Quarterly report [Sections 13 or 15(d)]

Note 12 - Segment Information

v3.25.3
Note 12 - Segment Information
 9 Months Ended
Oct. 31, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

(12)    Segment Information

 

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise that earn revenue and incur expenses, for which discrete financial information is available, and whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) in determining how to allocate resources and to assess performance. Skillsoft’s CODM is its Chief Executive Officer. No operating segments have been aggregated to determine our reportable segments.

 

Our CODM organizes Skillsoft's business, manages resource allocation and measures performance through two operating and reportable segments: Talent Development Solutions (“TDS” formerly known as Content & Platform) and Global Knowledge (“GK” formerly known as Instructor-Led Training). These two businesses, described below, are highly complementary and give Skillsoft a differentiated value proposition. The CODM uses segment revenues, segment (“business unit”) contribution profit and business unit contribution margin (business unit contribution profit as a percentage of business unit revenue) to evaluate segment performance and allocate resources. There are no intercompany revenue transactions reported between our reportable segments. When our segments enter into transactions to provide products and services to third parties, revenue is generally allocated to our segments based on relative value. 

 

Business unit contribution profit is determined by subtracting the following from segment revenue: business unit costs of revenues, business unit content and software development expenses, and with respect to our TDS segment, business unit product research and management expenses, which are defined as the costs of revenues, content and software development expenses, and product research and management expenses attributable to each segment, respectively (as described below), but excluding in each case the following items, as our CODM does not consider them in measuring segment performance:

 

  ●

Depreciation expenses – Cost of property and equipment recorded to expense over their respective estimated useful lives on a straight-line basis.
  ●

Long-term incentive compensation expenses – Charges associated with long-term incentive compensation programs, including stock-based compensation, cash awards tied to stock performance, and awards granted in lieu of stock that are intended to be settled in cash.
  ●

System migration costs – Costs of temporary resources needed for the migration of content and customers from our legacy system to a global platform.

 

In determining business unit costs of revenues, business unit content and software development expenses, and business unit product research and management expenses, identifiable costs and expenses are allocated directly to the applicable segment while other costs and expenses, including indirect costs and certain corporate charges, are allocated to our segments based on an analysis of the relative usage or benefit derived therefrom by each segment.

 

Business unit contribution profit excludes the following, as these items are managed and reviewed by the CODM at the company level: selling and marketing expenses; general and administrative expenses; amortization of intangible assets; impairment of goodwill; acquisition and integration-related costs; restructuring expenses; net other income (expense); interest rate swap fair value adjustments; interest income; and interest expense. Although business unit contribution profit and business unit contribution margin are used to evaluate the performance of our segments, we may incur operating costs in one segment that may also benefit the other segment. Operating segment performance is not evaluated based on segment asset or liability information. Our accounting policies for segment reporting are the same as those applied to Skillsoft as a whole.

 

The TDS segment is comprised of a strong foundation of products and customers, with its enterprise-grade solution serving customers and employees worldwide. TDS Learner is a world-renowned consumer scale and experience learner platform that serves learners worldwide. We deliver AI-led, interactive, and multi-modal experiences, a premium technology learning brand, outcome-based learning through benchmarks, enterprise grade security and integrations, and extensive coverage of topics across business, technology, and compliance skills.

 

The GK segment is centered around instructor-led training, or live learning, with face-to-face delivery by experienced trainers, both in-person and virtually. GK is a live learning partner for corporations with a large, but focused, schedule of vendor-authored and certified courses utilizing certified instructors. The quality and consistency of trainers, the access to quality content and interactive labs from the world’s largest vendors, and a market-leading blended proposition with TDS, define GK's uniqueness in the market. Our GK segment has strong partnerships with the world’s leading technology companies and certification authorities.

 

As previously disclosed, in the fourth quarter of fiscal 2025, our CODM made changes to the components used to determine segment results to increase transparency and improve segment comparability to peers. We believe that business unit contribution profit as currently defined is a key financial indicator of the performance of our segments. The changes did not impact our consolidated financial statements.

 

The following reconciles business unit contribution profit to GAAP net income (loss), recast for the prior-year periods to reflect our segments under the new structure, for the periods presented (in thousands):

 

   

Three Months Ended October 31,

    

Nine Months Ended October 31,

  
   

2025

    

2024

    

2025

    

2024

  

TDS

                                

Revenues

   $ 100,798     $ 102,998     $ 301,131     $ 302,725  

Business unit costs of revenues

     17,698       14,763       49,765       46,481  

Business unit content and software development expenses

     13,020       13,149       37,585       39,944  

Business unit product research and management expenses

     2,153       2,429       6,751       6,314  

Business unit contribution profit

     67,927       72,657       207,030       209,986  

GK

                                

Revenues

     28,200       34,227       80,890       94,516  

Business unit costs of revenues

     17,374       19,257       50,032       53,959  

Business unit content and software development expenses

     650       857       2,112       2,095  

Business unit contribution profit

     10,176       14,113       28,746       38,462  

Consolidated

                                

Revenues

     128,998       137,225       382,021       397,241  

Business unit costs of revenues

     35,072       34,020       99,797       100,440  

Business unit content and software development expenses

     13,670       14,006       39,697       42,039  

Business unit product research and management expenses

     2,153       2,429       6,751       6,314  

Business unit contribution profit

     78,103       86,770       235,776       248,448  

Business unit product research and management expenses

     (2,153 )     (2,429 )     (6,751 )     (6,314 )

Excluded from cost of revenues and content and software development expenses:

                                

Depreciation

     162       123       468       491  

Long-term incentive compensation expenses

     164       1,100       2,661       3,602  

System migration

     —       —       —       118  

Selling and marketing expenses

     36,078       39,615       115,278       122,591  

General and administrative expenses

     21,175       21,686       63,594       66,390  

Amortization of intangible assets

     32,068       31,826       95,120       95,197  

Impairment of goodwill

     20,771       —       20,771       —  

Acquisition and integration related costs

     17       931       1,327       3,349  

Restructuring expenses

     4,150       3,095       7,653       15,361  

Operating income (loss)

     (34,329 )     (9,177 )     (64,345 )     (52,337 )

Other income (expense), net

     (1 )     (538 )     (2,508 )     1,261  

Fair value adjustment of interest rate swaps

     (1,478 )     (822 )     (3,606 )     418  

Interest income

     487       924       1,470       2,897  

Interest expense

     (14,757 )     (15,845 )     (44,115 )     (48,538 )

Income (loss) before provision for (benefit from) income taxes

     (50,078 )     (25,458 )     (113,104 )     (96,299 )

Provision for (benefit from) income taxes

     (8,799 )     (1,859 )     (9,988 )     (5,498 )

Net income (loss)

   $ (41,279 )   $ (23,599 )   $ (103,116 )   $ (90,801 )

 

Our segment assets primarily consist of cash and cash equivalents, accounts receivable, prepaid expenses, deferred taxes, property and equipment, goodwill and intangible assets. The following sets forth our segment assets as of the periods presented (in thousands):

 

   

October 31, 2025

    

January 31, 2025

  

TDS

   $ 847,763     $ 1,026,295  

GK

     49,819       79,774  

Total assets

   $ 897,582     $ 1,106,069