Thank you for standing by and welcome to the Skillsoft Corp Fourth Quarter Fiscal 2024 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s present there will be a question-and-answer session. [Operator Instructions]. Please note that today’s call is being recorded. I will now hand the call over to your first speaker, Chad Lyne, Head of Investor Relations. Thank you. Please go ahead.

Thank you, operator. Good afternoon. And thank you for joining us today to discuss our results for the fourth quarter and full fiscal year ended January 31, 2024. Before we jump in, I want to remind you that 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, financial condition, and market outlook. These forward-looking statements and all statements that are not historical facts reflect management's current beliefs and expectations as of today and therefore are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of the material risks and other important factors that could affect our actual results, we refer you to our most recent Form 10-K filing with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements for information which speak as of the respective dates. During the call, unless otherwise noted, all financial metrics we discuss will be non-GAAP financial measures, which are not prepared in accordance with Generally Accepted Accounting Principles. In addition, any year-over-year comparisons to the full-year results for fiscal 2023 are on a pro-forma basis to include Codecademy’s financial results prior to its acquisition on April 4th, 2022. To enhance comparability between the periods, a reconciliation of the pro-forma and non-GAAP financial measures included in today's commentary to the most directly comparable GAAP financial measures, as well as how we define these 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. In addition to the press release we issued today after market close announcing Skillsoft's financial results, we also issued a press release announcing a leadership transition, as Ron Hovsepian has been named by the Board to the role of Executive Chair and Principal Executive Officer, and Jeff Tarr will retire from his positions as CEO and a member of the Board, each effective as of April 16th, 2024. We will open the call with comments from Jeff and Ron on today's transition announcement. Rich will cover our fiscal 2024 business and financial highlights and our fiscal 2025 financial outlook, and then Ron will conclude our prepared remarks. Ron, Rich, and I will be available for Q&A at the end of the call. With that, it's my pleasure to turn the call over to Jeff.

Thanks, Chad. Good afternoon, everyone. Let me start by saying it's been a privilege to lead Skillsoft since the company returned to public markets nearly three years ago. When I joined Skillsoft, my hope was that we would create a new, more effective way to learn online. And I want to thank our dedicated and capable executive leadership team and every member of our organization for making that vision a reality. There is still, of course, much work to do in order to realize the full potential of the new Skillsoft. And there is no one better to lead the organization forward than Ron Hovsepian in his new role as Executive Chair of the Board and Principal Executive Officer. In addition to being a well-respected and highly accomplished executive, Ron brings a wealth of Skillsoft-specific experience and continuity of leadership to the table, having served as a member of the Board of Skillsoft since 2018. He is one of the most talented leaders I have known and brings deep expertise in operations and go-to-market. Ron and I have worked closely together for more than three years and have partnered to ensure a seamless transition. So as you would expect, today's news has no impact on what Skillsoft does every day to help organizations and their people to grow together through transformative learning experiences. As for me, I'm looking forward to my next chapter. I plan to pursue my passion for coaching CEOs, dedicate more time to board work and personal interests, and find new ways to give back. With that, it's my pleasure to hand the call over to Ron.

Thank you so much, Jeff. It's been a privilege to work with you over the past three years plus. As we started to transform the company into a multimodal, AI-centric market leader, on behalf of the Board and everyone at Skillsoft, we are grateful for your contributions to the company. I'm honored to step into this role and build on the strong foundation that has been established. For those of you who aren't familiar with my background, I've been deeply involved with Skillsoft for more than six years. From 2018 to 2021, I served as Executive Chair, working closely with the team, many of whom are senior leaders with Skillsoft today, to revitalize the company and position it to return to public markets. During that time, we instilled a culture of innovation and accelerated the transition from our legacy Skillport platform to Skillsoft Percipio, our AI-driven learning platform. We reimagined the brand and enhanced our position as a forward-thinking market leader. And we strengthened our operational foundation to ensure mutual success for learners and customers. Since our return to public markets and my ongoing involvement as a Board member since 2021, we have made additional progress to reposition Skillsoft to seize a tremendous market opportunity. Although the company has come a long way, I'm most excited about what is still in front of us. The shift to a skill-centric economy, which will increasingly be shaped by generative AI, is still in the early phase and I have the utmost confidence that our strategy is aligned to leading that market into this new era. I look forward to working alongside our talented team as we seek to accelerate the execution of our strategy and create value for our stakeholders. Now let me hand the call to Rich.

Thank you, Ron, and welcome back to this familiar role. And thank you, everyone, for joining today. Before jumping into my remarks, I just want to say thank you, Jeff, for your vision and leadership at Skillsoft over the past three years. You've done much to transform Skillsoft and have established a strong foundation for our future success. I'll start with an overview of our fiscal 2024 results. Share some insight on how the market is evolving and where we're seeing both greater success and challenge. And then cover our financial results and fiscal 2025 outlook in more detail. We delivered full year adjusted EBITDA of $105.1 million above the top end of our guidance range and improved on what we believe is an industry-leading profit profile with a 19% adjusted EBITDA margin. We beat our full year adjusted EBITDA outlook largely as the result of our disciplined expense management, but fell short on bookings and revenue. The instructor-led training segment remained challenged by broader market conditions. Its results were also impacted by our proactive decision to prune non-core, unprofitable revenue streams. In our content and platform segment, our success in winning a growing number of large, complex accounts where we typically displace multiple providers was partially offset by weakness at the low end of the market, where we saw significant price competition that caused higher churn in our installed base and softer net new acquisition performance. We have a clear understanding of the issues that impeded our progress and have made changes where needed to strengthen our execution and results, all with a focus on profitable growth. We made good progress during fiscal 2024, positioning Skillsoft to help our customers thrive in an age of generative AI. We supported the workforce transformation priorities of thousands of organizations, and we…

Thank you, Rich. First, I want to thank our employees for their dedication and tireless efforts in fiscal 2024. And our customers and partners and stockholders, we value and appreciate your support of Skillsoft. I look forward to meeting with many of you in the coming days and weeks ahead. I also have made it a high priority to host an Investor Day in the coming months so that we can provide a deeper dive into our long-term strategy and the exciting opportunities in front of Skillsoft. As I step back into an executive role at Skillsoft, I am optimistic about the year ahead and I am confident in our ability to execute a plan that enables future profitable growth and value creation. Organizations around the world are in the midst of a transformation to a skill-centric economy and simultaneously adapting to a generative AI era. And I believe there is no other company better suited than Skillsoft to support these paradigm shifts. With that, Operator, please open up the call to questions.

Thank you. [Operator Instructions] Our first question comes from the line of Raimo Alensha with Barclays. Please proceed with your question.

Hi, this is Sheldon McMeans for Raimo. Thanks for taking our question. I wanted to ask how has the overall corporate spending environment looked like for enterprise learning? Are you seeing budgets increase? Are budgets decreasing, but you have an opportunity to consolidate multiple vendors and hence you still have a nice growth opportunity? Any color there would be helpful.

Yes, we highlight the skills champion segment in particular. And companies, larger complex ones, are spending money where it's a strategic priority. And they're spending money for outcomes. I would say at the lower end of the market, there's price pressure, less spending. Those companies may be more susceptible to some of the macro pressure. And they're typically spending on more narrow solutions, largely video libraries, less complex solutions. But the customers, which are our best customers, where we're growing the most, stay with us the longer. They're definitely making investments. Those sales cycles are elongated, as we called out in the earnings script. But when we execute with those customers, it's a good outcome for us longer term.

Got it. And a quick follow-up, if I may. I wanted to ask about that other 40% of your customer base. It certainly does seem like the skills champions are doing well. Of that 40%, is that an area that will keep dwindling down as you prioritize the more strategic customers? Or do you see that stabilizing in the back half of the year, maybe in calendar year 2025, when the macro environment improves?

This is Ron. Let me jump in here on that one. I think the work we did on the archetype on the enterprise skills champion and the results we're seeing there is a good proxy for what we want to build and execute on the other segments within our business. And I think that operational focus that was brought to that segment, which is our biggest one, very important one, is what we're bringing to the other segments. And I see that as part of our overall journey to make sure that the business performs the way it's capable of. At this point, I don't see us leaving any of those market segments.

I would simply add it's a critically important segment. And while we've not achieved the results we've expected there, we're addressing that through pricing and packaging, addressing the specific need those customers have. So we're going to be focused on growing that segment and retaining more of that segment going forward.

Great. Thanks.

Thank you. Our next question comes from the line of Raj Sharma with B. Riley Securities. Please proceed with your question.

Hi. Thank you for taking my questions. My first one is on global knowledge and any kind of color on the continued losses there. There's also a substantial impairment. If you could also tell us what amount of the book value is still being held for global knowledge. So color on continued losses and then just related to that is the guidance for the year. What growth is it building for the ILT and the content segments? How do we look at the business going forward?

Yes, I'll start it off and Rich can pick up from there. But ILT is not performed at the level that we had hoped or aspired to for it. So for me, I'm very much looking forward to digging into this business and more detail and reporting back to you what we intend to do to operationally improve this business and get it on the right track. So give me some time there to get underneath that and we will come back there. You had a multi-part question, I’ll let Rich handle a couple of the other pieces here.

Yes, I think the tonality and the temper. We've taken a very cautious view of ILT as both as we exited the year and what we see happening in the market environment. That business, we've not guided specifically to it. But the business is going to detract from the overall growth in the content platform business. So we've talked, gave some comments about the shape of the curve for the full year. We do expect some better compares in the second half. The content and platform business does account for about 75% of the revenue for the full year. But we think that content platform growth is going to be muted by the ILT. Also compounding that to some degree, we exited an apprenticeship business. That does impact the year-over-year ILT results by several million dollars.

Right. And then, is it fair to say that there is a marked decrease in the business, a deterioration in the business of both the content and the ILT side in Q4? Exiting Q3, it didn't seem like, it seemed like you would meet your bookings or possibly do better than your bookings guidance. Was Q4 a marked deterioration in trends?

We, when we gave an update on our third quarter call, we thought we'd be at the bottom of both bookings and revenue guidance. And we fell short of that. The execution in the fourth quarter alluded to a lot of it in the script. We saw some elongation of sales cycles. We saw opportunity that moved out of the pipeline into deferred periods. But we thought we executed reasonably well in light of that, certainly at the adjusted EBITDA level. You're asking specifically about the components. Content and platform was up. Fourth quarter, it's a really an LTM business. And for the fourth straight quarter, our DRR was 101% and higher than that in our best customer archetype, the skills champions. So enterprise skills champions with the overall sales cycle elongating created some unforeseen headwinds when we gave our updates previously. And we talked about the weakness in the lower end of the market where we saw more price competition, higher churn and softer new acquisition.

Great. Thank you. Thank you for taking my questions. I'll take it offline. Thank you.

Thank you. [Operator Instructions] And there are no further questions at this time. Therefore, I'll now turn the call back over to Ron Hovsepian for closing.

Thank you. As I embark on this role with all of you, I really look forward to speaking with a number of our investors and our analysts as we go on this journey together. I'm very excited about what this company is capable of doing. I'm very excited what I see inside the asset base that we have and most importantly, where the market is migrating to overall in its need for skills and skill development and the outcomes required on that journey. With that in mind, we need to make sure we bring those pieces together in the following months in that investor day and really bring those pieces to life as to how we see we're going to capture it and overall and improve the overall performance of the company as we look forward to it. So with that said, I look forward to chatting with you in the future. Thank you very much.

And this concludes today's conference and you may disconnect your line at this time. Thank you for your participation.