Q3 2023 Skillsoft Corp Earnings Call
[music].
Hello, and welcome to the skill swept to third quarter 2023 financial results conference call and webcast. At this time all participants are in a listen only mode. If anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to turn the call.
Over to Eric Boyer Senior Vice President head of Investor Relations. Please go ahead Sir.
Good afternoon, and welcome to still soft third quarter fiscal 2023 earnings call. After market close we issued our Q3 earnings press release posted supplemental materials to the Investor Relations website. Today's call will contain forward looking statements that accompanies this outlook and expectations, including statements concerning financial and business trends, our expected future business and financial.
Performance.
And Apple <unk>.
These forward looking statements all statements that are not historical facts reflect management's beliefs and predictions as of today and therefore are subject to risks and uncertainties that could cause actual results to differ materially from expectations for discussion of material risks and other important factors that could affect our actual results. Please refer to the risks described in the safe Harbor discussion.
Company's SEC filings.
During the call. We will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles GAAP requires accounting periods before and after the merger and these back on June 11, 2021 would be separating the predecessor and successor periods to reflect the change in ownership and that variability is different.
Investment basis.
In addition, global large activities only reflected in the GAAP financial statements. After June 11 references on this call to pro forma results refer to our results have been prepared percentage reflects historical periods as a skull global knowledge and Coke caffeine convergence every one.
A reconciliation of non-GAAP financial measures include today's commentary and in the supplemental materials to the most directly comparable GAAP financial measures as well as how we define these metrics and other metrics are.
Our earnings press release, which has been furnished to the SEC and also available on our website at Www Dot Skillsoft.
After our prepared remarks, Jeff Tarr, CEO and rich Walker, our CFO to take questions with that it's my pleasure to turn the call over to Jeff.
Thanks, Eric.
Good afternoon, and thank you all for joining us.
Today, I'll provide some financial and operational commentary on the quarter and then turn the call over to rich Walker to cover our financial results in detail.
I'm very grateful that rich has agreed to take on the CFO role.
Richard has been involved in skillsoft since before the company's return to public markets.
Served as our chief strategy and corporate development Officer and was previously the CFO of two public companies, including IHS, where we work together.
Before turning to the business I also want to thank Gary for his contributions to our company and its commitment to a smooth transition.
Q3 results were in line with our expectations and we're pleased to reaffirm our full year guidance.
Importantly, we successfully stabilized our global knowledge instructor led training or IL tea business.
Delivering 3% sequential bookings growth.
While the segment was down year over year in the quarter due to reduced subsidies by one large partner with.
We've seen healthy growth in other products within the segment.
With a new general manager with deep experience and instructor led training reporting directly to me, we are cautiously optimistic and the potential to deliver continued progress.
We also remain focused on integrating instructor led training into relevant subscription offerings and continue to believe it can be a meaningful differentiator.
Turning to our core Skillsoft content segment, we believe the best way to look at bookings growth is on a trailing 12 month basis.
This metric was up 5% in constant currency, driven by customer wins and cross sell and upsell success with large enterprises.
That said, our Skillsoft content business was down in the quarter due primarily to a downgrade by one account.
Despite the general macro headwinds, we continue to expect solid growth in Q4, which generally represents approximately half of our subscription bookings.
Finally, turning to <unk> as a reminder, we acquired the business earlier in the year to establish a leadership position in tech and Dev where skills gaps are most acute.
Oh Kadhum means one of the strongest brands and tech and Dev learning and we're still early in realizing the potential of the acquisition.
<unk> bookings were up 6% and revenue was up 16% in constant currency.
We believe our revenue growth and traffic are outpacing other BDC competitors.
We also continue to see early traction cross selling coat cat image for enterprise customers.
It is important to note that we had a slow start to the quarter due to a promotion that depressed short term results in return for longer term benefit.
And returned the business to double digit bookings growth on a constant currency basis in October .
We've learned a lot during our first two quarters since acquiring codecademy that will help us achieve what we believe to be a substantial cross sell opportunity.
We're in discussions with more than 100 enterprise customers regarding Codecademy and have already cross sold the offering into some of the world's largest and most recognizable brands and tech retail pharma and professional services.
Given the impact of currency exchange rates wage inflation and slower economic growth, we've been relentlessly focused on managing our cost structure and I'm grateful to our team members for making numerous difficult decisions doing more with less and shrinking our employee base to attrition reductions in staffing and it.
Disciplined approach to hiring.
We're fortunate to have an important base of operations in India that has helped us manage our labor costs.
Managing our costs will be an ongoing focus while continuing to make selective investments in growth.
Overall, I'm optimistic about the future, we serve a large and growing market and an important purpose propelling organizations and people to grow together through transformational learning experiences.
Through organic investments and acquisition, we've built a community of more than 80 million learners, who we serve with our highly differentiated suite of capabilities are.
Our content covers leadership business skills technology skills in compliance.
We leverage our wide array of modalities, including micro videos hands on learning assessments coaching and mentoring instructor led training and blockchain enabled batches.
We deliver our content to a flexible AI driven learning experience platform.
And we add additional value to our clients with a team of nearly 200 instructional design professionals and systems integrators.
Together, we believe no one is better able to deliver on the complex workforce transformation needs of the world's most demanding and sophisticated customers, including approximately 70% of the fortune 1000.
In Q3, we continued to extend our tech and Dev offerings with the release of our cloud career journey, which helps learners achieve proficiency in cloud platforms, such as AWS and Azure with hands on practice, an instructor led classes.
The strength of our instructor led training was recognized by AWS as their 2022 training partner of the year in North America.
Similar recognition was awarded the Skillsoft by New Tonics, Palo Alto Red hat, Vmware and EC Council.
We released new code of conduct training to the market featuring 12 engaging scenarios that help our learners navigate the complexities of highly nuanced situations.
We released the first editions of our newly refreshed business skills courses, featuring real world perspectives from our leadership coaches and topics such as problem solving critical thinking and wellness.
These courses have been well received by learners with N. P. S. In excess of 60 and are designed for the way people learn online.
We continue to expand our local language coverage and have recently released an AI powered automation caption capability that makes our content available in that doesn't languages.
We also continue to expand our assessments offerings and add new and compelling courses to our content collection focused on helping our customers deliver on their most important reskilling upskilling and workforce transformation initiatives.
As a result of these investments in content and platform, we're seeing strength in our most important learner metrics at the end of Q3 on a year over year basis monthly active users are up 23% completed courses are up 19% and badges issued are also up 19%.
We're encouraged by these strong positive trends and believe their evidenced that learners are embracing our unique science based approach to Reskilling and upskilling.
Importantly, we're in the early innings of integrating our capabilities to create a new more absorbing and connected way to learn online.
We're excited by the potential of what we are creating.
We have also largely completed our go to market transformation.
Hired key talent made investments in tools and technology and realigned our sales force to a coverage model that better enables cross sell upsell and acquiring new logos.
We also redesigned compensation to drive higher levels of performance.
This transformation was predictably disruptive, but now better positions us for future growth and value creation.
In Q3. Some notable wins include two large U S government agencies large French energy company, a global hospitality leader and a major media Corporation.
Finally, we're pleased to have released our first annual impact report entitled living our values, our responsible business for a sustainable future.
This report serves as an important milestone in our ESG journey.
During our first five quarters as a public company, we've made much progress transforming skillsoft into a business that can deliver growth and margin expansion over the long term.
We acquired three businesses and divested another have been executing a complex salesforce transformation and made important investments in content and platform.
Returned our Skillsoft content segment to growth on an LTM basis and stabilized our instructor led training segment on a sequential basis.
Despite a challenging macro environment, we're entering our important Q4 and next year with confidence and look forward to updating you on our progress and with that I'll turn it over to rich.
Thanks, Jeff and welcome everyone.
Wanted to start by saying how excited I am to be able to take on the role of Chief Financial Officer.
Gary has built a strong finance team, which I've been working with closely already and this has made for a seamless transition.
I will now begin with the summary of Q3 results before turning to our thoughts on the remainder of the year.
The prior year comparisons will be presented on a pro forma basis.
Yes, Gil saw global knowledge, and Codecademy had been merged and their fiscal quarters had been Hawaii.
And on January 31, 2020.
Additionally, due to the sum total divestiture pro forma comparisons exclude sum total for all periods.
Before I get into the financials I want to provide just a few high level thoughts on the skill soft financial model as it has gone through changes over the past year due to the acquisitions and divestitures skills.
<unk> now has approximately 70% of its revenue from the content business, which is primarily subscription based with a large portion there are multiyear contracts.
This part of the business as a SaaS like business with strong operating leverage and low capital intensity.
The seasonality of the business remains largely the same with approximately half of our content bookings in the fourth quarter.
Therefore, looking at the business on a quarterly basis can be difficult as such we try to focus on the last 12 months trends as a more useful measure.
The remaining 30% of the business is our global knowledge or instructor led training segment.
As transactional and lower margin over time, we expect the content segment to grow more quickly, which should drive margin expansion.
Now moving on to the Q3 results.
Bookings for the total company for the third quarter were $133 million down, 13% and down 9% on a constant currency basis, which is due largely to declines in our lower margin transactional business and the downgrade of a large customer that Jeff referenced.
Tom.
We continue to believe our subscription content bookings are on pace to have a solid end to this year.
Probably as a result of our realignment efforts and incremental focus our Iot bookings grew sequentially.
On a reported and a constant currency basis.
<unk> bookings in the third quarter were $85 million.
Down, 6% and down 4% in constant currency due to the aforementioned downgrade of one larger accounts.
Due to the smaller contribution in our first three quarters does not take much to move our quarterly year over year growth rate in either direction.
On an LTM basis content bookings growth was 5% in constant currency.
In the third quarter Codecademy bookings grew 6% on a constant currency basis and.
And is included in our content segment.
We continued to make progress closing more enterprise deals in Q3 and are encouraged by the success in building our pipeline for this product.
We would expect to report material progress in cross sell bookings in the fourth quarter, which is our heaviest renewal period and when we sign the bulk of cross sell activity.
Bookings for ion Geo in the third quarter were $48 million.
23% and down 16% in constant currency.
On a constant currency basis, the year to date decline was due primarily to changes.
Ranges in the training program with two large technology partners, one of which has recovered in the quarter.
We have also largely stabilized the sales efforts within our Iot business and expected productivity of recent sales hires to continue to improve.
Turning to revenue.
GAAP revenue was $139 million in the quarter down, 8% and down 3% on a constant currency basis, we are no longer reporting adjusted gross revenue to conform with GAAP accounting, which is net of reseller fees reset.
Reseller fees in the quarter were $7 million.
GAAP revenue for the Skillsoft content segment in Q3 was $98 million, which was flat and up 3% in constant currency.
GAAP revenue growth for code Academy, which is included in the content segment was up 12% and up 16% on a constant currency basis.
Our quarterly <unk> was 96% and on an LTM basis, it held steady at 98%.
Q3, GAAP revenue for our Iot business was $41 million.
Down, 22% and down 15% in constant currency.
The decline was due to lower prior quarter than any quarter bookings as these bookings typically convert to revenue within two quarters.
Moving on to profitability.
As we've mentioned on previous calls when comparing adjusted EBITDA year over year, you need to also consider the increase in public company costs as we move through the first year as a public company.
Accordingly, Q3, adjusted EBITDA was $28 million down $6 million, a decrease of 15% compared to last year and down 8% in constant currency adjusted EBITDA margin for the quarter was 21% down approximately 160 <unk>.
Basis points from the prior year.
Our GAAP net loss from continuing operations was $528 million for the quarter, which included an approximate $571 million impairment of goodwill and intangible costs. Our adjusted net loss was $31 million.
Yeah.
Moving on to capital allocation at the end of Q3, we ended the quarter with $175 million of cash on the balance sheet and pro forma net leverage of four six times, which includes the negative contribution of the code Academy.
For periods, which we did not own.
On a reported basis net leverage was four one times.
As previously mentioned, we closed the sum total transaction in mid August .
Net cash proceeds after all fees and other adjustments were approximately $175 million.
We paid down $31 million of debt in the quarter, yes.
We also repurchased 645000 shares.
Our trading window was cut short due to information that is now been shared.
Moving forward, we expect to continuously weigh the benefits of reducing debt.
Share repurchase based on market conditions.
We are reaffirming our prior outlook, however, as I mentioned earlier.
Moving to our GAAP revenue presentation to conform to GAAP accounting.
Due to a change in the fundamentals of the business as such our GAAP revenue outlook is now $520 million to $550 million and we are trending above the midpoint of the range or booking range remains $580 million to $615 million or.
The adjusted EBITDA range remains a $105 million to $125 million and we are trending towards the lower end of the range due primarily to revenue mix with that I'll turn the call back over to Jeff.
Thank you all for joining our call.
While there is uncertainty in today's operating environment. We believe our approach provides unique benefits to organizations and their employees.
By optimizing our solutions for how people learn online and aligning with the strategies of our enterprise customers. We believe we are uniquely positioned to deliver on the upskilling reskilling and workforce transformation needs the most complex and demanding organizations.
Operator, please open the call for questions.
Certainly we will now be conducting a question answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he'd like to move your question from the queue.
For participants using speaker equipment may be necessary to pick up your handset before pressing star one one moment. Please while we poll for questions. Our first question today is coming from Raimo <unk> from Barclays. Your line is that a lot.
Hi, This is Sean Mcmanus on for Raimo, Thanks for taking our questions.
Wanted to first ask about the core content business. This quarter was the first time in a while that we saw negative bookings girls here you discussed the reduction in the quarter and my question is what gives you confidence that this isn't isolated to internet as you approach the large Q4 renewal period.
Thanks, Paul.
Sure I think as you pointed out the quarter, we feel was an anomaly. It was due to one large customer that was it.
Experiencing severe financial pressures and downgraded quite significantly their business with us we really don't have many accounts of this size and we really don't have any significant revenue concentration at all so the loss of an account that is neighborhood, 1% of revenue was.
Really unusual event as we look at the <unk>.
Quarter going forward, we're one month into the quarter.
We can see how large our pipeline is how much business. We closed we've closed approximately 60% of our quarter and that's ahead of where it was last year. This time. So we feel really good about that we feel really good about the pipeline and so despite the fact that the economy is a little shaky.
Feel good about how we're teed up for our most important quarter.
Got it. Thank you and then second for Richard for first Congratulates. Congratulations on your new role I wanted to ask just a broad question on how you feel your guidance philosophy is.
Chip too.
Previous is there any changes to call out there. Thanks.
Thanks for the question in the in the remarks, I don't have a different viewpoint and how we think about guidance.
We only give annual guidance I think it's so critically tied to how we are.
Finish our forward planning for the coming year and that's informed by how we finished the quarter in this case our fourth quarter.
We are.
Trying to make sure that when we guide, we're giving consistent guiding metrics.
Personally when I look at bookings and think if theres not more relevant metrics, perhaps looking at total bookings the lifetime value and then showing a backlog against that but short of looking at bookings guidance no change in philosophy at all.
Got it thank you.
Thank you next question today is coming from Tom Silver.
From Citi. Your line is now live.
Oh, yeah good evening.
So thank you very much for taking the question.
Yeah, I think that's the one.
To go back to that.
But you're quite clear about.
The driver of that one account.
Exactly.
Sensitivity to the cycle I was just wondering what you can control.
What does that then they.
Yeah.
Outlook for smaller companies.
Two ones international but the U S.
Any color on that.
Let's say that of course.
Yeah.
It's around sort of broad cyclicality itself.
Scott with that my follow up.
Thanks, So I was a little broken up so if I didn't get the question exactly right. Just let me know, but I think what you're asking is are we seeing segments of customers that are performing better or worse than others or than we've seen historically.
And you asked specifically about SMB, so historically SMB has.
Perform has had lower retention rates than our large enterprise. So we give you.
Dollar retention rate you should anticipate our large enterprise customers are meaningfully outperforming that blended rate and our SMB customers are underperforming that blended rate.
We haven't seen significant change in that other than the fact that our mix has shifted and we have less exposure to smbs and we had a year ago. So at this point, we consider roughly about 20% of our enterprise.
Of our customer base, rather to be SMB.
And I hope that answers the question and we would expect them to cycle that could continue to see more and more pressure on F&B less pressure on large enterprise when we look at the business through the lens of geography.
Biggest impact we see is the impact of currency, which has been a quite substantial headwind given that we're a global business and do have exposure outside the U S. But other than that nothing nothing really new were remarkable to report.
Yeah.
Okay and then.
Cash.
You said it talks about the well you said it.
The buyback could be.
Couple of Katanga.
Can you just sort of once again sort of outline the priorities for cash usage.
When they came on and especially in the context of places.
Rising interest rates.
And therefore some hiring.
Yeah.
Great it's rich.
I think it's pretty simple.
Given the magnitude of fourth quarter, we've consistently signaled that as our confidence grows with that quarter will be informed as to what we want to do from a capital allocation.
<unk>.
Second.
If if juxtaposing between debt and share repurchase on the debt side.
I think the simple answer is we are definitely going to do something it's a question of when and how much.
Particularly as exacerbated by the current rate environment, even since our second quarter call Theres been two rate increases of 150 basis points. So when you put a very specific disciplined financial analysis.
Attending to the capital structure and the debt profile is probably an increasingly higher priority for us we did announce on a.
Proved up to a $30 million share repurchase we only executed.
Less than $2 million against that and that plan is still in place and we'll continue to evaluate share buybacks.
That's very clear thank you very much.
Thank you next question is coming from Raj Sharma from B Riley. Your line is now live.
Okay.
Hi, Thank you for taking my questions I wanted to.
Address.
A few things just in terms of.
The global knowledge.
<unk> uptake.
Uptake sequentially do you see the new.
Do you.
Expect to see that.
Continuing.
Stabilization slash increase for the next several quarters.
Hum.
And then I have a similar question on quota Kadhum me just in terms of the growth in the metrics of the pad the product uptake.
If you could give some color on that.
Sure.
We are really pleased that we've been able to stabilize the global knowledge business and we also have a much better understanding of that business with each passing quarter. So I feel good about it.
Continued stabilization for the foreseeable future now keep in mind, it's a transactional business. So we don't have.
Visibility on that business is more limited than our subscription business, but with that said from what I can see today. It is stable and that's good news.
I understand why it's stable.
A couple of key points first of all.
The entirety of the year over year decline in that business can be attributed to two partners on a year to date basis and one partner in the quarter those partners reduce their subsidies in other words, they subsidize the customer in purchasing training and when they changed their subs sub.
The model that reduced consumption.
That is largely behind us and we understand it very deeply today the rest of the business has actually been growing so that's good news and that's where we get our confidence that this business is stable at this point in time.
Great.
And then on.
Uncoated Cadillac.
The growth metrics and product uptake.
And color on that and whether you're expecting to reach a breakeven.
The following 12 months as you would expect it over here.
Yes, certainly so let's talk about code Academy through the lens of code C code to be the peak.
<unk> B to C is growing at quite a slow start in the quarter, but then reaccelerate as as the quarter progressed and into the current quarter. So we feel good about the BDC business as sort of at this point to a high single digit low double digit grower on a constant currency basis.
Yes.
If we look and by the way I'll point out well that is below what we thought when we acquired the business. It is above where we believe most of our competitors are performing so we believe that we're taking share and code b to C.
If we look at the feet of beef side of the business, we're getting good traction with some very sophisticated customers I'm talking fortune 50 customers of real scale and sophistication taking codecademy. That's the good news sales cycles have been a little longer than we expected and I.
Believe that's largely due to just caution that it's with all customers in this economy, but we are seeing uptick we are talking to more than 100 customers. Most of them very large companies about code and feel very good about our ability over time to achieve the original expectations we set on.
On the PDP side of things.
Got it.
And then just.
I just wanted to clarify on the skills of the content business am I understanding this correctly that you expect a good bookings quarter.
That's and that's largely obviously the new customers, but in terms of just one downgrades you had from a large enterprise you don't expect that that is a one off.
Event in your minds, and you Shouldnt expect to see that.
Occurring consistently, especially since you say the large enterprises are going to perform better than the than the SMB, despite a potentially shaky economy.
Is that.
We have very few customers of that size and so we have no reason to believe there's anything like that hanging out in the foreseeable future. I'd also say our organization has learned from that experience and that's another reason why I feel that we're well positioned going forward to not have that kind of <unk>.
That.
Again, and then anywhere in the foreseeable future if you'll look through that one event the metrics in the business in the quarter were pretty consistent with our LTM metrics. So that's another way to look at the business and really get some confidence around around Q4.
Okay. Thank you al. Thank you for answering my questions I'll take this offline. Thanks.
Thank you.
Your next question today is coming from Ken Wong from Oppenheimer. Your line is now a lot.
Hi, This is Nancy on for Ken Thanks for taking our questions I have two the first one.
It's a bit more on the cost savings here do you see more areas or levers you can pull to further reduce opex going forward.
And have the full effect of prior cost savings hit the P&L yet.
Yes.
So why don't I start and then rich may add something.
Taking a very disciplined approach to our cost structure going into Q4 and next year I'm really pleased with how the team is approaching approaching that in our our head count we've been managing that very tightly actually head count was down sequentially, we've been focused on offshoring.
Where that makes sense.
And I expect that discipline too.
To continue rich anything to add.
I'd, maybe add only the context, we did in the first 15 months spring or companies together and divest or another so we're constantly on a journey on a continuum of degrees of integration and as we continue to do that will drive further efficiencies out of the business.
And great companies do this all the time and part of our culture is continually an unrelentingly to look at how we're organized spans and layers and I think that the.
The quick response around our Iot business is evidence of organizing smartly and driving efficiencies in the process.
Got it that makes sense very helpful. Thank you and then my second question I believe you mentioned previously you are increasing your inside sales capacity for global knowledge, specifically can we get an update on that alright, that's great doctors now or is there some market share.
The organization is largely staff, that's a continuous effort because theres always turnover and functions like that and in terms of fully productive. The answers now I mean are people that are hired take generally 12 to 24 months to be fully productive.
One of the reasons, we feel good about the future of this business. We made a lot of changes to our sales force not just within our instructor led training business, our global knowledge, but the subscription business too.
And we hired a lot of great talent, and we expect that for that talent to be fully productive will take 12 to 24 months. So we won't achieve full productivity on those hires until next year.
Yes.
Thank you.
Thank you next question today is coming from Robert Simmons from D. A Davidson your line is now live.
Hey, thanks for taking our questions.
First what changes are you looking at it.
As CFO rich is it basically you're going to be essentially the same kind of a push statements you already touched on guidance, but I'm, just kind of thinking kind of operationally and then how much of your time right. Now is just put on more CFO type activities versus your old role strategy and development and I would expect that to evolve over the next few quarters.
Yeah, I think thanks for the question Robert I'm spending.
A lot of time on capital allocation, not only the debt and share repurchase that we spoke to but as we look at the portfolio make sure we're <unk>.
Driving the investment to our highest growth more profitable areas of the business.
That address your second question I'm sorry.
In almost all of my time on that.
Have a good team a continuity of team in our business and corporate development and our transformational office, we're not in an environment now where we're acquisitive will continue to evaluate partnerships as they may make sense, but that's not consuming my time minus entirely for.
Just on driving more efficiencies productivity and good smart disciplined capital allocation.
Got it and then global knowledge transitioned to subscription.
Could you give us how that's going and you can have recently alluded to it but I can't give any more details or color would be great.
So I don't want to overstate that it is a transactional business and it's not going to see.
Suddenly in a remarkably become a subscription business. So we see the subscription opportunity on the margin.
And we see this we see the Iot capability as a differentiator for our subscription business. So for example, we've included the ILP and.
In our growing suite of career journeys those career journeys blend all of our capabilities to deliver a really immersive experience.
Really transformative experience to our learners and an experienced that's aligned with the strategies of our customers regardless of what the topic area is whether its business skills leadership technology all of the above.
And leveraging all of our modalities, including Iot and we see that as a source of future growth.
But beyond that the core <unk> business is transactional in nature and will likely continue to be.
Got it that makes sense and then so you touched on this or are you talking about the code Academy, but.
What are you seeing in terms of changes in your sales cycles for.
For the rest of the business.
How much longer are they getting are you seeing deal compression or a breakup.
Any color there would be helpful.
We are seeing sales cycles prolong.
Maybe six to nine months to more than nine to 12 months. These are larger transactions with big sophisticated companies.
Everybody is watching their budgets. These days so we're adapting to that and you see that in our performance you see it in our guidance and and that we.
We should assume that continues for the foreseeable future with that said Reskilling upskilling workforce transformation remain critical imperatives. We also have a labor shortage and in certain key roles and employees are looking increasingly development their own develop.
That's the reason they stay with companies. So I believe we're well positioned. This is this is an increasingly critical service.
Inside the enterprise, it's just it just takes a little longer to close new business or upsell.
Got it thank you very much.
Yeah.
Next question is coming from Robin <unk> from Piper Sandler Your line is now live.
Hi.
Thanks for taking my question I just wanted to follow up on some of the commentary you just made on the.
Sort of overall demand environment.
You indicated you know on one hand, you have some of the data cycles, taking longer and from my own checks that have done an enterprise spend it.
It looks like 'twenty 'twenty three budget.
Budgets will likely come in pressured like all of our overall attack education.
I'm just kind of overall.
It looks like kind of spending will be a little bit more qualitative in 'twenty versus <unk> 22, based on initial checks and and while I fully appreciate that.
But just have not yet been finalized that's kind of.
How things are looking.
But on the other hand it also it looks like that is you know pretty.
Pretty good demand for kind of a pretty good demand that youre seeing can you just kind of.
And I have great insight to those right because you'll have budgets coming in but it feels like.
The demand environment for us because it's all still seems quite.
Quite healthy.
Yeah.
Thanks for the question we see.
A critical need for what we do.
The key to growing in an environment like this and growing profitably, we believe us to be really smart about segmentation really understanding.
Where where we can win where we have a high likelihood to win where we can grow and aligning our products and our packaging and our pricing to those segments. So we're hard at work.
Doing that hard work to make sure that we can deliver the best possible outcome next year, the environment's a reality.
And the critical need for what we do is a reality to when we believe we have a really unique offering we are a player with deep enterprise heritage and the largest enterprise customer base, we have a tremendous breadth of content. We are the one player that's deep in.
Allergy business skills leadership skills and compliance we have a tremendous breadth of modalities that allows us to deliver a truly transformational experience to our learners and we've designed our product as a content creator for the way people learn online to debt for example.
Large percentages of the workforce are mobile they don't have laptops or even tablets theyre working on mobile phones, and we are optimized with our micro learning approach for that kind of delivery. We believe this the value that we deliver that we deliver positions us in a really unique way and we're going to see.
That opportunity as the quarters progress.
Uh huh.
That's helpful.
On pricing right.
Yes.
Some.
So you'd be looking to.
Keep kind of volumes tend to keep keep in our business are healthy and growing with yodlee.
Are you seeing any pressure on on on unit pricing.
Well I think in this environment.
We always we often end up in those kinds of conversations we try to move them to be conversations about value and ROI and we have really compelling ROI data, including a study we just did with Forrester on our ROI, which is really <unk>.
Quite powerful so we're equipped to have those conversations the other important tool is to have clear segmentation and thinking about pricing and packaging. There is a segment of the market that sees learning as a check box and we generally don't serve that part of the market well, maybe we need to play there.
We tend to play and win where there is a workforce transformation imperative and there is a need to get employees from eight point b.
For example from.
From hire to billable or re skilling of cohort for a project or develop from development people to their first promotion to people leader.
That's where we win and.
We intend to get better and better at that and extend our lead.
Perfect and if I can just get one more and.
It's been about a year.
It's until they're not having to code.
Kodak.
If you could provide any sort of update on sort of how our business on that side has gone I mean I would assume.
The business is a fully merged.
That'd be keeping full.
This creates a drag of Q1 growth rates.
How is postponed at academy has that been.
<unk>.
Been a good acquisition about its kind of help you land some new deals.
Is growth accelerating in any sort of updates on court academia would be.
It would be super helpful.
Well, we're a little more than two quarters into our period of ownership. So while we announced last year that the starting gun really went off this year and I feel good about the progress.
I should say first of all we operate the business.
Thats been operated before the <unk> team has a tremendous amount of autonomy to grow their business.
They're really good at it and I believe they are outperforming the competition in that particular segment. That's the BDC side on the <unk> side. We're just getting started sales cycles or 969 12 months, we've closed our first <unk>.
Deals with very large customers who've got about two dozen very large enterprise.
Customers that have signed we've got a pipeline of more than 100 customers of scale that we're talking to and I feel good about where we are in the progress that we're making in terms of being able to tease out the various costs. We are integrating a lot of the back office cost structure. So.
We don't report.
Bottom line for Codecademy, it's not a separate reportable segment, but there was a question I neglected to ask earlier and I think you're asking that to our we roughly on track to be roughly breakeven in that business next year.
As best as we can tell yes. The fact is that.
There is there has been a substantial integration of back office and so it's hard to break that out but I feel were roughly on the trajectory that we said at that time with that transaction.
Okay perfect.
Thank you for the for the <unk>.
Those answers I appreciate it.
Thank you.
Thank you we reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.
Super. Thank you very much first of all I'd like to thank the entire skill soft team around the globe. This is a challenging operating environment and I'm pleased with the way. The team is stepping up to that challenge and the opportunity ahead. I also want to thank all of the analysts who are on this call and to follow our business we don't.
<unk> for granite.
Greatly appreciate all the hard work that you do to follow our company and to all of our shareowners. Thank you very much we are deeply committed to delivering a return and in many ways. We're just getting started on the operational execution of our vision that we feel is very big and very important and we will make a difference so.
Very much we look forward to keeping you posted.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.