Skillsoft Corp.

Hello and welcome to the Skillsoft third quarter 2023 financial results conference call and webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Eric Boyer, Senior Vice President and Head of Investor Relations. Please go ahead, sir.

Good afternoon and welcome to Skillsoft's third quarter fiscal 2023 earnings call. After the market closed, we issued our Q3 earnings press release and posted supplemental materials to the Skillsoft Investor Relations website. Today's call 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 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. GAAP requires accounting periods before and after the merger and de-SPAC on June 11th, 2021 to be separated to 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 pro forma results refer to our results that have been prepared and presented to reflect historical periods as if Skillsoft Global Knowledge and Codecademy had merged on February 1st, 2021. A reconciliation of non-GAAP financial measures included in today's commentary and in the supplement materials 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. After our prepared remarks, Jeff Tarr, CEO, and Rich Walker, 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. Today I'll provide some financial and operational commentary on the quarter and then turn the call over to Rich Walker to cover our financial results in detail. I'm very grateful that Rich has agreed to take on the CFO role. Rich has been involved in Skillsoft since before the company's return to public markets, served as our Chief Strategy and Corporate Development Officer was previously the CFO of two public companies, including IHS, where we work together. Before turning to the business, I also want to thank Gary Ferreira for his contributions to our company and his commitment to a smooth transition. Q3 results were in line with our expectations and we're pleased to reaffirm our full year guidance. Importantly, We successfully stabilized our global knowledge instructor-led training or ILT business, delivering 3% sequential bookings growth. While the segment was down year over year in the quarter due to reduced subsidies by one large partner, we've seen healthy growth in other products within the segment. With a new general manager with deep experience in instructor-led training reporting directly to me, we are cautiously optimistic in the potential to deliver continued progress. We also remain focused on integrating instructor-led training into relevant subscription offerings and continue to believe it can be a meaningful differentiator. Turning to our core Skillsoft content segment, we believe the best way to look at bookings growth is on a trailing 12-month basis. This metric was up 5% in constant currency driven by customer wins and cross-sell and up-sell success with large enterprises. That said, our Skillsoft content business was down in the quarter due primarily to a downgrade by one account. Despite the general macro headwinds, we continue to expect solid growth in Q4, which generally represents approximately half of our subscription bookings. Finally, turning to Codecademy. As a reminder, we acquired the business earlier in the year to establish a leadership position in tech and dev, where skills gaps are most acute. Codecademy is one of the strongest brands in tech and dev learning, and we're still early in realizing the potential of the acquisition. Codecademy bookings were up 6%, and revenue was up 16% in constant currency. We believe our revenue growth and traffic are outpacing other B2C competitors. We also continue to see early traction cross-selling Codecademy to our enterprise customers. It is important to note that we had a slow start to the quarter due to a promotion that depressed short-term results in return for longer-term benefit. and return the business to double digit bookings growth on a constant currency basis in October. We've learned a lot during our first two quarters since acquiring Codecademy that will help us achieve what we believe to be a substantial cross-sell opportunity. We're in discussions with more than 100 enterprise customers regarding Codecademy, and have already cross-sold the offering into some of the world's largest and most recognizable brands in tech, retail, pharma, and professional services. Given the impact of currency exchange rates, wage inflation, and slower economic growth, we've been relentlessly focused on managing our cost structure, and I'm grateful to our team members for making numerous difficult decisions, doing more with less and shrinking our employee base to attrition, reductions in staffing, and a disciplined approach to hiring. We're fortunate to have an important base of operations in India that's helped us manage our labor costs. Managing our costs will be an ongoing focus while continuing to make selective investments in growth. Overall, I'm optimistic about the future. We serve a large and growing market and an important purpose, propelling organizations and people to grow together through transformational learning experiences. Through organic investment and acquisition, we've built a community of more than 80 million learners who we serve with a highly differentiated suite of capabilities. Our content covers leadership, business skills, technology skills, and compliance. We leverage a wide array of modalities, including micro videos, hands-on learning, assessments, coaching and mentoring, instructor-led training, and blockchain-enabled badges. We deliver our content through a flexible AI-driven learning experience platform. And we add additional value to our clients with a team of nearly 200 instructional design professionals and systems integrators. Together, we believe no one is better able to deliver on the complex workforce transformation needs of the world's most demanding and sophisticated customers, including approximately 70% of the Fortune 1000. In Q3, we continue to extend our tech and dev offerings with the release of our Cloud Career Journey, which helps learners achieve proficiency in cloud platforms, such as AWS and Azure, with hands-on practice and instructor-led classes. The strength of our instructor-led training was recognized by AWS as their 2022 Training Partner of the Year in North America. Similar recognition was awarded to Skillsoft by Nutanix, Palo Alto, Red Hat, VMware, and EC Council. We released new code of conduct training to the market, featuring 12 engaging scenarios that help our learners navigate the complexities of highly nuanced situations. and we released the first editions of our newly refreshed business skills courses featuring real world perspectives from our leadership coaches and topics such as problem solving, critical thinking, and wellness. These courses have been well received by learners with NPS in excess of 60 and are designed for the way people learn online. We continue to expand our local language coverage and have recently released an AI powered automation caption capability that makes our content available in a dozen languages. We also continue to expand our assessments offering and add new and compelling courses to our content collection, focused on helping our customers deliver on their most important reskilling, upskilling, and workforce transformation initiatives. As a result of these investments in content and platform, we're seeing strength in our most important learning metrics, At the end of Q3 on a year over year basis, monthly active users are up 23%, completed courses are up 19% and badges issued are also up 19%. We're encouraged by these strong positive trends and believe there are evidence that learners are embracing our unique science-based approach to reskilling and upskilling. Importantly, we're in the early innings of integrating our capabilities create a new, more absorbing and connected way to learn online, and are excited by the potential of what we are creating. We've also largely completed our go-to-market transformation. We've hired key talent, made investments in tools and technology, and realigned our sales force to a coverage model that better enables cross-sell, up-sell, and acquiring new logos. We also redesigned compensation to drive higher levels of performance. This transformation was predictably disruptive, but now better positions us for future growth and value creation. In Q3, some notable wins include two large U.S. government agencies, a large French energy company, a global hospitality leader, and a major media corporation. Finally, we're pleased to have released our first annual impact report entitled Living Our Values, a Responsible Business for a Sustainable Future. This report serves as an important milestone in our ESG journey. During our first five quarters as a public company, we've made much progress transforming Skillsoft into a business that can deliver growth and margin expansion over the long term. We acquired three businesses and divested another, have been executing a complex Salesforce transformation, and made important investments in content and platforms. We've returned our Skillsoft content segment to growth on an LTM basis and stabilized our instructor-led training segment on a sequential basis. Despite a challenging macro environment, we're entering our important Q4 and next year with confidence and look forward to updating you on our progress. And with that, I'll turn it over to Rich.