Skillsoft Corp. Q3 FY2026 earnings call

Management Statement and Operational Highlights:

• Transformation started in August 2024 with goals to reach revenue inflection, return to growth, and maintain profitability. Focus on talent development market as it influences business functions. AI is accelerating change, making workforce readiness a priority.
• Reshaped go-to-market approach: Rebuilt marketing team, invested in sales subject matter experts, realigned sales coverage to large enterprise customers with 115% DRR in Q3. Released early version of Skillsoft Precipio platform in September, signed four large enterprise customers.
• AI used in over 50% of content design, curation, and production, contributing to expense improvements. GK segment underwent strategic review due to negative financials, pursuing partnership-driven model to align with company growth timeline.

Segment Performance:

• TDS (Talent Development Solutions): Revenue per TDS was $100.8 million in the third quarter, down 2.1% year over year. Around 70% of the decline came from the B2C learner product (9% of TDS revenue). The enterprise solutions portion was down ~1%, reflecting customer churn earlier in the year. TDS LTM dollar retention rate (DRR) was 99% in Q3, up from 98% the prior year, driven by higher customer upgrades.
• GK (Global Knowledge): Revenue of $28.2 million in the quarter was down ~17.6% year over year. GK accounted for 73% of the revenue decline while representing 22% of total revenue. Financial performance of GK remains negative, and a strategic review is underway to explore partnership alternatives.

Guidance:

• For TDS, expected revenue for full fiscal 2026 is between $410 million and adjusted EBITDA between $112 million and $116 million (about 28% of revenue).
• Free cash flow for fiscal 2026 expected to be between 0 and $5 million due to GK's weakness and costs associated with evaluating strategic alternatives for GK. Withdrew consolidated revenue and adjusted EBITDA guidance due to GK, provided TDS-specific guidance.

Risks:

• GK segment underperformance impacting cash flow and overall financial results.
• Uncertainty around the timeline and outcome of the strategic review of the GK segment.
• Dependence on successful AI adoption and market shift towards AI-driven skills management, which carries inherent execution risks.

Question and Answer: Q: Ken Wong on strategic review timeline and optimization A: Ronald W. Hovsepian and John Frederick discuss that the timeline for the GK strategic review is not specified, but urgency is on improving cash flow and making the segment better for the company overall.

Q: Ken Wong on TDS margin profile and growth A: Ronald W. Hovsepian and Rich Walker talk about TDS's strong margin profile (28% EBITDA margins) and setting up for growth by leveraging AI and repositioning around enterprise value.

Q: Ken Wong on public sector and Q4 outlook A: Rich Walker discusses TDS's federal business DRR (103-104%) and stabilization, with Q4 momentum expected to reflect in TDS guidance.

Q: Ken Wong on AI capabilities and investment cadence A: Ronald W. Hovsepian talks about AI integration in content and platform, customer conversations, and the plan to invest in TDS growth by aligning sales, branding, and product around AI-driven skills management.