10-Q: Skillsoft Reports Q3 2026 Losses, Goodwill Impairment

Skillsoft Corp. reported a significant net loss of $41.3 million for the third quarter of fiscal 2026, alongside a $20.8 million goodwill impairment for its Global Knowledge segment, reflecting ongoing macroeconomic challenges and declining revenues.

Summary

• Net loss for the three months ended October 31, 2025 (Q3 2026) was $(41.3) million, compared to $(23.6) million in the same period of 2024 (Q3 2025).
• Net loss for the nine months ended October 31, 2025 (YTD 2026) was $(103.1) million, compared to $(90.8) million in the same period of 2024 (YTD 2025).
• Total revenues for Q3 2026 decreased by 6.0% to $129.0 million from $137.2 million in Q3 2025.
• Total revenues for YTD 2026 decreased by 3.8% to $382.0 million from $397.2 million in YTD 2025.
• Operating loss for Q3 2026 was $(34.3) million, significantly wider than $(9.2) million in Q3 2025.
• Operating loss for YTD 2026 was $(64.3) million, compared to $(52.3) million in YTD 2025.
• A non-cash goodwill impairment charge of $20.8 million was recorded for the Global Knowledge (GK) segment in Q3 2026.
• Cash and cash equivalents decreased to $74.6 million as of October 31, 2025, from $100.8 million as of January 31, 2025.
• Net cash used in operating activities for YTD 2026 was $(5.4) million, a decrease from $12.2 million provided in YTD 2025.
• Restructuring charges for Q3 2026 increased to $4.2 million from $3.1 million in Q3 2025.
• Long-term debt (net of discount and financing costs) was $570.2 million as of October 31, 2025.

Sentiment

Score: 3

Explanation: The company reported significant net and operating losses, declining revenues across both segments, and a substantial goodwill impairment. While management expresses confidence in short-term liquidity and is undertaking cost-saving measures, the overall financial performance and outlook for the Global Knowledge segment are concerning, indicating significant challenges.

Positives

• Management believes there will be sufficient internal and external liquidity to fund operations for at least the next twelve months and the foreseeable future.
• The company is in compliance with all covenants under the Amended Credit Agreement as of October 31, 2025.
• Cost savings from the consolidation of facilities contributed to lower general and administrative (G&A) and facilities/utilities expenses.
• Productivity gains through leveraging technology investments led to decreases in compensation and benefits within content and software development expenses.
• Payments on the accounts receivable facility were reduced by $35.0 million for the nine months ended October 31, 2025, compared to the same period in 2024.
• $45 million was available to be drawn under the accounts receivable facility as of October 31, 2025.

Negatives

• Net loss significantly widened to $(41.3) million in Q3 2026 from $(23.6) million in Q3 2025, and to $(103.1) million YTD 2026 from $(90.8) million YTD 2025.
• Total revenues declined by 6.0% for the three months and 3.8% for the nine months ended October 31, 2025.
• Global Knowledge (GK) segment revenues declined by 17.6% for the three months and 14.4% for the nine months, impacted by macroeconomic uncertainty and a decline in public sector business.
• Talent Development Solutions (TDS) segment revenues decreased by 2.1% for the three months and 0.5% for the nine months, primarily due to lower Learner revenue.
• A $20.8 million non-cash goodwill impairment charge was recorded for the GK segment, indicating a significant decline in its estimated fair value.
• Net cash used in operating activities for the nine months ended October 31, 2025, was $(5.4) million, a substantial negative shift from $12.2 million provided in the prior year, primarily due to lower GK margins, reduced cash collections from a U.S. government shutdown, and working capital timing.
• Cash and cash equivalents decreased by $26.2 million from January 31, 2025, to October 31, 2025.
• Interest income decreased due to lower money market balances and lower average money market investment yields.
• The remaining goodwill in the GK segment ($8.7 million) is considered at risk of future impairment.

Risks

• The Global Knowledge (GK) reporting unit is impacted by industry macroeconomic uncertainty and a shift to integrated learning experiences.
• A continued decline in public sector business contributes to lower enrollment and revenue for the GK segment.
• The goodwill assigned to the GK reporting unit is considered at risk of future impairment due to its estimated fair value.
• Future impairment charges could result from a further decline in expected operating performance, an increase in the discount rate, continued or additional adverse macroeconomic conditions, or changes in industry trends.
• The timing and outcome of the strategic review for the GK business remain uncertain.
• Restrictions on guarantor subsidiaries' ability to pay dividends or make intercompany payments could prevent Skillsoft from making required debt payments.
• There is no assurance that outstanding obligations under the credit agreement can be refinanced on favorable terms or at all.
• Additional capital may be required in the future to fund capital expenditures, acquisitions (including contingent consideration payments), strategic transactions, or other investments.
• Operating cash flow performance may be adversely affected by risk factors discussed in the 2025 Form 10-K.
• Exposure to foreign currency fluctuations (Euro, pound sterling, Canadian dollar, Australian dollar, Indian rupee, Singapore dollar) could impact pre-tax income/loss.
• A hypothetical 100 basis point increase in interest rates would result in approximately $2.9 million additional pre-tax annual interest expense.

Future Outlook

Management expects the decline in Global Knowledge segment revenues to continue for the foreseeable future due to macroeconomic uncertainty and shifts in the industry. The company will continue to evaluate its cost structure and operating model, which may lead to further restructuring actions. Despite current challenges, management anticipates having sufficient internal and external liquidity to fund operations and meet cash needs for at least the next twelve months and the foreseeable future, though additional capital may be required for future expenditures or acquisitions.

Management Comments

• Skillsoft empowers organizations and learners to unlock their full potential by delivering personalized, interactive learning experiences and enterprise-ready solutions.
• Skillsoft is a global leader in AI-native skills management for the human + AI era.
• We believe that Skillsoft's unique capabilities set us apart as a trusted partner for workforce transformation and preparedness: Measurable Outcomes, Technological Innovation, Blended Learning Experiences, Enterprise Scalability.
• We have undertaken a full strategic review of the GK segment and began pursuing a range of alternatives with the GK business, although the timing and outcome of this process remain uncertain.
• Management has completed the majority of planned restructuring actions as of October 31, 2025; however, we will continue to evaluate our cost structure and operating model to align operating expenses with existing economic conditions, which could result in further restructuring actions.
• Management does not anticipate that the outcome of any such current proceedings or known claims, either individually or in aggregate, will materially affect Skillsoft's financial position, results of operations or cash flows.
• We anticipate we will have sufficient internal and external sources of liquidity to fund operations and anticipated working capital and other expected cash needs for at least the next twelve months, as well as for the foreseeable future, with capital sources currently available.

Industry Context

Skillsoft operates in the enterprise learning solutions market, which is experiencing an industry shift towards integrated learning experiences and AI-native skills management. The company positions itself as a leader in this space, aiming to help organizations build their 'Skillforce' by unifying learning, real-time skills intelligence, and workforce insights. The Global Knowledge segment, focused on instructor-led training, is particularly affected by macroeconomic uncertainty and a decline in public sector business, indicating a potential challenge in traditional learning models compared to the evolving digital and AI-driven landscape.

Management Changes

Corporate Governance

Legal Proceedings

• Skillsoft is party to general legal proceedings and claims that arise in the ordinary course of business, including commercial and contractual disputes, employment matters, and intellectual property.
• Management does not anticipate that the outcome of any current proceedings or known claims, individually or in aggregate, will materially affect Skillsoft's financial position, results of operations, or cash flows.
• No material amounts are currently accrued for probable losses from litigation.

Related Party Transactions

• In January 2025, Skillsoft entered into an agreement to provide off-the-shelf products to Prosus Companies (affiliates of its largest shareholder) for $0.8 million over three years.
• In June 2025, the Prosus Commercial Agreement was updated to consolidate and reallocate services from an approximately $84,000 March 2024 agreement.
• In April 2025, an additional one-year off-the-shelf product agreement for specific training products was entered into with Prosus Companies for approximately $69,000.

Stakeholder Impact

• Shareholders: Negative impact due to significant net losses, declining revenues, goodwill impairment, and negative cash flow from operations. Potential dilution from increased shares available under incentive plans.
• Employees: Impacted by restructuring actions and workforce reductions, though productivity gains are noted. Stock-based compensation is a significant part of overall compensation.
• Customers: Continued access to learning solutions, with investments in technology and AI-driven platforms. Potential impact on Global Knowledge customers due to the strategic review of the segment.
• Creditors: Long-term debt obligations remain substantial, though the company is in compliance with covenants and anticipates sufficient liquidity for the foreseeable future.

Next Steps

• Continue strategic review of the Global Knowledge (GK) segment, exploring a range of alternatives.
• Continue to evaluate cost structure and operating model for potential further restructuring actions.
• Monitor guidance issued by the U.S. Department of the Treasury, the Internal Revenue Service, and other regulatory bodies regarding the Tax Reform Act of 2025 (OBBBA) and incorporate updates into estimates.
• Monitor factors that could lead to future goodwill or intangible asset impairment, including operating performance, discount rates, macroeconomic conditions, and industry trends.
• Assess liquidity position and potential sources of supplemental liquidity.

Key Dates

Recommendation

The filing reveals a deteriorating financial performance with widening net and operating losses, consistent revenue declines across both segments, and a significant goodwill impairment for the Global Knowledge segment. Negative cash flow from operations for the nine-month period is a major concern. While management is taking cost-cutting measures and expresses confidence in short-term liquidity, the ongoing macroeconomic uncertainty, industry shifts, and the 'at-risk' status of remaining GK goodwill suggest continued headwinds. The strategic review of GK with uncertain outcomes adds further instability. These factors indicate a challenging outlook, making the stock a 'sell' for seasoned investors.

Keywords

Skillsoft, SKIL, 10-Q, Quarterly Report, Financial Results, Net Loss, Revenue Decline, Goodwill Impairment, Global Knowledge, Talent Development Solutions, Learning Solutions, SaaS, Corporate Training, Workforce Development, SEC Filing, Financial Performance, Operating Loss, Cash Flow, Debt, Restructuring, Market Risk, Interest Rate Swaps