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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the quarterly period ended October 31, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the transition period from ____________ to ____________

Commission File Number: 001-38960

Skillsoft Corp.

(Exact name of registrant as specified in its charter)

Delaware

 

83-4388331

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

300 Innovative Way, Suite 201
Nashua, New Hampshire 03062

(Address of principal executive offices)

Tel: (603) 324-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

Warrants, each whole warrant exercisable for one share of Class A common stock

SKIL

SKIL.WS

New York Stock Exchange

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes        No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   

 

Accelerated filer   

Non-accelerated filer   

 

Smaller reporting company   

Emerging growth company   

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No    

The number of shares of registrant’s common stock outstanding as of December 9, 2021 was: 133,164,526.

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SKILLSOFT CORP.

FORM 10-Q

FOR THE QUARTER ENDED OCTOBER 31, 2021

INDEX

PAGE NO.

PART I — FINANCIAL INFORMATION - UNAUDITED

Item 1. Unaudited Financial Statements:

4

Unaudited Condensed Consolidated Balance Sheets as of October 31, 2021 (Successor) and January 31, 2021 (Predecessor (SLH))

4

Unaudited Condensed Consolidated Statements of Operations for the three months ended October 31, 2021 (Successor), Period from June 12, 2021 through October 31, 2021 (Successor), Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH)), Period from August 28, 2020 through October 31, 2020 (Predecessor (SLH)), Period from August 1, 2020 through August 27, 2020 (Predecessor (PL)) and Period from February 1, 2020 through August 27, 2020 (Predecessor (PL))

5

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended October 31, 2021 (Successor), Period from June 12, 2021 through October 31, 2021 (Successor), Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH)), Period from August 28, 2020 through October 31, 2020 (Predecessor (SLH)), Period from August 1, 2020 through August 27, 2020 (Predecessor (PL)) and Period from February 1, 2020 through August 27, 2020 (Predecessor (PL))

7

Unaudited Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three months ended October 31, 2021 (Successor), Period from June 12, 2021 through July 31, 2021 (Successor), Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH)), Period from August 28, 2020 through October 31, 2020 (Predecessor (SLH)), Period from August 1, 2020 through August 27, 2020 (Predecessor (PL)), and Period from February 1, 2020 through August 27, 2020 (Predecessor (PL))

8

Unaudited Condensed Consolidated Statements of Cash Flows for the Period from June 12, 2021 through October 31, 2021 (Successor), Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH)), Period from August 28, 2020 through October 31, 2020 (Predecessor (SLH)) and Period from February 1, 2020 through August 27, 2020 (Predecessor (PL))

10

Notes to Unaudited Condensed Consolidated Financial Statements

12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

Item 3. Quantitative and Qualitative Disclosures about Market Risk

58

Item 4. Controls and Procedures

58

PART II — OTHER INFORMATION

60

Item 1. Legal Proceedings

60

Item 1A. Risk Factors

60

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

60

Item 3. Defaults Upon Senior Securities

60

Item 4. Mine Safety Disclosures

60

Item 5. Other Information

60

Item 6. Exhibits

61

SIGNATURES

62

1

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CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those laws. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our outlook, our product development and planning, our pipeline, future capital expenditures, financial results, the impact of regulatory changes, existing and evolving business strategies and acquisitions and dispositions, demand for our services and competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, our ability to successfully implement our plans, strategies, objectives, expectations and intentions are forward-looking statements. Also, when we use words such as “may,” “will,” “would,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “forecast,” “seek,” “outlook,” “target,” goal,” “probably,” or similar expressions, we are making forward-looking statements. Such statements are based upon the current beliefs and expectations of Skillsoft’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. All forward-looking disclosure is speculative by its nature.

There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including:

our ability to realize the benefits expected from the business combination between Skillsoft, Churchill Capital Corp. II and Global Knowledge;
the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability;
the impact of the ongoing COVID-19 pandemic (including any variant) on our business, operating results and financial condition;
fluctuations in our future operating results;
our ability to successfully identify, consummate and achieve strategic objectives in connection with our acquisition opportunities and realize the benefits expected from the acquisition;
the demand for, and acceptance of, our products and for cloud-based technology learning solutions in general;
our ability to compete successfully in competitive markets and changes in the competitive environment in our industry and the markets in which we operate;
our ability to market existing products and develop new products;
a failure of our information technology infrastructure or any significant breach of security, including in relation to the migration of our key platforms from our systems to cloud storage;
future regulatory, judicial and legislative changes in our industry;
our ability to comply with laws and regulations applicable to our business;
the impact of natural disasters, public health crises, political crises, or other catastrophic events;
our ability to attract and retain key employees and qualified technical and sales personnel;
fluctuations in foreign currency exchange rates;
our ability to protect or obtain intellectual property rights;
our ability to raise additional capital;
the impact of our indebtedness on our financial position and operating flexibility;
our ability to meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;
our ability to successfully defend ourselves in legal proceedings; and
our ability to continue to meet applicable listing standards.

The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For more information, please see the risk factors included in the Company’s S-1 amendment filed on July 29, 2021, and subsequent filings with the SEC.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a

2

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representation or guarantee by us that our objectives and plans will be achieved. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. Additionally, statements as to market share, industry data and our market position are based on the most currently available data available to us and our estimates regarding market position or other industry data included in this document or otherwise discussed by us involve risks and uncertainties and are subject to change based on various factors, including as set forth above.

Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements unless required by applicable law. With regard to these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.

3

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PART I – FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS.

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

Successor

Predecessor (SLH)

    

October 31, 2021

  

  

January 31, 2021

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

80,671

$

71,479

Restricted cash

 

2,680

 

2,964

Accounts receivable, less reserves of approximately $2,173 and $294 as of October 31, 2021 and January 31, 2021 respectively

 

136,890

 

179,784

Prepaid expenses and other current assets

 

42,066

 

30,326

Total current assets

 

262,307

 

284,553

Property and equipment, net

 

17,253

 

13,780

Goodwill

 

872,291

 

495,004

Intangible assets, net

 

904,797

 

728,633

Right of use assets

 

21,928

 

15,131

Deferred tax asset

 

Other assets

 

10,083

 

8,636

Total assets

$

2,088,659

$

1,545,737

LIABILITIES AND SHAREHOLDER'S EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Current maturities of long-term debt

$

4,800

$

5,200

Borrowings under accounts receivable facility

 

11,080

 

17,022

Accounts payable

 

31,472

 

7,425

Accrued compensation

 

38,681

 

36,375

Accrued expenses and other current liabilities

 

55,772

 

23,125

Lease liabilities

 

7,687

 

4,740

Deferred revenue

 

246,188

 

257,549

Total current liabilities

 

395,680

 

351,436

Long-term debt

 

462,996

 

510,236

Warrant liabilities

 

65,363

 

900

Deferred tax liabilities

 

91,497

 

81,008

Long term lease liabilities

 

15,209

 

13,155

Deferred revenue - non-current

 

1,883

 

3,035

Other long-term liabilities

 

9,699

 

5,998

Total long-term liabilities

 

646,647

 

614,332

Commitments and contingencies

 

 

Shareholders’ equity:

 

  

 

  

(Predecessor SLH) Shareholders’ common stock- Class A and Class B common shares, $0.01 par value: 1,000,000,000 shares authorized (800,000,000 Class A, 200,000,000 Class B) at January 31, 2021; 4,000,000 shares issued and outstanding (3,840,000 Class A, 160,000 Class B) at January 31, 2021

 

40

(Successor) Shareholders’ common stock- Class A common shares, $0.0001 par value: 375,000,000 shares authorized and 133,164,526 shares issued and outstanding at October 31, 2021

 

11

Additional paid-in capital

 

1,301,319

 

674,333

Accumulated deficit

 

(255,132)

 

(93,722)

Accumulated other comprehensive income (loss)

 

134

 

(682)

Total shareholders’ equity

 

1,046,332

 

579,969

Total liabilities and shareholders’ equity

$

2,088,659

$

1,545,737

The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

    

Quarter-to Date Results

Fiscal 2022

Fiscal 2021

Successor

Predecessor (SLH)

Predecessor (PL)

Three Months

From

From

Ended

August 28, 2020

August 1, 2020

    

October 31, 2021

to October 31, 2020

  

  

to August 27, 2020

Revenues:

 

  

  

 

  

Total revenues

$

170,559

$

36,973

 

$

38,687

Operating expenses:

 

  

  

 

  

Costs of revenues

 

48,891

15,882

 

6,329

Content and software development

 

16,437

10,919

 

5,208

Selling and marketing

 

39,938

18,193

 

8,259

General and administrative

 

28,120

10,075

 

5,440

Amortization of intangible assets

 

37,064

15,890

 

4,230

Recapitalization and acquisition-related costs

3,687

8,225

64

Restructuring

777

80

 

38

Total operating expenses

174,914

79,264

 

29,568

Operating (loss) income

(4,355)

(42,291)

 

9,119

Other (expense) income, net

(611)

717

 

(541)

Fair value adjustment of warrants

(36,838)

2,900

 

Interest income

18

9

 

21

Interest expense

(7,510)

(7,919)

 

(1,287)

Reorganization items, net

 

3,339,837

(Loss) income before (benefit from) provision for income taxes

 

(49,296)

(46,584)

 

3,347,149

(Benefit from) provision for income taxes

 

(6,441)

(7,870)

 

78,254

Net (loss) income

(42,855)

(38,714)

 

3,268,895

(Loss) income per share:

 

  

  

 

  

Ordinary – Basic and Diluted (PL)

 

*

*

32,656.29

Class A and B – Basic and Diluted (SLH)

 

*

(9.68)

 

*

Ordinary – Basic and Diluted (Successor)

(0.32)

*

 

*

Weighted average common share outstanding:

 

  

  

 

  

Ordinary – Basic and Diluted (PL)

 

*

*

 

100.1

Class A and B – Basic and Diluted (SLH)

 

*

4,000

 

*

Ordinary – Basic and Diluted (Successor)

 

133,116

*

 

*

*Not applicable

The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

    

Year-to Date Results

Fiscal 2022

Fiscal 2021

Successor

Predecessor (SLH)

Predecessor (SLH)

Predecessor (PL)

From

From

From

From

June 12, 2021 to

February 1, 2021

August 28, 2020

February 1, 2020

    

October 31, 2021

to June 11, 2021

to October 31, 2020

  

  

to August 27, 2020

Revenues:

 

  

  

  

 

  

Total revenues

$

261,572

$

139,636

$

36,973

 

$

273,851

Operating expenses:

 

  

 

  

  

 

  

Costs of revenues

 

76,897

 

35,881

15,882

 

52,160

Content and software development

 

26,316

 

24,084

10,919

 

38,986

Selling and marketing

 

62,171

 

41,940

18,193

 

75,028

General and administrative

 

45,194

 

17,217

10,075

 

37,455

Amortization of intangible assets

 

57,087

 

50,902

15,890

 

34,378

Impairment of intangible assets

 

332,376

Recapitalization and acquisition-related costs

13,682

6,938

8,225

32,099

Restructuring

1,093

(703)

80

 

1,179

Total operating expenses

282,440

176,259

79,264

 

603,661

Operating loss

(20,868)

(36,623)

(42,291)

 

(329,810)

Other (expense) income, net

(1,308)

(493)

717

 

1,268

Fair value adjustment of warrants

(19,723)

900

2,900

 

Interest income

30

64

9

 

105

Interest expense

(17,366)

(16,820)

(7,919)

 

(168,341)

Reorganization items, net

 

3,329,245

(Loss) income before (benefit from) provision for income taxes

 

(59,235)

 

(52,972)

(46,584)

 

2,832,467

(Benefit from) provision for income taxes

 

(4,527)

 

(3,708)

(7,870)

 

68,455

Net (loss) income

(54,708)

(49,264)

(38,714)

 

2,764,012

(Loss) income per share:

 

  

 

  

  

 

  

Ordinary – Basic and Diluted (PL)

 

*

 

*

*

27,612.51

Class A and B – Basic and Diluted (SLH)

 

*

 

(12.32)

(9.68)

 

*

Ordinary – Basic and Diluted (Successor)

(0.41)

*

*

 

*

Weighted average common share outstanding:

 

  

 

  

  

 

  

Ordinary – Basic and Diluted (PL)

 

*

 

*

*

 

100.1

Class A and B – Basic and Diluted (SLH)

 

*

 

4,000

4,000

 

*

Ordinary – Basic and Diluted (Successor)

 

133,096

 

*

*

 

*

*Not applicable

The accompanying notes are an integral part of these consolidated financial statements.

6

Table of Contents

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(IN THOUSANDS)

Quarter-to Date Results

Fiscal 2022

Fiscal 2021

Successor

Predecessor (SLH)

Predecessor (PL)

Three Months

From

From

Ended

August 28, 2020

August 1, 2020

    

October 31, 2021

to October 31, 2020

  

to August 27, 2020

Comprehensive (loss) income:

 

  

  

 

  

Net (loss) income

$

(42,855)

$

(38,714)

$

3,268,895

Other comprehensive (loss) income — Foreign currency adjustment, net of tax

 

(772)

168

 

92

Comprehensive (loss) income

$

(43,627)

$

(38,546)

$

3,268,987

Year-to Date Results

Fiscal 2022

Fiscal 2021

Successor

Predecessor (SLH)

Predecessor (SLH)

Predecessor (PL)

From

From

From

From

June 12, 2021 to

February 1, 2021

August 28, 2020

February 1, 2020

    

October 31, 2021

to June 11, 2021

  

to October 31, 2020

  

to August 27, 2020

Comprehensive (loss) income:

 

  

  

  

 

  

Net (loss) income

$

(54,708)

$

(49,264)

$

(38,714)

$

2,764,012

Other comprehensive income (loss) — Foreign currency adjustment, net of tax

 

134

(430)

168

 

(2,268)

Comprehensive (loss) income

$

(54,574)

$

(49,694)

$

(38,546)

$

2,761,744

The accompanying notes are an integral part of these consolidated financial statements.

7

Table of Contents

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

    

    

    

    

    

    

Ordinary Shares

Accumulated Other

Number of

Additional Paid-

Accumulated

Comprehensive

Total Shareholder's

Shares

Par Value

In Capital

(Deficit) Equity

(Loss) Income

(Deficit) Equity

Balance January 31, 2020 (Predecessor (PL))

 

100,100

 

$

138

 

$

83

 

$

(2,761,499)

 

$

(466)

 

$

(2,761,744)

Translation adjustment

 

 

 

 

 

(629)

 

(629)

Net loss

 

 

 

 

(433,902)

 

 

(433,902)

Balance April 30, 2020 (Predecessor (PL))

 

100,100

 

138

 

83

 

(3,195,401)

 

(1,095)

 

(3,196,275)

Translation adjustment

 

 

 

 

 

(1,731)

 

(1,731)

Net loss

 

 

 

 

(70,981)

 

 

(70,981)

Balance July 31, 2020 (Predecessor (PL))

 

100,100

 

138

 

83

 

(3,266,382)

 

(2,826)

 

(3,268,987)

Translation adjustment

 

 

 

 

 

92

 

92

Net income

 

 

 

 

3,268,895

 

 

3,268,895

Cancellation of Predecessor equity

(100,100)

(138)

(83)

221

Elimination of predecessor accumulated Other Comprehensive Loss

(2,734)

2,734

Issuance of Successor shares

4,000,000

40

666,933

666,973

Balance August 27, 2020 (Predecessor (PL))

 

4,000,000

 

$

40

 

$

666,933

 

$

 

$

 

$

666,973

Balance August 28, 2020 (Predecessor (SLH))

4,000,000

40

666,933

666,973

Impact of Warrant modification

7,400

7,400

Translation adjustment

168

168

Net loss

(38,714)

(38,714)

Balance October 31, 2020 (Predecessor (SLH))

 

4,000,000

 

$

40

 

$

674,333

 

$

(38,714)

 

$

168

 

$

635,827

The accompanying notes are an integral part of these consolidated financial statements.

8

Table of Contents

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

Ordinary Shares

Accumulated Other

Number of

Additional Paid-

Accumulated

Comprehensive

Total Shareholder's

Shares

Par Value

In Capital

(Deficit) Equity

(Loss) Income

(Deficit) Equity

Balance January 31, 2021 (Predecessor (SLH))

 

4,000,000

$

40

$

674,333

$

(93,722)

$

(682)

 

$

579,969

Translation adjustment

 

 

 

 

 

(228)

 

(228)

Net loss

 

 

 

 

(37,405)

 

 

(37,405)

Balance April 30, 2021 (Predecessor (SLH))

 

4,000,000

 

40

674,333

(131,127)

(910)

 

542,336

Translation adjustment

 

 

 

 

 

(202)

 

(202)

Net loss

 

 

 

 

(11,859)

 

 

(11,859)

Balance June 11, 2021 (Predecessor (SLH))

 

4,000,000

 

$

40

$

674,333

$

(142,986)

$

(1,112)

 

$

530,275

Balance June 12, 2021 (Successor)

 

51,559,021

 

3

 

305,447

 

(200,423)

 

 

105,027

Issuance of shares, PIPE Investment

 

53,000,000

 

5

 

608,161

 

 

 

608,166

Issuance of shares, Skillsoft Merger consideration

 

28,500,000

 

3

 

306,372

 

 

 

306,375

Issuance of shares, Global Knowledge acquisition

 

 

 

14,000

 

 

 

14,000

Reclassify Public Warrants to equity

56,120

56,120

Reclassify Private Placement Warrants - CEO to equity

2,800

2,800

Cash payout for fractional shares

(1)

(1)

Share-based compensation

 

 

 

4,817

 

 

 

4,817

Translation adjustment

 

 

 

 

 

906

 

906

Net loss

 

 

 

 

(11,854)

 

 

(11,854)

Balance July 31, 2021 (Successor)

133,059,021

11

1,297,716

(212,277)

906

1,086,356

Share-based compensation

 

 

 

4,217

 

 

 

4,217

Common stock issued

166,667

Shares repurchased for tax withholding upon vesting of restricted stock-based awarded

(61,162)

(614)

(614)

Translation adjustment

 

 

 

 

 

(772)

 

(772)

Net loss

 

 

 

 

(42,855)

 

 

(42,855)

Balance October 31, 2021 (Successor)

 

133,164,526

 

$

11

$

1,301,319

$

(255,132)

$

134

 

$

1,046,332

The accompanying notes are an integral part of these consolidated financial statements.

9