Skillsoft's Q2 2026 Earnings Call: Contradictions Emerge on Macro vs. Competitive Dynamics, Growth Expectations, and Live Learning Challenges

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

Date of Call: September 9, 2025

Financials Results

• Revenue: $128.8M, down 2.6% YOY
• EPS: $0.92 adjusted EPS, up from $0.87 in the prior year; GAAP net loss/share $2.78 vs $4.84 prior year
• Gross Margin: 75%, as cost of revenue was 25% of revenue; prior-year comparison not provided

Guidance:

• FY26 revenue outlook lowered to $510–$530M, reflecting continued softness in Global Knowledge (GK).
• FY26 adjusted EBITDA reiterated at $112–$118M.
• FY26 free cash flow reiterated at $13–$18M.
• Guidance reduction driven almost entirely by GK weakness, particularly North American public sector and Middle East.
• Seasonality considered: ~35% bookings 1H / ~65% 2H; low end assumes back-half down ~$13M vs 1H down ~$7M.
• Focus remains on TDS enterprise with ongoing transformation and product launches.

Business Commentary:

* Impact of Economic Uncertainty on Revenue: - Skillsoft reported revenue of $128.8 million for Q2 2026, down 2.6% year-over-year. - The decline was primarily due to economic uncertainty, affecting customer discretionary training spending, particularly in North America and the Middle East.

• Segment Performance and Challenges:
• Talent Development Solutions (TDS) revenue was $101.2 million, slightly down year-over-year, while Global Knowledge (GK) revenue was $27.6 million, down approximately 9.6% year-over-year.

• The decline in GK was attributed to softer public sector spending and geopolitical instability, mainly in the Middle East.

• Transformation and Strategic Investments:

• Skillsoft maintained full-year expectations for adjusted EBITDA and free cash flow despite lower revenue, reflecting the success of cost reduction and resource allocation initiatives.

• The company is focusing on AI innovation, intelligent learning design, and immersive learning experiences, with new product roadmaps expected to drive growth.

• Customer Retention and Enterprise Focus:

• The TDS LTM dollar retention rate (DRR) was 99%, with a 4 percentage point impact from federal business churn.
• The company is prioritizing enterprise customers, with a focus on enterprise-grade flexibility and high-impact learning solutions, which are seeing consistent growth.

Sentiment Analysis:

• Total revenue $128.8M, down 2.6% YOY; GK down 9.6%. Company lowered FY26 revenue guidance to $510–$530M, citing GK/public sector and Middle East softness. Profitability held: adjusted EBITDA $28.3M with 22% margin (vs 21.4% prior year), and FY26 adjusted EBITDA and FCF guidance maintained. Management highlights four consecutive quarters of TDS enterprise growth and transformation progress.

Q&A:

• Question from Hoi-Fung Wong (Oppenheimer & Co. Inc.): Which sectors/regions drove the live learning softness this quarter?
  Response: Public sector in North America and the Middle East drove the decline, while Europe showed improving bookings in live learning.

• Question from Hoi-Fung Wong (Oppenheimer & Co. Inc.): Is the weakness macro-driven or competitive?
  Response: Management views it as macro: peers also reported declines in live learning, and Europe public-sector bookings are strong, indicating non-competitive factors.

• Question from Hoi-Fung Wong (Oppenheimer & Co. Inc.): Is the ~$17M revenue guidance cut sufficiently derisked?
  Response: Yes; the cut is largely GK-related and embeds conservative back-half assumptions given 35/65 seasonality (1H down ~$7M, back half implied down ~$13M at the low end).

• Question from Hoi-Fung Wong (Oppenheimer & Co. Inc.): How does macro impact your timeline to return to growth?
  Response: TDS enterprise has grown four straight quarters and investments should drive growth; macro delayed plans by ~6 months, but they expect to recapture roughly one quarter over 12–18 months.

• Question from Hoi-Fung Wong (Oppenheimer & Co. Inc.): How did dollar retention and the non-enterprise TDS mix perform?
  Response: TDS DRR was 99%, with North American federal softness reducing it by ~4 pts; the B2C/learner product was down double digits, while enterprise remains the focus.

• Question from Hoi-Fung Wong (Oppenheimer & Co. Inc.): Can you sustain profitability if conditions soften further, and are costs variable?
  Response: Profitability will be protected via continued efficiency measures; margin resilience comes mainly from prior fixed-cost reductions, not variable cost flex.