Executive Summary
Skillsoft delivered a challenging top-line quarter in QQ2 2025, with total revenue of $132.2 million, down 6% YoY and up 3.5% QoQ, reflecting softness in Global Knowledge (GK) and a steady but constrained Talent Development Solutions (TDS) base. Management reinforced a strategic pivot anchored on Fix the Basics and a dual-business-unit structure designed to drive deeper customer alignment, tighter P&L discipline, and accelerated growth. Adjusted EBITDA rose meaningfully to $28.0 million (21% of revenue) versus $25.0 million (18% of revenue) in the prior year, signaling improved operating leverage even as GAAP net income remained negative (-$39.6 million) and GAAP EPS deteriorated to -$4.84 per share. The company reaffirmed full-year guidance of revenue between $510 million and $525 million and adjusted EBITDA of $105–$110 million, with negative free cash flow of approximately $15 million, reflecting ongoing investments to fix the basics and fund growth initiatives.
Management underscored that the material cost-reduction program (~$45 million) is being reinvested into growth initiatives and that the resource reallocation impact will be most visible in Q3 and beyond as the dual-BU structure and related governance take hold. Management highlighted several early customer wins and product innovations, including AI-enabled learning experiences and strategic partnerships (notably with Microsoft), as indicators of demand for a scaled, multi-modal learning platform. The near-term cash flow profile remains seasonally skewed (FQ2 cash burn with Q4/Q1 typically generating cash), but management is increasing transparency by reporting adjusted free cash flow and expects incremental free cash flow benefits as the transformation programs mature. The combination of a clearer operating framework, disciplined cost management, and AI-enabled product roadmaps provides a constructive albeit cautiously valued long-term growth trajectory for investors to monitor over the next several quarters.
Key Performance Indicators
QoQ: -43.17% | YoY:-23.65%
QoQ: -41.52% | YoY:-21.00%
Key Insights
Revenue and mix: Total revenue $132.223 million, down 6% YoY and up 3.47% QoQ. Talent Development Solutions (TDS) revenue was $102.0 million, down 1% YoY; GK revenue $31.0 million, down 20% YoY (includes ~3% impact from UK apprenticeship exit). DRR (LTM) about 98% in the quarter, vs ~101% in Q2 of last year, driven by public sector budget constraints and SMB transitions. Gross margin: gross profit $99.752 million, gross margin 75.4% (gross profit margin reported 0.754). Operating result: operati...
Financial Highlights
Revenue and mix: Total revenue $132.223 million, down 6% YoY and up 3.47% QoQ. Talent Development Solutions (TDS) revenue was $102.0 million, down 1% YoY; GK revenue $31.0 million, down 20% YoY (includes ~3% impact from UK apprenticeship exit). DRR (LTM) about 98% in the quarter, vs ~101% in Q2 of last year, driven by public sector budget constraints and SMB transitions. Gross margin: gross profit $99.752 million, gross margin 75.4% (gross profit margin reported 0.754). Operating result: operating loss $19.328 million; operating margin -14.62%. EBITDA and margins: EBITDA $6.581 million (EBITDAR ~4.98% of revenue); Adjusted EBITDA $28.0 million, 21% of revenue (vs $25.0 million, 18% in prior year). Net income: GAAP net loss $39.566 million; net loss per share (GAAP) $4.84; Adjusted net loss $20.0 million; Adjusted EPS $-2.40. Cash flow and liquidity: cash from operations -$11.444 million; capex -$4.678 million; free cash flow -$16.118 million for the quarter. For the six months, cash from operations $3.5 million; capex $9.2 million; negative free cash flow of $5.7 million; adjusted free cash flow positive $1.4 million after $7.1 million restructuring charges. Cash and equivalents $122.652 million; total debt $631.943 million; net debt $509.291 million. Balance sheet health: total assets $1.126 billion; total liabilities $0.985 billion; stockholders’ equity $141.422 million. Outlook: Full-year revenue guidance $510–$525 million; adjusted EBITDA guidance $105–$110 million; expected negative free cash flow around $15 million, reflecting restructuring or transformation charges. YoY and QoQ earnings metrics (from incomeMetrics): Revenue YoY -6.35%, QoQ +3.47%; Gross Profit YoY -0.96%, QoQ +61.57%; Operating Income YoY +23.60%, QoQ +9.55%; Net Income YoY -23.65%, QoQ -43.17%; EPS YoY -21.00%, QoQ -41.52%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
132.22M |
-6.35% |
3.47% |
| Gross Profit |
99.75M |
-0.96% |
61.57% |
| Operating Income |
-19.33M |
23.60% |
9.55% |
| Net Income |
-39.57M |
-23.65% |
-43.17% |
| EPS |
-4.84 |
-21.00% |
-41.52% |
Key Financial Ratios
operatingProfitMargin
-14.6%
operatingCashFlowPerShare
$-1.4
freeCashFlowPerShare
$-1.97
Management Commentary
Key takeaways from the QQ2 2025 earnings call: 1) Strategy and governance: The management team reiterated a two-part strategy—Fix the Basics and Invest to Grow—and outlined the transition to a dual business unit (BU) model with two general managers responsible for P&L, aimed at closer customer alignment and improved efficiency. Ron Hovsepian emphasized that this structure “is better for our customers and better for our company,” and noted the timely hires (Chief Transformation Officer, Chief Analytics Officer, Senior VP of Sales) to accelerate execution. 2) Growth opportunities and market stance: Management highlighted opportunities in Talent Development Solutions (TDS) and cross-segment synergies, including blended learning journeys and AI-enabled offerings, with examples such as Codecademy AI hints and KC-for-you AI simulations; management cited a growing market with substantial absolute spend (~$400B) and sub-segment growth in the mid-to-high single digits to low-teens. 3) Financial discipline and near-term impact: Rich Walker stressed disciplined cost management yielding EBITDA margin expansion while reaffirming full-year guidance; the resource reallocation was only beginning in August, with the majority of the impact expected in Q3/Q4 as investments in “fix the basics” and growth drivers scale. 4) Customer momentum and partnerships: The company cited wins with a global professional services firm (700k employees) and renewed trust from a major financial services institution, plus continued AI collaboration with Microsoft to drive large-scale AI transformation in learning. 5) Cash flow outlook: The company acknowledged seasonality in free cash flow and introduced the concept of adjusted free cash flow to capture restructuring costs; management expects the near-term FCF hurdle to ease as the transformation progresses, with the mid to long term target still focused on positive FCF.
Our strategy is centered around two fundamental principles, fix the basics and invest to grow. These strategies have been carefully crafted to strengthen our core operations while strategically channeling resources into areas with significant growth opportunities.
— Ron Hovsepian
We reaffirmed our guidance for the year and we look forward to sharing additional details on each business unit, including contribution margin, at our year-end call as we validate comparability to prior periods for external reporting.
— Richard Walker
Forward Guidance
Management reaffirmed FY2025 guidance: revenue of $510–$525 million and adjusted EBITDA of $105–$110 million, with full-year free cash flow around negative $15 million after accounting for restructuring or one-time transformation charges. The near-term path to positive earnings power hinges on the execution of the dual-BU operating model, stabilization of GK within its slower-growth context, and the acceleration of TDS-driven growth via higher-value learner journeys and enterprise-scale deployments. The company indicated that the bulk of the resource reallocation and associated cost-to-grow investments would be realized in Q3 and Q4, with early directional indicators expected on the next quarterly call. Investors should monitor: (1) progress and comparability of the two BUs (contribution margins and pricing discipline), (2) cadence and returns from restructuring and investments (transformation charges, hiring, analytics-driven performance management), (3) scale and impact of AI-enabled solutions (Microsoft collaboration, Codecademy integration, and new turnkey learner journeys), (4) retention and growth in TDS sub-segments, and (5) working capital and cash conversion given seasonality in bookings. The assumptions for growth beyond the current rebound in TDS and the stabilization of GK remain contingent on customer budgets, macro conditions, and the speed of deployment of the new operating structure.