Skillsoft Corp. Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Transformation Progress: About one year into the execution plan, with a fourth consecutive quarter of revenue growth in the TDS enterprise solution (representing over 90% of the TDS segment). Actions include creating a dual business unit structure, improving operational execution, shifting critical resources, and building a talented leadership bench. $45 million in expense reductions were achieved.
• Customer Wins: Examples include a global athletic apparel brand leveraging unified learning solutions, a global semiconductor manufacturer using AI-powered content, and a leading European digital services provider launching a workforce transformation initiative.
• Product Strategy: Evolution towards AI-native design, skills intelligence, and enterprise-grade flexibility. Upcoming AI authoring experience and advancements in Casey (e.g., full voice mode, proficiency scoring). Expanded global learner support with over 50 languages and custom enterprise landing pages.
• Skillsoft Precipio Platform: Technology learners up 50% year over year, AI learners up 74%, and AI learning hours up 158%.

Segment Performance

• Talent Development Solutions (TDS): Revenue was $101.2 million in the second quarter, slightly down year over year. TDS enterprise solutions showed growth, but the learner product line declined. The TDS LTM dollar retention rate (DRR) as of the second quarter was 99%.
• Global Knowledge (GK): Revenue in the quarter was $276 million, down approximately $2.9 million or 9.6% year over year. Soft demand due to lower discretionary spending, particularly in North America and The Middle East, impacted GK.
• Total Revenue: Total revenue for the second quarter was $128.8 million, down $3.4 million or 2.6% year over year.

Guidance

• Revenue: Updated full-year revenue guidance to $510 million to $530 million due to soft federal spending in the GK segment.
• Adjusted EBITDA: Reiterated full-year expectations for adjusted EBITDA of $112 million to $118 million.
• Free Cash Flow: Reiterated full-year expectation for free cash flow of $13 million to $18 million.

Risks

• Macroeconomic and Geopolitical Headwinds: Economic uncertainty and geopolitical factors weighed on revenue, particularly affecting GK due to lower discretionary spending and instability in regions like North America and The Middle East.
• Public Sector Spending Uncertainty: Impacted live learning offers, with public sector in North America and The Middle East being a key area of softness.

Question and Answer

• Q: Ken Wong asks about sectors with material softening in live learning. **A: Ron Hovsepian states public sector in North America and The Middle East hit live learning, but Europe is showing progress. John Frederick adds about green shoots in Europe bookings.
• Q: Ken Wong asks about confidence it's macro vs competitive. **A: Ron Hovsepian points to large public sector deals in Europe and market trends in live learning. John Frederick mentions derisking GK and growth in TDS enterprise.
• Q: Ken Wong asks about revenue guidance cut. **A: John Frederick explains first half revenue down $7 million, noting seasonality with back half being 65% of business.
• Q: Ken Wong asks about TDS dollar retention rate and non-enterprise mix. **A: John Frederick says TDS LTM DRR around 99%, with North American federal business impacting DRR. Non-enterprise TDS business (B2C) down double digits.
• Q: Ken Wong asks about Q2 being a trough. **A: John Frederick says TDS performing reasonably, GK has more trough in back half. Ron Hovsepian mentions transformation adding to challenges.
• Q: Ken Wong asks about levers for sustaining profit with further softening. **A: John Frederick says mostly fixed cost cuts previously, with constant assessment of efficiency during transformation.