EXCLUSIVE INTERVIEW: Skillsoft Acquires Codecademy

Hi everybody, welcome back to WorkTech. I'm George LaRock, and we've got some really exciting industry news to talk about today, uh, this time in the learning category. Skillsoft, a global leader in corporate digital learning, announced the acquisition of Codecademy recently, which is a leading online learning platform for technical skills. And when I say big news, was a big deal. If you've— any of you have seen the release, uh, the deal was worth $525 million in cash and stock. That, that's a, that's a big deal in our space. Um, and it's really exciting, especially given all of the market focus on upskilling and reskilling, uh, in the interest of retaining employees and also bringing new people into the workforce. Uh, and we've got the people possible here to discuss this with us today. Michael Yu, the head of Skillsoft's technology and development business, and Zach Sims, the founder and CEO of Codecademy. Welcome.

Welcome.

Thanks for having us.

Thanks, George.

Thanks for being here. Now, I imagine both of these brands are iconic in the space, so I think most people watching this know who you are, but just in case there might be a few, I'd love to start out with some quick intros from each of you on yourselves as well as Skillsoft and Codecademy. So, Mike— Michael, I'll hand it off to you.

Sure, my name is Michael Yu. I am the general manager of Skillsoft's tech and dev business. You may realize— you may know that we're one of three main businesses that Skillsoft has been in. So in addition to the technology developer business, we have similar businesses in leadership and business skills, as well as businesses in compliance and workplace safety. We are, we believe, the leader in serving enterprises in the skills space. And when we think about the Tech and Dev business, our mission has been to help our customers build the technology skills they need across their workforces so those workforces can take advantage of the rapid pace of technology change. We count about 3,000 enterprises as our customers and about 45 million learners worldwide. Cool, cool.

Thanks for that. And Zach?

Yeah, so Codecademy empowers people with the technology skills they need to lead inspiring careers, and we've helped more than 40 million learners around the world, most of whom are consumers, learn technology skills like programming and data science. As well as cybersecurity and DevOps, uh, learn in an online, interactive, easy-to-use way. And we have a subscription product, Codecademy Pro, that is $40 a month or $240 a year. And a couple years ago, we launched our first B2B business, Codecademy for Business, and we are most excited to be working with Skillsoft on scaling Codecademy for Business to hundreds of new businesses and hopefully millions of new learners.

That's great. That's great. This is, uh, I, I'm real excited about what's happening in the market and about deals like this that, uh, that really democratize access to, uh, to technical skills. Right. And, and, and so many people have access to, um, or will have access, have and will have access to this content that, that really does accelerate their career. So let's get, let's get into the, the deal a little bit. So what, how did it come about? What was happening out there in the market that, that brought these two, you know, brands together?

Zach, you want to take a first crack at that?

Sure. So we, we started talking with Skillsoft late last year, mid last year about working together. I think what we saw is a tremendous possibility in taking a product that's beloved by, you know, more than 40 million consumers and a small number of companies companies, and really helping to scale that to the enterprise. And I think what Skillsoft saw was, you know, a large pipe to companies that love Skillsoft products and requests from a lot of Skillsoft customers to add more technology developer content. And so we started talking about a partnership. And I think through spending lots of time together, our teams realized, you know, this could be more than a partnership and could create something great from a, from a business perspective for both companies as well. And I think that speaks to kind of what's happening in the broader online learning market right now as well, where you see almost every, you know, pure consumer business start to pivot hard into enterprise. And I think what we learned is, you know, we could work together with the market leader in corporate digital learning to build something better and faster than we could alone.

Yeah.

Michael, what did Skillsoft see?

I think we're super excited about the fact that we have two very complementary businesses. And so we talked about the nuts and bolts of B2B and B2C and number of learners and so forth. At the heart of it though, when I think about from a content point of view, we bring very complementary points of view to thinking about the tech and dev space and how we enable skills. Codecademy is historically very much focused on interactive learning, hands-on from the get-go enriched by other forms of content. And Skillsoft has historically been exactly the opposite, historically very much focused on how we deliver e-learning in a more didactic way, with a real emphasis in the past few years on how do we enrich that with live and in this case hands-on learning. So the two really sort of fit nicely together. And as Zach Sims mentioned, the strengths that Codecademy has in terms of its coverage of particular tech and dev topics within a hands-on way really matched neatly with some of the areas that we were looking to build out and deepen ourselves. I think the other thing that I, that I point out, um, when you think about the two different companies is, um, the fact that, you know, when we think about the business together Right. In addition to sort of being competent from content, the commercial sides of things are also incredibly complementary. And so we're very much on the Skillsoft side thinking about it as an enterprise business sold through a direct sales force. Codecademy is very much a B2C business, so primarily, you know, straight to consumers. And there's a real nice blend between the two because we're seeing in the enterprise space increasingly decisions around learning programs and learning solutions being driven, as you say, in a more democratic way where enterprises are really looking to their frontline learners to make recommendations and influence that buy. The two together make a sort of a natural fit.

Yeah, yeah. The impact here seems to be both ways, right? The opening up a big market for Codecademy while bringing this kind of you know, I won't even say employee first, but, you know, human first sort of approach to learning, putting the individual in the driver's seat and sort of bringing that together. And, you know, I did notice in the release, and the release is linked here, whether you're catching this on YouTube or whether you catch it on the WorkTech site, for understanding, I see a lot of these releases, and there were specific, like, there's specific language around how lucrative this deal might be when it comes to revenue and EBITDA. And that just tells me, that speaks to the confidence and what's happening in the market. So how, I think we've talked about the impact that you'll have, sort of where this fits broadly, but when I think of Skillsoft, you've got a couple of platforms on the B2B side, like SumTotal and Precipio that are— will Codecademy impact either of those or both of those?

So yes, they will. And let's start with Percipio, which is the platform by which— the learning experience platform by which we deliver our learning programs across all three of our business units, including tech and dev. What we will see going forward is that, as Zach mentioned, we want to try to take and leverage what we have in terms of content on the Codecademy side and bring that to enterprises. We will be now delivering that as an additional product to our enterprises, but well integrated within Percipio. So our enterprise customers that currently access our services through Percipio, um, will now also be able in a seamless way to be able to access their content, their entitlements that they get from a Codecademy subscription that they purchase. In addition. And then SumTotal, as you may know, is a talent management platform that interfaces well with many different learning systems, but most importantly, not surprisingly, Percipio is one of them. And so all of the integrations that are already present between Percipio and SumTotal now apply to the experience for customers who also buy— enterprise customers who now buy Codecademy subscriptions as well.

Yeah, okay, well, that's, that's great news for, for your customers. And Zach, on, on your side, I'm just curious, speaking of these integrations, is your content also available in other learning systems, you know, beyond the Skillsoft properties?

Yeah, so, so today we interface with a couple of other learning systems, but really our priority has been, you know, customers that are using Codecademy alone. And so I think we are most excited about bringing a lot of our content to Percipio, helping the learners through Percipio get the most out of the Codecademy experience. And I think that's what's powerful about this combination is bringing together kind of a best-in-class enterprise product with Percipio, with a best-in-class consumer experience with Codecademy, and kind of getting really the best of both worlds.

Yeah, yeah. So what— there's a lot of opportunity. What do you see as the impact on customers on both sides? Whoever wants to go first.

Zach, why don't you go first?

Sure, I'll start with the Khan Academy customers. You know, I think our learners will only see, you know, more content across both the consumer and B2B sides, you know, better reporting on the B2B side, you know, more distribution and more modalities of learning, which I think are really exciting. It really expands kind of the topics that our learners can interface with and the formats they can learn them in. So if anything, you know, better is the short version and, and more distribution. I think we live in a pro— with a product that gets better with more learners, more people to say, you know, the features that are good and the features that aren't good, the content that they need, the content they don't need, you know, question and answer forums or questions are answered quickly. So kind of building network effects, I think, seems really important, and we'll be able to do that even better with Skillsoft's help.

Great.

Great. Yeah, on the enterprise side, I think our enterprise customers at the end of the day will see a better and deeper and more impactful learning experience. So, you know, simple way to think about it is they currently use their existing Skillsoft subscriptions to learn material across all sorts of technology skills, and with the Codecademy subscriptions that they can purchase in addition, they now have a place where they can hone their— that knowledge by practicing. And, um, you know, when you put the two together, we were already moving in our existing subscriptions towards increasing fractions of hands-on learning because it better matches the way technologists learn. Technologists learn most effectively and most durably by doing as opposed to by listening.

Yeah, yeah. So I'm going to come back to impact and maybe the, the another constituency in a moment. But as, as you think about, uh, Michael, as you think about the vision for Skillsoft and this business, um, it, you know, is there anything about the, uh, that this reflects, you know, you know, that relates that we could maybe read into around the, the future of Skillsoft? Is there that anything you can share about where you're headed for the vision of the, of the product and the company?

Um, I could say some stuff at a high level, right? Broadly speaking, we've been on a journey for decades, but particularly in the last 3 or 4 years, focusing primarily upon what I said at the outset, which is how do we help deliver better learning experiences and better learning outcomes But not learning for learning's sake, learning because what it does is it helps workforces build the right skills that they need. And it's, you know, there's a— what did they say in hockey? It's the don't skate to where the puck is, skate to where the puck is going. That's sort of the mentality we have in mind when we think about our enterprise customers. We're trying not only to help them with the skill gaps that they have today, but more importantly, the skill gaps they're going to need to succeed in the future. So I think, you know, the kinds of direction that we're moving, whether it's things that we do organically in terms of features that we build in our products, content that we cover, or things that we do inorganically, like great combinations with organizations like Codecademy, they're all aimed towards if we deliver a better and more effective and more durable learning experience, for learners on the skills they need now and the future, anything in that direction will work well.

Okay, okay. So back to that impact, the constituency I always like to ask about are, you know, when something like this comes together, the employees. So, you know, what does this mean for the Codecademy and Skillsoft teams?

Yeah, I think I'll chime in and then let Michael do the same. For the Codecademy team, I think it's lots of opportunity, right? I think there's a several thousand person organization with hundreds of millions of dollars in revenue, uh, you know, where our impact can now be felt across that broader organization, across, uh, all of the different, uh, products that organization runs, across all those customers as well. So I think it's really a chance for us to grow our impact from purely consumer business to a consumer and an enterprise business, to learn lots about that as well. And I'm really excited for what it means for our employees.

Cool. I think for us, it's very much the dual of what Zach said, which is, you know, for our teams that focus on the learning assets, it is direct exposure to a new paradigm, a new way of thinking about learning and delivering learning and delivering skilling. For those who sit more on the go-to-market side, its exposure and learning a whole new different commercial model, B2C model that's very, very different from B2B model provides avenues, I think, for tremendous growth professionally for folks on, you know, pretty much in every portion of our organization.

Great, great. Yeah, it sounds like an exciting time for everyone involved. So we, you know, in our audience, while we have a lot of leaders in HR and learning, we also have a lot of operators. And so I'm gonna shift gears with the, we've got a couple minutes and I'll ask you each this question from your perspective. Michael, I'll start with you. When you're acquiring a company, what are the attributes that you look for, consider in making that decision?

I think for us, the main pieces are we have a reasonable sense of what we think our strategic differentiators are in the market. And we are looking for partnerships or acquisitions that strengthen and extend those. And with Codecademy, we have something that sort of fits that bill to a T. You may remember at the beginning, I highlighted how complementary the businesses are. We're looking for businesses that have assets that really extend that, whether that is from a content point of view or a platform point of view or a sales point of view or a marketing and otherwise go-to-market point of view, we're looking for acquisitions and assets that extend what we currently have, particularly in areas that we think give us differentiation. With Code, we were thrilled because I think the combination brings not just one, but two and maybe even three of those different dimensions into play.

Cool. Now, you know, you only get to sell your company once, or, you know, usually. I suppose there are some exceptions to that in this space, world, or you spin things out again. But, uh, what— when, when the opportunity to exit, Zach, became real, uh, or something you were interested in, in making happen, what, what were the things that, that you were evaluating, um, where you knew this was the right next step for the co— for Codecademy and the team?

Yeah, so we weren't actually looking to sell the business. I think, you know, we realized that our future as an independent company again was You know, we empower people with inspiring careers in technology, and I think I'd always plan to do that in 3 parts. You know, first, by helping consumers learn important technology skills. Second, by helping companies learn the skills they need. And finally, by connecting the two. Um, and I think what we saw was that doing that alone, uh, would take a very long time. And I think we did a very good job of part 1 on the consumer side. We had a really nascent business in part 2, and I think we realized that by working together with Skillsoft, we could really accelerate the vision, for what we were trying to accomplish alone. And that to me was the most inspiring part.

Okay, cool. Well, I, I could keep going on this for a while, but we're just about out of time. And I'm very, uh, I'd love to give you the opportunity to tell people where to go, uh, to learn more about the deal, about Codecademy, Skillsoft, uh, where things are headed. Where should people look?

Well, I'll start with talking about the enterprise business side. So enterprise customers, enterprise prospects can absolutely hear more about what are the new opportunities that are available to them through our new set of Codecademy products in the enterprise space, either on skillsoft.com or by speaking to their sales representative. And if you don't have one today, just reach out to me at michael.u@skillsoft.com. Happy to connect you. Cool.

That— does that work for you, Zach, too, or, uh, is there—

absolutely.

Yeah, okay.

For any— anyone learning, uh, as a consumer, or if you want more information on Codecademy for Business, uh, codecademy.com also works.

Great. Well, Michael, Zach, thank you both for being here. Uh, I know how busy you are, especially, uh, after just announcing something like this. Thank you for your time and telling your story here at WorkTech. And, uh, thanks everybody for listening.

Thanks for having us.

Thanks, George. Appreciate it.

Thanks. Take care.