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 July 31, 2022

☐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

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 September 6, 2022 was 164,438,599.

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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. 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

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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		Successor
	July 31, 2022		January 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	43,344	$	138,176
Restricted cash		5,300		14,015
Accounts receivable, less reserves of approximately $136 and $125 as of July 31, 2022 and January 31, 2022 respectively		98,522		173,876
Prepaid expenses and other current assets		45,355		37,082
Assets held for sale, current portion		44,079		64,074
Total current assets		236,600		427,223
Property and equipment, net		12,583		11,475
Goodwill		1,032,706		795,811
Intangible assets, net		826,511		793,859
Right of use assets		16,310		17,988
Other assets		11,284		10,780
Assets held for sale, long-term portion		156,043		164,812
Total assets	$	2,292,037	$	2,221,948
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	37,795	$	4,800
Borrowings under accounts receivable facility		35,477		74,629
Accounts payable		22,412		24,159
Accrued compensation		19,710		40,822
Accrued expenses and other current liabilities		48,799		47,757
Lease liabilities		5,036		6,387
Deferred revenue		214,482		259,701
Liabilities held for sale, current portion		74,734		87,467
Total current liabilities		458,445		545,722

Long-term debt		583,975		462,185
Warrant liabilities		11,247		28,199
Fair value of hedge instruments		15,065		—
Deferred tax liabilities		83,474		99,395
Long term lease liabilities		13,505		11,750
Deferred revenue - non-current		1,280		1,248
Other long-term liabilities		11,638		11,125
Liabilities held for sale, long-term portion		2,092		2,426
Total long-term liabilities		722,276		616,328
Commitments and contingencies		—		—
Shareholders’ equity:
Shareholders’ common stock - Class A common shares, $0.0001 par value: 375,000,000 shares authorized and 164,308,000 shares issued and outstanding at July 31, 2022 and 133,258,027 shares issued and outstanding at January 31, 2022		14		11
Additional paid-in capital		1,504,428		1,306,146
Accumulated deficit		(390,371)		(247,229)
Accumulated other comprehensive (loss) income		(2,755)		970
Total shareholders’ equity		1,111,316		1,059,898
Total liabilities and shareholders’ equity	$	2,292,037	$	2,221,948

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

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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	$	140,574	$	75,466	$	34,814
Operating expenses:
Costs of revenues		34,998		22,290		6,949
Content and software development		19,693		6,208		4,510
Selling and marketing		41,848		19,650		10,905
General and administrative		26,367		16,824		4,652
Amortization of intangible assets		45,200		18,493		14,575
Impairment of goodwill and intangible assets		70,475		—		—
Recapitalization and acquisition-related costs		8,452		9,900		4,927
Restructuring		4,323		287		(910)
Total operating expenses		251,356		93,652		45,608
Operating loss		(110,782)		(18,186)		(10,794)
Other income (expense), net		80		(992)		304
Fair value adjustment of warrants		6,846		17,115		800
Fair value adjustment of hedge instruments		(15,065)		—		—
Interest income		10		9		53
Interest expense		(11,470)		(9,265)		(5,354)
Loss before benefit from income taxes		(130,381)		(11,319)		(14,991)
Benefit from income taxes		(3,065)		(1,996)		(464)
Loss from continuing operations		(127,316)		(9,323)		(14,527)
Income (loss) from discontinued operations, net of tax		5,817		(2,531)		2,668
Net loss	$	(121,499)	$	(11,854)	$	(11,859)

Gain (loss) per share:
Class A and B – Basic and Diluted (SLH) - continuing operations		*		*		(3.63)
Class A and B – Basic and Diluted (SLH) - discontinued operations		*		*		0.67
Class A and B – Basic and Diluted (SLH)		*		*		(2.96)
Ordinary – Basic and Diluted (Successor) - continuing operations		(0.78)		(0.07)		*
Ordinary – Basic and Diluted (Successor) - discontinued operations		0.04		(0.02)		*
Ordinary – Basic and Diluted (Successor)		(0.74)		(0.09)		*
Weighted average common share outstanding:
Class A and B – Basic and Diluted (SLH)		*		*		4,000
Ordinary – Basic and Diluted (Successor)		164,089		133,059		*

*Not applicable

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

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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	$	275,413	$	75,466	$	102,494
Operating expenses:
Costs of revenues		73,008		22,290		22,043
Content and software development		36,026		6,208		15,012
Selling and marketing		81,410		19,650		34,401
General and administrative		55,711		16,824		16,471
Amortization of intangible assets		84,758		18,493		46,492
Impairment of goodwill and intangible assets		70,475		—		—
Recapitalization and acquisition-related costs		21,764		9,900		6,641
Restructuring		8,279		287		(576)
Total operating expenses		431,431		93,652		140,484
Operating loss		(156,018)		(18,186)		(37,990)
Other income (expense), net		1,132		(992)		(167)
Fair value adjustment of warrants		16,952		17,115		900
Fair value adjustment of hedge instruments		(15,065)		—		—
Interest income		170		9		60
Interest expense		(23,007)		(9,265)		(16,763)
Loss before benefit from income taxes		(175,836)		(11,319)		(53,960)
Benefit from income taxes		(25,402)		(1,996)		(3,521)
Loss from continuing operations		(150,434)		(9,323)		(50,439)
Income (loss) from discontinued operations, net of tax		7,292		(2,531)		1,175
Net loss	$	(143,142)	$	(11,854)	$	(49,264)

Income (loss) per share:
Class A and B – Basic and Diluted (SLH) - Continuing operations		*		*		(12.61)
Class A and B – Basic and Diluted (SLH) - Discontinued operations		*		*		0.29
Class A and B – Basic and Diluted (SLH)		*		*	$	(12.32)
Ordinary – Basic and Diluted (Successor) - Continuing operations		(0.98)		(0.07)		*
Ordinary – Basic and Diluted (Successor) - Discontinued operations		0.05		(0.02)		*
Ordinary – Basic and Diluted (Successor)	$	(0.93)	$	(0.09)		*
Weighted average common share outstanding:
Class A and B – Basic and Diluted (SLH)		*		*		4,000
Ordinary – Basic and Diluted (Successor)		153,442		133,059		*

*Not applicable

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

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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	$	(121,499)	$	(11,854)	$	(11,859)
Other comprehensive (loss) income — Foreign currency adjustment, net of tax		(1,477)		906		(202)
Comprehensive loss	$	(122,976)	$	(10,948)	$	(12,061)


	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	$	(143,142)	$	(11,854)	$	(49,264)
Other comprehensive (loss) income — Foreign currency adjustment, net of tax		(3,725)		906		(430)
Comprehensive loss	$	(146,867)	$	(10,948)	$	(49,694)

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

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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))	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

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

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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)	133,258,027	$	11	$	1,306,146	$	(247,229)	$	970	$	1,059,898
Share-based compensation	—		—		6,898		—		—		6,898
Common stock issued	179,167		—		—		—		—		—
Shares repurchased for tax withholding upon vesting of restricted stock-based awards	(51,316)		—		(309)		—		—		(309)
Common stock issued in conjunction with Codecademy acquisition	30,374,427		3		182,547		—		—		182,550
Fair value adjustment for equity awards attributed to Codecademy acquisition	—		—		538		—		—		538
Translation adjustment	—		—		—		—		(2,248)		(2,248)
Net loss	—		—		—		(21,643)		—		(21,643)
Balance April 30, 2022 (Successor)	163,760,305		14		1,495,820		(268,872)		(1,278)		1,225,684
Share-based compensation	—		—		10,017		—		—		10,017
Common stock issued	828,831		—		—		—		—		—
Shares repurchased for tax withholding upon vesting of restricted stock-based awards	(281,136)		—		(1,409)		—		—		(1,409)
Translation adjustment	—		—		—		—		(1,477)		(1,477)
Net loss	—		—		—		(121,499)		—		(121,499)
Balance July 31, 2022 (Successor)	164,308,000	$	14	$	1,504,428	$	(390,371)	$	(2,755)	$	1,111,316

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

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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	$	(143,142)	$	(11,854)	$	(49,264)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation		16,915		4,817		—
Depreciation and amortization		3,897		1,705		3,572
Amortization of intangible assets		91,103		20,023		50,902
Change in bad debt reserve		113		(170)		(174)
(Benefit from) provision for income taxes – non-cash		(36,535)		1,239		(5,886)
Non-cash interest expense		1,053		434		487
Fair value adjustment to warrants		(16,952)		(17,115)		(900)
Right-of-use asset		1,977		1,445		748
Impairment of goodwill		70,475		—		—
Unrealized loss on derivative instrument		15,065		—		—
Changes in current assets and liabilities, net of effects from acquisitions:
Accounts receivable		82,783		6,963		88,622
Prepaid expenses and other current assets

	PAGE NO.
PART I — FINANCIAL INFORMATION - UNAUDITED
Item 1. Unaudited Financial Statements:	4
Unaudited Condensed Consolidated Balance Sheets as of July 31, 2022 (Successor) and January 31, 2022 (Successor)	4
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended July 31, 2022 (Successor), the Period from June 12, 2021 through July 31, 2021 (Successor), the Period from May 1, 2021 through June 11, 2021 (Predecessor (SLH)), and the Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH))	5
Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended July 31, 2022 (Successor), the Period from June 12, 2021 through July 31, 2021 (Successor), the Period from May 1, 2021 through June 11, 2021 (Predecessor (SLH)), and the Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH))	7
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended July 31, 2022 (Successor), the Period from June 12, 2021 through July 31, 2021 (Successor), the Period from May 1, 2021 through June 11, 2021 (Predecessor (SLH)), and the Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH))	8
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2022 (Successor), the Period from June 12, 2021 through July 31, 2021 (Successor), and the Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH))	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	59
Item 1. Legal Proceedings	59
Item 1A. Risk Factors	59
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3. Defaults Upon Senior Securities	59
Item 4. Mine Safety Disclosures	59
Item 5. Other Information	59
Item 6. Exhibits	60
SIGNATURES	61