On Tuesday, Oppenheimer maintained a Perform rating on Skillsoft Corp. (NYSE:SKIL) stock following the company's Investor Day held last week.
Skillsoft, a provider of digital learning and talent management solutions, announced its future financial targets along with a resource reallocation strategy designed to increase margins and support growth initiatives.
Skillsoft's management has identified over $45 million in cost savings, with plans to reinvest approximately 40-50% of these savings to drive growth. The company anticipates an acceleration of its top-line growth to over 10% in the long term, with medium-term growth projected at 5-7%. Despite these targets, analysts expect investor skepticism to persist until consistent positive top-line growth is delivered.
The company has set a long-term adjusted EBITDA margin goal of 28-30%. In terms of revenue forecasts, Skillsoft has adjusted its FY25E revenue outlook to $510-$525 million, with EBITDA projections remaining unchanged due to the anticipated partial-year impact of cost savings. This adjustment comes as part of management's more cautious approach to forecasting.
Finally, Skillsoft expects its free cash flow (FCF) to align with the FY24 projection of negative $15 million. With these revised expectations, Skillsoft acknowledges the need to demonstrate tangible results to gain investor confidence.
In other recent news, Skillsoft Corp. has announced updates to its fiscal year 2025 financial outlook and has revealed a $10 million share repurchase program. The company has revised its revenue forecast for the fiscal year ending January 31, 2025, to a range of $510 million to $525 million, down from the previously projected $530 million to $550 million. Skillsoft also aims for an Adjusted EBITDA Margin of 23% to 25% in the mid-term and 28% to 30% in the long-term.
The company is also partnering with Microsoft (NASDAQ:MSFT) to launch a generative AI (GenAI) skilling program. This initiative is designed to help organizations and their workforce leverage Microsoft AI tools, including Copilot and Azure Open AI, to boost business productivity and innovation.
Skillsoft announced Q1 fiscal 2025 results, stating a revenue of $128 million, a 6% year-over-year decrease. The company's content and platform revenue remained consistent at $98 million, while the instructor-led training revenue saw a significant 20% drop to $30 million. Despite these figures, Skillsoft maintained its full-year revenue guidance of $530 million to $550 million and adjusted EBITDA guidance of $105 million to $110 million.
InvestingPro Insights
As Skillsoft Corp. (NYSE:SKIL) navigates its growth and cost-saving strategies, real-time data from InvestingPro offers a clearer picture of its financial health and market performance. With a market capitalization of $129.86M and a significant gross profit margin of 72.54% in the last twelve months as of Q1 2023, Skillsoft shows a strong ability to generate earnings relative to its revenue. However, its P/E ratio stands at -0.4, reflecting challenges in profitability, as analysts do not expect the company to be profitable this year.
InvestingPro Tips indicate that Skillsoft operates with a significant debt burden and may struggle with interest payments, which could be a concern for potential investors. On a brighter note, two analysts have revised their earnings upwards for the upcoming period, signaling potential optimism in the company's financial prospects. For those interested in further analysis, there are additional tips available on InvestingPro, including insights into stock volatility and shareholder yield. To access these tips and more, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Investors considering Skillsoft should note its impressive short-term returns, with a 21.24% return over the last week and a substantial 62.1% return over the last month. Such metrics may entice those looking for quick gains, although the company's long-term price performance has been less favorable. With a fair value estimate of $19.0 according to InvestingPro, compared to analyst targets of $40, investors have varying perspectives on the company's valuation.
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