(12)    Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a fair value hierarchy that prioritizes the inputs used to measure fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are information that reflect the assumptions that market participants would use in pricing the asset or liability based on market data obtained from sources independent of us. Unobservable inputs are variables that reflect our assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three levels of the fair value hierarchy established by ASC 820 in order of priority are as follows:

The following summarizes our assets (liabilities) that are measured at fair value on a recurring basis as of April 30, 2026 and are categorized using the fair value hierarchy (in thousands):

Cash, Cash Equivalents and Restricted Cash

The cost of our cash, cash equivalents and restricted cash was consistent with their estimated fair values as of April 30, 2026. See Note 2 “Summary of Significant Accounting Policies - Cash, Cash Equivalents, and Restricted Cash” to the 2026 AFS for additional detail.

Disposal Group Classified as Held for Sale

As discussed in Note 3 "Discontinued Operations and Assets Held for Sale", on April 30, 2026, Skillsoft classified the GK segment as held for sale and discontinued operations, and measured the disposal group at fair value less costs to sell. The fair value of the disposal group was determined using significant unobservable inputs and therefore is classified as a Level 3 fair value measurement within the fair value hierarchy.

Skillsoft considered available information in estimating the fair value of the disposal group less costs to sell, including the timing and probability of expected cash flows and discount rates derived from observable market data for applicable instruments with similar durations, as well as information received during our sale process, which was well underway during the quarter ended April 30, 2026. The terms of the Sale Agreement and other corroborative evidence were used to confirm our estimates of fair value less costs to sell as of April 30, 2026.

The contingent consideration under the Sale Agreement was valued using a probability-weighted expected present value methodology, which included estimates related to future transaction scenarios, expected proceeds, probability assumptions, timing of expected cash flows and market participant discount rates.

Significant increases or decreases in the estimated probability of future qualifying transactions, expected proceeds or discount rates could result in a materially higher or lower fair value measurement.

Interest Rate Swaps

On June 17, 2022, Skillsoft entered into two fixed-rate interest rate swap agreements to change the Secured Overnight Financing Rate (“SOFR”)-based component of the interest rate on a portion of our variable rate debt to a fixed rate (the “Interest Rate Swaps”). The Interest Rate Swaps have a combined notional amount of $300.0 million and a maturity date of June 5, 2027. The objective of the Interest Rate Swaps is to eliminate the variability of cash flows for interest payments on $300.0 million of variable rate debt attributable to changes in benchmark one-month SOFR interest rates. The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark SOFR interest rates over the interest rate swap term. The changes in cash flow of the Interest Rate Swaps are expected to offset changes in cash flow of the variable rate debt. The Interest Rate Swaps are not designated as cash flow hedges, and unrealized gains and losses from changes in fair value of the Interest Rate Swaps are included in the caption “fair value adjustment of interest rate swaps” in the statements of operations as they occur. For the three months ended April 30, 2026 and 2025, we recognized a non-cash gain (loss) of $1.2 million and ($4.3) million, respectively.

The inputs for determining fair value of the Interest Rate Swaps are classified as Level 2 inputs. Level 2 fair value is based on estimates using standard pricing models. These standard pricing models use inputs which are derived from or corroborated by observable market data such as interest rate yield curves, index forward curves, discount curves, and volatility surfaces. The counterparties to these derivative contracts are highly rated financial institutions which we believe carry only a minimal risk of nonperformance.

Depending on whether the Interest Rate Swaps are in an asset or liability position at the end of the reporting period, they are included in either the captions “other assets” or “other long-term liabilities” on our unaudited condensed consolidated balance sheets.

Liability-Classified Market-Based Awards 

The fair value of the liability-classified market-based award is determined using a Monte Carlo simulation, weighted for the service period completed, at each reporting date. The most significant inputs for determining the fair value either originate from the grant agreement (e.g., stock price hurdles, vesting amounts, and service dates) or are derived from or corroborated by observable market data (e.g., interest rates, stock prices, equity risk, market betas, size premiums, average stock volatility); therefore we have classified the fair value measurement as Level 2. See Note 10 “Stock-Based Compensation” above for additional information related to the liability-classified market-based award.

Other Fair Value Instruments

Skillsoft currently invests available cash balances primarily in money market funds invested in United States Treasury securities and United States Treasury securities repurchase agreements, as well as cash deposits held at major banks. The carrying amounts of cash and cash equivalents, trade receivables, trade payables and accrued liabilities, as reported on the unaudited condensed consolidated balance sheet as of  April 30, 2026, approximate their fair value because of the short maturity of those instruments. 

Our long-term debt is a financial instrument, and the fair value of Skillsoft’s outstanding principal amounts as of April 30, 2026 was $534.2 million. This fair value is determined based on inputs that are classified as Level 2 within the fair value hierarchy. The fair value hierarchy table presented above only includes assets and liabilities measured at fair value on the condensed consolidated balance sheets.