Executive Summary
Skillsoft reported Q3 FY2025 revenue of $137.2 million, down 1% year over year, as the company continues to execute a multi-quarter transformation aimed at stabilizing and reaccelarating growth. Talent Development Solutions (TDS) grew 2% YoY to $103 million, while Global Knowledge (GK) declined ~10% YoY to $34 million, consistent with the ongoing GK restructuring and regional go-to-market refresh. Despite a softer top line, the company delivered positive free cash flow of $4 million in the quarter and expanded gross margins to roughly 75%, with adjusted EBITDA of $32 million (about 23% of revenue), marking margin resilience amid a leaner cost base. Management tightened FY2025 guidance to revenue of $520–$530 million and reaffirmed adjusted EBITDA guidance of $105–$110 million, guiding toward breakeven or modestly positive free cash flow for the full year. The quarter featured meaningful transformation milestones, including the new two-GM organization, AI-enabled product enhancements (AI Coaching Assistant, AI learning assistants for Percipio and Codecademy), and GK regionalization that yielded stabilizing revenue signals and go-to-market improvements.
Management emphasized the two-pronged transformation framework: fix the basics to improve execution and invest to grow to achieve above-market growth in the coming years. The quarter also highlighted two proof points: positive free cash flow and GK go-to-market progress, supporting a constructive ramp toward 2026 profitability and cash generation. Risks remain around GK volatility, coaching/compliance headwinds, and elevated leverage, but the company outlined concrete actions to address these headwinds, including a shift to subscription-based coaching, a new integrated compliance platform, and disciplined working-capital optimization. Given the mix of revenue growth potential from AI-enabled learning and the ongoing restructuring cadence, Skillsoft presents a selectively constructive long-term growth thesis with near-term profitability and cash-flow stabilization being the principal near-term catalysts.
Key Performance Indicators
Key Insights
Revenue: $137.2m (-1.0% YoY, +3.78% QoQ; YoY decline driven by GK softness and coaching/compliance headwinds)
Gross Profit: $102.9m; gross margin ~75.0%
Operating Income: -$9.18m; operating margin -6.69%
EBITDA: $23.21m; EBITDA margin ~16.9%
Adjusted EBITDA: $32.0m; margin 23% of revenue (+$2.0m YoY, 150 bps improvement)
Net Income: -$23.60m; net margin -17.2%
EPS (GAAP): -$2.86; diluted EPS -$2.86; shares ~8.24m
Adjusted Net Income: -$15.0m; adjusted EPS -$1.82
Free Cash Flow (FCF) Q3: +$4.07m;...
Financial Highlights
Revenue: $137.2m (-1.0% YoY, +3.78% QoQ; YoY decline driven by GK softness and coaching/compliance headwinds)
Gross Profit: $102.9m; gross margin ~75.0%
Operating Income: -$9.18m; operating margin -6.69%
EBITDA: $23.21m; EBITDA margin ~16.9%
Adjusted EBITDA: $32.0m; margin 23% of revenue (+$2.0m YoY, 150 bps improvement)
Net Income: -$23.60m; net margin -17.2%
EPS (GAAP): -$2.86; diluted EPS -$2.86; shares ~8.24m
Adjusted Net Income: -$15.0m; adjusted EPS -$1.82
Free Cash Flow (FCF) Q3: +$4.07m; nine months FCF: -$1.6m; Adjusted FCF (9M): +$15.6m
Cash & Liquidity: Cash and cash equivalents ~$102.0m; total debt ~$599.7m; net debt ~$501.7m; cash flow from operations (9M) ~$12.2m
Balance Sheet: Total assets ~$1.053b; goodwill ~$317.1m; intangible assets ~$456.7m; total current liabilities ~$294.0m; long-term debt ~$581.2m; current ratio ~0.89; debt-to-capitalization ~0.83; price-to-sales ~0.92; EV/EBITDA ~27.0
Guidance: FY2025 revenue guided to $520–$530m; adjusted EBITDA guided to $105–$110m; near breakeven free cash flow for the full year.
LTL vs. peers: GK stabilization remains a key swing factor; AI product advances and regional GTM model are incremental catalysts, but the company remains in a high-leverage, loss-making phase with a long runway to cash-flow-positive profitability.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
137.23M |
-1.25% |
3.78% |
| Gross Profit |
102.91M |
0.35% |
3.17% |
| Operating Income |
-9.18M |
53.82% |
52.52% |
| Net Income |
-23.60M |
14.92% |
40.36% |
| EPS |
-2.86 |
17.10% |
40.91% |
Key Financial Ratios
operatingProfitMargin
-6.69%
operatingCashFlowPerShare
$1.06
freeCashFlowPerShare
$0.49
Management Commentary
- Strategy and transformation progress: Ron Hovsepian emphasized the two-pronged plan—fix the basics and invest to grow—and highlighted progress such as the new two-GM organization, faster decision-making near customers, and early favorable signals from resource reallocation. He cited two major milestones: “driving at least $45 million in annualized expense reductions this fiscal year” and “returning to top line growth and continued margin expansion in fiscal year 2026.”
- GK stabilization and product/ GTM enhancements: Rich Walker noted GK revenue declines moderated (GK down 10% YoY, an improvement from the prior two quarters) and emphasized regionalized GTM as a driver of stabilization. He also highlighted product improvements (regional sales focus, partner recognition with CompTIA and EC) and the potential tailwinds from a new compliance platform and subscription coaching model to improve retention.
- Management quotes on cash flow and profitability: The leadership stressed positive free cash flow in Q3 (a notable inflection after two cash-using quarters) and the expectation for continued collections discipline. Rich stated: “we delivered revenue ahead of our expectations, improved profitability, and delivered strong free cash flow performance.” Ron added that the actions taken are translating into a “very strong, financially sound business” and a roadmap for sustained free cash flow generation.
- Strategic pricing and product model shifts: The coaching business is transitioning from seat-licensing to subscription pricing to improve utilization and retention, while the compliance platform upgrade is expected to lift retention and NPS (reported 48% lift in NPS within migrated customers).
- Guidance and risk posture: The company raised full-year revenue guidance and reaffirmed adjusted EBITDA guidance, recognizing GK margin headwinds relative to TDS. Management underscored that near-term free cash flow will be influenced by the mix shift toward GK and the timing of cost-reallocation investments. The Q4 and FY2026 trajectory remains contingent on GK stabilization, continued execution of the pricing transition, and sustainable collections performance.
"We delivered two critical proof points in this quarter. First, we delivered positive free cash flow. Secondly, we demonstrated go-to-market improvement in GK."
— Ron Hovsepian
"I am pleased that we delivered revenue ahead of our expectations, improved profitability, and delivered strong free cash flow performance."
— Richard Walker
Forward Guidance
- Near-term outlook: Skillsoft raised FY2025 revenue guidance to $520–$530 million and reaffirmed adjusted EBITDA of $105–$110 million, with management targeting breakeven or modest positive free cash flow for the full year. The revision reflects stronger than expected Q3 revenue execution, particularly from GK, and the expected benefit from the resource reallocation actions.
- Revenue mix and margin expectations: GK has a slightly lower margin than TDS, so revenue mix improvements could pressure consolidated EBITDA if GK growth remains challenged; however, management expects continued margin expansion through cost discipline and mix optimization as GK stabilization takes hold.
- Growth catalysts: AI-enabled product enhancements (AI Coaching Assistant, Percipio/Codecademy integrations) and regional go-to-market restructuring are intended to drive higher engagement, better retention (especially in coaching and compliance), and larger cross-sell opportunities across TDS and GK.
- Key risk factors to monitor: (1) GK revenue stabilization trajectory and retention per dollar retention rate (DRR) around 98% with potential drift if large deals are deferred; (2) the effectiveness of the coaching subscription model in improving utilization and pricing; (3) working-capital efficiency and AR facility utilization; (4) macro demand for enterprise learning budgets; (5) the pace and cost of restructuring and its impact on cash flow.
- Outlook conclusion: The company appears on a path to more sustainable cash generation and margin expansion, albeit with persistent headwinds from GK volatility and the costs associated with transformation. Investors should monitor GK revenue trends, DRR evolution, gross margin progression, and the timing of free cash flow breakeven for FY2025, plus the trajectory toward positive free cash flow in 2026.