2026 Q1 and Q2 Earnings Calls Reveal Contradictions on Macroeconomic Impact, TDS Growth, and Revenue Outlook

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $128.8M, down 2.6% YOY
• EPS: $0.92 adjusted EPS, up from $0.87 prior year; GAAP EPS $(2.78) vs $(4.84) prior year

Guidance:

• FY2026 revenue guidance cut to $510M–$530M due to continued softness in Global Knowledge and federal spending.
• FY2026 adjusted EBITDA reiterated at $112M–$118M.
• FY2026 free cash flow reiterated at $13M–$18M.
• Guidance reduction largely isolated to Global Knowledge; TDS Enterprise viewed as stable with modest seasonality.
• Management prioritizing profitability, cash generation, and ongoing transformation investments.

Business Commentary:

• Revenue Impact and Economic Uncertainty:
• Skillsoft's total revenue in the second quarter was $128.8 million, down 2.6% year-over-year.

• The decline was primarily due to economic uncertainty extending Q1 headwinds into Q2, impacting discretionary customer spending, particularly in live learning offerings.

• Global Knowledge Revenue Decline:

• Global Knowledge revenue in the second quarter was $27.6 million, down approximately 9.6% year-over-year.

• The decline was attributed to softer demand, lower discretionary spending in North America, and geopolitical instability in the Middle East.

• Profitability and Expense Reduction:

• Despite lower revenue, the company maintained consistent profitability with an adjusted EBITDA of $28.3 million, flat compared to the previous year.

• This was achieved through successful expense reduction, operational improvement initiatives, and resource allocation executed to date, resulting in $45 million in expense reductions.

• Transformation and Enterprise Growth:

• The TDS Enterprise Solutions segment experienced a fourth consecutive quarter of revenue growth, representing more than 90% of the TDS segment.
• This growth was attributed to the ongoing transformation, including a dual business unit structure and significant shifts in critical resources.

Sentiment Analysis:

• Management lowered full-year revenue outlook but maintained profitability and cash targets: “we are updating our full-year revenue guidance… Despite a lower revenue base, we delivered consistent profitability and improved adjusted EBITDA margins… we are maintaining our full-year expectations for adjusted EBITDA and free cash flow.”

Q&A:

• Question from Ken Wong (Oppenheimer): Which sectors or regions most impacted the softer live learning environment?
  Response: Public sector weakness in North America and Middle East drove declines in live learning; Europe bookings improved, giving confidence in recovery.

• Question from Ken Wong (Oppenheimer): Why is the weakness macro-driven versus competitive?
  Response: European public sector bookings are strengthening and peers show similar declines in live learning, indicating macro pressure rather than competitive losses.

• Question from Ken Wong (Oppenheimer): Does the ~$17M revenue guide-down fully reflect risks, and how was it derived?
  Response: Guide embeds heavier back-half seasonality (65% of bookings) with H1 down ~$7M and H2 down ~$13M at the low end; largely tied to Global Knowledge.

• Question from Ken Wong (Oppenheimer): Path back to growth—macro vs. controllable elements?
  Response: TDS Enterprise has grown four straight quarters; GK de-risked; macro delays timeline by ~3–6 months, but management expects to recoup roughly a quarter over 12–18 months.

• Question from Ken Wong (Oppenheimer): How did dollar retention and the non-enterprise portion of TDS perform?
  Response: TDS DRR was ~99%; North American federal headwinds reduced DRR by ~4 pts; B2C (sub-10% of TDS) declined double digits.

• Question from Ken Wong (Oppenheimer): Is Q2 or Q3 the trough?
  Response: Trough primarily modeled in Global Knowledge in the back half; TDS expected to remain stable with roughly 50/50 seasonality.

• Question from Ken Wong (Oppenheimer): Can profitability be sustained if demand softens further?
  Response: Yes—management is continuously improving efficiency and aligning the cost model to the current trajectory.

• Question from Ken Wong (Oppenheimer): Were cost improvements variable or fixed?
  Response: Mostly from prior fixed cost reductions; minimal impact from variable cost changes.