Skillsoft Corp. (SKIL)·Q4 2025 Earnings Summary

Executive Summary

• Q4 FY2025 revenue was $133.8M, down 2.8% year over year, with adjusted EBITDA of $29.9M (22.4% margin) and adjusted EPS of $2.11; free cash flow was $13.2M. Management emphasized delivering above the high end of FY25 outlook ranges and ongoing margin expansion .
• Significant estimate beats: revenue beat consensus by ~$5.4M (+4.2%) and adjusted EPS beat by $4.16 per share; coverage was thin (1 estimate each), but the magnitude is notable. Values retrieved from S&P Global*.
• FY2026 outlook initiated: revenue $530–$545M, adjusted EBITDA $112–$118M; management guided FY26 free cash flow of $13–$18M and unlevered FCF $71–$76M, reinforcing a pivot to growth with continued cash generation .
• Execution catalysts: Q4 DRR of 105% (LTM DRR 100%), top 10 TDS deals totaling $22M TCV, and nearly 1M launches of the AI simulator CAISY; GK revenue decline improved vs 1H, supporting stabilization efforts .

What Went Well and What Went Wrong

What Went Well

• DRR and enterprise momentum: “We delivered dollar retention rate or DRR of 105%, which drove our last 12 months DRR to 100%,” positioning FY26 for growth; top 10 TDS deals in Q4 represented $22M TCV across multiyear skill-building programs .
• Margin expansion and cash generation: Adjusted EBITDA rose to $29.9M (22.4% margin) from $28.3M (21.0%) YoY; Q4 free cash flow improved to $13.2M from $5.4M, reflecting disciplined costs and working capital execution .
• AI product traction and ecosystem: CAISY passed ~1M launches; integrations expanded (SAP Talent Intelligence Hub; Pluralsight, Big Thinks, Oracle), underpinning platform differentiation and enterprise adoption .

What Went Wrong

• Top-line contraction: Total revenue fell to $133.8M (-2.8% YoY; GK down ~13% YoY to $30.9M), with FX a modest headwind in GK and broader macro uncertainty cited by management .
• GAAP profitability remains negative: GAAP net loss of $31.1M (-$3.75 per share) reflects heavy amortization of intangibles and transformation charges; management modified adjusted net income to exclude amortization prospectively to better reflect core operations .
• GK margin pressure: GK contribution margin slipped YoY; management attributed this to mix (partner courses, trainer sourcing, reseller vs delivery), expecting sequential improvement through FY26/FY27 as proprietary IP ramps .

Financial Results

Q4 vs prior year and estimates:

Segment revenue (company-reported):

Q4 business unit contribution (company-reported):

KPIs and balance sheet highlights:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We delivered solid fourth quarter and fiscal year results with revenue exceeding the high end of our guidance range and adjusted EBITDA at the upper end of the range.” – CEO Ron Hovsepian .
• “We are firmly on track to return to top line growth, drive continued margin expansion, and generate positive free cash flow this fiscal year as indicated by our outlook.” – CFO Rich Walker .
• “Our growing portfolio of AI capabilities…reaching nearly a total of 1 million launches of our AI simulator, Skillsoft CAISY™, with 100 enterprise design partners.” – Company release .
• “Beginning this quarter, we modified our non-GAAP presentation of adjusted net income…excluding the noncash impact of amortization expense related to acquired intangible assets.” – CFO .

Q&A Highlights

• Macro/regulatory: As a federal contractor, SKIL implemented proactive compliance measures; no material impact yet, but management cautioned uncertainty could elongate purchasing decisions .
• Profitability vs reinvestment: FY26 guidance includes front-loaded reinvestment in 1H with expected 2H payoff; modest margin expansion (~<100 bps) alongside revenue growth and stronger FCF conversion .
• GK margins: Margin pressure driven by partner/course mix and trainer sourcing; proprietary course ramp expected to improve margins through FY26/FY27 .
• DRR durability: Q4 strength supported by multiyear contracts; company-wide focus continues, with cohorts >110% DRR offset by mid-market/SMB volatility .
• CAISY monetization: Early signs include ~1/3 of preview customers engaging professional services for authoring and rollout; pricing/packaging work ongoing .

Estimates Context

• Q4 2025 consensus vs actuals: revenue $128.34M* vs $133.75M actual; Primary/Normalized EPS -$2.05* vs $2.11 adjusted EPS actual; both were strong beats despite limited coverage (Primary EPS estimates: 1; Revenue estimates: 1)*. Values retrieved from S&P Global.
• Implication: Consensus likely underappreciated margin execution and DRR-driven bookings, suggesting upward estimate revisions for FY26 on revenue, EBITDA, and FCF.

Key Takeaways for Investors

• Estimate beats and FY26 guide: Beat on revenue and adjusted EPS with FY26 revenue and EBITDA guide signaling a pivot to growth and continued margin expansion .
• DRR/enterprise momentum: Q4 DRR of 105% and $22M TCV in top TDS deals validate enterprise focus; expect sustained retention improvements into FY26 .
• GK stabilization path: Sequential improvements; margin headwinds are mix-related with proprietary IP expected to lift margins over FY26/FY27—watch quarterly progress .
• Cash generation: Q4 FCF $13.2M and FY26 FCF guide $13–$18M (unlevered $71–$76M) provide near-term support for equity and credit narratives .
• Non-GAAP clarity: Adjusted net income now excludes amortization of acquired intangibles; comparability improves, but monitor transformation charges and tax impacts .
• Trading setup: Near term, front-loaded reinvestment may compress margins in 1H FY26, with 2H bookings seasonality and enterprise wins as the upside catalyst; earnings leverage evident vs revenue growth .
• Risk monitor: Macro/regulatory uncertainty could elongate sales cycles; GK mix remains a swing factor; FX modestly impacts GK revenue but is naturally hedged at EBITDA .

---

Footnote: *Values retrieved from S&P Global.