What happened
Shares of Skillsoft (NYSE: SKIL) plummeted on Thursday, finishing the session at $2.29, down 14.9%. Meanwhile, the major indexes were up across the board for the second straight day, with the Dow Jones Industrial Average up 0.6%.
Skillsoft, an educational technology company that develops learning management system software and content, dropped following the release of its fiscal 2023 second-quarter report, and an analyst's subsequent downgrade.
So what
Skillsoft reported its earnings on Wednesday afternoon, and the results were worse than expected. For the period that ended July 31, it generated $140.5 million in revenue. That was up 27% year over year, but well shy of analysts' consensus estimate of $184 million.
It also missed on earnings, reporting a net loss of $121 million, or $0.74 per share, which was worse than the consensus prediction of a $0.16 per share loss.
There were some good signs, though. The company's subscription content bookings rose 5% year over year in the quarter, and 12% for the first half of the year. Also, its content dollar revenue retention rate, which represents subscription renewals and upgrades, was 98% over the last 12 months, up 3 percentage points. However, the global knowledge segment of its business saw bookings decline of 21% year over year in the quarter, and 17% for the fiscal first half, due in part to the recovery that segment experienced in 2021.
In addition, the company authorized a $30 million stock buyback, as CEO Jeffrey Tarr called it the "best use of capital available to us at this time."
This follows the sale of its SumTotal business in June to Cornerstone OnDemand for $200 million. SumTotal provides learning and human capital management software for highly regulated industries. Tarr said the sale of SumTotal will simplify the company's portfolio and focus it on its core business of "providing customers transformative learning experiences."
The earnings report prompted an analyst at D.A. Davidson to lower their price target for Skillsoft from $7 per share to $3 per share. A couple of days ago, an analyst at B. Riley dropped their price target from $11 per share to $6 per share.
Now what
On top of the earnings and revenue misses, the market reacted negatively to Skillsoft's guidance for the rest of the fiscal year. In the quarterly report, management reduced its outlook ranges to reflect macroeconomic uncertainty, the sale of SumTotal, foreign exchange rate impacts, and the performance of the global knowledge business.
Bookings guidance was adjusted down to the $580 million to $615 million range, from a previous range of $790 to $825 million. Adjusted revenue guidance -- previously $765 million to $790 million -- was reduced to the $545 million to $580 million range, while its forecast for adjusted EBITDA was dropped to the $105 million to $125 million range, down from $167 million.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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