Earnings Call Transcript - SKIL Q1 2023

Operator, Operator

Greetings. Welcome to the Skillsoft Corp First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to Eric Boyer, SVP of Investor Relations. Thank you, sir, you may begin.

Eric Boyer, SVP of Investor Relations

Good afternoon and welcome to Skillsoft's first quarter fiscal 2023 earnings call. After the market closed, we issued our Q1 earnings press release and posted supplemental materials to the Skillsoft Investor Relations website. Today's call will contain forward-looking statements about the company's business outlook and expectations, including statements concerning financial and business trends, our expected future business and financial performance, financial condition and outlook. These forward-looking statements and 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 a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks described in the safe harbor discussion found in the 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 de-SPAC on June 11, 2021, to be separated into predecessor and successor periods to reflect the change in ownership and lack of comparability between periods due to different ownership and investment basis. In addition, Global Knowledge activity is only reflected in the GAAP financial statements after June 11th. References on this call to combined GAAP results reflect a combination of the predecessor period before June 11th that excludes Global Knowledge with the successor period after June 11th. For all non-GAAP measures in the supplemental materials and in today's commentary, the Company is providing normalized results as if Skillsoft and Global Knowledge had been combined for all periods presented, which we believe is useful to investors to show the trends of the go-forward company. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics is included in our earnings press release, which has been furnished to the SEC, and is also available on our website. After our prepared remarks, Jeff Tarr, CEO, and Gary Ferrera, CFO, will be available to take questions. With that, it's my pleasure to turn the call over to Jeff.

Jeff Tarr, CEO

Thanks, Eric. Good afternoon, and thank you for joining us. I'm very pleased to report that in Q1 we grew bookings in our Skillsoft content segment by 22%. This is the fourth consecutive quarter of growth in this segment and the first quarter of double-digit growth under the leadership of our new management team, which stepped in with our return to public markets a year ago. It’s particularly noteworthy that it followed seven straight years of declines. These results are due to new organically developed and acquired capabilities; early success in our go-to-market strategy; and strong demand for the transformative learning experiences we offer organizations and their employees. The Skillsoft content segment, which includes the Percipio platform, is almost entirely subscription in nature and high margin, and we expect it to be the main driver of future value creation for the company. The strength of the content segment was offset in the quarter by a decline in our lower margin transactional instructor-led training business and in sum total due to a loss of a large customer for the Company's payroll solution. On this call, I'll discuss the acquisition of Codecademy, which greatly enhances our tech and dev offering and a number of important product enhancements made in the quarter. Finally, I'll talk about actions we are taking to improve our global knowledge instructor-led training business and our longer-term strategy to further transition the business to subscription revenue. Let's start with the Codecademy acquisition, which closed in April. This combination nearly doubles our reach, creating one of the world's largest communities of learners, totaling more than 90 million people across more than 160 countries. When combined with Skillsoft’s existing tech and dev offerings, enterprise customer reach, and the Percipio learning platform, we have created an industry leader in tech and dev and an important driver of future growth. We see a long runway for cross-selling Codecademy into our large enterprise customer base. We've already completed a light integration of the Codecademy platform into Percipio. We've also developed sales enablement programs and have begun working with more than 50 enterprise customers, who have expressed interest in Codecademy, including some of the world's largest banks, healthcare companies, and professional services firms. Moving on to product enhancements in the quarter. As employees make new demands on their employers, labor and skills gaps have emerged as the number one threat to business according to the recently released survey of Fortune 500 CEOs. This threat ranked higher than inflation, recession, geopolitics, and cybersecurity. Skillsoft is uniquely positioned to help organizations address this enormous challenge while others approach learning from a primarily consumer perspective. We've long operated at the intersection of the organization and its employees, propelling organizations and people to grow together through transformative learning experiences. Experiences that are absorbing, trusted, connected, and that deliver exponential results to our 17,000 business customers and community of 90 million learners. Our recent product enhancements advance these objectives, contributing to increases in customers, learners, and usage. Let me share a few notable examples. As already mentioned, we recently completed the first phase of the technical integration of Codecademy into Percipio, our immersive AI-driven learning platform. This is an important enabler to cross-selling Codecademy to our enterprise customers to help them address critical skills gaps in programming and data science. As we advance our integration, we are blending Skillsoft micro videos, Codecademy hands-on learning, the coaching solution we acquired with Pluma, and instructor-led training from Global Knowledge to create more absorbing and immersive learning journeys. During the quarter, we also launched Skills benchmarks, which are objective standards to officially profile learners' knowledge in particular areas and recommend personalized AI-curated learning journeys. By giving both the organization and the learner a clear understanding of the point of departure from a skills perspective and the clear path forward, we deliver an exponential return on investment. We've already released 125 Skills benchmarks and expect to launch 500 by year-end. We've also made our transformative learning experiences more engaging with gamification features, including our recently launched digital flashcards that reinforce learning and recall on the go. We've made our learning experiences more connected with new social features, including the addition of shared playlists, and we've kept a sharp focus on enhancing customer ROI with the addition of goals and reminders, propelling organizations and their learners forward towards a set of shared learning objectives. These new features combined with a $120 million investment in new content over the last four years, content that is trusted and designed for the way people learn online, have contributed to the growth of our subscription business. Our migration to Percipio has also been a big driver of this transition to growth, lifting our content dollar retention rate above 101%, a 10 percentage point increase over last year. I'm proud that we're winning more new major accounts including PayPal and Saks in Q1. We are seeing a number of encouraging metrics, including 31% growth in new business, a 13% increase in new logos, and a 16% increase in average deal size. In Q1, our strong subscription growth was offset by declines in Global Knowledge. Global Knowledge is transactional in nature and more sensitive to macroeconomic headwinds, including customer investment in new major IT projects; investment from our partners in training their customers; and our ability to maintain full staffing in entry-level inside sales. It's also a lower margin and has lower impact on adjusted EBITDA. We are working on initiatives that we believe will help improve the performance of this segment in the back half of the year. For example, we've launched new products and initiatives with our technology partners to train their customers, supplemented hard-to-fill inside sales positions with outside resources, and implemented targeted increases in go-to-market spend. We're also taking important steps to shift this transactional revenue to our higher margin subscription offerings consistent with our longer-term strategy. We are embedding instructor-led training into subscriptions and cross-selling both Skillsoft and Codecademy to Global Knowledge customers. An exciting example is a recently launched subscription that offers comprehensive training on a wide range of Microsoft products such as Azure and Dynamics, combined with important competencies such as agile and DevOps. We've also been cross-training a subset of Global Knowledge salespeople to sell both Skillsoft and Codecademy subscriptions. We believe proactively increasing our percentage of subscription revenue is the right strategic decision that will accrete to growth in margin and create a more valuable company. Before I turn it over to Gary, I want to briefly speak about our engagement with two great causes that align with our deep commitment to opening doors to new possibilities through learning. We recently announced an initiative with iamtheCODE, whose mission is to train 1 million young women and girls in marginalized communities to code by 2030. iamtheCODE will be launching its digital learning platform powered by Skillsoft’s Percipio in some of Africa's largest refugee camps where tens of thousands will have access to the curriculum. We're also partnering with our longstanding customer Adecco to help train Ukrainian refugees in much-needed soft skills, so they can find new jobs as they rebuild their lives. We're proud to be a partner with these great causes. In summary, we're pleased with the progress we've made, putting our higher margin content subscription business on a solid growth trajectory. We’re committed to improving the performance of Global Knowledge and will accelerate our transition towards even more subscription revenue for the long term. And with that, I'll now turn the call over to Gary.

Gary Ferrera, CFO

Thanks, Jeff. I will now begin with the summary of our Q1 results before turning to our thoughts on the remainder of the year. As I describe our results they will be presented as if Skillsoft and Global Knowledge had been combined and their fiscal quarters had been aligned to end on January 31st, 2021. In addition, for comparability, the results that I describe will include approximately one month of Codecademy in both Q1 FY '23 and Q1 FY '22. Bookings for the total company for the first quarter were $125 million, down 5% compared to the prior year. Bookings were flat year-over-year when excluding the SumTotal segment. This was driven by significant growth in the content segment of 22% offset by a 15% decline in the Global Knowledge segment, which is the larger of the two segments in Q1. Turning to revenue, combined GAAP revenue was $164 million in the quarter. Adjusted revenue in the quarter was $170 million, up 1% over the prior year. As a reminder, our outlook is based on adjusted gross revenue. You will notice that this quarter, as with Q4, there was a much smaller difference between adjusted revenue and GAAP revenue. This relates to our adoption of a new accounting standard ASU 2021-08 accounting for contract assets and contract liabilities. Non-GAAP revenue adjustments are expected to be significantly smaller due to this change. Our GAAP net loss was $22 million for the quarter. Q1 adjusted EBITDA was $3 million, down $4 million, a decrease of 12% compared to last year. Adjusted EBITDA margin for the quarter was 19%. As I mentioned on the last call, when comparing adjusted EBITDA year-over-year you need to also consider the increases in public company costs as we move through the first full year as a public company. In addition, Q1 adjusted EBITDA and margin significantly outperformed the expectations we provided on our last call. This was partially due to slightly higher revenue than anticipated, but primarily driven by the fact that our higher margin content segment outperformed expectations, while the lower margin Global Knowledge segment underperformed expectations. Public company costs and hiring also ramped more slowly than anticipated in the first quarter. We ended the quarter with $76 million in cash versus $155 million at year-end. The decrease in cash balance was due to the acquisition of Codecademy at the beginning of the quarter, as well as the $47 million decrease in borrowings on our accounts receivable facility. At quarter end, net leverage was 4.1 times, due to the lower cash balance and EBITDA from this quarter being below prior year Q1 EBITDA, due to increased public company costs, as well as the inclusion of the Codecademy acquisition. Let's now move to the individual segments. Bookings for the Content segment in Q1 were $51 million, an increase of $9 million or 22% year-over-year. This growth was driven by contributions from the Pluma acquisition, new customers, and DRR or dollar retention rate of 101% versus 91% in the year-ago period. Codecademy performed as expected with bookings growth of 24%. We are also very encouraged by the pipeline that has been built within our enterprise customer base since our acquisition of Codecademy in early April. Adjusted revenue for Skillsoft content in Q1 was $90 million, up $5 million or 5% year-over-year. This increase was driven by new business and growth in prior year bookings. Bookings for Global Knowledge in Q1 were $56 million, a decrease of $10 million or 15% year-over-year. This decline was due to its more transactional nature and its greater sensitivity to macroeconomic headwinds including investment levels in IT spending and open sales positions due to the tight labor market. Q1 adjusted revenue for Global Knowledge was $51 million, a decrease of $3 million or 6% year-over-year. The decline was largely due to lower in-quarter bookings, which typically convert to revenue within two quarters. Now turning to SumTotal. Q1 bookings were $19 million, a decrease of $7 million or 26%, due mainly to a large contract loss in the legacy payroll business. Adjusted revenue for the quarter was $29 million, flat year-over-year. In terms of outlook, we continue to feel good about our content subscription segment performing well throughout the remainder of the year. However, we are now tracking towards the low end of our bookings and revenue outlook, due to the primarily transactional Global Knowledge segment, which is starting off the year slower-than-planned. We are taking actions on multiple fronts that we believe can positively impact the second half of the year. If the macro environment worsens or these efforts do not take hold, Global Knowledge could further weigh on the overall bookings and revenue outlook for the year. However, we are also taking actions to deliver our adjusted EBITDA outlook of approximately $167 million, even if Global Knowledge does not see improving results in the second half. This is in part aided by the strength within our higher-margin content business and Global Knowledge being our lowest-margin business and therefore, having a smaller impact on total company profitability. Now focusing on the more immediate future, while we are very pleased with the 22% growth in the Content segment in Q1, it is by far the smallest quarter of the year for content bookings. We do not anticipate reporting that level of percentage growth as we continue throughout the year. In addition, Q2 last year was our strongest growth quarter with total bookings growth of 18% and Content bookings growth of 9%, making it a tough comp. More specifically for Q2, we would expect bookings and revenue to approximate or be slightly down to prior year, as the continued growth in the content segment in Q2 is not expected to make up for the near-term decline in the Global Knowledge segment. We expect EBITDA to be up on a sequential basis from Q1 fiscal year '23 with margins approximating 20%. With that, I'll turn it back over to Jeff.

Jeff Tarr, CEO

Thank you, Gary. Before opening the call for questions, I'd like to take a moment to thank our dedicated team members. Bringing the company public, forming a new management team, completing three acquisitions, and returning our subscription business to growth has required tremendous dedication and sacrifice from our more than 3,000 employees. With that, operator, please open the call for questions.

Operator, Operator

Thank you, sir. At this time, we will be conducting a question-and-answer session. Our first question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question.

Raimo Lenschow, Analyst

Thank you. I have a couple of questions. First, Jeff, it's encouraging to see the progress in Content, where we receive many inquiries from investors, particularly regarding Global Knowledge and SumTotal. Can you elaborate a bit on this? I understand it’s transaction-focused, but some companies in our sector have reported varying impacts, particularly in Europe, where you've indicated a bit more already. Could you discuss how this is manifesting for you? The second question concerns SumTotal, which appeared to face challenges that influenced the quarter. What is your confidence level in maintaining stability for the remainder of the year? Lastly, regarding Codecademy, you've mentioned cross-selling opportunities into the enterprise segment. Could you elaborate on how clients are responding to this? Are these blanket contracts enabling access for everyone? What kind of growth are you anticipating from this? Apologies for asking three questions, and thank you.

Jeff Tarr, CEO

Okay. Raimo, that's great. Thank you. So first of all, Global Knowledge is a transactional business; we sell seats in virtual classes and in actual physical classrooms. To understand your question, how does the macro affect Global Knowledge? It's in a few ways. First of all, Global Knowledge is sold in bulk when customers undertake new big IT projects. If new big IT projects start, that's when you need to start training your employees, and when those get moved to the right, customer purchases of Global Knowledge slowdown. Secondly, we help our large partners, the largest IT hardware and software vendors in the world train their customers. When their growth slows, their spending on training their customers slows. Finally, this business has more exposure to Europe relative to the rest of our business and that shows up both in demand and in our foreign exchange impact. So that's why we believe we've gotten off to a slow start in this business. Additionally, we’ve had a harder time maintaining full staffing levels in our inside sales organization. Those jobs are just harder to fill in this environment, and we're taking action to supplement that by ramping up our recruiting and also engaging a couple of outsourced services firms to help us with that, and we're launching a number of new products with our customers to again ramp Global Knowledge in the back half. Your second question was on SumTotal. SumTotal, as we’ve said in the past, about 80% of SumTotal historically, at least last year, is the Learning Management System or LMS business and that part of the business is performing well and continues to perform well. Last year, 20% of the business was in the Legacy Human Capital Management modules, payroll being one of them, time management being another, which are core to the Learning Management System part of the business. They've been subscale relative to competitors in that space, and we lost one large customer, which takes that percentage of the business down from about 20% down to about 15%. So that helps you size the pressure that we could see over time. That pressure will show up in the legacy business, but the Learning Management System business is performing quite well. Your final question was on Codecademy and the cross-sell opportunity. We are selling Codecademy for business. It's an add-on to our subscription product, so there's an additional charge. It addresses critical skills gaps in the enterprise in the areas of data science and coding. While it's early, at the end of the quarter, we were only one month in. We're seeing strong interest from our customers in the Codecademy offering as we expected.

Raimo Lenschow, Analyst

Okay. Perfect, very clear. Thanks, Jeff.

Operator, Operator

Thank you. Our next question comes from the line of Robert Simmons with DA Davidson. Please proceed with your question.

Robert Simmons, Analyst

Hey, thanks for taking the question. I guess, first off, you sort of answered this, but where would you say the Global Knowledge reaching was focused? You said there's European exposure for sure. But was it also industry? And what is your exposure to directly to the war-impacted areas?

Jeff Tarr, CEO

Yes. So first of all, I can say we're not impacted significantly directly by the war. We really have negligible exposure to Ukraine and Russia. It's more in Europe about foreign exchange and the economy in general. Globally, it's really just some of the pressure we've all seen as some of the large hardware and software vendors have reported that we're just not seeing as much growth as we were seeing in IT spending. I think the other key factor to keep in mind is that the first half was very strong in Global Knowledge last year. We had a really strong bounce-back from COVID. We also believe in hindsight we benefited from some delayed spending in IT as the world started to open back up. So really tough comparisons in the first half of Global Knowledge.

Robert Simmons, Analyst

Got it. And then where are you in the process of buying out some of the executive or working high-level roles that you need to fill as a public company? Like, you said that some of that hiring delay in the quarter. Are you done with the most important hires that you need to make?

Jeff Tarr, CEO

I feel confident about our leadership team. A significant focus during the first phase of the new Skillsoft was assembling that team, and they are now collaborating effectively to drive business growth. You can witness the positive impact on our subscription business, which is performing very well. It represents the highest margin segment of our operations, and we have concentrated our efforts there as we view it as crucial for our future. While other areas are important, we are shifting the business towards subscriptions, as we discussed with Global Knowledge. We have been incorporating some of that content into subscription models and actively cross-selling subscriptions, which is a direct outcome of this focus. The leadership team we established, along with the employees they have recruited, are working diligently with our 3,000 team members across the organization to expand the business.

Gary Ferrera, CFO

You're correct that the hire you mentioned was for the inside sales team, which has been slower, and we had been working on that.

Jeff Tarr, CEO

Yes, it's very focused; it's the inside sales for Global Knowledge in particular.

Robert Simmons, Analyst

Got it. And then with your Workday adjustment, how quickly do you expect that cohort of legacy customers to migrate to Percipio? And also, how big is it?

Jeff Tarr, CEO

So in terms of Workday, they are important learning management system providers or human capital management system providers. Having that connector in general availability is really important to our customers. In terms of the migration to Percipio, we feel really good about the progress. I think you see that in the retention rate that's now over 100%. We've got approximately 10% of our revenue base sitting on SkillPort. What we're seeing is that the retention rates on SkillPort are way up. The reason for that is the customers who are still on SkillPort are really sticky. I mean, these are customers who in many cases have really deep integrations into their software; they are resellers; they are government customers. They will take a little longer to move. But as you can see, it's not holding back our dollar retention rates materially, as it had in past years with DRR up 10 percentage points year-over-year.

Robert Simmons, Analyst

Got it. Great, thank you very much.

Jeff Tarr, CEO

Thank you.

Operator, Operator

Thank you. Our next question comes from the line of Raj Sharma with B. Riley. Please proceed with your question.

Raj Sharma, Analyst

Hi, thank you for taking my questions. Can we go back to the Global Knowledge, the decline in revenues year-on-year and sort of the outlook is impacting your guidance. Is this COVID pandemic-related, or is it sort of any economic slowdown here? Or is it just one-off project that didn't come through? And then if you can give more color on that. I know you said that industries or geographies were equally impacted. And also, how are you feeling confident that you'd be able to reverse this Global Knowledge decline? And then I have a couple more questions.

Jeff Tarr, CEO

Okay, super. Thank you. In quantifying how much of the Global Knowledge shortfall is macro, we've quantified it as about 50% macro. That's multiple large projects, that's not just one large project, and about 50% of it, we believe, is due to staffing in our inside sales organization. Logically, the staffing piece of it is easier to address; the economy is obviously not in our control, although we are working to launch new products with partners that are better suited to the market that we're in today. In terms of industry and geography, last year our business in Europe delivered very strong growth in GK as it bounced back. This year, we're not seeing Europe as a driver of growth, at least so far in the year. That's what we see as the single biggest change in trend. In terms of going forward, I'm confident that we're going to be able to staff up the inside sales organization and supplement that with third-party resources. But I have less visibility into IT spending and customer spending, end-products. That's why we're pointing to the lower end of our guidance.

Raj Sharma, Analyst

Got it. And then going to the Skillsoft part and the content. Was there organic growth? I know that it includes one month of Codecademy. I wanted to understand if you were not going to break out the Codecademy revenues going forward. And they're going to be larger in context. So is that sort of the right way to look at the business? Just wanted to understand the organic growth versus the additions from Codecademy.

Gary Ferrera, CFO

Yes. The addition from Codecademy was minimal. It’s not even a full month, so we're talking less than $1 million in the numbers. When you look at the pro forma numbers, it's half-and-half. It's growing from that by 24%, but its impact in the content business that 22% would basically remain 22% whether Codecademy was in there or not.

Raj Sharma, Analyst

Right. And then are you going to break out the Codecademy numbers going forward or are they going to be lumped together?

Gary Ferrera, CFO

The plan is to have it in content; we’ll give color when it makes sense. But the way it's being sold, everything, it’s just part of the content business.

Raj Sharma, Analyst

Great. And then the last part, I want to understand the engagement levels in the Percipio platform; have they changed? I see that the retention rates are higher; I wanted to understand the engagement. And then also on the digital adoption by federal agencies, where is that tracking with your FedRAMP certification from last quarter?

Jeff Tarr, CEO

We are seeing increases in usage on the platform, with this quarter reaching an all-time high for Percipio. This is expected given its high engagement. We continue to enhance features and functionality. I am particularly pleased with the number of blockchain-based digital badges issued, which is nearing 30 million. This is significant as these digital badges are transferable, portable, and follow the learner. We are very optimistic about the usage and adoption of Percipio. Could you remind me of the second part of your question?

Raj Sharma, Analyst

Yes, just the federal agencies that you were looking to ramp up significantly, I think your overall to 100%.

Jeff Tarr, CEO

That's all in flight. As we know, the U.S. government doesn't move all that fast for good reason on IT projects. So we're still early; we just received FedRAMP certification a quarter ago. So no updates there.

Raj Sharma, Analyst

Yes. Got it. I'll take it offline. Thank you so much for answering our questions. Thanks.

Jeff Tarr, CEO

Thank you.

Operator, Operator

Thank you. Our next question comes from Arvind Ramnani with Piper Sandler. Please proceed with your question.

Arvind Ramnani, Analyst

Hi, thanks for taking my questions. I just wanted to double-click on the Codecademy and Global Knowledge integration. You've certainly provided some color as part of the prepared remarks, but if you can clarify how do you expect these two offerings to combine? And then the follow-up to that would be for the Codecademy, will users experience anything different? How does the user experience change for each of these customers?

Jeff Tarr, CEO

So let me start with the latter; the Codecademy experience hasn't changed for Codecademy customers. They continue to enjoy the same service that they've always enjoyed. The only real change is that users of Percipio can now access Codecademy through Percipio, and that's an important first step in cross-selling Codecademy to our enterprise customers. I believe we're off to a very good start with that. In terms of integration, I can start by sharing that Codecademy runs as a separate business unit reporting directly to me. From an enterprise sales perspective, we brought enterprise sales for Global Knowledge, Skillsoft tech and Dev, and Codecademy together under one leader, focusing on tech and dev sales globally. Within that, there are individual teams, with enterprise teams focusing on enterprise customers, and for the most part, those teams sell the full suite of offerings. Then there are inside sales teams that are dedicated generally to specific products. The inside sales team selling Global Knowledge is dedicated to Global Knowledge. That's how we integrated sales for our tech and dev offerings.

Arvind Ramnani, Analyst

Great, great. And then just, you know, as you look out over the next, I guess, 18 months or two years. Would you expect, from a secular perspective, Global Knowledge to continue to become an insignificant portion of revenue, or how should we be thinking of the Global Knowledge business? I don't know, maybe not even in two years, maybe in three or four years.

Jeff Tarr, CEO

Yes. First, I believe we should focus on driving strong growth in our subscription business. This includes the Skillsoft business on Percipio and Codecademy, which operates entirely on a subscription model and is where we are seeing growth. For the transaction side, we aim to integrate capabilities from Global Knowledge into our subscription offerings. We will also encourage our sales teams, who support our enterprise customers, to shift revenue from transactions to subscriptions, where the margins are higher and where we see greater value creation. Over time, I expect our subscription business to grow at a faster pace than transactions, which should reduce transaction revenue to less than 20% of our overall revenue. I believe there remains a role for transaction revenue in our business, but it should represent a smaller percentage than it does currently.

Arvind Ramnani, Analyst

Great. And just one last question from what I recall, you know, the Global Knowledge acquisition was done maybe right before the SPAC transaction. Given that it's relatively new, is this sort of like, you know, have things played out as per your expectation? When you did that acquisition, has some of the decline come as a surprise?

Jeff Tarr, CEO

I would say that first of all, the acquisition was closed essentially simultaneously with the de-SPAC transaction. It outperformed our expectations last year and while we're early in the year at this point, I'd say it's underperformed our expectations this year. What's offsetting that is that so far this year our subscription business is over-performing our expectations. So that's, I think that would give a complete picture of performance relative to expectations.

Arvind Ramnani, Analyst

Thank you for answering my questions.

Gary Ferrera, CFO

My pleasure.

Jeff Tarr, CEO

Thank you.

Operator, Operator

Thank you. At this time, I'm not seeing any questions coming in. Jeff, I'd like to pass it back over to you for any closing remarks.

Jeff Tarr, CEO

Well, thanks everyone for participating in the call, and we'll certainly keep you updated as we advance through the year. Thank you.

Operator, Operator

Thank you, everyone. This does conclude today's conference call. You may disconnect your lines at this time. Thank you for your participation and have a great day.