Skillsoft Corp.

Ladies and gentlemen, thank you for standing by and welcome to Skillsoft's second quarter fiscal 2022 results conference call. At this time, all participants are in a listen-only mode. After the speakers present, there will be a question and answer session. I would now like to hand the conference over to your first speaker today, Jim Gruskin, Interim Head of Investor Relations. Thank you. Please go ahead.

Good afternoon and welcome to Skillsoft's second quarter fiscal 2022 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me are Skillsoft CEO Jeff Tarr and interim CFO Ryan Murray. Today's call will contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition, and our guidance for fiscal 2022. They can be identified by words such as expect, anticipate, intend, plan, believe, seek, or will. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date. and we do not undertake any duty to update these statements. Statements as to market share, industry data, and our market position are based on data generated internally by the company. While we are not aware of any misstatements regarding market position or industry data discussed on today's call, our estimates involve risks and uncertainties and are subject to change based on various factors. Forward-looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks described in today's press release, our quarterly report on Form 10-Q for the three months ended July 31st, 2021, to be filed with the Securities and Exchange Commission, and our other periodic filings with the SEC. During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Now a few comments on the required GAAP presentation of Skillsoft's financial statements following the merger and DSPAC on June 11th. GAAP requires accounting periods before and after June 11th to be separated into predecessor and successor periods. to reflect the change in ownership and lack of comparability between periods due to different ownership and investment bases. In addition, global knowledge activity is only reflected in the GAAP financial statements after June 11th. References on this call to combined GAAP results reflect a combination of the predecessor period before June 11th that excludes global knowledge with the successor period after June 11th. For all non-GAAP measures in the supplemental materials, filed with the SEC today, and in today's commentary, the company is providing normalized results as if Skillsoft and global knowledge had been combined for all periods presented, which we believe is useful to investors to show the trends of the go-forward company. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics, is included in our earnings press release. which has been furnished to the SEC and is also available on our website at www.skillsoft.com. With that, I will turn the call over to Jeff.

Thanks, Jim. And thanks to all who have joined our first earnings call as the new Skillsoft. Our vision is to be the most highly valued provider of learning solutions, preparing the workforce of today with the skills for tomorrow. When we say valuable, we mean to our customers, our learners, our communities, our team members, and our shareholders. Importantly, we believe that the most highly valued provider of learning solutions serving the world's workforce will be built on great technology and will deliver its solutions primarily online. We are proud to operate the largest corporate digital learning business in the world. with more than $600 million in digital learning revenue from more than 5,000 enterprise customers. We are also the most profitable. To be the most valuable, we must also deliver growth. I'm pleased to report that this quarter, we exceeded our expectations and grew bookings by 18% with strong performance in all three of our business segments. The Skillsoft content segment, which includes our Percipio learning experience platform, was up 9%. Global knowledge was up 30%. These segments on a combined basis were up 19%, and our sum total segment was up 15%. Each part of the business also delivered major blue-chip customer wins during the quarter. In addition to our strong bookings growth, We achieved a number of key milestones this quarter. We began trading on the New York Stock Exchange. We established a healthy balance sheet with the benefit of a strategic investment from Process, one of the world's largest technology investors. We refined and reduced our debt, eliminating $25 million in annual cash interest expense. We appointed a world-class board of directors, with decades of relevant experience from the highest levels of industry, academia, and government. We seeded a new management team that is already executing well against our targets and announced a new CFO and SVP of investor relations who will be joining us soon. And we completed the acquisition of Pluma, adding a fast-growing digital coaching platform to our portfolio. Notably, We accomplished all of this while significantly advancing our integration with global knowledge. This speaks to the dedication of our team members and to what we can accomplish as the new Skillsoft. For those who are new to Skillsoft, I'd like to provide a brief overview of the market opportunity and the company and share our growth strategy. I'll then hand it over to Ryan to walk you through the numbers in greater detail. And I'll close with an update on our guidance before we open the call for questions. We believe the new Skillsoft is the global leader in corporate digital learning. We serve an estimated $28 billion total addressable market growing at approximately 10% annually. The growth is being driven by an increasing skills gap and the transition from a classroom-first approach to corporate learning to a digital-first approach. that has been accelerated by COVID and work from home. According to the OECD, technology will radically transform 1.1 billion jobs by 2030. According to McKinsey, 87% of companies worldwide either currently have skills gaps or believe they will within the next few years. And core skills are changing at an unprecedented pace. Reskilling, the war for talent, and the great resignation have all become C-suite topics. With approximately 70% of the Fortune 1000 as our customers, we believe Skillsoft is ideally positioned to prepare today's workforce for the jobs of tomorrow. Not only is Skillsoft the largest provider of digital learning solutions to enterprise customers, But we are also the only player that operates at scale in the three largest categories of corporate digital learning. Leadership and business skills, tech and dev, and compliance. We are number one or number two in each of these categories, which collectively represent approximately 80% of the addressable market. And we're number one in corporate digital learning revenue overall. By playing in all three categories, we are uniquely positioned as a one-stop shop for a wide range of corporate digital learning needs. Importantly, the breadth of our offerings drives higher dollar retention rates. We find that when a customer buys all three categories, we get a 21 percentage point lift in retention compared to when they buy one. Currently, 45% of our annual recurring revenue or ARR comes from customers that buy all three products. And as we cross-sell to the remaining 55% and add new offerings like Global Knowledge and Pluma, we expect to drive both new revenue growth and higher retention rates. We deliver our proprietary and third-party content through two modern best-in-class SaaS software platforms. Percipio, a leading learning experience platform, or LXP, and SumTotal, a leading learning management system, or LMS. Percipio is an advanced, immersive, AI-driven, SaaS-based LXP. SumTotal is focused on meeting the learning and talent development needs of highly regulated industries, by a SaaS and on-premise deployment. In addition to selling our solutions to approximately 70% of the Fortune 1000, we serve governments and small businesses, all through a roughly 600-person go-to-market organization. By virtue of our scale, we reach 45 million learners globally. Our enterprise customer relationships, large number of learners, and go-to-market organization are important competitive advantages and provide a strong foundation for future growth. We also have an incredible opportunity to create value for our shareholders. We're starting with a strong foundation and an attractive SaaS business model with enterprise subscriptions, high operating leverage, low capital intensity, and strong free cash flow conversion. And with investments in content, platform, and go-to-market, we've put the business on an improved growth trajectory. As I mentioned, our vision is to be the most highly valued provider of learning solutions, preparing the workforce of today with the skills for tomorrow. Our strategy to realize this bold vision rests on six key pillars. Content leadership, platform leadership, go-to-market leadership, operational excellence, disciplined M&A, and our culture of leadership and learning. Let me spend a few minutes today on the three key drivers of our organic growth, content leadership, platform leadership, and go-to-market leadership. First, content leadership. Content is an important competitive advantage. Skillsoft is a leading content creator, and this differentiates us in the industry. Our content is designed for the way people learn online, using a micro-learning approach where 140,000 short videos, usually a few minutes in length, are strung together and interspersed with assessments and badges, forming more than 14,000 courses and nearly 80 Aspire learning journeys. We currently offer over 180,000 content assets, and 30% of our catalog consists of our own original content. Our proprietary content is developed using a neuroscience-based approach validated by MIT. It drives 90% of our usage and has been substantially refreshed over the last four years with more than $100 million of investment. And as a result of our global knowledge acquisition, we have substantially strengthened our position in tech and dev, adding the largest catalog of mission-critical authorized content through our partnerships with the world's largest technology companies. We believe no one has prepared more IT professionals for certification than us. This quarter, we launched updated diversity, equity, and inclusion and customer service courses, that collectively generate a net promoter score of 60, underscoring the high quality of our refreshed content. We also closed the acquisition of Pluma, which brings a disruptive and robust personalized executive coaching offering to our customers. Coaching is highly valued by current and future leaders and their employers, and is a powerful tool for both professional development and employee retention. Historically, coaching has only been available to a small number of executives due to its high cost, often tens of thousands of dollars. Pluma has democratized access to this valuable opportunity by offering impactful coaching sessions over an engaging digital platform at a fraction of that cost. Pluma is indicative of the growth-oriented bolt-on acquisitions we seek to complete on a regular basis. Turning to our second pillar, platform leadership. We've been focused on accelerating the migration of customers from the legacy Skillport to our Percipio learning experience platform. As of the end of second quarter, 81% of our ARR base for the Skillsoft content business was generated from customers on Percipio or Percipio dual deployment, up from 62% at the end of Q2 last year. Precipio bookings were up 47% and dual deployment bookings were up 19%, highlighting customer adoption of the platform. We believe we are on track to have migrated 90% of our revenue base by the end of the fiscal year, consistent with our plan. On average, over the last four quarters, the combined dollar retention rate for Precipio and dual deployment customers has exceeded that of the legacy Skillport platform, by 23 percentage points. In the second fiscal quarter, the Skillsoft content dollar retention rate was 99%, and the dollar retention rate on Precipio and dual deployment combined was 103%. We also added several platform features this quarter that further differentiate Precipio in the market in three important ways. We strengthened our tech and dev offering through the launch of Cloud Labs that enhanced experiential learning. Second, we achieved a number of key milestones that will help customers complete their migration to Percipio. We completed the integration with the Cornerstone Learning Management System, allowing for improved content consumption and experience on that platform. We also added nine additional languages to the Percipio platform, bringing the total to 28, which allows us to better serve the learning needs of our global customer base. And third, later this month, we will be launching instructor-led training events from global knowledge within Precipio, allowing us to deliver blended aspire journeys that add depth to the learning experience and strengthen our tech and dev value proposition. Now to our third pillar, go-to-market leadership. Our new Chief Revenue Officer, Eric Stein, is off to a tremendous start. We stood up a new customer acquisition team, staffed with more than 30 professionals and extensive enterprise sales experience. We integrated the global knowledge in Skillsoft tech and dev sales organizations, creating a team of approximately 300 people serving the certification training needs of CTOs, CIOs, CDOs, and their organizations. We also filled a number of key leadership positions in addition to Eric, including a new head of go-to-market operations, a new sales leader for the Americas, and a new sales leader for Canada, a market that is performing well for us and showing signs of considerable growth potential. Notable customer wins in the quarter include Ricoh, Canon, Ingersoll-Rand, Kyocera, and Datacom, among others. Our sum total business also had some big wins when competing head to head against the largest LMS providers in the industry. In short, we have done what we said we would do, and we're just getting started. In the last three months, we have refinanced our debt and established a healthy balance sheet, gained scale in tech and dev with the global knowledge transaction, assembled a world-class team and board with a track record of driving growth and value for shareholders, and strengthened our leadership and business skills offering by adding a powerful digital coaching platform through the Pluma acquisition. Looking ahead, there is more to do as we continue to build on our momentum. With content, we remain focused on completing the integrated offering for Skillsoft and Global Knowledge, and continuing to strengthen our tech and dev business, both organically and through partnerships and M&A. With respect to our platform, we have completed all required technical and process work for our FedRAMP certification and our approach and completion. We are also adding integrations and developing features necessary to transition remaining SkillPort customers to Precipio. Our top go-to-market priority is our Salesforce transformation and achieving our growth targets. Operational excellence at this point relates primarily to achieving our synergy targets. With M&A, we will seek to complete additional acquisitions that are accretive to growth and long-term value. And finally, we are committed to our culture of leadership and learning, built on an inspiring purpose, vision, and values. and will leverage our products to become a role model for learning and development. With our new leadership team in place and recent improvements to content, platform, and go-to-market, we believe we are well-positioned to achieve our vision and create substantial value for our shareholders, customers, learners, and other stakeholders. I'll now turn the call over to Ryan Murray to discuss our financial results in greater detail.