On Tuesday, Skillsoft Corp. (NYSE:SKIL), a provider of digital learning and talent management solutions, was reiterated at Perform by Skillsoft following the company's second-quarter financial results.
Skillsoft's revenue and adjusted EBITDA for the quarter were reported at $132 million and $28 million, respectively, surpassing the consensus estimates of $131 million in revenue and $24 million in adjusted EBITDA. The company achieved these results despite facing challenges such as tighter budgets and a decrease in upgrade and renewal consistency.
Skillsoft's in-person learning (ILT) execution remained unchanged from the previous quarter, showing a 20% decline. The company's long-term (LTM) retention rate saw a slight decrease, dropping by 1 percentage point quarter-over-quarter to 98%, with the public sector and small-to-medium-sized businesses (SMB) being noted.
The management team at Skillsoft, led by CEO Jeffrey R. Hovsepian, confirmed their financial outlook for fiscal year 2025, expecting revenue to be between $510 million and $525 million and adjusted EBITDA to range from $105 million to $110 million. Hovsepian also pointed out initial positive results from the company's transition to a dual business structure, including some customer win-backs.
The forecast for free cash flow (FCF) in FY25 is projected to be in line with FY24 levels, which are anticipated to be around negative $15 million.
"We continue to take a wait and see approach to FY25 outlook with retention continuing to inch lower sequentially, and FCF objectives largely dependent on the seasonally heavy F4Q," said Oppenheimer.
In other recent news, Skillsoft has also made changes to its board, appointing tech and finance veterans Jim Frankola and Fahd Beg. The company has expanded its stock incentive plan by 1.1 million shares, following a shareholder vote. As part of a strategic retention strategy, Skillsoft has agreed to a $200,000 retention payment to key executive Apratim Purakayastha.
The company has also partnered with the Mark Cuban Foundation and Codecademy to offer free Codecademy Pro subscriptions, aiming to enhance coding and AI education for underserved high school students.
InvestingPro Insights
InvestingPro data and tips provide a deeper look into Skillsoft Corp.'s (NYSE:SKIL) financial health and market performance. With a market capitalization of $122.74 million and a striking gross profit margin of 72.54% in the last twelve months as of Q1 2023, Skillsoft demonstrates a strong ability to generate revenue relative to its costs. However, the company operates with a significant debt burden, which is a critical factor for investors to consider as it may have trouble making interest payments on its debt. These challenges are reflected in a negative P/E ratio of -0.36, indicating investor concerns about profitability.
Despite these challenges, there are positive signs. Skillsoft has seen a strong return over the last three months, with a price total return of 59.74%, showing a notable uptick in investor confidence. Additionally, three analysts have revised their earnings upwards for the upcoming period, suggesting potential optimism about the company's future performance. It's important to note, though, that Skillsoft does not pay a dividend to shareholders, which may be a consideration for income-focused investors.
For those interested in further analysis and additional InvestingPro Tips, Skillsoft has a total of 14 tips available on the platform, which can provide more comprehensive insights into the company's financial nuances and stock performance.
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