UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
1934
For the quarterly period ended
or
1934
For the transition period from ____________ to ____________
Commission File Number:
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
(Address of principal executive offices) |
Tel: (
(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 |
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.
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).
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 ☐ |
| 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
The number of shares of registrant’s common stock outstanding as of September 6, 2022 was
SKILLSOFT CORP.
FORM 10-Q
FOR THE QUARTER ENDED JULY 31, 2022
INDEX
1
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. 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, share repurchases, financial results, the impact of regulatory changes, existing and evolving business strategies and acquisitions and dispositions, demand for our services, competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, and 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. 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, and other recent transactions, including our acquisitions of Pluma and Codecademy, and disposition of SumTotal; |
● | the impact of U.S. and worldwide economic trends, financial market conditions, geopolitical events, natural disasters, climate change, public health crises, the ongoing COVID-19 pandemic (including any variant), political crises, or other catastrophic events on our business, liquidity, financial condition and results of operations; |
● | our ability to attract and retain key employees and qualified technical and sales personnel; |
● | our reliance on third parties to provide us with learning content, subject matter expertise and content productions and the impact on our business if our relationships with these third parties are terminated; |
● | 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, including shifting global privacy, data protection, and cyber and information security laws and regulations, as well as state privacy and data protection laws, such as those in California, Colorado, and Virginia; |
● | a failure to achieve and maintain effective internal control over financial reporting; |
● | 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 implement our share repurchase program successfully; |
● | our ability to successfully defend ourselves in legal proceedings; and |
● | our ability to continue to meet applicable listing standards. |
Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K for our fiscal year ended January 31, 2022 (filed April 18, 2022) and our other filings with the Securities and Exchange Commission. Actual
2
results and events in future periods may differ materially from those expressed or implied by the forward-looking statements in this Form 10-Q.
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 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 do not undertake to 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
PART I – FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS.
SKILLSOFT CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
Successor | Successor | ||||||
| July 31, 2022 |
|
| January 31, 2022 | |||
ASSETS |
|
|
|
| |||
Current assets: |
|
|
|
| |||
Cash and cash equivalents | $ | | $ | | |||
Restricted cash |
| |
| | |||
Accounts receivable, less reserves of approximately $ |
| |
| | |||
Prepaid expenses and other current assets |
| |
| | |||
Assets held for sale, current portion | | | |||||
Total current assets |
| |
| | |||
Property and equipment, net |
| |
| | |||
Goodwill |
| |
| | |||
Intangible assets, net |
| |
| | |||
Right of use assets |
| |
| | |||
Other assets |
| |
| | |||
Assets held for sale, long-term portion | | | |||||
Total assets | $ | | $ | | |||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
| |||
Current liabilities: |
|
|
|
| |||
Current maturities of long-term debt | $ | | $ | | |||
Borrowings under accounts receivable facility |
| |
| | |||
Accounts payable |
| |
| | |||
Accrued compensation |
| |
| | |||
Accrued expenses and other current liabilities |
| |
| | |||
Lease liabilities |
| |
| | |||
Deferred revenue |
| |
| | |||
Liabilities held for sale, current portion | | | |||||
Total current liabilities |
| |
| | |||
Long-term debt |
| |
| | |||
Warrant liabilities |
| |
| | |||
Fair value of hedge instruments | | — | |||||
Deferred tax liabilities |
| |
| | |||
Long term lease liabilities |
| |
| | |||
Deferred revenue - non-current |
| |
| | |||
Other long-term liabilities |
| |
| | |||
Liabilities held for sale, long-term portion | | | |||||
Total long-term liabilities |
| |
| | |||
Commitments and contingencies |
|
| |||||
Shareholders’ equity: |
|
|
|
| |||
Shareholders’ common stock - Class A common shares, $ |
| | | ||||
Additional paid-in capital |
| |
| | |||
Accumulated deficit |
| ( |
| ( | |||
Accumulated other comprehensive (loss) income |
| ( |
| | |||
Total shareholders’ equity |
| |
| | |||
Total liabilities and shareholders’ equity | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SKILLSOFT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Quarter to Date Results | |||||||||
Fiscal 2023 | Fiscal 2022 | |||||||||
Successor | Successor | Predecessor (SLH) | ||||||||
Three Months | From | From | ||||||||
Ended | June 12, 2021 to | May 1, 2021 to | ||||||||
| July 31, 2022 |
| July 31, 2021 | June 11, 2021 | ||||||
Revenues: |
|
|
|
| ||||||
Total revenues | $ | | $ | | $ | | ||||
Operating expenses: |
| |||||||||
Costs of revenues |
| | | | ||||||
Content and software development |
| | | | ||||||
Selling and marketing |
| | | | ||||||
General and administrative |
| | | | ||||||
Amortization of intangible assets |
| | | | ||||||
Impairment of goodwill and intangible assets | | — | — | |||||||
Recapitalization and acquisition-related costs | | | | |||||||
Restructuring | | | ( | |||||||
Total operating expenses | | | | |||||||
Operating loss | ( | ( | ( | |||||||
Other income (expense), net | | ( | | |||||||
Fair value adjustment of warrants | | | | |||||||
Fair value adjustment of hedge instruments | ( | — | — | |||||||
Interest income | | | | |||||||
Interest expense | ( | ( | ( | |||||||
Loss before benefit from income taxes |
| ( | ( | ( | ||||||
Benefit from income taxes |
| ( | ( | ( | ||||||
Loss from continuing operations | ( | ( | ( | |||||||
Income (loss) from discontinued operations, net of tax | | ( | | |||||||
Net loss | $ | ( | $ | ( | $ | ( | ||||
Gain (loss) per share: |
|
|
|
| ||||||
Class A and B – Basic and Diluted (SLH) - continuing operations |
| * | * | ( | ||||||
Class A and B – Basic and Diluted (SLH) - discontinued operations |
| * | * | | ||||||
Class A and B – Basic and Diluted (SLH) | * | * | ( | |||||||
Ordinary – Basic and Diluted (Successor) - continuing operations | ( | ( | * | |||||||
Ordinary – Basic and Diluted (Successor) - discontinued operations | | ( | * | |||||||
Ordinary – Basic and Diluted (Successor) | ( | ( | * | |||||||
Weighted average common share outstanding: |
|
|
|
| ||||||
Class A and B – Basic and Diluted (SLH) |
| * | * | | ||||||
Ordinary – Basic and Diluted (Successor) |
| |
| | * |
*Not applicable
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
SKILLSOFT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year to Date Results | ||||||||||
Fiscal 2023 | Fiscal 2022 | |||||||||
Successor | Successor | Predecessor (SLH) | ||||||||
Six Months | From | From | ||||||||
Ended | June 12, 2021 to | February 1, 2021 to | ||||||||
| July 31, 2022 | July 31, 2021 | June 11, 2021 | |||||||
Revenues: |
|
|
| |||||||
Total revenues | $ | | $ | | $ | | ||||
Operating expenses: |
|
| ||||||||
Costs of revenues |
| |
| | | |||||
Content and software development |
| |
| | | |||||
Selling and marketing |
| |
| | | |||||
General and administrative |
| |
| | | |||||
Amortization of intangible assets |
| |
| | | |||||
Impairment of goodwill and intangible assets | | — | — | |||||||
Recapitalization and acquisition-related costs | | | | |||||||
Restructuring | | | ( | |||||||
Total operating expenses | | | | |||||||
Operating loss | ( | ( | ( | |||||||
Other income (expense), net | | ( | ( | |||||||
Fair value adjustment of warrants | | | | |||||||
Fair value adjustment of hedge instruments | ( | — | — | |||||||
Interest income | | | | |||||||
Interest expense | ( | ( | ( | |||||||
Loss before benefit from income taxes |
| ( |
| ( | ( | |||||
Benefit from income taxes |
| ( | ( | ( | ||||||
Loss from continuing operations | ( | ( | ( | |||||||
Income (loss) from discontinued operations, net of tax | | ( | | |||||||
Net loss | $ | ( | $ | ( | $ | ( | ||||
Income (loss) per share: |
|
|
|
|
| |||||
Class A and B – Basic and Diluted (SLH) - Continuing operations |
| * |
| * | ( | |||||
Class A and B – Basic and Diluted (SLH) - Discontinued operations | * | * | | |||||||
Class A and B – Basic and Diluted (SLH) |
| * |
| * | ( | |||||
Ordinary – Basic and Diluted (Successor) - Continuing operations | ( | ( | * | |||||||
Ordinary – Basic and Diluted (Successor) - Discontinued operations | | ( | * | |||||||
Ordinary – Basic and Diluted (Successor) | ( | ( | * | |||||||
Weighted average common share outstanding: |
|
|
|
|
| |||||
Class A and B – Basic and Diluted (SLH) |
| * |
| * |
| | ||||
Ordinary – Basic and Diluted (Successor) |
| |
| | * |
*Not applicable
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
SKILLSOFT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
Quarter to Date Results | ||||||||||
Fiscal 2023 | Fiscal 2022 | |||||||||
Successor | Successor | Predecessor (SLH) | ||||||||
Three Months | From | From | ||||||||
Ended | June 12, 2021 to | May 1, 2021 to | ||||||||
| July 31, 2022 |
| July 31, 2021 | June 11, 2021 | ||||||
Comprehensive loss: |
|
|
|
| ||||||
Net loss | $ | ( | $ | ( | $ | ( | ||||
Other comprehensive (loss) income — Foreign currency adjustment, net of tax |
| ( |
| | ( | |||||
Comprehensive loss | $ | ( | $ | ( | $ | ( |
Year to Date Results | ||||||||||
Fiscal 2023 | Fiscal 2022 | |||||||||
Successor | Successor | Predecessor (SLH) | ||||||||
Six Months | From | From | ||||||||
Ended | June 12, 2021 to | February 1, 2021 to | ||||||||
| July 31, 2022 | July 31, 2021 | June 11, 2021 | |||||||
Comprehensive loss: |
|
|
|
| ||||||
Net loss | $ | ( | $ | ( | $ | ( | ||||
Other comprehensive (loss) income — Foreign currency adjustment, net of tax |
| ( | | ( | ||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
SKILLSOFT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
|
|
|
|
|
| ||||||||||||
Ordinary Shares | |||||||||||||||||
Accumulated Other | |||||||||||||||||
Number of | Additional Paid- | Accumulated | Comprehensive | Total Shareholders' | |||||||||||||
Shares | Par Value | In Capital | Deficit | Loss | Equity | ||||||||||||
Balance January 31, 2021 (Predecessor (SLH)) |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
Translation adjustment |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balance April 30, 2021 (Predecessor (SLH)) |
| |
| |
| |
| ( |
| ( |
| | |||||
Translation adjustment |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balance June 11, 2021 (Predecessor (SLH)) |
| |
| |
| |
| ( |
| ( |
| | |||||
Balance June 12, 2021 (Successor) |
| |
| |
| |
| ( |
| — |
| | |||||
Issuance of shares, PIPE Investment |
| |
| |
| |
| — |
| — |
| | |||||
Issuance of shares, Skillsoft Merger consideration | |
| |
| |
| — |
| — | | |||||||
Issuance of shares, Global Knowledge acquisition | — |
| — |
| |
| — |
| — | | |||||||
Reclassify Public Warrants to equity | — | — | | — | — | | |||||||||||
Reclassify Private Placement Warrants - CEO to equity | — | — | | — | — | | |||||||||||
Cash payout for fractional shares | — | — | ( | — | — | ( | |||||||||||
Share-based compensation | — |
| — |
| |
| — |
| — | | |||||||
Translation adjustment | — |
| — |
| — |
| — |
| | | |||||||
Net loss | — |
| — |
| — |
| ( |
| — | ( | |||||||
Balance July 31, 2021 (Successor) |
| |
| $ | |
| $ | |
| $ | ( |
| $ | |
| $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
SKILLSOFT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
Ordinary Shares | |||||||||||||||||
Accumulated Other | Total | ||||||||||||||||
Number of | Additional Paid- | Accumulated | Comprehensive | Shareholders' | |||||||||||||
Shares | Par Value | In Capital | Deficit | Income | Equity | ||||||||||||
Balance January 31, 2022 (Successor) |
| | $ | | $ | | $ | ( | $ | |
| $ | | ||||
Share-based compensation | — | — | | — | — | | |||||||||||
Common stock issued | | — | — | — | — | — | |||||||||||
Shares repurchased for tax withholding upon vesting of restricted stock-based awards | ( | — | ( | — | — | ( | |||||||||||
Common stock issued in conjunction with Codecademy acquisition | | | | — | — | | |||||||||||
Fair value adjustment for equity awards attributed to Codecademy acquisition | — | — | | — | — | | |||||||||||
Translation adjustment |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balance April 30, 2022 (Successor) |
| |
| | | ( | ( |
| | ||||||||
Share-based compensation |
| — |
| — |
| |
| — |
| — |
| | |||||
Common stock issued |
| |
| — |
| — |
| — |
| — |
| — | |||||
Shares repurchased for tax withholding upon vesting of restricted stock-based awards |
| ( |
| — | ( | — | — |
| ( | ||||||||
Translation adjustment |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balance July 31, 2022 (Successor) | | $ | | $ | | $ | ( | $ | ( | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
SKILLSOFT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
| Fiscal 2023 | Fiscal 2022 | |||||||||
Successor | Successor | Predecessor (SLH) | |||||||||
Six Months | From | From | |||||||||
Ended | June 12, 2021 to | February 1, 2021 to | |||||||||
July 31, 2022 | July 31, 2021 | June 11, 2021 | |||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | $ | ( | |||||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
| ||||||||
Share-based compensation |
| | |
| — | ||||||
Depreciation and amortization | | | | ||||||||
Amortization of intangible assets | | | | ||||||||
Change in bad debt reserve | | ( | ( | ||||||||
(Benefit from) provision for income taxes – non-cash | ( | | ( | ||||||||
Non-cash interest expense | | | | ||||||||
Fair value adjustment to warrants | ( | ( | ( | ||||||||
Right-of-use asset | | | | ||||||||
Impairment of goodwill | | — | — | ||||||||
Unrealized loss on derivative instrument | | — | — | ||||||||
Changes in current assets and liabilities, net of effects from acquisitions: | |||||||||||
Accounts receivable |
| | |
| | ||||||
Prepaid expenses and other current assets |
|