Skillsoft Corp. Q4 FY2026 earnings call

Over the past 18 months, Skillsoft undertook strategic transformation. Work confirmed content, platform, and data as foundational assets. Reduced gross costs by ~$45 million and reinvested half into go-to-market and AI-driven product innovation. Advanced product roadmap, released upgraded KC AI simulation offering, announced and made AI native platform generally available with 15 paying customers. Streamlined cost structure, improved efficiency, generated positive free cash flow. Initiated strategic review of Global Knowledge. Differentiation lies in skills intelligence, integration of content/platform/data, and ability to operationalize AI in enterprise environments.

For the fourth quarter, TDS revenue was $102.6 million, nearly flat year over year with growth in enterprise solutions offsetting drag from B2C learner product. Global knowledge revenue was $28 million, down approximately 9.4% year over year. Total revenue was $130.7 million, down 2.3% year-over-year. TDS LTM dollar retention rate as of the fourth quarter was 98%, compared to 105% in the prior year quarter.

For fiscal 27, TDS expects revenue for the full year of between $388 and $406 million and adjusted EBITDA between $108 million and $116 million or around 28% of revenue. Putting aside GK, expects free cash flow in the range of $14 to $22 million for TDS.

Conflict in the Middle East has had meaningful impacts on the strategic assessment process of Global Knowledge given GK's direct exposure to the Middle East, fears of global economic issues, and some potential buyers being physically located in the market.

Q: Fantastic. Thanks for taking my question. Great to see a solid close to the year, guys. Ron, maybe starting with you, when I look at the TDS program, guidance you know it does show a slight decline um can you talk through some of the business dynamics that you're seeing uh you know some of the maybe you know maybe how that progression could look through the year and then and then john to the extent that you can maybe comment on the levels of conservatism or some of the assumptions that are baked into that guidance so we have a sense of kind of the the you know how qualified that that number could could eventually settle out at.

A: Thanks, Ken. Great to hear your voice. The key business dynamics that you're asking about that are influencing are some historical pieces that I'm looking at my teammate, John, and he'll walk you through them so you can bridge them as part of it. So we've got some historical pieces with the normal things you're seeing. I just remind everybody, When we came into the year, we were driving our strategic transformation in that operational turnaround. We made really good progress against that as part of it. So now we're shifting to the phase here where we're going to start to focus on the growth. That will show up actually first in bookings before it shows up inside of the revenue number. And the revenue had some headwinds and other dimensions that I'm looking at John to cover with you so we can bridge those numbers to you to make it clearer of where we're going. But the market is definitely slowed and focused on it right now. Customers are thinking. That plays right to our core strategy of that learning unified approach. platform, the Skillsoft Precipio platform, unifying all their skills management needs. That's definitely been the conversation. As we said, we've now signed up 15 customers onto that strategy and that journey with us, all paying customers, which is great. So I'll flip it over to John to fill in the rest of that guidance dimension for you, and then we'll come back to it more, Ken. Hey, Ken, how you doing? Thanks for asking the question. So if you break down TDS, we have two components of it. We have a consumer business. We have an enterprise business or an enterprise solution, if you will. When you think about the relative size of those two components, you know, consumer is about 9% of the total and enterprise is the rest. So just to contextualize it, When you look at the midpoint of our guidance, we're down about $7 million year over year at the midpoint. Nearly all of that is as a result of our consumer business. The enterprise business has actually been performing reasonably well. It hit the inflection point. We've talked about that. So we're pretty happy with that. Some of the headwinds that we saw earlier in the year, namely some of the churn and some of our government federal clients put a bit of a bookings headwind going into fiscal 27, as Ron was commenting on the fact that you really have to get the growth out of bookings first before you get revenue. We had a bit of a headwind from that. We think that we can overcome that. most if not all of that, and perhaps grow on a revenue basis in enterprise. But we'll continue to have – we're planning for a continued decline in the consumer business.

Q: Yeah, I think the range that we put out, I think, is pretty reflective of what we're seeing in the market right now, which is really a couple of components. At the low end of the range, we're thinking about things like pressure from the Middle East, most notably at the low end of guidance. at the high end of guidance, you know, we're assuming that we can temper the decline in the consumer business and that we have a well-performing Middle East business. So, you know, just to kind of think about the two ends of the spectrum, that kind of informs where we could end up. It actually gives you a way to track how we're doing through the year.

Q: Ron, you touched earlier on some of the customer engagement on the AI side and north of 200% on a few of your APIs there. Any thoughts on how the timeline might look when you move from activity to workforce transformation and then hopefully workforce transformation leads to monetization? What's the path forward on that particular timeline?

A: Yeah, it's a multidimensional timeline. So to your first part of the timeline, we're already collecting from those customers and those numbers I just gave you, right? So we're already getting some of that revenue as part of that journey. Two, the way we structured it was we wanted the customers to really begin to use it, so we were more open about the usage of how they were approaching it versus trying to hit them with all usage fees. We were driving adoption as part of it at these early customers that we had as part of our journey. So as I think about that part of the roadmap, we structured our pricing and packaging to make sure that we got the customers adopting and going. So we're in the early days of that. Those pieces associated with it after these early parts of what we're talking about, Then get into the full migration where the customer can then sell. And I'm jumping all the way to the end of the journey, which for a customer could really range from anywhere from six months to two years as a large customer who's going on one of those large migrations. But the correlation would be they move from... you know, multiple hundreds of thousands of dollar type customers to multiple millions of size customers as we go on our journey. And as you know, each leg of the adoption gathers more impact and more holding power for us with the customer. And what I'm more excited about in some of the numbers as we go forward, when we start showing some of those, will be around how they adopt our strategy around our custom content, their content and building that. That's still the early days on that piece. Everything else was really driving innovation. on the products that we got out last year. And then we'll continue to report back to you these pieces and put it together in a more broader mosaic. But the ultimate life cycle that I look forward to packaging up here once we get more data will be that life cycle journey. Where do I have the customers at this stage? Then going to the next stage, to the next stage, to the next stage. And we think of those stages in four big chunks and we can walk you through what those are. um after uh after on that one 10 but happy to i do see you know large i'm focused on the enterprise and larger enterprises i see that those turning into multi-million dollar contracts you know per year with our customers in terms of upside which i think is where you're saying hey ron how fast can you get there and then how much is it worth at the end Q: I think one piece of the guidance that I thought was particularly attractive, but you're still projecting for increased EBITDA, free cash flow, despite a slight downtick in TDS. I guess as we think about that, the spend numbers there, do you feel there is sufficient investment to provide growth? And I think, John, you mentioned that once you guys potentially clear GK off the deck, there's maybe room for further improvement. Maybe dive into those two pieces if you could.

A: Sure. Happy to. So one of the interesting things that isn't completely visible in the numbers is we – have been fairly successful in reducing costs on a year-over-year basis. We have that grow under year-over-year where you get the rest of the costs that you reduced in the prior year. So we have a little bit of a tailwind from that. We're taking those benefits and we're investing in growth. We're investing in things like marketing programs. We're investing in the platform. So everything that we're doing at this point is reorienting our spend towards the areas of the business that we think will grow the fastest. When you think about what's possible on the other side of a GK, there's really two big components. One is the trap costs that are in the business. We believe that by the end of the fourth quarter, we can get those out of our run rate, assuming we can get to a satisfactory transaction between now and then. And then as you simplify the business, it gives us the ability to refine the rest of the cost structure over time because it's just a simpler business to run.

Q: I realize we're not focused as much on GK anymore with you guys looking to exit that business, but while it declined, it does appear that maybe we found some footing at the 28 million revenue run rate level. I guess, is that a fair assumption? And again, just to the extent that you guys can talk on how GK tracked relative to expectations, we'd just love to get a sense of whether or not that business has stabilized.

A: So I think, as you know, we're giving guidance on TDS. With respect to the historicals, I think we would have liked to have seen a little bit more progress in the fourth quarter. One of the challenges for that business, though, is the process itself. And that process, along with 20% of our business being in the Middle East, the combination of those two things, you know, put some pretty intense pressure on the business. Now, having said that, I think the team did a good job of absorbing those fundamental challenges. So thanks for the observation. For sure, I think they'll appreciate that observation. I think that the business has the ability to grow. I think if we had more time and this was on the same pace of performance as TDS, we'd have a demonstrable reason to keep the company or keep the business in the company because we do like that learning modality. But I think we've also concluded that from a learning modalities perspective, we can partner and get that piece, and including GK being a partner on the other side of what happens. If I drill down into the individual pieces of GK, the EMEA business is really starting to look like a good performer. We're very excited about that. in the Middle East, notwithstanding what's going on in the world, we're seeing some solid progress there. In North America, that's the place where we have a bit of work to do to repair the business.

Q: Shifting back to the core TDS side, you touched on the DRR, slight downtick sequentially, down year over year. not an area where you guys expect to live forever and there's a path upwards ron do you feel you guys have the appropriate product set the appropriate go to market that we can see drr return to that you know 105 levels again maybe not this year but down the line and And then for you, John, I guess, how should we think about that trajectory? Again, not a specific quantification of what that number could be, but should we assume that the path forward will hopefully be at least a little bit of an upward trajectory?

A: Yes. As John pointed out in his prepared remarks, there was a headwind from the prior year comparison that was there, and then there was some of the headwinds that happened as part of the year that we had pointed out as part of that overall journey. When I look forward, when you combine that, and I look forward to where we can go, absolutely, I do see us have the ability to recover to those historical patterns that we were operating in as I look ahead. So to me, Having, as we layer more the bricks down in this big foundation that we poured last year, those pieces will just continue to build our story. And that should directly tie to DRR from my perspective with these customers, especially as we've shared with you, we've got a good group of customers that are very loyal. We've got a good group of customers that are very engaged and And those 15 customers that are signed up for the, you know, paying customers have signed up for the new platform journey in the very early days here is a real good testament to that opportunity to improve that DRR as we go on that journey as the first, you know, green shoot, let's call it, Ken.

Q: When you look out at the competition, both old and new, how would you say you guys are stacking up? I guess any concern that Again, some of the prior softness that hopefully we're going to laugh. What's the confidence that that is not driven by competition and is more a dynamic of macros?

A: So from my perspective, as I look at the market in total, customers are going to make some big shifts these next five years. And some of them are going to come sooner than later. When I look at the competition from that perspective, AI will be that catalyst and it'll come in both the agentic workflow. The way people consume content and learning experiences, that will all tie together. At the end of the day, skills management for the companies is going to be the new high order for what customers have to get done. That requires a unified platform system that allows the customer to manage that full lifecycle. And at the learning level, right, not at the system of record down at the at the HRIS level, they can complement each other. But it's really how do I take my company on that learning journey? What I see in the market today is a series of point solutions in the market. And I see some people after our announcement last September scrambling to try to fill in some of the cracks around that on their platform stories because their platforms are narrow. They're point solutions. I'm an LMS. Now I want to be a talent management system. So what I'm seeing right now is the normal repackaging of the marketing and the materials around it in general. I'm actually more comfortable that there's more point solutions that the customers will want to learn to over time migrate into a full skills lifecycle management, which our skills management positioning will be excellent as we progress on that journey as I look at it. So I remain very optimistic that this piece of it is going to Very, very move with great velocity for us. And let's just get these early wins as part of it, as part of the overall journey. So to me, it's a logical aggregation opportunity for us, for the customer, excuse me, to then make that migration from point solutions. My life experience has been point solutions to suites, to platforms as part of the journey. And again, I'm in the learning space. I'm not thinking on anything with HRISs or anything like that. But in that learning space, you have to train humans in AI now. You have to manage humans in AI now. You have to bring all those pieces together. We've got a skills ontology of 20 years around content and learning. We've got the skills ontology of how to do roles assessment. That's how we're winning these deals. That's our data. And that's why I made the comment around our platform, the data that we have along with the platform, along with the content is actually the winning hand, right? Much like the media market. Right. Oh, it's all content. It's all content. No, no, no. It's all platform. No, no, no, no. It's actually both. We have streaming. Right. Putting all three together to me is going to be the key in this market. And that's what we have.