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, 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) (Zip Code)

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 December 6, 2022 was 164,445,401.

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SKILLSOFT CORP.

FORM 10-Q

FOR THE QUARTER ENDED October 31, 2022

INDEX

	PAGE NO.
PART I — FINANCIAL INFORMATION - UNAUDITED
Item 1. Unaudited Financial Statements:	4
Unaudited Condensed Consolidated Balance Sheets as of October 31, 2022 (Successor) and January 31, 2022 (Successor)	4
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended October 31, 2022 (Successor), the three months ended October 31, 2021 (Successor), the Period from June 12, 2021 through October 31, 2021 (Successor), 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 nine months ended October 31, 2022 (Successor), the three months ended October 31, 2021 (Successor), the Period from June 12, 2021 through October 31, 2021 (Successor), 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 nine months ended October 31, 2022 (Successor), the three months ended October 31, 2021 (Successor), the Period from June 12, 2021 through October 31, 2021 (Successor), and the Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH))	8
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 31, 2022 (Successor), the Period from June 12, 2021 through October 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	43
Item 3. Quantitative and Qualitative Disclosures about Market Risk	57
Item 4. Controls and Procedures	57
PART II — OTHER INFORMATION	58
Item 1. Legal Proceedings	58
Item 1A. Risk Factors	58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3. Defaults Upon Senior Securities	58
Item 4. Mine Safety Disclosures	59
Item 5. Other Information	59
Item 6. Exhibits	60
SIGNATURES	61

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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;

●

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 results and events in future periods may differ materially from those expressed or implied by the forward-looking statements in this Form 10-Q.

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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.

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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
	October 31, 2022		January 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	174,708	$	138,176
Restricted cash		7,322		14,015
Accounts receivable, less reserves of approximately $393 and $125 as of October 31, 2022 and January 31, 2022 respectively		102,440		173,876
Prepaid expenses and other current assets		38,027		37,082
Current assets associated with discontinued operations		—		64,074
Total current assets		322,497		427,223
Property and equipment, net		10,657		11,475
Goodwill		462,080		795,811
Intangible assets, net		769,680		793,859
Right of use assets		14,046		17,988
Fair value of hedge instruments		5,249		—
Other assets		11,192		10,780
Non-current assets associated with discontinued operations		—		164,812
Total assets	$	1,595,401	$	2,221,948
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	6,404	$	4,800
Borrowings under accounts receivable facility		41,461		74,629
Accounts payable		20,950		24,159
Accrued compensation		18,858		40,822
Accrued expenses and other current liabilities		31,578		47,757
Lease liabilities		4,271		6,387
Deferred revenue		197,907		259,701
Current liabilities associated with discontinued operations		8,000		87,467
Total current liabilities		329,429		545,722

Long-term debt		582,870		462,185
Warrant liabilities		2,119		28,199
Deferred tax liabilities		77,055		99,395
Long term lease liabilities		11,976		11,750
Deferred revenue - non-current		667		1,248
Other long-term liabilities		17,410		11,125
Long-term liabilities associated with discontinued operations		—		2,426
Total long-term liabilities		692,097		616,328
Commitments and contingencies		—		—
Shareholders’ equity:
Shareholders’ common stock - Class A common shares, $0.0001 par value: 375,000,000 shares authorized and 164,316,842 shares issued and outstanding at October 31, 2022 and 133,258,027 shares issued and outstanding at January 31, 2022		14		11
Additional paid-in capital		1,511,940		1,306,146
Accumulated deficit		(918,714)		(247,229)
Treasury stock at cost, 645,428 shares at October 31, 2022		(1,433)		—
Accumulated other comprehensive (loss) income		(17,932)		970
Total shareholders’ equity		573,875		1,059,898
Total liabilities and shareholders’ equity	$	1,595,401	$	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)


	Successor		Successor
	Three Months		Three Months
	Ended		Ended
	October 31, 2022		October 31, 2021
Revenues:
Total revenues	$	139,390	$	140,153
Operating expenses:
Costs of revenues		36,655		39,052
Content and software development		17,252		10,462
Selling and marketing		44,680		35,046
General and administrative		28,281		27,452
Amortization of intangible assets		43,438		34,406
Impairment of goodwill and intangible assets		570,887		—
Recapitalization and acquisition-related costs		4,889		3,407
Restructuring		2,010		775
Total operating expenses		748,092		150,600
Operating loss		(608,702)		(10,447)
Other income (expense), net		1,601		(661)
Fair value adjustment of warrants		9,128		(36,838)
Fair value adjustment of hedge instruments		20,314		—
Interest income		69		9
Interest expense		(14,556)		(6,997)
Loss before benefit from income taxes		(592,146)		(54,934)
Benefit from income taxes		(8,832)		(6,168)
Loss from continuing operations		(583,314)		(48,766)
Gain on sale of business		53,756		—
Income from discontinued operations, net of tax		1,215		5,911
Net loss	$	(528,343)	$	(42,855)

Gain (loss) per share:
Ordinary – Basic and Diluted (Successor) - continuing operations		(3.54)		(0.37)
Ordinary – Basic and Diluted (Successor) - discontinued operations		0.33		0.04
Ordinary – Basic and Diluted (Successor)		(3.21)		(0.32)
Weighted average common share outstanding:
Ordinary – Basic and Diluted (Successor)		164,368		133,116

*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)
	Nine Months		From		From
	Ended		June 12, 2021 to		February 1, 2021 to
	October 31, 2022		October 31, 2021		June 11, 2021
Revenues:
Total revenues	$	414,803	$	215,620	$	102,494
Operating expenses:
Costs of revenues		109,662		61,342		22,043
Content and software development		53,276		16,679		15,012
Selling and marketing		126,089		54,739		34,401
General and administrative		83,994		44,281		16,471
Amortization of intangible assets		128,196		52,899		46,492
Impairment of goodwill and intangible assets		641,362		—		—
Recapitalization and acquisition-related costs		26,653		13,305		6,641
Restructuring		10,289		1,062		(576)
Total operating expenses		1,179,521		244,307		140,484
Operating loss		(764,718)		(28,687)		(37,990)
Other income (expense), net		2,733		(1,653)		(167)
Fair value adjustment of warrants		26,080		(19,723)		900
Fair value adjustment of hedge instruments		5,249		—		—
Interest income		239		18		60
Interest expense		(37,541)		(16,322)		(16,763)
Loss before benefit from income taxes		(767,958)		(66,367)		(53,960)
Benefit from income taxes		(34,234)		(8,165)		(3,521)
Loss from continuing operations		(733,724)		(58,202)		(50,439)
Gain on sale of business		53,756		—		—
Income from discontinued operations, net of tax		8,483		3,494		1,175
Net loss	$	(671,485)	$	(54,708)	$	(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		(4.67)		(0.44)		*
Ordinary – Basic and Diluted (Successor) - Discontinued operations		0.40		0.03		*
Ordinary – Basic and Diluted (Successor)	$	(4.27)	$	(0.41)		*
Weighted average common share outstanding:
Class A and B – Basic and Diluted (SLH)		*		*		4,000
Ordinary – Basic and Diluted (Successor)		157,137		133,116		*

*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
	Three Months		Three Months
	Ended		Ended
	October 31, 2022		October 31, 2021
Comprehensive loss:
Net loss	$	(528,343)	$	(42,855)
Other comprehensive (loss) income — Foreign currency adjustment, net of tax		(17,287)		(772)
Comprehensive loss	$	(545,630)	$	(43,627)


	Year to Date Results
	Fiscal 2023		Fiscal 2022
	Successor		Successor		Predecessor (SLH)
	Nine Months		From		From
	Ended		June 12, 2021 to		February 1, 2021 to
	October 31, 2022		October 31, 2021		June 11, 2021
Comprehensive loss:
Net loss	$	(671,485)	$	(54,708)	$	(49,264)
Other comprehensive (loss) income — Foreign currency adjustment, net of tax		(21,012)		134		(430)
Comprehensive loss	$	(692,497)	$	(54,574)	$	(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	In			Additional Paid-		Accumulated		Treasury	Comprehensive		Total Shareholders'
	Shares	Treasury	Par Value		In Capital		Deficit		Shares	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
Share-based compensation	—	—		—		4,217		—	—		—		4,217
Common Stock Issued	166,667	—		—		—		—	—				—
Shares repurchased for tax withholding upon vesting of restricted stock-based awards	(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 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	In			Additional Paid-		Accumulated		Treasury	Comprehensive		Shareholders'
	Shares	Treasury	Par Value		In Capital		Deficit		Shares	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
Share-based compensation	—	—		—		8,396		—	—		—		8,396
Common stock issued	1,031,191	—		—		—		—	—		—		—
Shares repurchased for tax withholding upon vesting of restricted stock-based awarded	(376,921)	—		—		(884)		—	—		—		(884)
Repurchase of common stock	—	(645,428)		—		—		—	(1,433)		—		(1,433)
Translation adjustment	—	—		—		—		—	—		(17,287)