Is Skillsoft (NYSE:SKIL) Weighed On By Its Debt Load?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Skillsoft Corp. (NYSE:SKIL) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Skillsoft Carry?

The image below, which you can click on for greater detail, shows that Skillsoft had debt of US$579.6m at the end of April 2025, a reduction from US$625.2m over a year. On the flip side, it has US$127.8m in cash leading to net debt of about US$451.8m.

A Look At Skillsoft's Liabilities

According to the last reported balance sheet, Skillsoft had liabilities of US$324.9m due within 12 months, and liabilities of US$634.9m due beyond 12 months. Offsetting these obligations, it had cash of US$127.8m as well as receivables valued at US$96.0m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$736.0m.

The deficiency here weighs heavily on the US$136.7m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. At the end of the day, Skillsoft would probably need a major re-capitalization if its creditors were to demand repayment. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Skillsoft's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Skillsoft

In the last year Skillsoft had a loss before interest and tax, and actually shrunk its revenue by 3.3%, to US$527m. That's not what we would hope to see.

Caveat Emptor

Importantly, Skillsoft had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable US$42m at the EBIT level. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. Of course, it may be able to improve its situation with a bit of luck and good execution. But we think that is unlikely since it is low on liquid assets, and made a loss of US$132m in the last year. So we think this stock is quite risky. We'd prefer to pass. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Be aware that Skillsoft is showing 1 warning sign in our investment analysis , you should know about...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.