Operator: Thank you. Next question today is coming from Robert Simmons from D.A. Davidson. Your line is now live.
Robert Simmons: Hey, thanks for taking our questions. I guess, first, what changes are you looking as CFO, Rich? Is it basically going to be essentially the same kind of approach to things? You already touched on guidance, but I’m thinking kind of operationally. And then how much of your time right now is spent on more CFO-type activities versus your old role of strategy and development and how do you expect that to evolve over the next few quarters?
Rich Walker: Yes, 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, we make sure we’re driving the investment to our highest growth, more profitable areas of the business. And that address your second question. I’m spending 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. We’ll continue to evaluate partnerships as they make sense, but that’s not consuming my time. Mine is entirely focused on driving more efficiencies, productivity and good, smart, disciplined capital allocation.
Robert Simmons: Got it. And then on the Global Knowledge transition to Subscription, can you give us an update on how that’s going? You have briefly alluded to it, but any more detailed color would be great.
Jeff Tarr: So I don’t want to overstate that. It is a transactional business, and it’s not going to suddenly and remarkably become a subscription business. So we see the subscription opportunity on the margin, and we see the ILT capability as a differentiator for our subscription business. So for example, we’ve included ILT 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 experience that’s aligned with the strategies of our customers regardless of what the topic area is, whether it’s business skills, leadership, technology, all of the above and leveraging all of our modalities, including ILT, and we see that as a source of future growth. But beyond that, the core ILT business is transactional in nature and will likely continue to be.
Robert Simmons: Got it. That makes sense. And then so you touched on this or you talked about this for Codecademy. But what are you seeing in terms of changes in your sales cycles for the rest of the business? How much longer are they getting? Are you seeing deal compression or breakup? Any kind of color there would be helpful?
Jeff Tarr: We are seeing sales cycles prolong from maybe six to nine months to more nine to 12 months. These are larger transactions with big sophisticated companies. And 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 that’s €“ 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 in certain key roles, and employees are looking increasingly to development, their own development as a reason they stay with companies. So I believe we’re well positioned. This is an increasingly critical service inside the enterprise. It just takes a little longer to close new business or upsell.
Robert Simmons: Got it. Thank you very much.
Operator: Thank you. Next question is coming from Arvind Ramnani from Piper Sandler. Your line is now live.
Arvind Ramnani: Hi. Thanks for taking my question. Yes, I just wanted to follow-up on some of the comments you just made on the sort of overall demand environment. You indicated on one hand, you have some of the deal cycles that are taking longer. And from my own checks that I’ve done on enterprise spend, it looks like 2023 budgets will likely come in pressured. Like overall, tech, education. I mean just kind of overall, it looks like kind of spending will be a little bit more curtailed in 2023 versus 2022 based on initial checks. And while I fully appreciate that budgets have not yet been finalized, that’s kind of where €“ how things are looking. But on the other hand, it also looks like there’s pretty good demand for €“ kind of pretty good demand that you’re seeing. Can you just kind of help reconcile those, right, because you have budgets coming in, but it feels like the demand environment for Skillsoft still seems quite healthy.
Jeff Tarr: Yes. 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 is to be really smart about segmentation, really understanding 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 is a reality and the critical need for what we do is a reality too. And 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 technology, 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’re €“ we’ve designed our product as a content creator for the way people learn online today. For example, large percentages of the workforce are mobile. They don’t have laptops or even tablets. They’re 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 positions us in a really unique way, and we’re going to seize that opportunity as the quarters progress.
Arvind Ramnani: That’s helpful. And just on pricing, right, like as some of your clients maybe looking to keep kind of volumes and to keep kind of business healthy and growing with you all, are you seeing any pressure on unit pricing?
Jeff Tarr: 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 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’s a workforce transformation imperative and there’s a need to get employees from point A to point B.
So for example, from hire to billable or reskilling a cohort for a project or develop from development people to their first promotion to people leader. Like that’s where we win, and we intend to get better and better at that and extend our lead.
