Skillsoft Corp.

Ladies and gentlemen, thank you for holding. We will begin momentarily. Please stay on the line. We appreciate your patience. Thank you for holding. We'll begin momentarily. Please stay on the line. We appreciate your patience. Thank you. Thank you. Greetings and welcome to the Skillsoft fourth quarter 2023 financial results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. If anyone should require operator assistance during the conference, press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to our host, Chad Lyne, Head of Investor Relations at Skillsoft. Thank you. You may begin.

Thank you, operator. Good afternoon and thank you for joining us today for Skillsoft's earnings call to discuss our fourth quarter and full year financial results for the fiscal year ended January 31st, 2023. By way of quick introduction for those I have not had the pleasure of speaking with already, my name is Chad Line, SVP of Strategic Finance and Skillsoft's Head of Investor Relations. Participating on today's call are Jeff Tarr, Skillsoft's Chief Executive Officer, and Rich Walker, Skillsoft's Chief Financial Officer. Today after market close, Skillsoft issued a press release announcing its financial results. As a reminder, today's earnings release is available on Skillsoft's investor relations website. Before I hand the call over to Jeff, I want to remind you that 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 current beliefs and expectations as of today, and therefore 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 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 11, 2021 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 basis. In addition, global knowledge activity is only reflected in the GAAP financial statements after June 11, 2021. 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 1, 2021. Unless otherwise noted, All comparisons on this call to prior year results are being made on a pro forma constant currency basis, which represents pro forma fiscal 2023 local currency amounts translated at prior year foreign exchange rates for the respective period. A reconciliation of the non-GAAP financial measures included in today's commentary 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 and Rich Walker will be available to take questions. With that, it's my pleasure to turn the call over to Jeff. Thanks, Chad.

Good afternoon and thank you all for joining us. On today's call, I plan to cover two key areas. First, I'll provide some commentary on our full year business and financial highlights, which are trending well. And then second, I will share some perspective on what we're seeing in the marketplace and our strategic priorities for creating shareholder value. I'll then turn the call over to Rich to cover our financial results in detail. including a discussion of our fiscal 2024 financial outlook. I'm proud of how our team quickly adapted and responded to a dynamic macro environment as we work to grow our Skillsoft content segment and stabilize our transactional ILT business. We ended fiscal 2023 with solid execution, improved operating results, and stronger financial performance. I'm pleased that we delivered in line with the expectations and commitments we shared with you on our last call. And we exited the year with measurable progress throughout the business. Full year bookings were $607 million. Gap revenue was $555 million. Proforma revenue was $563 million. And adjusted EBIT up from continuing operations was $107 million. representing a margin of 19% of GAAP revenue. I'm especially proud that we're one of the most profitable businesses in our sector. Reflecting on our first full year as a newly public company with a new executive leadership team, fiscal 2023 was clearly a foundational and transformative year for Skillsoft. Early in the year, we acquired Codecademy to establish a leading position in technical skills training and divested some total to focus our portfolio on the higher growth enterprise learning market, better positioning our business for the future. One year after completing the Codecademy acquisition, our underlying thesis has not changed. The acquisition has helped us establish a leadership position in tech and dev skilling, and we believe we are taking a share in the sector. We are still early days in fully realizing the expected value of the acquisition as we've taken a methodical approach in order to preserve what has made Codecademy an industry leader. I'm encouraged that we exited the year with good momentum at Codecademy, growing bookings 16% for the full year and 19% in Q4. During the quarter, we had a number of notable large enterprise wins with Codecademy. including one of the world's largest pharmaceutical companies, a leading electronics and defense contractor, a Fortune 50 specialty retailer, and a Fortune 50 healthcare and pharmaceutical company, joining wins from earlier in the year at a global technology leader in hybrid cloud and artificial intelligence, and with other market leaders in the technology, retail, and services sectors. We have a healthy pipeline of opportunity and are excited about the potential for the business to be a larger contributor to growth in the coming year. Turning to our Skillsoft content segment, which is primarily subscription in nature and includes the Codecademy results I just shared, full year bookings grew 5%, up from the 4% we reported last year, and against the backdrop of a vastly tougher macro environment. The growth here was broad-based across our leadership and business, tech and dev, and compliance portfolio. We also had particularly good traction in our coaching business, where full-year bookings more than doubled, driven by strong underlying market demand for coaching and soft skills development, as well as our ongoing efforts to cross-sell this highly competitive offering into our enterprise customer base. Across the Skillsoft segment, we're seeing demonstrable proof points that our strategic focus and growth investments are fostering higher customer satisfaction and improved retention rates. Our dollar retention rate or DRR was approximately 100% for fiscal 2023, up from approximately 97% in the prior fiscal year. And we believe we will continue to improve this important metric and growth driver going forward. Consistent with what we shared on our last two calls, our consolidated results continue to be tempered by our global knowledge instructor-led training or ILT business. ILT bookings were down 16% for fiscal 2023 and were down 13% in Q4, but up sequentially. As a reminder, this year-over-year decline can be attributed primarily to reductions in customer subsidies from the business's two largest technology partners. In order to strengthen the ILT business, we took a number of important steps, including the appointment of a new dedicated general manager with deep and relevant domain expertise, and a realignment of critical resources, which together have brought improved focus, visibility, and stability to the business. Based on our discussions with customers, prospects, and partners, we continue to have conviction that instructor-led training is a valuable learning modality and a source of differentiation as part of our industry-leading blended offering. In that context, we continue to integrate ILT into our subscription offerings and large account sales, while seeking to maintain the relative stability we brought to the business in the second half of last year. Let me now spend some time covering other highlights from the year. our enterprise learning solutions enabled our customers to transform their workforces, helping to prepare organizations for the future of work and unlock the potential in their people. I joined Skillsoft as CEO because of my belief that we could deliver on this ambition by building a market leader with one of the industry's most differentiated and innovative suite of assets and capabilities. Over the past year, through both M&A and organic investment, we have made important strides to unlock this potential. You will recall that we focused our efforts in fiscal 2023 across three key investment areas, content, platform, and go-to-market. And we applied this focus consistently through the lens of delivering on our customers' needs and our purpose to propel people and organizations to grow together through transformative learning experiences. On the content side, we now have more than 500,000 expert-led, skills-building courses in modalities including micro-videos, hands-on learning, coaching and mentoring, and instructor-led training and live boot camps. This robust collection of capability and content is continually refreshed, enhanced, and deepened, ensuring that our more than 85 million learners have access to relevant, localized, effective, and engaging content that delivers measurable outcomes for learners and their employers alike. We believe our content portfolio and our position as a producer of award-winning original content rather than simply a content aggregator allows us to approach the market in a differentiated manner that sets us apart in the eyes of customers. Our robust content library is developed with a science and evidence-based pedagogy embedded in nearly 1200 skills-based learning paths and interlaced with more than 25,000 skills assessments that facilitate an immersive and optimized end-to-end learning journey. In the fourth quarter, we continue to invest in further growing our content portfolio and enhancing its competitive advantage. We launched new business skills courses featuring Skillsoft coaches to extend our blended learning offerings, added to our career journeys with the release of Cloud and Agile, refreshed certification assets in key areas like Cloud and DevOps, added new titles across technology and business topics, launched Aspire learning journeys for DEI leaders, and released a new and engaging global code of conduct program in more than 30 languages. We also recently announced a number of enhancements to the Codecademy product suite. We launched Codecademy Plus, a new subscription product focused on upskilling and continuous career development. And we upgraded features for Codecademy Pro, a product that helps learners gain the necessary skills for entry-level technology careers, including online exams with real-time coding exercises, professional certifications, and career advice. Our content is accessible through Skillsoft Percipio, our industry-leading AI-driven platform that is both customer-centric and learner-focused. Our data shows high user engagement and a robust learner experience are central to customer satisfaction, renewal, and growth. We believe our R&D investments and progress advancing our portfolio and its underlying technology are key enablers to improve retention and growth rates. On the learner experience front, we launched a new Skillsoft Percipio homepage to provide a more contextualized and guided experience. Our customers are promoting and encouraging their employees to utilize our platform for continuous learning, upskilling, and reskilling. While an upgraded learner experience is driving more content consumption with a 37% increase in learning hours on the platform. Learners also want to be able to showcase their achievements and the new skills they've earned through Skillsoft, whether for technical skills such as OWASP, cloud security fundamentals, and API security, or for leadership and development skills around communication, trust building, and DEI in the workplace. In the past year, learners have earned nearly 16 million Skillsoft badges, a 25% increase from prior year. In response to customer demand, we recently enhanced our badges to allow employers to customize and configure badges that are specific and unique to their employer and share them via social media channels, which allows our customers to benefit from a more incentivized, recognized, and appreciated workforce while building and promoting their employer brand. Localization and the ability to serve learners in their native language has also been a key focus of ours as we serve customers in more than 150 countries worldwide. We recently enhanced our capability here by automating closed caption translation into an additional 23 languages, strengthening our language offering to be one of the most comprehensive in the market. In March of last year, Skillsoft Precipio became the first e-learning platform to receive FedRAMP authorization. underscoring the security of the platform and positioning us to deploy it to serve the learning needs of U.S. federal government agencies. More recently, we achieved FedRAMP authorization for our coaching offering integrated within Skillsoft Percipio, allowing federal agencies to now address critical skills gaps and challenges through digital coaching engagements with our expert ICF accredited coaches. Another area of focus is generative AI. Importantly, this focus is by no means new to us. Across both content and platform, AI is part of our DNA, and we have many generative AI and chat GPT initiatives underway that we look forward to sharing with you in the coming months. Given it is a topic of interest and front and center for everyone, I want to share some context about how we're leveraging AI across our business to facilitate transformative learning experiences and compelling outcomes. In one example on the content side, we utilized a GPT-3 model to analyze the transcripts and generate brief and accurate descriptions for more than 40,000 videos in our library. thereby improving the searchability of this content and increasing the relevance of search results. As you can imagine, without AI, this would be a time and labor intensive undertaking. By leveraging GPT-3, we were able to do this in effect with the push of a button. From a learner perspective, we have long had a large foundation of AI content in our library, including areas such as deep learning, machine learning, and natural language processing. More recently, we've begun to add courses in generative AI and GPT with much more to come. We effectively see this as a new fifth pillar in our tech and dev learning business, alongside cloud, cyber programming, and data science, and a potentially important source of growth in the future. On the platform side, We are proud to be at the forefront of providing AI-driven transformative learning experiences through Skillsoft Precipio. In the past month, we were recognized for these efforts by Business Intelligence Group's annual 2023 Artificial Intelligence Excellence Awards, which recognizes organizations, products, and people who bring AI to life and apply it to solve real-world problems. Our platform uses collaborative filtering and feedforward AI models to personalize learning for each user based on their profile, search behavior, learning activity, skills assessment, and role. It also leverages AI to improve search relevance and content discovery using AI models such as Google's BERT, Meta's Distil-Roberta, and GPT-3. We have much in our product line that utilizes this important technology for the benefit of customers, learners, and ultimately our shareholders. And since Skillsoft owns both our content and our industry leading AI driven platform, we believe we are uniquely well positioned to be a leader in this area. The investments in our content and platform are foundational to our innovation, growth, and market leadership agenda. In addition to creating a more differentiated product portfolio and learning suite, these investments are also driving higher learner and customer satisfaction, which are translating into stronger DRR performance. We remain committed to continuing to enhance our portfolio and profile in the market and strengthening our position as an innovative, forward-thinking enterprise learning leader that helps customers transform their workforce. In this regard, industry analysts are recognizing Skillsoft as one of the most important and effective corporate learning providers at a time when addressing talent and skills gaps are among the highest priorities for the C-suite. Research in the past few months from analysts at Constellation Research, Fosway Group, Aragon Research, and IDC Research are providing meaningful third-party validation that Skillsoft's immersive end-to-end learning solutions lead in providing critical skills development. All of these analysts have recognized us as a leader in the space. We particularly shine with large enterprise customers who view skill building as a strategic imperative. This is where our extensive content offering, designed for the way people learn online, Our broad portfolio of modalities, including coaching, mentoring, and hands-on learning, our AI-driven platform, and value-added professional services capabilities set us apart from other providers and positions us to win a greater share of the market. Our strength in this area, powered by our organic and inorganic investments over the last 18 months, has enabled us to win important new accounts, including a multi-million dollar deal with a global fintech market leader, a three-year deal with one of Europe's largest telecommunications and technology providers, and another three-year deal with one of the world's largest IT infrastructure and technology integration services companies, the latter two of which were competitive win-backs. Throughout the course of fiscal 2022 and 2023, we executed a multi-year go-to-market transformation, including recruiting proven executives into sales leadership roles, realigning coverage models and territories, restructuring compensation plans, and adding a deeper bench of sales enablement and customer success resources. Although we anticipated these changes could be disruptive in the near term, we undertook this transformation with conviction that once completed, it would support a consultative portfolio-based enterprise selling motion that we believed would accelerate our growth in the longer term. With this foundational work largely behind us, we are now focused on continuing to enable our go-to-market team to better engage in an increasingly consultative sales process. The last topic I want to touch on is the broader market backdrop and our priorities for the year ahead. We are certainly mindful that industry commentary and outlooks have grown more cautious as of late. We exited fiscal 2023 with healthy demand gen activity and a pipeline that has grown nicely year over year. Sitting here now two months into the new fiscal year, we feel good about the momentum in our business and the year ahead. Thematically, The original strategy we laid out for investors at the time of our IPO remains true and relevant to build a leader in enterprise learning through strength in platform, content, and go-to-market. Our strategic priorities are an extension of this strategy to lead in enterprise workforce transformation, win in tech and dev, strengthen our operational foundation, and build a culture of leadership and learning. From an investor lens, I believe our investment thesis continues to be highly compelling. Underpinned by a large and growing market with structural tailwinds. An enterprise customer base with room for more growth and penetration. A valuable collection of assets and best of breed capabilities across content platform and various modalities. and a scalable, capitalized, SaaS-based recurring revenue business model that we believe leads the market and profitability. Our entire team is committed to execution on the things that are within our control, and we remain devoted to delivering profitable growth and creating shareholder value. With that, I'll now turn the call over to Rich to cover our financial results, and then I'll be back with some brief closing comments.