Skillsoft Corp. Form 10-K Summary
Reporting period: Fiscal year ended January 31, 2022; filed April 15, 2022. Skillsoft provides corporate digital learning, instructor-led and virtual training, and talent-management software through Skillsoft/Percipio, Global Knowledge and SumTotal. It acquired Pluma in June 2021. Codecademy was acquired after year-end, on April 4, 2022.
Financial performance
Because the June 2021 business combination and fresh-start accounting make reported periods difficult to compare, management presents combined fiscal-year figures for 2022 and 2021. These combined results are not GAAP or pro forma results and do not represent actual results absent the transactions.
| Metric | FY2022 combined | FY2021 combined |
|---|---|---|
| Revenue | $567.4 million | $382.6 million |
| Operating loss | $79.9 million | $429.0 million |
| Net income (loss) | $(96.1) million | $2,670.3 million |
| Cash from operating activities | $62.0 million | $12.1 million |
| Cash used in investing activities | $(574.6) million | $(11.4) million |
| Cash from financing activities | $440.3 million | $41.2 million |
- Revenue rose 48.3%. The inclusion of Global Knowledge contributed $132.6 million; the filing also says prior-year GAAP revenue was reduced by about $89 million due to fresh-start accounting. After adjusting for those effects, Content and SumTotal revenue was slightly lower, reflecting weaker prior-year bookings.
- Approximate gross margin was 71.4% versus 75.7% in FY2021, based on reported combined revenue and cost of revenue. Operating loss improved, with operating margin approximately (14.1)% versus (112.1)%; the prior-year result included $332.4 million of impairment charges.
- FY2021 net income was dominated by a $3.3 billion gain on emergence from Chapter 11. FY2022 net loss included a $18.3 million noncash gain from warrant fair-value changes. Interest and other expense was $43.4 million in FY2022, down from $186.4 million in FY2021, primarily following debt reduction in the restructuring and a July 2021 refinancing.
- At January 31, 2022, cash and cash equivalents were $154.7 million, with restricted cash of $14.3 million. Current assets were $427.2 million and current liabilities $545.7 million. Accounts-receivable-facility borrowings were $74.6 million.
- Debt included $478.8 million of scheduled term-loan principal payments ($467.0 million net carrying amount, including current maturities and after discounts and financing costs). The July 2021 facility matures in 2028, bears variable interest, and is secured by substantially all material assets of the loan parties. The company reported covenant compliance at year-end.
Material changes and transactions
- Skillsoft completed its business combination and acquired Global Knowledge on June 11, 2021; it acquired Pluma on June 30, 2021. Acquisition-related costs and acquired-intangible amortization increased expenses.
- The company refinanced its prior first- and second-out loans in July 2021 with a $480 million term-loan facility. It reported $28.2 million of warrant liabilities at year-end; related fair-value movements can materially affect reported earnings without corresponding cash flows.
- Codecademy closed after year-end for approximately $390.3 million: 30.4 million shares and $207.6 million cash. The cash portion was funded partly with $160 million of additional term loans and cash on hand. The transaction adds dilution and integration demands.
- The filing reports FY2022 revenue mix of 65.6% United States, 23.2% Europe, Middle East and Africa, 6.7% other Americas, and 4.5% Asia-Pacific. No customer represented more than 2% of revenue.
Outlook, risks and unusual items
- Management cited digital-learning adoption, workforce upskilling and demand for technical skills as market opportunities, but provided no clear numeric company revenue or earnings guidance in the supplied filing text. It expected to complete migration of Skillport customers to Percipio during FY2023; about 90% of Content segment ARR had contracted for Percipio by year-end.
- Management said it expected available internal and external liquidity to fund operations and anticipated needs for at least 12 months. Cash flow remains affected by pronounced seasonality: fourth-quarter bookings and billings represent about 40% of annual volume, and about 50% for Content.
- Key risks include execution and integration of recent acquisitions, competitive and pricing pressure, customer adoption and renewal, Global Knowledge’s exposure to corporate training budgets and authorized-vendor relationships, cybersecurity and service interruptions, privacy regulation, foreign exchange, and the company’s leverage and restrictive debt covenants.
- Global Knowledge’s in-person training was affected by COVID-19, with more training accessed virtually. The company also warns that economic weakness, inflation, geopolitical disruption and continuing pandemic effects could reduce customer spending or disrupt operations.
- A stockholder lawsuit and six demand letters alleged proxy-statement disclosure deficiencies concerning the Codecademy acquisition. The company had not accrued a liability because the matters did not meet the probable-and-estimable threshold. The filing also describes related-party interests involving major shareholder Prosus and a $2 million transaction fee paid to the Klein Group.
- Fresh-start accounting makes pre- and post-August 2020 results not directly comparable. The auditor issued an unqualified opinion on the financial statements but did not provide an opinion on internal control over financial reporting; management concluded disclosure controls were effective as of January 31, 2022.
Important facts for investors to verify
- Reconcile the combined, non-GAAP comparative results with the audited successor and predecessor statements, and assess the effect of acquisition scope and fresh-start accounting on growth and margins.
- Confirm current debt principal, interest-rate terms, facility availability, covenant headroom and the impact of the Codecademy borrowing on leverage and liquidity.
- Track organic subscription growth, bookings, renewals, Content and SumTotal trends, and progress and costs of the Percipio migration.
- Evaluate Codecademy integration, realized synergies, share issuance and dilution, and any further acquisition-related expenses or financing.
- Monitor operating cash conversion and seasonal working-capital needs, along with the status and potential costs of the Codecademy-related litigation and demand letters.