Executive Summary

Q3 FY2025 revenue was $137.2M vs $139.0M YoY and $132.2M QoQ; adjusted EBITDA rose to $31.9M (23.3% margin) from $29.8M (21.4%) YoY, and the company generated positive free cash flow of $4.1M .
Management raised and tightened FY2025 GAAP revenue guidance to $520–$530M (from $510–$525M in Q2; vs $530–$550M in Q1) and reaffirmed adjusted EBITDA of $105–$110M .
TDS (Talent Development Solutions) grew 2% YoY to $103.0M while GK (Global Knowledge) declined 10% YoY to $34.2M but improved sequentially; LTM DRR was 98% (flat QoQ; down from ~101% last year) .
Transformation execution continued: expense reallocation, product innovation (AI Coaching Assistant, AI Learning Assistant, AI Coding Assistant, integrated compliance suite), and go-to-market changes under new BU structure; CFO noted revenue ahead of internal expectations .

What Went Well and What Went Wrong

What Went Well
- Positive free cash flow in a seasonally cash-consuming quarter; Q3 free cash flow was $4.1M as collections discipline improved .
- Profitability and margin expansion continued: adjusted EBITDA of $31.9M (23.3% margin) vs $29.8M (21.4%) YoY .
- Product momentum and client validation: launched AI Coaching Assistant, AI Learning Assistant, AI Coding Assistant; new compliance suite; multiple “Partner of the Year” awards; notable multiyear AI upskilling wins .
- “I am pleased with our financial results for the quarter, which are highlighted by strong revenue execution, improved profitability, and positive free cash flow” — CFO Rich Walker .
What Went Wrong
- YoY revenue down modestly (total revenue $137.2M vs $139.0M) as GK remained a headwind despite sequential stabilization .
- LTM DRR declined to 98% from ~101% in Q3 last year, with softness in coaching and compliance; management is revising pricing/licensing and rolling out the new compliance platform to address retention .
- GAAP net loss remained sizable at $(23.6)M, though improved YoY from $(27.7)M; interest expense and amortization continue to weigh on GAAP results .

Financial Results

Revenue, EPS, and Profitability (USD)

Metric	Q1 2025	Q2 2025	Q3 2025	Consensus (Q3 2025)
Total Revenue ($M)	$127.793	$132.223	$137.225	N/A (S&P Global data unavailable at retrieval)
GAAP Net Loss ($M)	$(27.636)	$(39.566)	$(23.599)	N/A
GAAP EPS (Basic & Diluted)	$(3.42)	$(4.84)	$(2.86)	N/A
Adjusted EBITDA ($M)	$18.898	$28.349	$31.924	N/A
Adjusted EBITDA Margin (%)	14.8%	21.4%	23.3%	N/A
Free Cash Flow ($M)	$10.420	$(16.118)	$4.084	N/A

Segment Revenue ($M)

Segment	Q1 2025	Q2 2025	Q3 2025
Talent Development Solutions (TDS)	$99.148	$101.652	$102.998
Global Knowledge (GK)	$25.053	$30.571	$34.227
Total	$124.201	$132.223	$137.225

Selected KPIs and Balance Sheet

KPI/Metric	Q1 2025	Q2 2025	Q3 2025
LTM Dollar Retention Rate (TDS)	~99%	~98% (sequential context)	98% (flat QoQ; ~101% prior year)
Cash, Cash Equivalents & Restricted ($M)	$149.604	$130.143	$101.802
Gross Debt ($M)	—	—	$591
Adjusted Gross Margin (%)	—	75.6%	75.2%

Notes: Consensus unavailable at time of retrieval due to S&P Global API limit; see Estimates Context section. DRR mid-year context based on management commentary .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
GAAP Revenue	FY2025	$510M–$525M (Q2 reaffirmed)	$520M–$530M	Raised and tightened
GAAP Revenue	FY2025	$530M–$550M (Q1)	$520M–$530M	Lower vs Q1; raised vs Q2
Adjusted EBITDA	FY2025	$105M–$110M (Q1)	$105M–$110M	Maintained

Management also expects to be at or near breakeven free cash flow for FY2025, driven by working capital improvements and disciplined collections .

Earnings Call Themes & Trends

Topic	Q1 2025 (Prior-2)	Q2 2025 (Prior-1)	Q3 2025 (Current)	Trend
AI/Technology initiatives	Launched AI-powered Interactive Skill Benchmarks	Reimagined AI-driven learner UX; Microsoft partnership for GenAI upskilling	Rolled out AI Coaching Assistant, AI Learning Assistant, AI Coding Assistant; CAISY simulations	Accelerating AI feature rollout and adoption
TDS performance	+1% YoY; third consecutive quarter of TDS growth (noted later in FY2026, but Q1 2025 C&P flat YoY)	TDS $102M, down 1% YoY	TDS $103M, +2% YoY	Improving growth trajectory
GK performance	Continued headwinds (implied via mix and prior declines)	GK $31M, -20% YoY	GK $34M, -10% YoY; sequential stabilization; multiple “Partner of the Year” awards	Stabilizing sequentially; YoY declines moderating
Retention (DRR)	~99% LTM (C&P)	~98% LTM (sequential context)	98% LTM; down YoY due to coaching/compliance; fixes underway	Slight pressure; remediation actions progressing
Pricing/licensing	—	—	Coaching moving seat license → subscription to improve utilization	Business model optimization
Compliance platform	—	—	New integrated compliance suite; +48% NPS on migrated customers	Product upgrade supporting retention

Management Commentary

Strategy and execution: “Our transformation strategy focuses on 2 key principles: fix the basics and invest to grow... driving at least $45 million in annualized expense reductions... returning to top line growth and continued margin expansion in fiscal year 2026, and generating positive free cash flow for the full fiscal year 2026” — CEO Ron Hovsepian .
Operating progress: “Revenue ahead of our expectations, improved profitability and delivered strong free cash flow performance” — CFO Rich Walker .
GK stabilization: “Sequential revenue improvement… the year-over-year decline in GK revenue improved to a 10% drop as compared to a 20% drop in the previous 2 quarters” — CEO .
Collections and cash: “We delivered positive free cash flow in the third quarter of $4 million... driven primarily by disciplined collections management” — CFO .
Outlook: “We are now raising and tightening our full year revenue guidance range… reaffirming our adjusted EBITDA outlook of $105 million to $110 million… expect to be at or near breakeven free cash flow for the full fiscal year” — CFO .

Q&A Highlights

GK outlook: Management cited broad-based “singles and doubles” across transactions and momentum building through the quarter; emphasized awards and partner recognition (CompTIA, EC-Council, Cisco, Palo Alto Networks) while cautioning it’s early in the turnaround .
Retention/drivers: DRR at ~98% (flat QoQ; down YoY) driven by softness in coaching and compliance; actions include moving coaching to subscription model and rolling out integrated compliance platform with +48% NPS among migrated customers .
Licensing transition risks: Management acknowledged transition considerations but believes the subscription model improves consistency of usage and outcomes for coaching .

Estimates Context

Wall Street consensus from S&P Global for Q3 FY2025 revenue and EPS was unavailable at time of retrieval due to an API request limit. As a result, we cannot quantify beat/miss vs consensus. Management stated revenue was ahead of internal expectations, but that is not a proxy for Street consensus .
Guidance implies management confidence into Q4, with a raised and tightened FY2025 revenue range and maintained adjusted EBITDA .

Key Takeaways for Investors

Margin expansion and cash discipline are taking hold: adjusted EBITDA margins improved to 23.3% and free cash flow turned positive in Q3, supporting the transformation narrative .
Top-line trajectory is improving sequentially; TDS grew 2% YoY and GK declines moderated, which, if sustained, can underpin FY2026 objectives for growth and FCF generation .
Retention is the key watch item: DRR at 98% (vs ~101% last year) with remediation plans (coaching subscription model, integrated compliance suite) — monitor DRR trajectory through Q4 and early FY2026 for confirmation .
FY2025 outlook raised on revenue and maintained on EBITDA; focus now shifts to execution against collections, operating efficiency, and GK stabilization to protect margins while re-accelerating growth .
Product cadence in AI (coaching, learning assistants, CAISY) and compliance could drive better retention and upsell; customer wins and partner awards validate positioning in upskilling and certifications markets .
Capital structure remains a constraint to GAAP profitability (amortization, interest expense), but cash/liquidity are being managed prudently; gross debt $591M; cash and restricted cash $102M .
Near-term trading: stock likely reacts to raised FY25 revenue guidance and positive FCF surprise; medium-term thesis hinges on DRR stabilization, sustained TDS growth, and continued GK improvement to support durable margin expansion .

Skillsoft Corp. (SKIL)·Q3 2025 Earnings Summary