to $790

($123)

($15)

($70)

$545 to $580

 

Adjusted EBITDA

~ $167

($37)

($4)

($20)

$105 to $125

 

 

 

 

 

 

 

 

Key Operational Metrics and Non-GAAP Financial Measures from Continuing Operations

Bookings

The following table sets forth unaudited bookings for the three months and six months ended July 31, 2022 and 2021 as if pre-combination Skillsoft and Global Knowledge had been combined and the Skillsoft content line in the prior year includes Codecademy bookings as if the acquisition had closed on April 5, 2021:

Three MonthsChange (Constant Currency)Six MonthsChange (Constant Currency)
(In thousands)Ended July 31,ChangeEnded July 31,Change

2022

2021

$%%

2022

2021

$%%
Continuing operations:
Skillsoft Content

$

77,380

$

74,801

$

2,579

 

3

%

5

%

$

128,449

$

116,636

$

11,813

 

10

%

12

%

Global Knowledge

 

46,493

 

63,541

 

(17,048

)

-27

%

-21

%

 

102,158

 

128,798

 

(26,640

)

-21

%

-17

%

Total

123,873

 

138,342

 

 

(14,469

)

-10

%

 

-7

%

 

 

 

230,607

 

245,434

 

 

(14,827

)

-6

%

 

-3

Adjusted Revenue

GAAP revenue was $140.6 million and $110.3 million for the three months ended July 31, 2022 and 2021, respectively, and $275.4 million and $178.0 million for the six months ended July 31, 2022 and 2021, respectively. The following table sets forth unaudited Adjusted Revenue for the three months and six months ended July 31, 2022 and 2021 as if pre-combination Skillsoft and Global Knowledge had been combined and the Skillsoft content line in the prior year includes Codecademy bookings as if the acquisition had closed on April 5, 2021:

Three MonthsChange (Constant Currency)Six MonthsChange (Constant Currency)
Ended July 31,ChangeEnded July 31,Change

2022

2021

$%%

2022

2021

$%%
Continuing operations:
Skillsoft Content

$

98,754

$

95,791

$

2,963

 

3

%

5

%

$

188,539

$

180,860

$

7,679

 

4

%

6

%

Global Knowledge

49,628

$

60,976

($

11,348

)

-19

%

-13

%

$

101,013

 

115,742

($

14,729

)

-13

%

-8

%

Total Adjusted Gross Revenue

148,382

$

156,767

$

(8,385

)

-5

%

-2

%

$

289,552

$

296,602

($

7,050

)

-2

%

0

%

Dollar Retention Rate

The following table sets forth dollar retention rates (“DRR”) for the last twelve-month (“LTM”) period ended July 31, 2022 and July 31, 2021 and for the three month periods ended July 31, 2022 and 2021:

July 31

LTM
2022

LTM
2021

 

Q2
2022

Q2
2021

 

Skillsoft Content (continuing operations)

98%

95%

98%

99%

Adjusted EBITDA and Adjusted Net Income

Net loss from continuing operations was $127.3 million and $23.9 million for the three months ended July 31, 2022 and 2021, respectively, and $150.4 million and $59.8 million for the six months ended July 31, 2022 and 2021, respectively. The following table sets forth Adjusted EBITDA and Adjusted Net Income for the three and six month periods ended July 31, 2022 and 2021. See full reconciliation and adjusting items in the tables on pages 11 to 14.

Three MonthsChange (Constant Currency)Six MonthsChange (Constant Currency)
Ended July 31,ChangeEnded July 31,Change

2022

2021

$%%

2022

2021

$%%
Continuing operations:
 
Adjusted EBITDA

$32,585

$34,323

 

($1,738)

-5%

 

1%

 

$56,650

$62,939

 

($6,289)

-10%

 

-5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income

$15,393

$22,636

 

($7,243)

-32%

 

N/A

 

$45,145

$38,710

 

$6,435

17%

 

N/A

 

Webcast and Conference Call Information

Skillsoft will host a conference call and webcast today at 5:00 p.m. Eastern Time to discuss its financial results. To access the call, dial (877) 413-9278 from the United States and Canada or (215) 268-9914 from international locations. The live event can be accessed from the Investor Relations section of Skillsoft’s website at investor.skillsoft.com. A webcast replay will be available at the same site for six months.  A telephone replay will be available by dialing (877) 660-6853 or international dial-in (201) 612-7415 conference ID 13732286, beginning about three hours after call’s end, running through September 13th, 2022.

About Skillsoft

Skillsoft (NYSE: SKIL) is a global leader in corporate digital learning, focused on transforming today’s workforce for tomorrow’s economy. The Company provides enterprise learning solutions designed to prepare organizations for the future of work, overcome critical skill gaps, drive demonstrable behavior change, and unlock the potential in their people. Skillsoft offers a comprehensive suite of premium, original, and authorized partner content, including one of the broadest and deepest libraries of leadership & business skills, technology & developer, and compliance curricula. With access to a broad spectrum of learning options (including video, audio, books, bootcamps, live events, and practice labs), organizations can meaningfully increase learner engagement and retention. Skillsoft’s offerings are delivered through Percipio®, its award-winning, AI-driven, immersive learning platform purpose built to make learning easier, more accessible, and more effective. Learn more at www.skillsoft.com.

NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE METRICS

We track several non-GAAP financial measures and key performance metrics that we believe are key financial measures of our success. Non-GAAP measures and key performance metrics are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies comparable to us, many of which present non-GAAP measures and key performance metrics when reporting their results. These measures can be useful in evaluating our performance against our peer companies because we believe the measures provide users with valuable insight into key components of U.S. GAAP financial disclosures. For example, a company with higher U.S. GAAP net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales. Likewise, excluding the effects of interest income and expense moderates the impact of a company’s capital structure on its performance. However, non-GAAP measures and key performance metrics have limitations as analytical tools. Because not all companies use identical calculations, our presentation of non-GAAP financial measures and key performance metrics may not be comparable to other similarly titled measures of other companies. They are not presentations made in accordance with U.S. GAAP, are not measures of financial condition or liquidity, and should not be considered as an alternative to profit or loss for the period determined in accordance with U.S. GAAP or operating cash flows determined in accordance with U.S. GAAP. As a result, these performance measures should not be considered in isolation from, or as a substitute analysis for, results of operations as determined in accordance with U.S. GAAP.

We do not reconcile our forward-looking non-GAAP financial measures to the corresponding U.S. GAAP measures, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible; and because not all of the information necessary for a quantitative reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure is available to us without unreasonable efforts. For the same reasons, we are unable to address the probable significance of the unavailable information. We provide non-GAAP financial measures that we believe will be achieved, however we cannot accurately predict all of the components of the adjusted calculations and the U.S. GAAP measures may be materially different than the non-GAAP measures.

Adjusted Net Income or Loss

Adjusted net income or loss is defined as net income or loss plus or minus primarily non-cash items and other items that management does not consider to be useful in assessing our operating performance (e.g., stock-based compensation expense, amortization related to acquired intangible assets, restructuring and impairment charges, acquisition-related costs, financing related costs, other gains and losses, and discontinued operations, all net of the related tax effects.

Dollar Retention Rate (“DRR”)

For existing customers at the beginning of a given period, DRR represents subscription renewals, upgrades, churn, and downgrades in such period divided by the beginning total renewable base for such customers for such period. Renewals reflect customers who renew their subscription, inclusive of auto-renewals for multi-year contracts, while churn reflects customers who choose to not renew their subscription. Upgrades include orders from customers that purchase additional licenses or content (e.g., a new Leadership and Business module), while downgrades reflect customers electing to decrease the number of licenses or reduce the size of their content package. Upgrades and downgrades also reflect changes in pricing. We use our DRR to measure the long-term value of customer contracts as well as our ability to retain and expand the revenue generated from our existing customers.

Bookings

Bookings in any particular period represents orders received during that period and reflects (i) subscription renewals, upgrades, churn, and downgrades to existing customers, (ii) non-subscription services, and (iii) sales to new customers. Bookings generally represents a customer’s annual obligation (versus the life of the contract), and, for the subscription business, revenue is recognized for such bookings over the following 12 months. We use bookings to measure and monitor current period business activity with respect to our ability to sell subscriptions and services to our platform.

Forward Looking Statements

This document includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those laws. All statements, other than statements of historical facts, that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our outlook (including bookings, adjusted revenue, and adjusted EBITDA), our product development and planning, our pipeline, future capital expenditures, share repurchases, financial results, the impact of regulatory changes, existing and evolving business strategies and acquisitions and dispositions, demand for our services and competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, and our ability to successfully implement our plans, strategies, objectives, expectations and intentions are forward-looking statements. Also, when we use words such as “may,” “will,” “would,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “forecast,” “seek,” “outlook,” “target,” “goal,” “probably,” or similar expressions, we are making forward-looking statements. Such statements are based upon the current beliefs and expectations of Skillsoft’s management and are subject to significant risks and uncertainties. All forward-looking disclosure is speculative by its nature.

There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including:

  • our ability to realize the benefits expected from the business combination between Skillsoft, Churchill Capital Corp. II, and Global Knowledge, and other recent transactions, including our acquisitions of Pluma and Codecademy, and disposition of SumTotal;
  • the impact of U.S. and worldwide economic trends, financial market conditions, geopolitical events, natural disasters, climate change, public health crises, the ongoing COVID-19 pandemic (including any variant), political crises, or other catastrophic events on our business, liquidity, financial condition and results of operations;
  • our ability to attract and retain key employees and qualified technical and sales personnel;
  • our reliance on third parties to provide us with learning content, subject matter expertise, and content productions and the impact on our business if our relationships with these third parties are terminated;
  • fluctuations in our future operating results;
  • our ability to successfully identify, consummate, and achieve strategic objectives in connection with our acquisition opportunities and realize the benefits expected from the acquisition;
  • the demand for, and acceptance of, our products and for cloud-based technology learning solutions in general;
  • our ability to compete successfully in competitive markets and changes in the competitive environment in our industry and the markets in which we operate;
  • our ability to market existing products and develop new products;
  • a failure of our information technology infrastructure or any significant breach of security, including in relation to the migration of our key platforms from our systems to cloud storage;
  • future regulatory, judicial, and legislative changes in our industry;
  • our ability to comply with laws and regulations applicable to our business, including shifting global privacy, data protection, and cyber and information security laws and regulations, as well as state privacy and data protection laws, such as those in California, Colorado, and Virginia;
  • a failure to achieve and maintain effective internal control over financial reporting;
  • fluctuations in foreign currency exchange rates;
  • our ability to protect or obtain intellectual property rights;
  • our ability to raise additional capital;
  • the impact of our indebtedness on our financial position and operating flexibility;
  • our ability to meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;
  • our ability to implement our share repurchase program successfully;
  • our ability to successfully defend ourselves in legal proceedings; and
  • our ability to continue to meet applicable listing standards.

The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For more information, please see the risk factors included in our Form 10-K filed with the SEC for the fiscal year ended January 31, 2022.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved. Annualized, pro forma, projected, and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. Additionally, statements as to market share, industry data, and our market position are based on the most currently available data available to us and our estimates regarding market position or other industry data included in this document or otherwise discussed by us involve risks and uncertainties and are subject to change based on various factors, including as set forth above.

Our forward-looking statements speak only as of the date made and we do not undertake to update these forward-looking statements unless required by applicable law. With regard to these risks, uncertainties, and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.

____________________________
1 Growth calculated compared to the prior year as if pre-combination Skillsoft and Global Knowledge had been combined and their fiscal quarters had been aligned to end on January 31, 2022 and includes Codecademy for both years as if the acquisition had occurred as of April 5, 2021. Constant currency results represent current year period local currency amounts translated at prior year foreign exchange rates. Continuing operations excludes SumTotal results for all periods presented as a result of the sale on August 15, 2022.
2 See “Non-GAAP Financial Measures and Key Performance Metrics.” The Company is unable to reconcile forward-looking non-GAAP measures without unreasonable efforts.

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

 
July 31, 2022January 31, 2022
ASSETS
Current assets:
Cash and cash equivalents$

43,344

 

$

138,176

 

Restricted cash

5,300

 

14,015

 

Accounts receivable, less reserves of approximately $136 and $125 as of July 31, 2022 and January 31, 2022 respectively

98,522

 

173,876

 

Prepaid expenses and other current assets

45,355

 

37,082

 

Assets held for sale, current portion

44,079

 

64,074

 

Total current assets

236,600

 

427,223

 

Property and equipment, net

12,583

 

11,475

 

Goodwill

1,032,706

 

795,811

 

Intangible assets, net

826,511

 

793,859

 

Right of use assets

16,310

 

17,988

 

Other assets

11,284

 

10,780

 

Assets held for sale, long-term portion

156,043

 

164,812

 

Total assets$

2,292,037

 

$

2,221,948

 

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt$

37,795

 

$

4,800

 

Borrowings under accounts receivable facility

35,477

 

74,629

 

Accounts payable

22,412

 

24,159

 

Accrued compensation

19,710

 

40,822

 

Accrued expenses and other current liabilities

48,799

 

47,757

 

Lease liabilities

5,036

 

6,387

 

Deferred revenue

214,482

 

259,701

 

Liabilities held for sale, current portion

74,734

 

87,467

 

Total current liabilities

458,445

 

545,722

 

 
Long-term debt

583,975

 

462,185

 

Warrant liabilities

11,247

 

28,199

 

Fair value of hedge instruments

15,065

 

 

Deferred tax liabilities

83,474

 

99,395

 

Long term lease liabilities

13,505

 

11,750

 

Deferred revenue - non-current

1,280

 

1,248

 

Other long-term liabilities

11,638

 

11,125

 

Liabilities held for sale, long-term portion

2,092

 

2,426

 

Total long-term liabilities

722,276

 

616,328

 

Commitments and contingencies

 

 

Shareholders’ equity:
Shareholders’ common stock - Class A common shares, $0.0001 par value: 375,000,000 shares authorized and 164,308,000 shares issued and outstanding at July 31, 2022 and 133,258,027 shares issued and outstanding at January 31, 2022

14

 

11

 

Additional paid-in capital

1,504,428

 

1,306,146

 

Accumulated deficit

(390,371

)

(247,229

)

Accumulated other comprehensive (loss) income

(2,755

)

970

 

Total shareholders’ equity

1,111,316

 

1,059,898

 

Total liabilities and shareholders’ equity$

2,292,037

 

$

2,221,948

 

 

SKILLSOFT CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

       
Quarter to Date Results
Fiscal 2023Fiscal 2022
SuccessorSuccessorPredecessor (SLH)
Three MonthsFromFrom
EndedJune 12, 2021 toMay 1, 2021 to
July 31, 2022July 31, 2021June 11, 2021
Revenues:     
Total revenues$

140,574

 

$

75,466

 

$

34,814

 

Operating expenses:    
Costs of revenues

34,998

 

22,290

 

6,949

 

Content and software development

19,693

 

6,208

 

4,510

 

Selling and marketing

41,848

 

19,650

 

10,905

 

General and administrative

26,367

 

16,824

 

4,652

 

Amortization of intangible assets

45,200

 

18,493

 

14,575

 

Impairment of goodwill and intangible assets

70,475

 

 

 

Recapitalization and acquisition-related costs

8,452

 

9,900

 

4,927

 

Restructuring

4,323

 

287

 

(910

)

Total operating expenses

251,356

 

93,652

 

45,608

 

Operating loss

(110,782

)

(18,186

)

(10,794

)

Other income (expense), net

80

 

(992

)

304

 

Fair value adjustment of warrants

6,846

 

17,115

 

800

 

Fair value adjustment of hedge instruments

(15,065

)

 

 

Interest income

10

 

9

 

53

 

Interest expense

(11,470

)

(9,265

)

(5,354

)

Loss before benefit from income taxes

(130,381

)

(11,319

)

(14,991

)

Benefit from income taxes

(3,065

)

(1,996

)

(464

)

Loss from continuing operations

(127,316

)

(9,323

)

(14,527

)

Income (loss) from discontinued operations, net of tax

5,817

 

(2,531

)

2,668

 

Net loss$

(121,499

)

$

(11,854

)

$

(11,859

)

      
Gain (loss) per share:     
Class A and B – Basic and Diluted (SLH) - continuing operations

*

*

(3.63

)

Class A and B – Basic and Diluted (SLH) - discontinued operations

*

*

0.67

 

Class A and B – Basic and Diluted (SLH)

*

*

(2.96

)

Ordinary – Basic and Diluted (Successor) - continuing operations

(0.78

)

(0.07

)

*

Ordinary – Basic and Diluted (Successor) - discontinued operations

0.04

 

(0.02

)

*

Ordinary – Basic and Diluted (Successor)

(0.74

)

(0.09

)

*

Weighted average common share outstanding:     
Class A and B – Basic and Diluted (SLH)

*

*

4,000

 

Ordinary – Basic and Diluted (Successor)

164,089

 

133,059

 

*

     

SKILLSOFT CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

       
Year to Date Results
Fiscal 2023Fiscal 2022
SuccessorSuccessorPredecessor (SLH)
Six MonthsFromFrom
EndedJune 12, 2021 toFebruary 1, 2021 to
July 31, 2022July 31, 2021June 11, 2021
Revenues:    
Total revenues$

275,413

 

$

75,466

 

$

102,494

 

Operating expenses:     
Costs of revenues

73,008

 

22,290

 

22,043

 

Content and software development

36,026

 

6,208

 

15,012

 

Selling and marketing

81,410

 

19,650

 

34,401

 

General and administrative

55,711

 

16,824

 

16,471

 

Amortization of intangible assets

84,758

 

18,493

 

46,492

 

Impairment of goodwill and intangible assets

70,475

 

 

 

Recapitalization and acquisition-related costs

21,764

 

9,900

 

6,641

 

Restructuring

8,279

 

287

 

(576

)

Total operating expenses

431,431

 

93,652

 

140,484

 

Operating loss

(156,018

)

(18,186

)

(37,990

)

Other income (expense), net

1,132

 

(992

)

(167

)

Fair value adjustment of warrants

16,952

 

17,115

 

900

 

Fair value adjustment of hedge instruments

(15,065

)

 

 

Interest income

170

 

9

 

60

 

Interest expense

(23,007

)

(9,265

)

(16,763

)

Loss before benefit from income taxes

(175,836

)

(11,319

)

(53,960

)

Benefit from income taxes

(25,402

)

(1,996

)

(3,521

)

Loss from continuing operations

(150,434

)

(9,323

)

(50,439

)

Income (loss) from discontinued operations, net of tax

7,292

 

(2,531

)

1,175

 

Net loss$

(143,142

)

$

(11,854

)

$

(49,264

)

      
Income (loss) per share:     
Class A and B – Basic and Diluted (SLH) - Continuing operations

*

*

(12.61

)

Class A and B – Basic and Diluted (SLH) - Discontinued operations

*

*

0.29

 

Class A and B – Basic and Diluted (SLH)

*

*

$

(12.32

)

Ordinary – Basic and Diluted (Successor) - Continuing operations

(0.98

)

(0.07

)

*

Ordinary – Basic and Diluted (Successor) - Discontinued operations

0.05

 

(0.02

)

*

Ordinary – Basic and Diluted (Successor)$

(0.93

)

$

(0.09

)

*

Weighted average common share outstanding:     
Class A and B – Basic and Diluted (SLH)

*

*

4,000

 

Ordinary – Basic and Diluted (Successor)

153,442

 

133,059

 

*

SKILLSOFT CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 
Fiscal 2023Fiscal 2022
SuccessorSuccessorPredecessor (SLH)
Six MonthsFromFrom
EndedJune 12, 2021 toFebruary 1, 2021 to
July 31, 2022July 31, 2021June 11, 2021
Cash flows from operating activities:
Net loss$

(143,142

)

$

(11,854

)

$

(49,264

)

Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation

16,915

 

4,817

 

 

Depreciation and amortization

3,897

 

1,705

 

3,572

 

Amortization of intangible assets

91,103

 

20,023

 

50,902

 

Change in bad debt reserve

113

 

(170

)

(174

)

(Benefit from) provision for income taxes – non-cash

(36,535

)

1,239

 

(5,886

)

Non-cash interest expense

1,053

 

434

 

487

 

Fair value adjustment to warrants

(16,952

)

(17,115

)

(900

)

Right-of-use asset

1,977

 

1,445

 

748

 

Impairment of goodwill

70,475

 

 

 

Unrealized loss on derivative instrument

15,065

 

 

 

Changes in current assets and liabilities, net of effects from acquisitions:
Accounts receivable

82,783

 

6,963

 

88,622

 

Prepaid expenses and other current assets

(7,492

)

(13,065

)

3,379

 

Accounts payable

(2,559

)

5,175

 

(6,417

)

Accrued expenses, including long-term

(23,066

)

18,026

 

(18,592

)

Lease liability

96

 

(1,690

)

(1,301

)

Deferred revenue

(66,734

)

(15,195

)

(31,365

)

Net cash (used in) provided by operating activities

(13,003

)

738

 

33,811

 

Cash flows from investing activities:
Purchase of property and equipment

(3,528

)

(75

)

(641

)

Internally developed software - capitalized costs

(5,721

)

(881

)

(2,350

)

Acquisition of Codecademy, net of cash acquired

(198,633

)

 

 

Acquisition of Global Knowledge, net of cash received

 

(156,926

)

 

Acquisition of Skillsoft, net of cash received

 

(386,035

)

 

Acquisition of Pluma, net of cash received

 

(18,646

)

 

Net cash used in investing activities

(207,882

)

(562,563

)

(2,991

)

Cash flows from financing activities:
Shares repurchased for tax withholding upon vesting of restricted stock-based awarded

(1,720

)

 

 

Proceeds from equity investment (PIPE)

 

530,000

 

 

Proceeds from issuance of term loans, net of fees

157,088

 

464,290

 

 

Principal payments on capital lease obligation

 

(137

)

(370

)

Proceeds from accounts receivable facility, net of borrowings

(39,152

)

(9,456

)

16,577

 

Principal payments on term loans

(3,202

)

 

 

Repayment of First and Second Out loans

 

(605,591

)

(1,300

)

Net cash provided by financing activities

113,014

 

379,106

 

14,907

 

Effect of exchange rate changes on cash and cash equivalents

(4,646

)

(250

)

203

 

Net (decrease) increase in cash, cash equivalents and restricted cash

(112,517

)

(182,969

)

45,930

 

Cash, cash equivalents and restricted cash, beginning of period

168,923

 

288,483

 

74,443

 

Cash, cash equivalents and restricted cash, end of period$

56,406

 

$

105,514

 

$

120,373

 

Supplemental disclosure of cash flow information:
Cash and cash equivalents$

43,344

 

$

90,772

 

$

117,299

 

Restricted cash

5,300

 

14,742

 

3,074

 

Cash attributed to discontinued operations

7,762

 

 

 

Cash, cash equivalents and restricted cash, end of period$

56,406

 

$

105,514

 

$

120,373

 

SKILLSOFT CORP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(IN THOUSANDS)

 
For the Three Months Ended July 31, 2022
Non-GAAP
Revenue
Skillsoft Corp.Adjustments (1)Combined
Revenues:
Total revenues

$

140,574

 

$

7,808

$

148,382

 

Operating expenses
Cost of revenues

 

34,998

 

 

7,808

 

42,806

 

Content and software development

 

19,693

 

-

 

19,693

 

Selling and marketing

 

41,848

 

-

 

41,848

 

General and administrative

 

26,367

 

-

 

26,367

 

Amortization of intangible assets

 

45,200

 

-

 

45,200

 

Impairment of goodwill and intangible assets

 

70,475

 

-

 

70,475

 

Recapitalization and acquisition-related costs

 

8,452

 

-

 

8,452

 

Restructuring

 

4,323

 

-

 

4,323

 

Total operating expenses

 

251,356

 

 

7,808

 

259,164

 

Operating loss:

$

(110,782

)

$

-

$

(110,782

)

Other income (expense), net

 

80

 

-

 

80

 

Fair value adjustment of warrants

 

6,846

 

-

 

6,846

 

Fair value adjustment of hedge instruments

 

(15,065

)

-

 

(15,065

)

Interest income

 

10

 

-

 

10

 

Interest expense

 

(11,470

)

-

 

(11,470

)

Loss before benefit from income taxes

 

(130,381

)

 

-

 

(130,381

)

Benefit from income taxes

 

(3,065

)

-

 

(3,065

)

Loss from continuing operations

 

(127,316

)

 

-

 

(127,316

)

Income from discontinued operations, net of tax

 

5,817

 

-

 

5,817

 

Net loss

$

(121,499

)

$

-

$

(121,499

)

 
Adjusted net income and Adjusted EBITDA:
Amortization of intangible assets

 

45,200

 

-

 

45,200

 

Impairment of goodwill and intangible assets

 

70,475

 

-

 

70,475

 

Recapitalization and acquisition-related costs

 

8,452

 

-

 

8,452

 

Restructuring

 

4,323

 

-

 

4,323

 

Warrant fair value adjustment and foreign currency

 

(7,066

)

-

 

(7,066

)

Fair value adjustment of hedge instruments

 

15,065

 

-

 

15,065

 

Stock-based compensation expense

 

10,017

 

-

 

10,017

 

Tax impact of non-GAAP adjustments

 

(3,757

)

-

 

(3,757

)

Income from discontinued operations, net of tax

 

(5,817

)

-

 

(5,817

)

Adjusted net income from continuing operations

$

15,393

 

$

-

$

15,393

 

 
Expense from income taxes, excluding tax impacts above

 

692

 

-

 

692

 

Interest expense, net

 

11,460

 

-

 

11,460

 

Depreciation

 

942

 

-

 

942

 

Non-recurring costs and other

 

4,098

 

-

 

4,098

 

Adjusted EBITDA from continuing operations

$

32,585

 

$

-

$

32,585

 

 
Adjusted EBITDA Margin %

 

22

%

 
(1) Non-GAAP revenue adjustments include reseller fees, which are presented on a net basis in GAAP revenue.

SKILLSOFT CORP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(IN THOUSANDS)

 
For the Six Months Ended July 31, 2022
Non-GAAP
Revenue
Skillsoft Corp.Adjustments (1)Combined
Revenues:
Total revenues

$

275,413

 

$

14,139

$

289,552

 

Operating expenses
Cost of revenues

 

73,008

 

 

14,139

 

87,147

 

Content and software development

 

36,026

 

-

 

36,026

 

Selling and marketing

 

81,410

 

-

 

81,410

 

General and administrative

 

55,711

 

-

 

55,711

 

Amortization of intangible assets

 

84,758

 

-

 

84,758

 

Impairment of goodwill and intangible assets

 

70,475

 

-

 

70,475

 

Recapitalization and acquisition-related costs

 

21,764

 

-

 

21,764

 

Restructuring

 

8,279

 

-

 

8,279

 

Total operating expenses

 

431,431

 

 

14,139

 

445,570

 

Operating loss:

$

(156,018

)

$

-

$

(156,018

)

Other income (expense), net

 

1,132

 

-

 

1,132

 

Fair value adjustment of warrants

 

16,952

 

-

 

16,952

 

Fair value adjustment of hedge instruments

 

(15,065

)

-

 

(15,065

)

Interest income

 

170

 

-

 

170

 

Interest expense

 

(23,007

)

-

 

(23,007

)

Loss before benefit from income taxes

 

(175,836

)

 

-

 

(175,836

)

Benefit from income taxes

 

(25,402

)

-

 

(25,402

)

Loss from continuing operations

 

(150,434

)

 

-

 

(150,434

)

Income from discontinued operations, net of tax

 

7,292

 

 

 

7,292

 

Net loss

$

(143,142

)

$

-

$

(143,142

)

 

 
Adjusted net income and Adjusted EBITDA:

 

Amortization of intangible assets

 

84,758

 

-

 

84,758

 

Impairment of goodwill and intangible assets

 

70,475

 

-

 

70,475

 

Recapitalization and acquisition-related costs

 

21,764

 

-

 

21,764

 

Restructuring

 

8,279

 

-

 

8,279

 

Warrant fair value adjustment and foreign currency

 

(18,123

)

-

 

(18,123

)

Fair value adjustment of hedge instruments

 

15,065

 

-

 

15,065

 

Stock-based compensation expense

 

18,510

 

-

 

18,510

 

Tax impact of non-GAAP adjustments

 

(5,149

)

-

 

(5,149

)

Income from discontinued operations, net of tax

 

(7,292

)

-

 

(7,292

)

Adjusted net income from continuing operations

$

45,145

 

$

-

$

45,145

 

 

 
Benefit from income taxes, excluding tax impacts above

 

(20,253

)

-

 

(20,253

)

Interest expense, net

 

22,837

 

-

 

22,837

 

Depreciation

 

2,360

 

-

 

2,360

 

Non-recurring costs and other

 

6,561

 

-

 

6,561

 

Adjusted EBITDA from continuing operations

$

56,650

 

$

-

$

56,650

 

 
Adjusted EBITDA Margin %

 

20

%

 
(1) Non-GAAP revenue adjustments include reseller fees, which are presented on a net basis in GAAP revenue.
 

SKILLSOFT CORP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(IN THOUSANDS)

   
For the Three Months Ended July 31, 2021
For the
Period from
5/1/21 to 6/11/21
For the
Period from
5/1/21 to 6/11/21
For the
Period from
6/12/21 to 7/31/21
Non-GAAP
Revenue
Adjustments (2)
Combined
Global KnowledgeSkillsoftSkillsoft (1)Codecademy (3)
Proforma
Revenues:  
Total revenues

$

25,255

 

$

34,814

 

$

75,466

 

$

10,923

 

$

146,458

 

$

10,309

$

156,767

Operating expenses  
Cost of revenues

 

11,836

 

 

6,949

 

 

22,290

 

 

6,468

 

 

47,543

 

Content and software development

 

258

 

 

4,510

 

 

6,208

 

-

 

 

10,976

 

Selling and marketing

 

5,398

 

 

10,905

 

 

19,650

 

-

 

 

35,953

 

General and administrative

 

10,765

 

 

4,652

 

 

16,824

 

-

 

 

32,241

 

Amortization of intangible assets

 

1,063

 

 

14,575

 

 

18,493

 

-

 

 

34,131

 

Recapitalization and acquisition-related costs

 

-

 

 

4,927

 

 

9,900

 

-

 

 

14,827

 

Restructuring

 

146

 

 

(910

)

 

287

 

-

 

 

(477

)

Total operating expenses

 

29,466

 

 

45,608

 

 

93,652

 

 

6,468

 

 

175,194

 

Operating loss:

$

(4,211

)

$

(10,794

)

$

(18,186

)

$

4,455

 

$

(28,736

)

Other income (expense), net

 

(852

)

 

304

 

 

(992

)

-

 

 

(1,540

)

Fair value adjustment of warrants

 

-

 

 

800

 

 

17,115

 

-

 

 

17,915

 

Interest income

 

-

 

 

53

 

 

9

 

-

 

 

62

 

Interest expense

 

(1,901

)

 

(5,354

)

 

(9,265

)

-

 

 

(16,520

)

Loss before benefit from income taxes

 

(6,964

)

 

(14,991

)

 

(11,319

)

 

4,455

 

 

(28,819

)

Provision for (benefit from) income taxes

 

481

 

 

(464

)

 

(1,996

)

 

 

(1,979

)

Loss from continuing operations

 

(7,445

)

 

(14,527

)

 

(9,323

)

 

4,455

 

 

(26,840

)

Income from discontinued operations, net of tax

 

-

 

 

2,668

 

 

(2,531

)

 

 

137

 

Net loss

$

(7,445

)

$

(11,859

)

$

(11,854

)

$

4,455

 

$

(26,703

)

  
Adjusted net income and Adjusted EBITDA:  
Amortization of intangible assets

$

1,063

 

$

14,575

 

$

18,493

 

$

-

 

$

34,131

 

Impact of fresh-start reporting

 

4,455

 

 

(4,455

)

Recapitalization and acquisition-related costs

 

7,469

 

 

4,927

 

 

9,900

 

 

-

 

 

22,296

 

Restructuring

 

266

 

 

(910

)

 

287

 

 

-

 

 

(357

)

Warrant fair value adjustment and foreign currency

 

-

 

 

(1,179

)

 

(16,377

)

 

-

 

 

(17,556

)

Stock-based compensation expense

 

-

 

 

-

 

 

4,817

 

-

 

 

4,817

 

Tax impact of non-GAAP adjustments

 

608

 

 

3,106

 

 

2,432

 

-

 

 

6,145

 

Income from discontinued operations, net of tax

 

-

 

 

(2,668

)

 

2,531

 

 

-

 

 

(137

)

Adjusted net income from continuing operations

$

1,961

 

$

10,447

 

$

10,229

 

$

-

 

$

22,636

 

  
Benefit from income taxes, excluding tax impacts above

 

(127

)

 

(3,570

)

 

(4,428

)

 

-

 

 

(8,124

)

Interest expense, net

 

1,901

 

 

5,301

 

 

9,256

 

 

-

 

 

16,458

 

Depreciation

 

467

 

 

557

 

 

1,006

 

 

-

 

 

2,030

 

Non-recurring costs and other

 

709

 

 

460

 

 

154

 

 

-

 

 

1,323

 

Adjusted EBITDA from continuing operations

$

4,911

 

$

13,195

 

$

16,217

 

$

-

 

$

34,323

 

  
Adjusted EBITDA Margin %  

 

23

%

  
(1) GAAP results of Skillsoft include Global Knowledge subsequent to June 11, 2021.  
  
(2) Non-GAAP revenue adjustments include the add back of (i) non-cash deferred revenue fair value adjustments and (ii) reseller fees, which are presented on a net basis in GAAP revenue.
  
(3) Non-GAAP revenue adjustment includes proforma Codecademy revenue to allow better comparison against the three months ended July 31, 2022.

SKILLSOFT CORP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(IN THOUSANDS)

 
For the Six Months Ended July 31, 2021
For the
Period from
2/1/21 to 6/11/21
For the
Period from
2/1/21 to 6/11/21
For the
Period from
6/12/21 to 7/31/21
Non-GAAP
Revenue
Adjustments (2)
Combined
Global KnowledgeSkillsoftSkillsoft (1)Codecademy (3)
Proforma
Revenues:
Total revenues

$

71,932

 

$

102,494

 

$

75,466

 

$

33,640

 

$

283,532

 

$

13,070

$

296,602

Operating expenses
Cost of revenues

 

34,698

 

 

22,043

 

 

22,290

 

 

14,557

 

 

93,588

 

Content and software development

 

492

 

 

15,012

 

 

6,208

 

 

-

 

 

21,712

 

Selling and marketing

 

16,404

 

 

34,401

 

 

19,650

 

 

-

 

 

70,455

 

General and administrative

 

19,765

 

 

16,471

 

 

16,824

 

 

-

 

 

53,060

 

Amortization of intangible assets

 

2,646

 

 

46,492

 

 

18,493

 

 

-

 

 

67,631

 

Recapitalization and acquisition-related costs

 

-

 

 

6,641

 

 

9,900

 

 

-

 

 

16,541

 

Restructuring

 

2,764

 

 

(576

)

 

287

 

 

-

 

 

2,475

 

Total operating expenses

 

76,769

 

 

140,484

 

 

93,652

 

 

14,557

 

 

325,462

 

Operating loss:

$

(4,837

)

$

(37,990

)

$

(18,186

)

$

19,083

 

$

(41,930

)

Other income (expense), net

 

624

 

 

(167

)

 

(992

)

 

-

 

 

(535

)

Fair value adjustment of warrants

 

-

 

 

900

 

 

17,115

 

 

-

 

 

18,015

 

Interest income

 

-

 

 

60

 

 

9

 

 

-

 

 

69

 

Interest expense

 

(11,970

)

 

(16,763

)

 

(9,265

)

 

-

 

 

(37,998

)

Loss before benefit from income taxes

 

(16,183

)

 

(53,960

)

 

(11,319

)

 

19,083

 

 

(62,379

)

Provision for (benefit from) income taxes

 

(359

)

 

(3,521

)

 

(1,996

)

 

-

 

 

(5,876

)

Loss from continuing operations

 

(15,824

)

 

(50,439

)

 

(9,323

)

 

19,083

 

 

(56,503

)

Income from discontinued operations, net of tax

 

-

 

 

1,175

 

 

(2,531

)

 

-

 

 

(1,356

)

Net loss

$

(15,824

)

$

(49,264

)

$

(11,854

)

$

19,083

 

$

(57,859

)

 
Adjusted net income and Adjusted EBITDA:
Amortization of intangible assets

$

2,646

 

$

46,492

 

$

18,493

 

$

-

 

$

67,631

 

Impact of fresh-start reporting

 

19,083

 

 

(19,083

)

 

-

 

Recapitalization and acquisition-related costs

 

8,862

 

 

6,641

 

 

9,900

 

 

-

 

 

25,403

 

Restructuring

 

2,884

 

 

(576

)

 

287

 

 

-

 

 

2,595

 

Warrant fair value adjustment and foreign currency

 

-

 

 

(1,001

)

 

(16,377

)

 

-

 

 

(17,378

)

Stock-based compensation expense

 

-

 

 

-

 

 

4,817

 

 

-

 

 

4,817

 

Tax impact of non-GAAP adjustments

 

(319

)

 

10,033

 

 

2,432

 

 

-

 

 

12,145

 

Income from discontinued operations, net of tax

 

-

 

 

(1,175

)

 

2,531

 

 

-

 

 

1,356

 

Adjusted net income from continuing operations

$

(1,751

)

$

30,233

 

$

10,229

 

$

-

 

$

38,710

 

 
Benefit from income taxes, excluding tax impacts above

 

(40

)

 

(13,554

)

 

(4,428

)

 

-

 

 

(18,021

)

Interest expense, net

 

11,970

 

 

16,703

 

 

9,256

 

 

-

 

 

37,929

 

Depreciation

 

1,473

 

 

1,776

 

 

1,006

 

 

-

 

 

4,255

 

Non-recurring costs and other

 

(714

)

 

626

 

 

154

 

 

-

 

 

66

 

Adjusted EBITDA from continuing operations

$

10,938

 

$

35,784

 

$

16,217

 

$

-

 

$

62,939

 

 
Adjusted EBITDA Margin %

 

22

%

 
(1) GAAP results of Skillsoft include Global Knowledge subsequent to June 11, 2021.
 
(2) Non-GAAP revenue adjustments include the add back of (i) non-cash deferred revenue fair value adjustments and (ii) reseller fees, which are presented on a net basis in GAAP revenue.
 
(3) Non-GAAP revenue adjustment includes proforma Codecademy revenue to allow better comparison against the six months ended July 31, 2022.