Skillsoft (SKIL) Q1 2027 Earnings Transcript

Image source: The Motley Fool.

DATE

Tuesday, June 9, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Executive Chair and Chief Executive Officer — Ronald W. Hovsepian
• Chief Financial Officer — Ronald W. Kisling
• Vice President, Investor Relations — Chad W. Lyne

TAKEAWAYS

• Revenue -- $94.5 million, down 4.7% year over year due to softness in government bookings and a 21% decline in the consumer business.
• Dollar Retention Rate (DRR) -- 105% for the quarter, up from 91% a year ago, reflecting improvements from go-to-market model changes.
• New Platform Customer Agreements -- Increased by 67% sequentially, from 15 to 25, surpassing the company's internal adoption target.
• Adjusted EBITDA -- $26.6 million, essentially flat year over year, with an improved margin of 28.2% versus 27.1% previously.
• GAAP Net Loss from Continuing Operations -- $18.7 million, compared to $29.6 million in the prior-year period.
• Adjusted Net Income -- $10.2 million ($1.16 per share), up from $9.5 million ($1.15 per share) a year ago.
• Free Cash Flow -- $25.4 million, slightly lower than $26.2 million in the prior-year period.
• Total Gross Debt -- $576 million, down from $580 million at the previous year-end.
• Total Net Debt -- $457 million, reduced from $481 million.
• Fiscal 2027 Guidance -- Revenue projected between $388 million and $406 million and adjusted EBITDA between $108 million and $116 million (approximately 28% margin).
• Global Knowledge Divestiture -- Transaction expected to close in fiscal Q2; anticipated to be accretive to growth and earnings, neutral to slightly below neutral for long-term liquidity.
• Management Focus -- Prioritizing post-divestiture debt refinancing and acceleration of enterprise growth through product and go-to-market execution.
• AI-Driven Platform Releases -- Released a skills visibility dashboard and LX Studio for content creation; product enhancements tied directly to enterprise buyer needs.
• Customer Pipeline -- Company reported a “very nice pipeline of some $60 million+” in strategic account deals post-transformation efforts.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Global Knowledge business is expected to incur an adjusted EBITDA loss of $10 million to $15 million annualized and negative free cash flow until the transaction closes, impacting near-term profitability and liquidity.
• Management stated, “For the quarter ended July 31, 2026, assuming the sale closes, we expect a reduction in liquidity of as much as $25 million attributable to Global Knowledge and the related sale.”
• Transaction-related costs on the GK sale are anticipated at $8 million to $10 million, with some deferred proceeds affecting cash flow timing.
• Revenue and dollar retention metrics remain “impacted by softness in government bookings in the first half of fiscal year 2026.”

SUMMARY

Skillsoft Corp. (NYSE:SKIL) reported a revenue decline driven largely by anticipated headwinds in government and consumer markets. Management emphasized the strategic priority of closing the Global Knowledge divestiture and initiating debt refinancing as key next steps. The company highlighted stronger DRR and a 67% sequential rise in new platform agreements as evidence of initial traction from go-to-market changes and product momentum. Ongoing platform innovation, particularly in AI-driven features, is tailored to expanding enterprise demand. Fiscal 2027 guidance remains unchanged, signaling management’s confidence in pipeline strength despite near-term transitional liquidity pressures from the divestiture.

• Skillsoft is planning further cost discipline and operating simplification after the Global Knowledge transaction, with integration of AI and skills intelligence remaining a central platform theme.
• Management asserted the divestiture will “strengthen our recurring revenue profile and improve free cash flow visibility,” while establishing a strategic partnership for future joint offerings with Global Knowledge.
• Leadership transition was completed in the CFO role, with Ronald W. Kisling noting alignment on priorities and a firm focus on driving sustained EBITDA growth and cash flow improvement with a favorable impact beginning in fiscal 2028.
• Deferred transaction proceeds and required minimum cash to be left with Global Knowledge upon sale will temporarily pressure liquidity, but future years are expected to benefit from the removal of loss-generating operations.

INDUSTRY GLOSSARY

• Dollar Retention Rate (DRR): A metric expressing the percentage of recurring revenue retained from existing customers over a period, factoring in upsell, cross-sell, and churn within the measured base.
• Skills Ontology: Skillsoft’s proprietary framework that categorizes, sequences, and measures job-related skills to enable tailored learning, assessment, and benchmarking across its enterprise platform.

Full Conference Call Transcript

Chad W. Lyne: Thank you, operator. Good day, and thank you for joining us to discuss our results for the first quarter ended 04/30/2026. Before we jump in, I want to remind you that today's call will contain forward looking statements about the company's business outlook and our expectations that constitute forward looking statements within the meaning of the U. S. Private Securities Litigation Reform Act of 2 thousand. Including statements concerning financial and business trends our expected future business and financial performance, financial condition and market outlook.

These forward looking statements and all statements that are not historical facts reflect management's current beliefs, expectations and assumptions and therefore are subject to risks and uncertainties that could cause actual results to differ materially from the conclusions, forecasts, estimates, or projections in the forward looking statements made today. For a discussion of the material risks and other important factors that could affect our actual results, we refer you to our most recent form 10 k Form 10 Q filed today, and other documents that we file with the Securities and Exchange Commission. We assume no obligation to update any forward looking or information which speak as of their respective dates.

During the call, unless otherwise noted, all financial metrics we discuss other than revenue will be non GAAP financial measures. Are not prepared in accordance with generally accepted accounting principles. For example, listeners should be cautioned that references to phrases such as adjusted EBITDA, free cash flow denote non GAAP financial measures. Non GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial measures.

Presentation of the most directly comparable financial measures determined in accordance with GAAP as well as the definitions, uses, and reconciliations of non GAAP financial measures included in today's commentary to the most directly comparable GAAP financial measures are included in our earnings press release, which has been furnished to the SEC on Form 8 ks and is available at the at www.sec.gov. It is also available on our website at www.skillsoft.com. Note that we do not provide reconciliations for forward looking non GAAP financial measures. As we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort.

In addition, as of 04/30/2026, Skillsoft's GK segment was classified as discontinued operations, making the TDS segment the only remaining segment. Prior period results have been recast to conform to the current presentation. Adjusted EBITDA from continuing operations is our current segment measure of profit. Reconciliation of this measure to net income loss from continuing operations is included in our earnings press release for the fiscal quarter ended April 30, 26, as described above as well as Note 13 to the unaudited condensed consolidated financial statements. Included in Skillsoft's most recent Form 10 Q. Following today's prepared remarks, Ronald W. Hovsepian, Skillsoft's executive chair and chief executive officer Ronald W. Kisling, Skillsoft's Chief Financial Officer, will be available for Q&A.

With that, it is my pleasure to turn the call over to Ronald W. Hovsepian.

Ronald W. Hovsepian: Thanks, Nick, and good afternoon. Thank you to everyone for joining us today. I want to welcome Ronald W. Kisling to Skillsoft as our new chief financial officer. Ronald brings more than 40 years of finance experience including 15 years as CFO at high growth technology companies. His work at Fastly, Fitbit gives him a strong foundation for what we are building here. I am confident his discipline and judgment will be valuable as we enter the next phase of the company's transformation. I also want to thank John Wilbert Frederick for his contributions and partnership as we advanced our transformation over the past year. For our first quarter results, revenue declined ~5% on a year over year basis.

2 expected factors drove this. Booking softness in our government business in the first half of last year and anticipated declines in our consumer business. Expected a portion of these declines to be offset by labor based offerings with more immediate revenue recognition. Such as professional services and coaching. However, those opportunities shifted to periods later in this fiscal year. The underlying business is performing in line with our plan, and strategic progress is visible in the number New platform customer agreements grew 67% quarter over quarter from 15 to 25. And our dollar retention in the first quarter reached 105%. These results reflect early returns from our redesigned go to market model and platform innovation strategy.

In Q1, we saw higher year over year bookings strong top of funnel engagement, expanding pipeline, and increasing average deal size. Today, I want to focus my remarks on 4 themes. First, the expected closing of the announced agreement for the divestiture of Global Knowledge will sharpen our focus and further simplify the company. Second, our transformation efforts to accelerate our path to enterprise growth through product innovation and go to market improvements, Third, AI is increasing the urgency and strategic value of what we deliver. Fourth, once the GK transaction closes, refinancing our debt will be a top management priority.

We believe that combined, themes reflect a more focused company with clearer operating model and a more direct path to durable growth. Let me start with global knowledge. As we announced in May, we entered into a definitive agreement to sell the GK business to an affiliate of Enduring Ventures with an expected fiscal Q2 closing. With that expected close of the transaction, we are simplifying how we refer to our remaining business. What had been reported as our TDS segment will simply be referred to as Skillsoft. We believe this is the right direction for Skillsoft. GK served an important purpose, but post close, we will concentrate fully on our AI native skills management platform.

Where we see the greatest opportunity to help organizations build workforce readiness and improve the impact of skills on business outcomes. This is where we have the biggest opportunity to accelerate growth with the strongest right to win. Upon successful completion of the transaction, we believe overall the financial impact will be near neutral while maintaining a strategic partnership for our customers. We expect the transaction to be accretive to growth rates and earnings. It strengthens our recurring revenue profile improves free cash flow visibility, and puts us in a better position to address our capital structure once the deal closes. That brings me to the second theme.

Over the past several quarters, we have significantly redesigned our go to market model. Aligned sales resources more tightly to enterprise opportunities and continue to refine our product experience in ways that matter to our customers. Our Skillsoft platform is differentiated by bringing together content, skills intelligence, assessment, and AI enabled experiences in 1 system. As organizations look for partners who can connect learning activity to workforce capability and business outcomes. We believe that approach is resonating more clearly. As we closely watch the market evolve, we see customers who are transforming their organizations and preparing to lead in an AI world. A Fortune 500 global energy company left a competing vendor and returned to Skillsoft.

They made our platform their enterprise wide learning and development front door to their HRIS system. They are using Skillsoft to address their 3 CEO level workforce priorities. Closing critical engineering succession gaps, executing a company wide AI upskilling program, and building the next generation of leadership pipelines. This is not a content vendor relationship. This is a strategic partnership at the highest level of business decision making. A leading US government contractor with over 8 thousand professionals, whose technical certifications directly determine billing rates replace their existing vendor with Skillsoft. Result was a 7x return on investment. $2.7 million in business value, and 82% of learners improving 426 benchmarks.

They credit Skillsoft with transforming their learning function from a compliance cost to a driver of revenue and retention. By eliminating the drag from GK on continuing operations, the underlying progress we have made becomes easier to see. We have more work to do, but we are realistic about the pace. But improvements in retention, growth of platform adoption, and strong customer engagement support our view that the business is moving forward toward a more sustainable growth trajectory. Now let me turn to AI. Why we believe it is increasing the urgency and strategic value of what we do. AI is widening the skills gap faster than most organizations can close it.

And that is driving demand for solutions that can translate AI into execution and measurable outcomes. Tomorrow, we are releasing our Skillsoft workforce readiness report. Which found that only 1 in 4 employees feel AI ready. Their reports surveyed 2,000 employees, managers, and executives globally. It uncovered a 53-point gap between how leaders and rate AI readiness. And found that 11% of their employees are assessed using formal skills benchmarks. These findings represent more than learning gaps. They are business execution risks and they underscore why platforms that can measure skills validate readiness, connect learning to outcomes, are becoming more important.

This quarter, we released the AI powered skills visibility dashboard that gives managers real time intelligence into team capabilities. skilling progress, and readiness gaps. That is a direct response to what the enterprise buyers are telling us they need. Better visibility into whether their workforce is actually ready. We have spent the last 20 years delivering curated learning to enterprise workforces across many industries. That work has taught us which skills matter for which roles, how skills build on each other, and how skill development connects to business performance. We have codified all of that into our Skillsoft platform. We call this our skills ontology. And it is not something that can be built quickly.

It is the foundation that makes our platform accurate, trusted, and governed in ways that matter to enterprise buyers. Offerings like KC and LX Design Studio build on that foundation. Helping customers move beyond passive consumption of learning content toward practice, simulation, and custom content creation at scale. Customers are looking for trusted partners who can help them securely and responsibly apply AI in ways that drive measurable business outcomes. Our combination of curated and blended learning journeys, skills intelligence, assessments, AI powered simulation, and the ability to prove impact is designed to do exactly that. Once the GK divestiture is complete, addressing our upcoming debt maturities will be management's top financial priority.

We recognize this is important to all of our stakeholders. We will evaluate all alternatives with discipline and urgency. The actions we are taking to simplify the company improve leverage, and strengthen free cash flow visibility are all designed to give us maximum flexibility as we approach that work. To summarize, we have made meaningful strategic and operational progress. We have a simpler portfolio, a more focused operating model, a platform that enterprise customers are using to transform their businesses. Customers I described today are treating Skillsoft as a strategic partner and that reflects the market is moving in our direction. Demand for platforms that can deliver these skills visibility validate capability, and business aligned outcomes is growing.

We believe Skillsoft is increasingly well positioned to translate that into durable value creation over time. There is still work ahead, and we remain realistic about the environment and the tasks in front of us. But the direction is clear. We are building a stronger company with a clear strategy and a more compelling long term profile. With that, let me turn the call over to Ronald W. Kisling to cover our financial results in more detail. Ronald?

Ronald W. Kisling: Thank you, Ronald, and good afternoon, everyone. Before I move into the financials, I want to start by saying how excited I am to be joining Skillsoft at such an important time for the company. I was drawn to the clarity of the mission, the strength of the leadership team, and the opportunity to help advance a business that enables organizations to build the work capabilities they need to compete in an AI driven world. I am looking forward to partnering with Ronald and the Skillsoft team to build on the progress already underway.

As a reminder, and as noted at the beginning of the call, consistent with prior quarters, our discussion will focus on non GAAP measures unless otherwise stated. Additionally, as noted in today's earnings release, and as Ronald discussed earlier on our call, our Global Knowledge business is now classified as discontinued operations. As a result, unless stated otherwise, the financials discussed today relate to our continuing operations which are comprised of our Talent Development Solutions business, which as Ronald discussed earlier, will simply be referred to as Skillsoft. Now turning to the results for the first quarter. Total revenue was $94.5 million down 4.7% over Q1 26 and our DRR was 105% in the first quarter.

Up significantly from 91% in Q1 26. Our LTM dollar retention rate or DRR as of the first quarter 98% compared to 99% in the prior year quarter. Overall, revenue and LTM DRR were impacted by softness in government bookings in the first half of fiscal year 2026. Revenue was also impacted by anticipated declines in our consumer business. I will now turn to our expenses which continue to see year over year improvements. Cost of revenue was $15.7 million in the first quarter or 16.7% of revenue down 3.3% year over year largely reflecting the variable nature of our delivery model, and lower revenue volume in the quarter, partially offset by sales mix and increased technology related investments.

Overall, adjusted total operating expenses were $67.9 million in the first quarter, or 71.8% of revenue, down $4.5 million or 6.2% year over year. Turning to the functional areas. Content and software development expenses were $12.7 million in the quarter, up approximately 4.8% year over year at 13.4% of revenue. Our selling and marketing expenses were $26.3 million in the first quarter down approximately 8.4% year over year or 27.8% of revenue, reflecting the benefit of lower spending due to the go to market redesign. And general and administrative expenses were $13.2 million in the first quarter, down approximately 13.7% year over year or 13.9% of revenue.

Our adjusted EBITDA from continuing operations of $26.6 million was essentially flat compared to $26.8 million in the prior year's comparable quarter. With adjusted EBITDA margin as a percentage of revenue for the quarter improving to 28.2% from 27.1% in the prior year. Our GAAP net loss from continuing operations was $18.7 million in the first quarter compared to a GAAP net loss from continuing operations of $29.6 million in the prior year period. GAAP net loss per share from continuing operations was $2.12 compared to a $3.56 loss per share the prior period.

Our adjusted net income was $10.2 million or $1.16 per share in the first quarter compared to an adjusted net income of $9.5 million or $1.15 per share in the prior year. Now moving to cash flow and balance sheet highlights. GAAP cash equivalents and restricted cash were $118 million at quarter end and our consolidated free cash flow for the first quarter was $25.4 million compared to $26.2 million in the prior year period. Total gross debt on a GAAP basis which includes borrowings on our term loan and accounts receivable facility, was $576 million at the end of Q1, down slightly from approximately $580 million at the end of the prior year period.

Total net debt, which includes borrowings on our term loan and accounts receivable facility net of cash, cash equivalents and restricted cash was approximately $457 million down from approximately $481 million at the end of the prior year period. And lastly, our full year fiscal 27 guidance remains unchanged. We expect revenue of between $388 million and $406 million and adjusted EBITDA from continuing operations of between $108 million to $116 million or approximately 28% of revenue.

We expect free cash flow for our continuing business operations in the range of $14 million to $22 million While we are encouraged by the strong cash collections in the first quarter, similar to last year, and in line with normal seasonality, we expect to consume cash in our continuing operations in the second and third quarters we then expect to generate free cash flow in the fourth quarter of the year all of which is reflected in the guidance range we have provided. While I am still only a few weeks into my role at Skillsoft, I am very excited that we are in the final stages of the process to complete the sale of Global Knowledge.

We believe this transaction has tremendous strategic value for our shareholders and allowing us to focus on our key mission and capabilities. The global knowledge business has been in decline for many years. Our transformation efforts and specifically our repositioning towards large strategic accounts is having an impact and starting to show in our results with a revenue decline that slowed to 2% the most recent quarter. We continue to be excited to work with Global Knowledge in the future as a key strategic partner that will allow both companies to grow and meet the evolving needs of our customers. As a reminder, in recent quarters, we have not provided guidance for the Global Knowledge business.

And our free cash flow guidance provided last quarter for fiscal year 27 also excluded the impact of Global Knowledge. While there are still uncertainties with respect to the timing and ultimate close of the planned sale, as well as the level of post closing support that will be required under transition services agreement. We want to share the estimated impact of the Global Knowledge business and transaction on our free cash flow and liquidity. Consistent with recent experience, we expect Global Knowledge to continue to incur adjusted EBITDA loss of between 10 million and $15 million on an annualized basis which closely mirrors Global Knowledge's free cash flow.

Assuming the Global Knowledge transaction closes in the second quarter as expected, once the divestiture of Global Knowledge and the related transitions are complete, we anticipate this negative impact on our profitability and cash flow will be eliminated and will have a favorable impact beginning in fiscal year 2028. From a total company liquidity standpoint, as previously disclosed, we expect proceeds net of cash divested and excluding anticipated transaction costs of between $5 million and $8 million over a period of 2 years following the closing of the Global Knowledge transaction.

Currently, we expect transaction related costs to be approximately $8 million to $10 million And as a result, we expect the overall transaction impact on long term liquidity to be neutral to slightly below neutral.

Due to the deferred nature of the payments we anticipate receiving under the sale, the impact of global knowledge on total liquidity differs in upcoming periods when considering the combined impact of free cash flow transaction related costs, and transaction proceeds For the quarter ended 07/31/2026, assuming the sale closes, we expect a reduction in liquidity of as much as $25 million attributable to Global Knowledge and the related sale driven by a requirement leave a minimum of $8 million of cash with the business upon sale, the payment of approximately $8 million to $10 million of onetime transaction related expenses and ongoing operating losses.

For the fiscal year ended 01/31/2027, which includes the first payment due from the buyer, we expect the total reduction as a liquidity of between $15 million and $20 million attributable to Global Knowledge. Under the terms of the agreement, we expect to receive an additional $4 million in proceeds in each of fiscal years 2028 and 2029 which is reflected in our estimates of net proceeds from the transaction. Before I turn the call back over for questions, I would like to remind stockholders our Annual Meeting of Stockholders will be held on June 25, Stockholders of record are encouraged to vote their shares in a timely manner in accordance with our annual meeting procedures.

Operator, please open the line for questions.

Operator: Thank you. We will now conducting a question-and-answer session. Before pressing the star key. Our first question comes from the line of Nancy Liu with Oppenheimer. Please proceed.

Analyst: Great. Thanks for taking my questions and apologies for any background noise here. Just on the GK sale post the divestiture, can you talk about where you plan to focus the extra bandwidth if you could provide any additional color on the partnership dynamics or the financial impact for the separation, that would be great.

Ronald W. Hovsepian: Yes. Hi, Nancy. How are you? Thank you for the question. If I heard you correctly, it was where do we expect to put the extra management bandwidth and to a little more information on where the partnership is and where that is going, I think, what I heard correct. Is that correct, Nancy? Yep. that is correct. Great. On the on your first part of the question, gonna go into 2 pieces. 1, the continued transformation and acceleration around growth is where we will deploy more management focus that is already begun. As part of it.

And as we reflected in our comments, we were able to see some of that growth in the bookings in the in the first quarter that we referenced and solid pipeline. 2, the second area we will go to from a financial perspective is really focusing on the debt refinancing Those are the 2 key priorities of where I would deploy the management energy and focus for the company is what Ronald and I have discussed and prioritized. In terms of the partnership, we have had a very good working relationship with the global knowledge team. And, as I look at the pipeline and what we shared with the investors on the call, we did 1 thing very importantly.

We focused on strategic accounts and winning a number of big deals. Those big deals have landed We have landed a very nice pipeline of some 60 plus million as part of that journey. And what is very exciting there is more coming through the pipeline, and that had a positive impact on their revenue slowing their decline. A lot time wise. It just did not fit our time horizon.

So what is exciting about the relationship right now is I know of 3 deals right now that I have been associated with in the team that are tied to that partnership agreement, which is where we are combining a blended learning experience and bringing that blended learning experience to life at the customer. And there is there is several bids out there that add up to roughly $8 million to $10 million, and I know that we are looking at just on those 3 alone that we are focused on. So I am very excited about what that could bring for revenue jointly.

And then we are gonna continue to talk about the partnership in other ways there is content from our side that they can use as well. That we have begun to migrate and give them access to, quote unquote, license. And that is turned into new products for global knowledge. Coming off of our base. So we see the relationship continuing. And I am excited to continue to be a good distribution partner to them and for them to use and leverage our content. Because that is what the customers want. They do want that piece of it. It just did not fit our time horizon in business. Model. Got it. That makes sense.

And were there any strategic for the remaining core that required the completion of the GK sale to kind of move forward on? Not that I can think of. there is nothing here that is hitting me in your question, Nancy. We are just gonna stay very focused on getting that transaction closed and then moving right towards the debt refinancing. I think strategically, everything's in place around that execution effort. And, from the company perspective, us continuing to push on 2 dimensions, 1, where we are going with the product and all the AI work we have done to date and what we have delivered.

We delivered in Q1, the first version of the of the LX Studio, the content creation part of the platform. We also are delivering the skills intelligence piece of it. So those 2 pieces of the platform that are build on built on foundational labs type componentry off of that same model. Are under are well underway. As we work on it. So I think our other strategic initiatives relate to the company are really well focused and underway as part of it.

I do not see anything significant at this point that Ronald or I would call out to all of you to pay attention to. it is now just staying more focused on what we are doing and continuing to see what we saw in the in the, in the backlog and the pipeline that I referenced in my comments. Understood. Appreciate that.

Analyst: And then on the quarter, there any particular dynamics you would call out from 1Q around the GDS decline? How much of that was consumer softness and the earlier government booking softness? Offsetting the better pipeline and deal size dynamics you called out. Or maybe perhaps was there any distraction from the GTL across the broader sales world?

Ronald W. Kisling: Yes. that is a good question. I think when you look at the decline you know, it was really driven by the softness we saw in government contracts in the first half of last year as well as the continued decline in our consumer business, which is down 21% year over year. That drove that know, impact. Particularly in the quarter, the other dynamics that know, Ronald spoke about and I mentioned is that the leading indicators that we are seeing in the quarter that convert into revenue in future quarters looked very healthy and strong. We saw DRR of 15% in the quarter.

And higher bookings on a year over year basis that I think reflect the strengthening of the business And I think it is fair to say we did not see any distraction in the in the TDS business. From the activities that were taking place on the GK transaction.

Ronald W. Hovsepian: Yeah. Nancy and I would just add I would just add a little smidge to that on what Ronald said. This additional color. When Ron referred to the declines that happened last year in the bookings on the lost contracts. As you know, it is a 12-month to 15-month cycle as we go through it. So we are just finishing feeling that first half impact from the government contract losses, and a little bit of the consumer, as Ronald said. We expected to make some of that back up with our labor based business as Ronald mentioned in his prepared comments, and I did in mine as well, I believe.

Those pieces, just got deferred on the calendar a little bit. So we still see those pieces coming as part of it, and that is why Ronald maintained the guidance as he went through the some of those numbers here. So other than that, I feel very comfortable where we are. We are right in the range that we said we would be. With just that 1 piece that we overcome. The good news is those bookings that Ronald referred to is, obviously, we get we get the benefit of that happening throughout the full year. So again, maintaining our guidance is the right way to look at the business at this early stage. Got it. I appreciate that.

And then, as you mentioned, it is nice to see the 105% spend in the DRR this quarter. I know you mentioned there is a little bit of that lag effect I was wondering how should we think about the time line towards the upward trajectory after some of those headwinds impacting the first half of 26 subside? Yes. Are you talking about the revenue trajectory? The DRR trajectory. Yeah. The DRR. DRR. Rich. And which is, like, 2. Yeah. it is all linked. Yeah.

Ronald W. Kisling: I think when we when we look at DRR, you know, we want it to be 100% or even better than that. We start to see a return. And over time, we would like to see consistent, you know, DRR, you know, 105, 107% So I think from a trajectory perspective, we are seeing progress toward where we ultimately want to be, and the focus is gonna be on maintaining and growing that DRR over time. You know, on the quarterly DRR, you know, you are gonna see some fluctuations. From quarter to quarter with the ultimate trend should be flat to up from what we saw in Q1.

Ronald W. Hovsepian: Yeah. And the programmatic piece is that build on what Ronald's saying is we put in place a couple of big changes. We redefined our model in Q3 last year and rolled that out. That has brought a very clear go to market model for us with our customers. Behind that, the programs that we put in place are around improving churn rate while improving the overall growth trajectory. Those are things that are in place in play right now, and we saw some good performance come out of that in the quarter, which is great. Rich, as part of the overall journey.

So if we can keep that kind of, work going throughout the full year, that will put us in line with the plan that we had laid out.

Analyst: Got it. Perfect. And you mentioned some of those churn initiatives. Just on the guide, you talk a little bit more about some of those business dynamics you are baking in kind of at the low end, at the top end and what the progression through the year could look like? And that kind of gives you that confidence to maintain outlook with the 1 you just saw.

Ronald W. Kisling: Yeah. So I think we talked a little bit about the dynamics in Q1, particularly some of the leading indicators, which gave us confidence that, you know, the guidance outlook on the revenue the 2088 to 04/2006, that we that the company had set at the end of February on the Q4 call. is the right way to go. I think a couple of comments I would make, you know, relative to that guidance is that guide does take into account some reflection of, you know, some level of variability and risk in the macro economy. I do not want to call that conservatism or, basically, just looking at what the environment is. It does reflect that in the business.

And so that is really kind of the thinking point is to, you know, maintaining it. I think, you know, the you know, we are still focused on, you know, the AI leverage both on the revenue you know, and the cost side. But from a-- given the leading indicators that we see, we feel that we are very on track to the plans that we had at the beginning of the year.

Analyst: Understood. And then shifting to the new Precipio platform, could you speak more about the pace of adoption relative to your internal expectations and how the upgrade rates are trending across the expanded group to 67% growth?

Ronald W. Hovsepian: Yes. Happy to. We set an internal target for the year. And we are running ahead of that target for the year. I have actually increased the target. So, obviously, we are excited about that. And as I shared with you on this call, now up to 25 new platform contracts that have been signed with current customers, primarily. Which is great because we want to make sure we protect that. That base of business. And that is helping drive that DRR in a nice way.

So the reaction in the market has been very positive to the skills management story or the skills supply chain story, and, we are fine tuning how we deliver that distinct need and what that means to the market. As it relates to business outcomes for the customer and as it relates to the technology they need to do that. So we are very pleased with what we are getting for feedback from our customers on the products as well as well as, what we are seeing in the reaction to it. So tell you the numbers and the and the reaction has been really, really good, and we will keep you posted on that as the year unfolds here.

Great. Super helpful. And then with some CFO transition, congrats, John, on the upcoming retirement, and welcome, Ronald. Wondering what the transition brings in terms of any potential changes to focus priorities or philosophy in the upcoming year? Yeah. I will let Ronald speak to if he sees anything at this early stage and in fairness to him. But everything he and I have spoken about today aligns with the plans that we had mapped out. We are gonna maintain our focus to go get that debt refinance upon closure of this. And really focus the business on growth and I am appreciative of what John did to help us get to this stage.

It was a natural break here as part of it towards his retirement. And then moving forward, really, on that core plan, that we had laid out here as a really piece of it. I am sure Ronald will make his adjustments as we get into the game further. As he sees things. But this next big lift is around the debt refinancing and really helping the company get to the next level of operationalization, in this in this simplified model, if I could say it that way. there is there is a lot of work to be done there that has not been identified, or I should not say it that way.

It has been identified, but the plans are not all in place for all of it. The work we have to do. And we spent time as a leadership team just last week on that as a group. Yeah.

Ronald W. Kisling: And the only other to add, you know, we talked extensively to you know, ahead of time, and I think in from the priorities, I think we are very much aligned Completing the GK, you know, transact transaction sets us up, I think, for a lot of opportunities to simplify the business, and you know, I want to really focus and take advantage of that simplification both in terms of the focus in our business, the focus that we are able to drive across go to market and our product organizations, but also across you know, the efficiencies we can make with a more simplified business and using that to leverage, you know, the transformation that we are doing is we are driving toward improving, you know, the revenue growth and, very much focused on adjusted EBITDA and cash flow.

Ronald W. Hovsepian: Yeah. When Ron talked about that last week at the off-site, also, the other thing that you know, struck both of us was the importance of that in the refinancing as well. Yeah. Putting that part of the work that is being done there. To highlight that as part of it, Nancy, to your question. So but at the at the very top of the waves, steady as she goes. I should say steady. Faster. Faster, faster, faster is my request from the teams.

And runs up for that challenge and I am really excited to have him here with all the background and experience that he brings to the company, to the team, and in each 1 of these areas. Because he is very engaged, and we all saw that last week as with the leadership team. Yeah.

Ronald W. Kisling: I understand. I think it is a very well-thought-out transition of or timing of completing GK, you know, sets us up for the conversations in terms of getting the debt. And I think with those 2 things addressed, really allows the focus on the transformation, dealing with the simplified business, to really drive business outcomes.

Analyst: that is it. Awesome. Appreciate the color and the thoughtful response here. that is it for me. Thanks, guys.

Ronald W. Hovsepian: Thank you, Nancy.

Ronald W. Kisling: Thank you, Nancy.

Operator: Thank you. There are no further questions at this I would like to pass the call back over to management for any closing remarks.

Ronald W. Hovsepian: Yes. This is Ronald Hovsepian. Again, very nice welcome in to Ronald for being here with us. Excited about what he will bring in his leadership and what he can do there. As I look at the quarter in the business overall, I would tell you that I am pleased with the leading and what they were pointing to.

I would have liked to have made up that, expected revenue that slid a little bit, on the labor based part of our business, the professional services and the and the coaching aspect of it, but it did not slide out of the plan And where the pipeline is right now also, as I spoke to that, was very different than how it is been here in years past in terms of the coverage and where we are. So those pieces to me give me a lot of enthusiasm for where we are going.

And then, getting the GK transaction signed was a gigantic step forward in the simplification of business and starting to really position us well for the next step of getting the debt refinancing done. And then really letting that growth start to shine through here as part of our overall journey. So, stay tuned. I look forward to our next update. And thank you for all the help. And talk to everybody soon. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.