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Skillsoft Corp. (SKIL)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 printed revenue of $124.201M (-3% YoY), adjusted EBITDA of $22.131M (17.8% margin), and free cash flow of $26.164M, while GAAP diluted EPS was $(4.57); management reaffirmed full-year FY2026 guidance for revenue ($530M–$545M) and adjusted EBITDA ($112M–$118M) .
  • TDS posted its third consecutive quarter of growth, up 1% YoY to $99.148M, while GK declined 16% YoY to $25.053M due to softer discretionary spend and a higher reseller mix; segment contribution margins remained strong (TDS 69.1%, GK 34.3%) .
  • Free cash flow strength was driven by collections timing and seasonal working capital patterns; management expects Q2 to be the lowest FCF quarter (cash usage) before achieving FY2026 FCF of $13M–$18M, reiterating positive FCF for the year .
  • Stock reaction catalysts: reaffirmed guidance despite macro/US public sector headwinds, multi-quarter TDS growth, and stronger-than-expected FCF, with back-half weighted growth expected .

What Went Well and What Went Wrong

What Went Well

  • TDS growth and durable unit economics: TDS revenue rose 1% YoY to $99.148M, marking a third straight quarter of growth, with a 69.1% contribution margin; “multi-quarter growth we are seeing in TDS…reinforces our confidence in our ability to achieve top line growth this year” .
  • Margin expansion and disciplined cost execution: Adjusted EBITDA increased to $22.131M (17.8% margin) vs. $18.898M (14.8%) YoY, reflecting lower variable costs and cost reductions; management highlighted “continued improvement in profitability” and AI-driven productivity gains .
  • Free cash flow outperformance: FCF of $26.164M vs. $10.420M YoY, aided by collections/disbursement timing; “we are reaffirming our fiscal 2026 outlook” and remain “on track” to meet full-year FCF expectations .

What Went Wrong

  • GK revenue pressure: GK fell 16% YoY to $25.053M, driven by softer US public sector discretionary spend and mix shift to reseller activity recognized net of fees .
  • GAAP loss widened: Net loss increased to $(38.049)M vs. $(27.636)M YoY; diluted GAAP EPS $(4.57) vs. $(3.42) YoY, reflecting macro headwinds and non-cash amortization .
  • Sequential DRR moderation: TDS LTM dollar retention rate was 99% vs. 100% last quarter (and 99% a year ago), reflecting cautious customer spending and elongated decision-making .

Financial Results

Consolidated summary (oldest → newest)

MetricQ3 FY2025Q4 FY2025Q1 FY2026
Revenue ($USD Millions)$137.225 $133.753 $124.201
GAAP Diluted EPS ($)$(2.86) $(3.75) $(4.57)
Adjusted EPS ($)$(1.82) $2.11 $0.30
Adjusted EBITDA ($USD Millions)$31.924 $29.931 $22.131
Adjusted EBITDA Margin (%)23.3% 22.4% 17.8%
Free Cash Flow ($USD Millions)$4.084 $13.221 $26.164

Segment breakdown and unit economics (oldest → newest)

MetricQ3 FY2025Q4 FY2025Q1 FY2026
TDS Revenue ($USD Millions)$102.998 $102.805 $99.148
TDS Contribution Margin (%)—70.5% 69.1%
GK Revenue ($USD Millions)$34.227 $30.948 $25.053
GK Contribution Margin (%)—38.0% 34.3%

KPI

KPIQ3 FY2025Q4 FY2025Q1 FY2026
TDS LTM Dollar Retention Rate (%)99% 100% 99%

YoY context for Q1 FY2026

  • Total Revenue: down 3% YoY .
  • TDS Revenue: up 1% YoY .
  • GK Revenue: down 16% YoY .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP RevenueFY2026$530M–$545M $530M–$545M Maintained
Adjusted EBITDAFY2026$112M–$118M $112M–$118M Maintained
Free Cash FlowFY2026N/A (not previously quantified in 8-K) $13M–$18M Introduced
Free Cash Flow SeasonalityQ2 FY2026N/AQ2 expected to be lowest FCF quarter (cash usage) Clarified

Earnings Call Themes & Trends

TopicQ3 FY2025 (Previous Mentions)Q4 FY2025 (Previous Mentions)Q1 FY2026 (Current)Trend
AI/technology initiativesLaunched AI Coaching/Learning/Coding assistants; certification capabilities; positive partner outcomes ~1M CAISY launches; new ecosystem integrations (e.g., SAP Talent Intelligence Hub) CAISY now available in 40+ languages; Percipio AI localization; certification dashboard; coaching platform scale Expanding capabilities and localization
Macro/discretionary spendNot a focus“Subject to an evolving macroeconomic environment” Softer discretionary spend impacting live learning (GK/coaching); elongated decision cycles Macro caution intensified
Segment performance (TDS/GK)TDS up 2% YoY; GK down YoY TDS +1% YoY; GK down YoY TDS +1% YoY; GK −16% YoY; GK pipeline healthy internationally TDS resilient; GK pressured US public sector
Go-to-market and investmentsTransformation initiationTransformation execution positioning for FY2026 Focused investments in 1H; benefits expected in 2H (Q3/Q4); new CMO to sharpen marketing Investing to accelerate 2H growth
Free cash flowPositive FCF in quarter Strong FCF in Q4 and FY2025 Strong Q1 FCF; Q2 usage expected; reiterate FY FCF $13M–$18M Seasonal but improving trajectory
DRR——TDS LTM DRR 99% (vs. 100% prior quarter, 99% YoY) Stable overall

Management Commentary

  • CEO on TDS momentum: “The multi-quarter growth we are seeing in TDS, our largest business segment, reinforces our confidence in our ability to achieve top line growth this year” .
  • CFO on profitability and cash: “We delivered continued improvement in profitability and free cash flow…we are reaffirming our fiscal 2026 outlook” and expect Q2 to be “our lowest free cash flow quarter” as working capital normalizes .
  • Product strategy emphasis: “CAISY…now available for learners in over 40 languages” and new certification dashboard and coaching platform features to scale program administration and measurement .
  • Execution focus: “The first half of the year is really all around investing in our go-to-market and products…in the back half…multi-year set of benefits” .

Q&A Highlights

  • Guidance confidence despite macro: Management reaffirmed FY guidance based on TDS resilience and GK pipeline visibility, contingent on live learning market stabilization .
  • GK pressure details: US public sector discretionary spend weakened; non-US public sector deals increased; reseller mix recognized net of fees weighed on GK revenue .
  • Free cash flow color: Q1 strength driven by collections and disbursement timing; Q2 expected reversal and cash usage; full-year FCF reiterated at $13M–$18M .
  • Government/DOGE: Executive orders not materially impacting revenue; DOGE-related workforce reductions remain fluid and under assessment; “DOGE impact is TBD” .
  • Finance integration: New CFO stressed embedding finance discipline across go-to-market and product decisions to drive growth .

Estimates Context

  • Q1 FY2026 comparison vs S&P Global consensus: revenue and EPS beat; adjusted EBITDA above consensus.
MetricCompany ReportedS&P Global ConsensusBeat/Miss
Revenue ($USD Millions)$124.201 $123.504*Beat
Primary EPS ($)$0.30 (Adjusted) $(2.65)*Beat
Adjusted EBITDA ($USD Millions)$22.131 $18.803*Beat

Values marked with * retrieved from S&P Global.

Where estimates may need to adjust:

  • EPS likely revised higher given a substantial beat versus negative consensus; EBITDA and revenue should see modest upward revisions, with caution on GK trajectory and Q2 FCF seasonality .

Key Takeaways for Investors

  • Back-half weighted year: Expect revenue and margin improvement in Q3/Q4 as 1H go-to-market and product investments begin to pay off .
  • Mix matters: TDS resilience (DRR ~99%, three quarters of sequential growth) offsets GK exposure to US public sector discretionary spend and reseller mix; watch public sector normalization .
  • Cash discipline and seasonality: Strong Q1 FCF was timing-driven; anticipate Q2 cash usage, with full-year FCF of $13M–$18M reiterated; debt stable (~$580M gross) .
  • AI as engagement lever: Expanded CAISY localization and certification dashboards aim to deepen customer adoption and learner outcomes; potential cross-sell into GK/live learning .
  • Guidance intact: FY2026 revenue ($530M–$545M) and adjusted EBITDA ($112M–$118M) maintained despite macro; delivery of these ranges is a key stock narrative anchor .
  • Watch DRR/renewals: TDS LTM DRR at 99%—stable but slightly below Q4; monitor renewal cycles and upsell momentum amid elongated decisions .
  • Trading setup: Reaffirmed guide, strong Q1 FCF, and TDS momentum are positives; US public sector/GK volatility and Q2 FCF seasonality are near-term swing factors .

Bolded beats indicate materially better-than-expected outcomes relative to consensus (S&P Global).