Index falls as earnings results weigh; pound above $1.33, Bodycote soars
Introduction & Market Context
Skillsoft Corp (NYSE:SKIL) released its Q1 FY2026 earnings presentation on June 9, 2025, highlighting progress in its ongoing transformation efforts despite continued revenue challenges. The company, which operates in a talent development market estimated at approximately $300 billion with an 8% CAGR, showed signs of stabilization in its core business while significantly improving profitability metrics.
The stock responded positively to the results, rising 1.79% to $17.90 in regular trading and adding an additional 5.14% in after-hours trading to reach $18.82. This performance continues a strong run for Skillsoft shares, which have gained over 100% in the past year despite facing a challenging economic environment.
Quarterly Performance Highlights
Skillsoft reported mixed financial results for Q1 FY2026, with total revenue declining 3% year-over-year, though its Talent Development Solutions (TDS) segment showed positive momentum. The company emphasized its focus on profitability and cash flow generation as key elements of its transformation strategy.
As shown in the following financial highlights from the presentation:
Key performance metrics included a 99% dollar retention rate, which remained flat compared to the prior year. This stability in customer retention comes despite what CEO Ron Hovsepian described as "a challenging economic environment," suggesting the company is maintaining its core customer relationships effectively.
The company also highlighted several business achievements during the quarter, including three consecutive quarters of revenue growth in the TDS segment, growth in the non-U.S. public sector for Global Knowledge (GK), and the expansion of its Skillsoft CAISY™ AI-powered learning platform to over 40 languages. Additionally, Skillsoft received recognition as "Most Dedicated to Employee Growth" in this year’s Digiday WorkLife Awards.
Segment Performance Analysis
Skillsoft’s performance continues to show a divergence between its two main business segments. The Talent Development Solutions segment posted revenue of $99.1 million in Q1 FY2026, representing a 1% increase year-over-year and marking the third consecutive quarter of growth. In contrast, the Global Knowledge segment recorded $25.1 million in revenue, a 16% decline compared to the same period last year.
The following chart illustrates the revenue breakdown by segment over recent quarters:
Geographically, Skillsoft maintains a strong presence in the United States, which accounts for 66% of total revenue, while EMEA contributes 25% and the rest of the world makes up the remaining 9%. This geographic diversification provides some buffer against regional economic fluctuations, though the company remains heavily dependent on the U.S. market.
Profitability and Cash Flow Improvements
Despite the overall revenue decline, Skillsoft demonstrated significant improvements in profitability and cash flow generation during Q1 FY2026. Adjusted EBITDA reached $22.1 million, representing an increase of $3 million or 17% compared to the prior year. The adjusted EBITDA margin expanded by 300 basis points to 18% of revenue.
The following chart shows the year-over-year improvement in adjusted EBITDA and free cash flow:
Free cash flow showed even more dramatic improvement, reaching $26.2 million for the quarter, up $15.7 million compared to Q1 FY2025. This substantial increase reflects the company’s focus on operational efficiency and cost management. Non-GAAP operating expenses decreased by 6% year-over-year to $102.1 million, contributing to the improved profitability metrics.
CFO John Frederick highlighted the "continued improvement in profitability and free cash flow despite macroeconomic volatility" and reaffirmed the company’s fiscal 2026 outlook. However, management noted that they expect to consume cash in Q2 FY2026 due to normal seasonality and the unwinding of favorable factors from Q1.
The company ended the quarter with a strong liquidity position of $131 million in cash, cash equivalents, and restricted cash.
Strategic Transformation Progress
Skillsoft’s presentation provided a detailed look at its ongoing transformation plan, which is divided into two phases: FY25-FY26 and FY27+. The current phase focuses on expense reduction, margin expansion, and returning to topline growth, while the future phase aims to achieve at or above-market growth and an industry-leading financial profile.
The transformation roadmap illustrates the company’s strategic priorities:
Key elements of the current transformation phase include implementing a dual business unit structure, restoring the Global Knowledge segment to profitable growth, improving operational execution, and shifting resource allocation toward strategic growth initiatives. The company has already achieved $45 million in annualized expense reductions in FY25 and expects to reallocate approximately 20% of total company non-GAAP expenses, including reinvesting 40-50% of the FY25 cost savings toward strategic growth priorities.
Skillsoft is positioning itself to capitalize on what it sees as a significant market opportunity in the talent development lifecycle:
The company’s investment thesis centers on leveraging its unique asset portfolio, making immediate operational improvements to "Fix The Basics," and executing a "Invest To Grow" strategy to create shareholder value through above-market growth, profitability, and free cash flow generation.
Forward Outlook
While Skillsoft did not provide specific updated guidance figures in the presentation materials, management reaffirmed the company’s fiscal 2026 outlook. Based on the previous earnings call, this outlook includes revenue between $530 million and $545 million and adjusted EBITDA between $112 million and $118 million for the full fiscal year.
The company expects to generate positive free cash flow of $13 million to $18 million for FY2026, continuing the positive momentum seen in Q1. However, management cautioned about cash consumption in Q2 due to normal seasonality factors.
Skillsoft’s transformation journey continues to focus on balancing growth initiatives with profitability improvements. As CEO Ron Hovsepian noted, the company delivered first-quarter results "in line with expectations despite a challenging economic environment," suggesting a realistic approach to navigating current market conditions while positioning for future growth.
The positive stock market reaction to these results indicates investor confidence in the company’s transformation strategy and improved financial performance, particularly in profitability and cash flow metrics, even as revenue growth remains a work in progress.
Full presentation:
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