Annual report [Section 13 and 15(d), not S-K Item 405]

Note 20 - Segment Information

v3.25.1
Note 20 - Segment Information
 12 Months Ended
Jan. 31, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

(20) Segment Information

 

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), in determining how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company’s CODM evaluates results using the operating segment structure as the primary basis for which the allocation of resources and financial results are assessed. No operating segments have been aggregated to determine our reportable segments.

 

The Company has organized its business into 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 are highly complementary and give Skillsoft a differentiated value proposition. The CODM primarily uses revenues, segment ("business unit") contribution profits and business unit contribution margin as measures to evaluate financial results and allocation of resources. There are no intercompany revenue transactions reported between the Company’s 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. The Company allocates certain operating expenses to the reportable segments based on the usage and relative contribution provided to the segments.

 

The TDS segment brings a strong foundation of products and customers. TDS enterprise-grade solution serves customers and employees worldwide. TDS Learner is a world-renowned consumer scale and experience learner platform that serves learners worldwide. Together, 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. Additionally, a key attribute to the success of GK continues to be our strong partnerships with the world’s leading technology companies and certification authorities.

 

In the fourth quarter of fiscal 2025, the Company made changes to the components of segment results to increase transparency and improve segment comparability to peers. These changes did not impact the Company's consolidated financial statements. For this new structure we track the non-GAAP financial measures and key performance metrics that we believe are key financial indicators of our success. Non-GAAP measures and key performance metrics are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies comparable to us, many of which present non-GAAP measures and key performance metrics when reporting their results. These measures can be useful in evaluating our performance against our peer companies because we believe the measures provide users with valuable insight into key components of U.S. GAAP financial disclosures. For example, a company with higher U.S. GAAP net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales. Likewise, excluding the effects of interest income and expense moderates the impact of a company’s capital structure on its performance. However, non-GAAP measures and key performance metrics have limitations as analytical tools. Because not all companies use identical calculations, our presentation of non-GAAP financial measures and key performance metrics may not be comparable to other similarly titled measures of other companies. They are not presentations made in accordance with U.S. GAAP, are not measures of financial condition or liquidity, and should not be considered as an alternative to profit or loss for the period determined in accordance with U.S. GAAP or operating cash flows determined in accordance with U.S. GAAP. As a result, these performance measures should not be considered in isolation from, or as a substitute analysis for, results of operations as determined in accordance with U.S. GAAP.

 

Segment ("business unit") contribution profit and business unit contribution margin are internal measures used by our CODM to evaluate and assess the results of our segments. We disclose these non-GAAP segment results because we believe they provide meaningful supplemental information. Business unit contribution profit is defined as business unit revenue, less business unit cost of revenue, business unit content and software development expenses, and business unit product research and management expenses. We have excluded the following items in our determination of business unit cost of revenue, business unit content and software development expenses, and business unit product research and management expenses as our Chief Executive Officer does not include them in the measurement of the performance of the segment:

 

 

●

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.

 

The following reconciles our segment measures of performance to the GAAP measures presented in the consolidated statements of operations, which have been recast for the prior-year periods to reflect, the Company's segments under the new structure, for the periods presented, (in thousands):

 

   

Twelve Months Ended January 31,

  
   

2025

    

2024

    

2023

  

TDS

                        

Revenues

   $ 405,530     $ 404,850     $ 384,378  

Business unit costs of revenues

     61,183       65,426       63,847  

Business unit content and software development expenses

     52,875       56,551       54,212  

Business unit product research and management expenses

     9,001       7,278       6,160  

Business unit contribution profit

     282,471       275,595       260,159  

GK

                        

Revenues

     125,464       148,387       170,746  

Business unit costs of revenues

     72,593       86,416       86,848  

Business unit content and software development expenses

     2,637       2,752       1,871  

Business unit contribution profit

     50,234       59,219       82,027  

Consolidated

                        

Revenues

     530,994       553,237       555,124  

Business unit costs of revenues

     133,776       151,842       150,695  

Business unit content and software development expenses

     55,512       59,303       56,083  

Business unit product research and management expenses

     9,001       7,278       6,160  

Business unit contribution profit

     332,705       334,814       342,186  

Business unit product research and management expenses

     (9,001 )     (7,278 )     (6,160 )

Excluded cost of revenues and content and software development expenses:

                        

Depreciation

     693       789       1,440  

Long-term incentive compensation expenses

     5,537       7,080       8,069  

System migration

     118       2,174       5,524  

Selling and marketing expenses

     162,879       170,982       173,281  

General and administrative expenses

     92,364       95,896       109,572  

Amortization of intangible assets

     127,216       152,511       170,260  

Impairment of goodwill and intangible assets

     —       202,233       641,362  

Acquisition and integration related costs

     4,247       5,063       30,663  

Restructuring expenses

     18,273       13,978       12,294  

Operating income (loss)

     (69,621 )     (308,614 )     (804,119 )

Other income (expense), net

     677       (1,986 )     4,438  

Fair value adjustment of warrants

     —       4,754       23,158  

Fair value adjustment of interest rate swaps

     1,287       2,756       (1,554 )

Interest income

     3,526       3,557       531  

Interest expense

     (63,516 )     (65,335 )     (53,493 )

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

     (127,647 )     (364,868 )     (831,039 )

Provision for (benefit from) income taxes

     (5,739 )     (16,265 )     (40,973 )

Net income (loss) from continuing operations

     (121,908 )     (348,603 )     (790,066 )

Gain (loss) on sale of business

     —       (682 )     56,619  

Income (loss) from discontinued operations, net of tax

     —       —       8,483  

Net income (loss)

   $ (121,908 )   $ (349,285 )   $ (724,964 )

 

The Company’s 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 the Company’s segment assets as of the periods presented (in thousands):

 

      As of January 31,  
   

2025

    

2024

  

TDS

   $ 1,026,295     $ 1,168,671  

GK

     79,774       104,963  

Total assets

   $ 1,106,069     $ 1,273,634  

 

The following sets forth the Company’s long-lived tangible assets by geographic region as of the periods presented (in thousands):

 

      As of January 31,  
   

2025

    

2024

  

United States

   $ 1,374     $ 3,311  

Rest of world

     1,822       3,328  

Total long-lived tangible assets

   $ 3,196     $ 6,639