Ladies and gentlemen, thank you for standing by, and welcome to Skillsoft's Third Quarter Fiscal 2022 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ present, there will be a question-and-answer session. Please note that today's call is being recorded. I would now like to hand the conference over to your first speaker today, Jim Gruskin, Interim Head of Investor Relations. Thank you. Please go ahead.

Good afternoon, and welcome to Skillsoft's third quarter fiscal 2022 earnings call. Today, we will be discussing the results announced in our press release issued after the market closed. With me are Skillsoft's CEO, Jeff Tarr and CFO, Gary Ferrera. Today's call will contain forward-looking statements about the company's business outlook and expectations including statements concerning financial and business trends, our expected future business and financial performance and financial condition, and our guidance for fiscal 2022. These forward looking statements and all statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks described in the safe harbor discussion found in the company's SEC filings. During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Now, a few comments on the required GAAP presentation of Skillsoft's financial statements following the merger and D spec on June 11, 2021. GAAP requires accounting periods before and after June 11, to be separated into predecessor and successor periods to reflect the change in ownership and lack of comparability between periods due to different ownership and investment basis. In addition, Global Knowledge activity is only reflected in the GAAP financial statements after June 11. References on this call to combined GAAP results reflect a combination of the predecessor period before June 11 that excludes Global Knowledge with the successor period after June 11. For all non-GAAP measures in the supplemental materials filed with the SEC today and in today's commentary, the Company is providing normalized results as if Skillsoft and Global Knowledge had been combined for all periods presented, which we believe is useful to investors to show the trends of the go forward Company. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as well as how we define these metrics and other metrics is included in our earnings press release, which has been furnished to the SEC, and is also available on our website at www.skillsoft.com. With that, I will turn the call over to Jeff.

Thanks, Jim. Good afternoon, and thank you all for joining us today. I want to begin by welcoming Gary Ferrera to his first earnings call as our new CFO. Gary and I have worked closely together before and I'm excited he chose to join our leadership team. And his 16 years as a CFO, he's taken two companies public and completed numerous strategic transactions. Since joining Skillsoft three months ago, Gary has rapidly come up to speed on the business and as expected, is proven to be a tremendous partner to the leadership team in May. While not on our call, I'm equally pleased that during the quarter, we were joined by Kristi Hummel, our new Chief People Officer. Kristi comes from Dell, where she was SVP of HR. She was previously Chief Human Resources Officer at VCE and VP of HR operations at EMC. The HR leadership role is especially critical and a company focused on helping customers unleash human potential through learning. Kristi is a recognized HR thought leader and will materially advance our culture of leadership and learning with benefits for team members and customers alike. Before I discuss our results, I want to thank our entire team for delivering another quarter of bookings and revenue growth that came in ahead of our expectations. I also want to thank our customers and learners who are at the heart of our purpose. Our headline message is clear. Since returning Skillsoft to public markets in June, we've made tremendous progress executing our plan. The foundation of our business is strong and getting stronger. We began by recapitalizing our balance sheet, assembling a world-class management team and Board of Directors and completing two acquisitions. We've since extended our industry-leading reach within the enterprise market and strengthened our content offerings and…

Thanks, Jeff. I appreciate the kind words. It's an absolute pleasure to be working with you again. It feels great to work at a company that is a clear leader in a growing sector with an opportunity to create significant value for shareholders. I have only been on Board a couple of months. During that time, I've been impressed with the caliber of the highly motivated team. I look forward to accomplishing great things together. Now let's focus on our consolidated results. Bookings for the quarter were $169 million, up $12 million or 7% compared to the prior year. In year-to-date bookings were $453 million, up $37 million or 9% compared to last year. Turning to revenue, GAAP revenue was $171 million in Q3, and for the year-to-date period combined GAAP revenue was $401 million. Adjusted revenue in Q3 was $179 million, an increase of $10 million or 6% over the prior year, and year-to-date adjusted revenue was $521 million, an increase of $4 million or 1% as compared to last year. This quarter, you will notice that there is a much smaller difference between adjusted revenue and GAAP revenue. This relates to our adoption of a new accounting standard during quarter, ASU 2021-08 accounting for contract assets and contract liabilities. While non-GAAP revenue adjustments will be significantly smaller due to this change, we will continue to adjust GAAP revenue to gross up Global Knowledge reseller fees which are accounted for on a net basis. Our GAAP net loss was $43 million for the quarter and for the year-to-date period, our combined GAAP net loss was $104 million. Q3 adjusted EBITDA was $49 million flat to the prior year. Year-to-date, adjusted EBITDA was $130 million down $4 million or 3% compared to the prior year. Adjusted EBITDA margin for Q3…

Thanks, Gary. We are proud to operate what we believe is the largest corporate digital learning business in the world, expected to generate at least $685 million and adjusted revenue in fiscal 2022 for more than 12,000 corporate customers, and more than 45 million learners. We are profitable and growing. And with our strong leadership, team and recent enhancements to content platform and go-to-market, we believe we're well positioned to drive continued growth and create substantial value for our shareholders, customers, learners and other stakeholders. Operator, you can now open the call for Q&A.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question.

Hey, thank you and congratulations from me. Another great comeback quarter. So that's really good to see. First question is on Global Knowledge, Jeff. We saw last quarter and this quarter again, like a really good return of growth, really good return of business activity there. Like, how do you see this in the more broader context? Is this just kind of just easier comps and a comeback? Or do you see like a more fundamental, it's found its new world around more virtual instructors and kind of what you see there in terms of momentum is something that is kind of beyond just a little bit of recovery? And then on the -- one question I always ask is on NRR for skills of content 101% is very good solid number. What are the puts and takes here that we should be aware of? Congrats from me again. Thank you.

Thanks, Raimo. So first of all, on Global Knowledge, certainly last quarter, when Global Knowledge was up about 30%, that was in part due to easier kind of COVID comparisons the prior year, but it is on a growth trajectory. We've now strung together three straight quarters of solid double-digit year-over-year growth. And importantly, we've done that with a vastly improved mix from when a mix that was predominantly classroom to one that now is predominantly virtual, and as we all know that virtual business carries a higher margin. Now, it's also a somewhat lumpier business in terms of, because it's more transactional than the rest of our revenue. And so that's just an aspect of that business. But it's a good business, and one that we expect to get better as we tighten the integration with Percipio, and with our subscription content business. So more to come on that and I'm pleased with the progress we've made. On your second question on the improvement and retention rates, I have a few thoughts and then I'll see if Gary has any others. But first of all, the biggest driver in the improvement of retention rates are our continued progress, migrating from Skillport to Percipio. And as we do that, we just structurally drive higher dollar retention rates. Now, I'm pleased also that Percipio plus dual deployment retention rate is improving slightly year-over-year. And we also look at the last 12-month retention rate as an important indicator because there is some lumpiness to the dollar retention rates, but we see them trending up, we see them continue to trend up. And that is because our sales team and customer success team is continuing to improve. The product continues to improve both the platform and the content. And overall, we're excited about where we can take that dollar retention rate over time.

Perfect. Thank you.

Thank you, Raimo.

Our next question comes from the line of Brian Schwartz with Oppenheimer. Please proceed with your question.

This is Ari Friedman subbing in for Brian Schwartz. I was just wondering how your sales hiring has been going. And if you could give some puts and takes on that.

Sales hiring has gone well. We staffed up that new customer acquisition team pretty early in the year and we're now seeing that team produce results. Some of those results have come in the form of a net new logos that we shared today. Then across the business, we're not -- we're doing talent upgrades and replacing vacancies in certain parts of the world, but we haven't been adding to the size of our salesforce since that 30 -- that increase of 30, we've been more focused on training development compensation coverage model and I believe you'll see the impact of the changes that we're making next year.

Thank you.

[Operator Instructions] Our next question comes from the line of Raj Sharma with B. Riley. Please proceed with your question.

Hi, this is Katherine Knop on for Raj Sharma. I was just wondering if you guys could give a little bit more color on the bookings increase and your upping of guidance. Are you seeing new customers or existing customers purchasing more? Thanks.

The answer is yes, we're seeing dollar retention rates move up. And so that dollar retention rate which is a net dollar retention rate reflects upgrades. It also reflects downgrades, which is why it's not vastly higher than that. But we're seeing -- we're seeing growth in new customers and we're seeing the addition of net new logos. So that combination is driving up the bookings.

Thank you. Our next question comes from the line of Arvind Ramnani with Piper Sandler. Please proceed with your question.

Hi. Thanks for taking my question. I wanted to ask you about the dynamics that you mentioned, that sort of increased levels of turnover at certain firms or kind of across the board. But then also kind of this increased levels of demand is, our employees, employers and enterprises looking at Skillsoft as now, something so essential to kind of to provide to the employees in terms of retention or kind of what's driving that increased demand, and with the backdrop of like, higher levels of turnover?

Yes. So, certainly higher levels of turnover is creating a number of needs within our customers. So, first and foremost, learning and development is a benefit. And the survey work that we've done has shown that when people do leave their employer, more often than not, it's for training and development more so than compensation. And so we're finding that those who purchase our products inside the enterprise now realize that learning and development is, is mission critical for retention, it is also essential to fill skills gaps. So, for example, one of our customers, which was in the -- which is in the printing business, that office printing business got hit incredibly hard by COVID, right, because people weren't using office printers. So what they did is we worked with them to retrain a large number of printing technicians for other technical jobs. And that's played a key role and that business is turned around as they've shifted their - the mix of their revenue from just office printing to a more broad suite of IT services. So we're seeing that everywhere across our business demands like that. We're excited by what we're seeing, because we believe that we can make a real difference, we make a real difference for learners. And we make a real difference for the enterprise that's seeking to combat the great resignation to upskill and reskill to train new employees for their jobs. It's an ongoing training within the enterprise. So it's an exciting opportunity to be in this particular business.

That's great. And then, you know, I just wanted to ask quickly on guidance, right, like, I mean, you had roughly about $13 million, Q3 beat. And then when I look at, you know, sort of the guidance range, you tighten the range by about $5 million and then increase the -- the kind of a target by $13 million sort of given sort of, you're seeing really good momentum in Q3. Is there some level of conservatism sort of built into Q4? Or are there some aspects in Q4, where you feel like this guidance is, is a lot more realistic and it's not like a whole lot of conservatism built into it.

Hi Arvind, this is Gary. Yes, so obviously, I've been here less than three months. So you know, what I do with guidance is tell you what I know. And so conservatism, I wouldn't say conservative that is built into that. bookings obviously still 40% left to go in the quarter and in Q4, revenues at tighter range because revenue is a lot more known at this point in time, and we were able to narrow down the adjusted EBITDA because you know that that comes in a couple of million in either direction. But obviously bookings is the biggest question at this time, because it's still 40 more percent.

Our next question comes from the line of Peter Heckmann with DA Davidson. Please proceed with your question.

Good afternoon, gentlemen. Just one quick housekeeping item about how much in ARR did Pluma add in the quarter?

Immaterial in the quarter as we -- this was our first full quarter with Pluma. We're very pleased. Bookings are ahead of our original expectations and acquisition model. But we're still early days on what's a small business that we expect to be a meaningful contributor going forward. But I will tell you, in addition is that, that when I'm out talking to customers, you know and I'm talking to customers at the CEO and CHRO level, Pluma really resonates as a value proposition we're seeing our pipelines build, and we think it will make a real difference over the long term for our company.

Great. And then just can you give us an update on the competitive dynamics? We all know that there's been a lot of relatively new entrants, or maybe our awareness of those new entrants is higher, given some recent IPOs and some content players, some direct competitors, but how would you talk about that, and the overall demand versus any other changes in let's say, pricing or willingness to bundle by competitors, and how you're dealing with that?

Well, we love the competitive environment. Well, I'll tell you what I'm speaking to customers and analysts. And I'm listening closely to what they have to say, what I'm hearing time and time again, is the single biggest change in the competitive environment over the last year is the new Skillsoft, we are -- we have a new management team, we have new sales leadership, we have new product, we brought three companies together, we've integrated those offerings, and we are having a huge impact in the marketplace. And if you look closely at the publicly available data on the competitive set, what you see is when it comes to the enterprise, the corporate market, our scale is vastly larger than the competition. And if you look behind the numbers, you look at such metrics as what's the average revenue per account, for example, you can see that we're not playing in a small way in the corporate market, we're playing in a big way at the corporate center on an enterprise scale. And we intend to continue to do so and grow our business. The one final point I'd make is there's a lot of consumer oriented learning offerings out there. And what we've been finding is that those are great partners for us, because we can take those offerings, and make those available through Percipio to our customers. And that's a real win-win for the numerous players who otherwise would not have access to the enterprise market. And it's a win for our customers who rely on us to curate the C of early stage offerings out there, and bring the best of breed to them in a fashion that's integrated into our Aspire learning journeys into Percipio in a way that works for learners. So I'm, I'm excited by what I see in the competitive environment.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now turn the call over to Jeff Tarr for closing remarks.

Thanks, everyone. I really appreciate you joining the call. today. We are pleased with the early results of our investments and platform content and go-to-market. I'm grateful for the strong execution that our team has been delivering. And I believe we're well on our way to achieving our vision of becoming the most highly valued provider of learning solutions, preparing the workforce of today with the skills for tomorrow. Looking forward to speaking with you next quarter and sooner than that, with any callbacks. So thanks very much and have a great day.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.