Skillsoft Corp.

Ladies and gentlemen, thank you for standing by and welcome to Skillsoft's fourth quarter fiscal 2022 financial 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. Please note that today's call is being recorded. I would now like to turn the conference over to your first speaker today, Eric Boyer, Head of Investor Relations. Thank you. Please go ahead.

Good afternoon and welcome to Skillsoft's fourth quarter fiscal 2022 earnings call. After the market closed, we issued our Q4 earnings press release and posted supplemental materials to the Skillsoft Investor Relations website. Today's call with... will contain forward-looking statements about the company's business outlook and expectations, including statements concerning financial and business trends, our expected future business and financial performance, financial condition, and our outlook. These forward-looking statements and all statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For discussion of the material risks and other important factors that could affect our actual results, please refer to the risks described in the Safe Harbor discussion found in the company's SEC filings. 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 SkillSource financial statements following the merger and de-SPAC on June 11, 2021. 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 and the supplemental materials, 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. 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 also available on our website at www.skillsoft.com. After our prepared remarks, Jeff Tarr, CEO, and Gary Ferreira, CFO, will be available to take questions. With that, it's my pleasure to turn the call over to Jeff.

Thanks, Eric. Good afternoon. And thank you all for joining us. I am pleased that we exceeded our bookings outlook and delivered another great quarter of strong results. I want to thank our entire team for their tireless efforts during a period of tremendous change as we formed the new Skillsoft and positioned the company to extend our lead in corporate digital learning. On today's call, I'll reflect upon some of our major accomplishments since returning Skillsoft to the public markets, provide financial and operational highlights, discuss our acquisition of Codecademy, and detail our compelling investment thesis. I'll then turn the call over to Gary to provide more financial detail on our financial results and outlook. The new Skillsoft returned to the public markets in June, We started with a business that had a strong foundation but had been experiencing declining revenue due to years of underinvestment because of excess leverage. We moved rapidly to set the company up for success. We recapitalized our balance sheet, assembled a world-class management team and board of directors, and closed three acquisitions. We also made important investments in content, platform, and go-to-market. which are already yielding results. These actions have helped us pivot the company onto a solid revenue growth trajectory. We're encouraged by our progress to date. Now to the financial highlights. We grew bookings 5% for the quarter and 7% for the year at the high end of our recently raised outlook and meaningfully above our original guidance. We returned the company to revenue growth. On our precipio and dual deployment revenue base, we delivered a dollar retention rate of 103 percent for the quarter and 104 percent for the year, up from 101 percent in the year-ago quarter and year. We continue to strengthen our core Skillsoft subscription business, delivering a dollar retention rate of 98 percent for the quarter and 97 percent for the year, up from 94 and 93 percent from the prior year. and finally we met our recently raised adjusted ebitda outlook for the year delivering 36 million dollars in the quarter and 167 million dollars for the year now turning to a few operational highlights within each of our three growth pillars content leadership platform leadership and go-to-market leadership within content We continue to deepen and enrich our product, releasing more than 30,000 content assets and more than 65% increase over prior year, bringing our total library to over 200,000 assets. We doubled the size of our tech and dev offering with new aspire journeys and analytics and dev ops and added nearly 500 new labs and topics including cloud, cybersecurity and data. We pioneered blended offerings that include virtual instructor-led training, self-study learning, real-world application and leadership coaching, delivering nearly 100 journeys that address high-growth, high-demand careers and competencies as informed by the rich analytics generated from the activity of our 51 million learners. We substantially increased our local language coverage, adding more than 700 localized courses. And we expanded our DE&I offering, creating what we believe to be the most comprehensive and compelling curriculum in our industry. Turning to platform, at the end of Q4, 89% of our annual recurring revenue base was on precipio and dual deployment, up from 75% in the year-ago period. And as of today, we are at 90%. We increased the number of learners to 51 million. Shortly after the quarter closed, we received FedRAMP certification in recognition of our cybersecurity processes, which allow us to implement Percipio for existing and new federal government customers. Additionally, Workday, one of the most used learning management systems, launched the capability to integrate with Percipio. This will allow us to better penetrate enterprises that use Workday. In addition to opening up new sales opportunities, we expect both FedRAMP certification and Workday integration will help us advance our migration and drive dollar retention rates for the company meaningfully above 100% in time. Percipio continues to deliver more value to our customers as we integrate a growing number of learning content sources. During the year, we added more content partners to Percipio, including Microsoft Learn, AWS, Skillable, Get Abstract, Udemy, and Good Habits. These partners are a source of additional content and capability for our customers, and in some cases, a new revenue source. We also received strong reviews from industry analysts, such as IDC, Aragon Research, and Fosway Group. recognizing our recent progress and reinforcing our leadership position and meeting the learning needs of the most sophisticated enterprise customers. Finally, turning to go to market. As I indicated, we grew bookings 5% in the quarter and 7% in the year. We added 176 new customers during the fourth quarter and 521 for the year. I'm proud of our many wins across the full range of product offerings, including Q4 wins at companies such as CSG, Moody's, and two of the world's largest technology service companies. I'm also especially proud that we displaced key competitors at one of the nation's largest retailers and at two large banks, adding to a growing number of competitive wins. With these successes, we increased our penetration of the Fortune 1000 to more than 75% at the end of the year from 70% at the start of the year. To further accelerate growth, we began our multi-year go-to-market transformation in fiscal 2022 with a number of important achievements. We recruited new senior leaders from some of the world's leading global software and tech companies. We invested in major alliances and integrated offerings with companies such as Microsoft, AWS, SAP SuccessFactors, and Go1. We aligned our operating model and selling motion to priority segments and geographies, making significant investments in Northern Europe, France, the DACH region, and both South and East Asia. And we redesigned our compensation plans. With the implementation of a fully integrated coverage model, we have shifted to a portfolio selling motion to better serve our customers and drive growth. The most significant strategic move in Q4 was the Codecademy acquisition, which we just closed earlier this week. The major strategic benefits are, first, Code Academy nearly doubles our reach, adding approximately 40 million registered learners to Skillsoft's more than 51 million learners. Together, we will create one of the world's largest communities of learners, totaling more than 90 million across more than 160 countries. Second, we believe the deal will be significantly and immediately accretive to bookings growth, revenue growth, and gross margin. The transaction will create substantial opportunities for cross-selling and upselling. The biggest near-term opportunity will be to cross-sell Codecademy's learning capabilities to our enterprise customers. In time, we will also leverage Codecademy's brand and sophisticated direct to learner digital sales and marketing engine to bring Skillsoft's capabilities to prosumers who we define as professional learners who purchase our services personally to expand their skills, advance their careers, and secure new jobs. Third, Codecademy expands Skillsoft's capabilities in the high-growth tech and dev segment, providing our learners an innovative and effective way to learn 14 programming languages across numerous domains, including web development, game development, mobile data science, cloud, and cybersecurity. Fourth, Codecademy adds to our Percipio platform a new modality with its hands-on experiential approach, which when combined with our micro videos, audio, books, boot camps, live events, assessments, coaching, mentoring, and badges, will contribute to our effort to create a new and more immersive way of learning. And finally, Codecademy brings to Skillsoft a talented and entrepreneurial team led by founder and CEO Zach Sims. Zach has now joined our executive leadership team reporting directly to me and will continue to run Codecademy as well as take on additional responsibilities for our tech and dev product line over time. When combined with our Skillsoft tech and dev offering, global knowledge, and our recently launched assessments offering, we believe we have the best collection of assets in the tech and dev segment of our industry, which will help us accelerate our growth rate. Moving on to some of our fiscal 23 priorities, we will be laser focused on realizing the promise of the Codecademy acquisition. We also expect to advance each of our three growth pillars, content, platform, and go to market. Starting with content, we expect to strengthen our position in all three major categories of corporate learning, including leadership and business skills, compliance, and tech and dev, with a particular focus on the latter given its compelling growth attributes. Look for us to invest in more content across more languages and new modalities while setting new standards and content quality. Turning to platform, our focus will be to further enable Percipio to even more seamlessly blend on-demand video, virtual live training, interactive labs, assessments, coaching and mentoring, and other capabilities while also adding more partnerships to the platform. And within go-to-market leadership, we will continue our transformation and expect to drive higher retention, cross-sell, upsell, and growth in that new business, extending our leadership position within the enterprise market, while also growing and leveraging our newly acquired digital sales channel and access to the tech and dev prosumer. Turning now to our investment thesis. We believe the investment thesis for the new SkillSoft is extremely compelling. First, we operate in a large and growing market as online learning has become an important C-suite priority for CEOs, chief people officers, CTOs, CIOs, and other executives intently focused on addressing skills gaps, labor shortages, and the great resignation. Education and training are increasingly being viewed as a required benefit to attract and retain talent. Our customers view Skillsoft as a leader and valued partner in helping turn these changing dynamics into competitive advantages. We believe these changes to be secular in nature, which gives us confidence that our large market opportunity of approximately $28 billion can grow 10% annually. Second, we benefit from what we believe to be the largest enterprise customer base and sales organization in our industry, serving more than 75% of the Fortune 1000. We also serve governments and small businesses. And with the recent addition of Codecademy, we now serve the prosumer market with a sophisticated digital marketing capability that we previously lacked and will benefit us across all of our segments. By reaching and serving the prosumer market, we will look to increase our brand awareness with this segment and turn even more learners into champions for Skillsoft within their places of employment. We also plan to use our newly acquired digital sales channel to more efficiently serve small and medium-sized businesses. Third, our content leadership is a clear competitive advantage. Skillsoft is a leading content creator, and this differentiates us in the industry. Rather than simply aggregating or repurposing content, we develop content using a science-based approach that is optimized for the way people learn online. And with the benefits of our powerful AI-driven platform, We are organizing our content into immersive learning journeys that meet the needs of both learners and their employers. We are also the only player that operates at scale with leadership positions in the three largest categories in our industry, leadership and business skills, tech and dev, and compliance. We believe this also provides us with a large cross-sell and up-sell opportunity. It should also drive our dollar revenue retention rates higher over time. Fourth, we deliver our content through two best-in-class SaaS software platforms, Percipio, a leading learning experience platform, or LXP, and SubmTotal, a leading learning management system, or LMS. And finally, our shareholders should benefit from an attractive SaaS business model with enterprise subscriptions, high operating leverage, low capital intensity, and strong free cash flow conversion. This strong foundation is being enhanced with a solid operational focus and investments in content platform and go to market, which should further strengthen our industry leading position and continue to drive improving financial results. And with that, I'll now turn the call over to Gary.