Skillsoft reported Q1 FY2027 results on June 9 - revenue fell 4.7% to $94.5 million, net loss widened to $43.1 million - and the market got exactly what it expected: a declining business burning cash.
The only problem is the market is measuring the wrong thing. Revenue has been falling for years, from $727 million in FY2023 to $513 million in FY2026. That decline is already in the price. The real question is what happens when the company finishes amputating the division responsible for most of it.
The variable swap: Revenue decline ≠ EBITDA decline
Adjusted EBITDA - earnings before interest, taxes, depreciation, and amortization, the closest proxy for cash a company generates from operations - came in flat year-over-year at $26.6 million despite revenue falling. On a full-year basis, Skillsoft is guiding for $108 million to $116 million in adjusted EBITDA for FY2027. Revenue guidance sits at $388 million to $406 million - a further decline, yes, but one that will leave a dramatically higher-margin business behind.
The math is simple. In FY2026, $513 million in revenue produced $110 million in adjusted EBITDA, or roughly a 21.4% margin. At the midpoint of FY2027 guidance ($397 million revenue, $112 million EBITDA), the margin jumps to 28.2%. That is operating leverage from removal, not from growth. The company doesn't need top-line acceleration to improve profitability - it needs to finish cutting out what doesn't work.
Global Knowledge was the problem. It's already on its way out.
Global Knowledge, Skillsoft's instructor-led training unit, was bleeding. Revenue fell 18% to $28 million in the most recent quarter, and the segment reported a net loss of $41 million for the period. It was a declining, capital-intensive business attached to a software company that doesn't need it.
Skillsoft announced in May that it sold Global Knowledge to an affiliate of Enduring Ventures for approximately $20 million total - $10 million in initial consideration, subject to adjustments, plus $10 million deferred. The deal removes the drag and returns cash. When $28 million in quarterly revenue that's losing money disappears from the topline, the remaining revenue base becomes more profitable per dollar. That's exactly what the FY2027 EBITDA guidance is pricing in.
Debt is the real risk - but the trajectory matters
Total net debt stands at $457 million, down from $481 million in the prior quarter. S&P Global Ratings put Skillsoft on a negative outlook in February citing leverage just under 8x. That is the real overhang in the stock, not revenue decline.
But here's what the bear narrative misses: debt is moving in the right direction. The company is guiding for $14 million to $22 million in free cash flow for FY2027. Add the $20 million from the GK sale, and the trajectory points toward de-leveraging, not deeper distress. The 8x leverage number looks different if you're starting from $457 million and cash flow plus asset sales are cutting into it, versus if you're staring at a static balance sheet.
The valuation disconnect
Skillsoft stock trades around $7.00, with a market cap near $62 million. That puts the stock at approximately 0.16x forward revenue on FY2027 guidance. On adjusted EBITDA at the midpoint of guidance, the market cap is roughly 0.55x - half of what the business generates in cash earnings before interest and principal.
You do not get that kind of valuation compression from a business that's fundamentally broken. You get it from a business where the decline has a visible end date, the math already works on the remaining operations, and the market refuses to look past the topline.
The catalyst and the break condition
The GK sale closing is the near-term catalyst. Once it closes and the $20 million lands, the balance sheet improves, the margin accretion is confirmed, and the narrative shifts from "declining revenue" to "what does the pure-play look like." After that, each quarter where revenue stabilizes and EBITDA continues to expand is a re-rating checkmark.
The break condition is simple: if GK closes, debt continues to come down, and the remaining business delivers on the $108M–$116M EBITDA guidance, the stock has no reason to stay at 0.5x EBITDA. A company with stable adjusted EBITDA in the $110 million range and a clear path to de-leveraging does not trade at $62 million.
The risk
The key risk is the debt overhang itself. At $457 million, even steady paydown requires execution. If revenue declines accelerate beyond guidance or if the GK sale encounters delay, the leverage ratio stays pinned and the stock stays cheap for longer. A major economic downturn that hits enterprise learning budgets would widen the gap further.
But that's a known risk with a visible trajectory, not a hidden structural failure.
The number
At roughly 0.55x FY2027 adjusted EBITDA, Skillsoft is trading at a fraction of the cash earnings it expects to generate. The revenue story is over - the company already told you it's shrinking. The earnings power story is just beginning, once the bleeding division is gone and the debt starts coming down faster. The market is still pricing the old narrative. The math already moved on.