Press Release

Pluralsight Announces Second Quarter 2018 Results

August 1, 2018
  • Billings grew 42 percent period over period to $65.3 million in Q2 2018
  • Revenue grew 38 percent period over period to $53.6 million in Q2 2018

SILICON SLOPES, Utah, Aug. 01, 2018 (GLOBE NEWSWIRE) -- Pluralsight, the enterprise technology learning company, today announced financial results for the second quarter ended June 30, 2018.

“We completed our IPO process early in the quarter and went on to deliver strong topline growth, as well as year over year improvement in operating performance,” said Aaron Skonnard, co-founder and CEO of Pluralsight. “We continue to disrupt the technology skills development market with a platform that enables industry leaders and their teams to keep up with the rapid pace of technology change and deliver key innovations on time and on budget.”

Financial Highlights for the Second Quarter 2018

  • Billings - Q2 2018 billings were $65.3 million, an increase of 42% period over period. Q2 2018 billings from business customers were $54.6 million, an increase of 52% period over period.
  • Revenue - Q2 2018 revenue was $53.6 million, an increase of 38% period over period.
  • Gross margin - Q2 2018 gross margin was 70%, compared to 69% in Q2 2017. Q2 2018 non-GAAP gross margin was 76%, compared to 74% in Q2 2017.
  • Adjusted pro forma net loss per share - Adjusted pro forma net loss per share for Q2 2018 was $0.21, compared to $0.29 in Q2 2017.
  • Cash Flows - Cash used in operations was $5.8 million, a 35% improvement over cash used in operations in Q2 2017. Free cash flow improved by $1.7 million in Q2 2018 compared to Q2 2017.
  • Cash - Cash and cash equivalents were $213.6 million as of June 30, 2018.

For information regarding the non-GAAP financial measures discussed in this press release, please see the section titled “Non-GAAP Financial Measures.” Reconciliations between GAAP and non-GAAP financial measures are provided in the tables of this press release. GAAP net loss per share is excluded above as it is only presented for the period following the initial public offering and is not indicative of the results for the entire quarter.

Financial Outlook

Pluralsight is providing the following financial guidance for the third quarter and full year 2018:

Third Quarter 2018 guidance:

  • Revenue is expected to be in the range of $57 million to $58 million.
  • Adjusted pro forma net loss per share is expected to be in the range of $0.14 to $0.13, assuming weighted average shares outstanding of approximately 130.9 million.

Full Year guidance:

  • Revenue is expected to be in the range of $222 million to $225 million.
  • Adjusted pro forma net loss per share is expected to be in the range of $0.68 to $0.65, assuming weighted average shares outstanding of approximately 100.5 million.

Guidance for non-GAAP financial measures excludes equity-based compensation, amortization of acquired intangible assets, and loss on debt extinguishment. Pluralsight has not reconciled its expectations as to adjusted pro forma net loss and adjusted pro forma net loss per share to their most directly comparable GAAP measures because certain items cannot be reasonably predicted. Accordingly, a reconciliation for adjusted pro forma net loss and adjusted pro forma net loss per share is not available without unreasonable effort.

Conference Call Information

Pluralsight will host a conference call for analysts and investors to discuss its second quarter 2018 results and outlook for its third quarter and full year 2018 today at 2:30 p.m., Mountain time (4:30 p.m. Eastern time).

Date: Wednesday, August 1
Time: 2:30 p.m. MT (4:30 p.m. ET)
Webcast: https://investors.pluralsight.com/ 
Dial-in number: (877) 350-6732 or (629) 228-0693, conference ID: 8170746

A live audio webcast of the conference call will also be accessible from the Pluralsight website at investors.pluralsight.com. A telephonic replay of the call will be available three hours after the call, will run for seven days, and may be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the passcode 8170746.

About Pluralsight

Pluralsight is an enterprise technology learning platform that delivers a unified, end-to-end learning experience for businesses across the globe. Through its subscription service, companies are empowered to move at the speed of technology, increasing proficiency, innovation and efficiency. Founded in 2004, brought online in 2011, and trusted by Fortune 500 companies, Pluralsight provides subscribers with on-demand access to a digital ecosystem of learning tools, including adaptive skill tests, directed learning paths, expert-authored courses, interactive labs and live mentoring.

Pluralsight and the Pluralsight logo are trademarks of Pluralsight, LLC in the United States and in jurisdictions throughout the world.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws that involve risks and uncertainties, including statements regarding our future financial and operating performance, including our financial outlook for the third quarter and the full year 2018. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the pace of market adoption of cloud-based learning solutions; our ability to expand our course library and develop new platform features; competition; our ability to attract and retain customers; our ability to increase sales of subscriptions to our platform to customers; our ability to expand our sales and marketing capabilities; and general market, political, economic, and business conditions.

Additional risks and uncertainties that could affect our financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our final prospectus filed with the SEC on May 17, 2018 (File No. 333-224301), which is available on our website at investors.pluralsight.com and on the SEC’s website at www.sec.gov. Additional information will also be set forth in other filings that we make with the SEC from time to time. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

Key Business Metrics

Billings. Billings represent total revenue plus the change in deferred revenue in the period, as presented in our condensed consolidated statements of cash flows. Billings in any particular period represent amounts invoiced to customers and reflects subscription renewals and upsells to existing customers plus sales to new customers. We use billings to measure our ability to sell subscriptions to our platform to both existing and new customers. We use billings from business customers and our percentage of billings from business customers to measure and monitor our ability to sell subscriptions to our platform to business customers.

Non-GAAP Financial Measures

Pluralsight has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). Pluralsight uses the non-GAAP financial measures of non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, adjusted pro forma net loss, adjusted pro forma net loss per share and free cash flow in analyzing its financial results and believes that the use of these metrics is useful to investors as an additional tool to evaluate ongoing operating results and trends and in comparing Pluralsight’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures.

The presentation of these non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. A reconciliation of our historical non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the financial statement tables included in this press release, and investors are encouraged to review these reconciliations.

Non-GAAP gross profit. We define non-GAAP gross profit as gross profit plus equity-based compensation and amortization related to acquired intangible assets.

Non-GAAP gross margin. We define non-GAAP gross margin as non-GAAP gross profit divided by our revenue.

Non-GAAP operating loss. We define non-GAAP operating loss as loss from operations plus equity-based compensation and amortization of acquired intangible assets.

Adjusted pro forma net loss and adjusted pro forma net loss per share. We define adjusted pro forma net loss as net loss attributable to common shares adjusted for the accretion of redeemable convertible preferred units and the reallocation of loss attributable to non-controlling interests from the assumed exchange of LLC Units of Pluralsight Holdings for newly issued shares of Class A common stock of Pluralsight, Inc. and further adjusted for non-cash or one-time charges, including equity-based compensation, amortization of acquired intangible assets, and loss on debt extinguishment. We define adjusted pro forma net loss per share as adjusted pro forma net loss divided by the weighted-average shares of Class A common stock outstanding, assuming the full exchange of all outstanding LLC Units of Pluralsight Holdings for newly issued shares of Class A common stock of Pluralsight, Inc.

 Free cash flow. We define free cash flow as cash used in operating activities less purchases of property and equipment and purchases of our content library.


         
PLURALSIGHT, INC.

Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
         
    Three Months Ended June 30,   Six Months Ended June 30,
    2018   2017   2018   2017
Revenue   $ 53,572     $ 38,891     $ 103,216     $ 76,130  
Cost of revenue(1)(2)   15,890     11,887     30,776     23,096  
Gross profit   37,682     27,004     72,440     53,034  
Operating expenses(1)(2):                
Sales and marketing   38,933     23,018     68,400     40,844  
Technology and content   16,493     11,326     29,818     21,531  
General and administrative   19,448     9,412     30,740     15,679  
Total operating expenses   74,874     43,756     128,958     78,054  
Loss from operations   (37,192 )   (16,752 )   (56,518 )   (25,020 )
Other (expense) income:                
Interest expense   (2,424 )   (3,597 )   (6,134 )   (5,124 )
Loss on debt extinguishment   (4,085 )   (1,882 )   (4,085 )   (1,882 )
Other income, net   48     21     35     69  
Loss before income taxes   (43,653 )   (22,210 )   (66,702 )   (31,957 )
Provision for income taxes   (143 )   (68 )   (252 )   (126 )
Net loss   $ (43,796 )   $ (22,278 )   $ (66,954 )   $ (32,083 )
Less: net loss attributable to non-controlling interests   (12,706 )       (12,706 )    
Net loss attributable to Pluralsight, Inc.   $ (31,090 )   $ (22,278 )   $ (54,248 )   $ (32,083 )
Less: accretion of Series A redeemable convertible preferred units   (156,750 )   (21,175 )   (176,275 )   (22,825 )
Net loss attributable to common shares   $ (187,840 )   $ (43,453 )   $ (230,523 )   $ (54,908 )
Net loss per share, basic and diluted(3)   $ (0.19 )       $ (0.19 )    
Weighted-average common shares used in computing basic and diluted net loss per share(3)   62,252         62,252      

(1) Includes equity-based compensation expense as follows:

    Three Months Ended June 30,   Six Months Ended June 30,
    2018   2017   2018   2017
    (in thousands)
Cost of revenue   $ 46     $ 5     $ 46     $ 10  
Sales and marketing   4,432     715     4,971     1,379  
Technology and content   2,668     526     3,049     990  
General and administrative   10,409     3,133     12,862     3,712  
Total equity-based compensation   $ 17,555     $ 4,379     $ 20,928     $ 6,091  
                                 


PLURALSIGHT, INC.

Condensed Consolidated Statements of Operations (cont.)
(in thousands)
(unaudited)

(2) Includes amortization of acquired intangible assets as follows:

    Three Months Ended June 30,   Six Months Ended June 30,
    2018   2017   2018   2017
    (in thousands)
Cost of revenue   $ 2,961     $ 1,642     $ 5,923     $ 3,284  
Sales and marketing   194     161     389     322  
Technology and content   177     176     353     352  
General and administrative       27         54  
Total amortization of acquired intangible assets   $ 3,332     $ 2,006     $ 6,665     $ 4,012  

(3) Represents net loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period from May 16, 2018 through June 30, 2018, the period following the reorganization transactions and Pluralsight, Inc.'s initial public offering.


PLURALSIGHT, INC.

Key Business Metrics and Non-GAAP Financial Measures
(dollars in thousands)
(unaudited)

Key Business Metrics

    Three Months Ended June 30,   Six Months Ended June 30,
    2018   2017   2018   2017
Billings   $ 65,297     $ 46,029     $ 120,716     $ 84,912  
Billings from business customers   $ 54,623     $ 35,845     $ 99,875     $ 65,172  
% of billings from business customers   84 %   78 %   83 %   77 %

Non-GAAP Financial Measures

    Three Months Ended June 30,   Six Months Ended June 30,
    2018   2017   2018   2017
Reconciliation of gross profit to non-GAAP gross profit:    
Gross profit   $ 37,682     $ 27,004     $ 72,440     $ 53,034  
Equity-based compensation   46     5     46     10  
Amortization of acquired intangible assets   2,961     1,642     5,923     3,284  
Non-GAAP gross profit   $ 40,689     $ 28,651     $ 78,409     $ 56,328  
Gross margin   70 %   69 %   70 %   70 %
Non-GAAP gross margin   76 %   74 %   76 %   74 %
                 
Reconciliation of loss from operations to non-GAAP operating loss:                
Loss from operations   $ (37,192 )   $ (16,752 )   $ (56,518 )   $ (25,020 )
Equity-based compensation   17,555     4,379     20,928     6,091  
Amortization of acquired intangible assets   3,332     2,006     6,665     4,012  
Non-GAAP operating loss   $ (16,305 )   $ (10,367 )   $ (28,925 )   $ (14,917 )


         
PLURALSIGHT, INC.

Key Business Metrics and Non-GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
         
    Three Months Ended June 30,   Six Months Ended June 30,
    2018   2017   2018   2017
Adjusted pro forma net loss per share                
Numerator:                
GAAP net loss attributable to common shares   $ (187,840 )   $ (43,453 )   $ (230,523 )   $ (54,908 )
Accretion of Series A redeemable convertible preferred units   156,750     21,175     176,275     22,825  
Reallocation of net loss attributable to non-controlling interests from the assumed exchange of LLC Units of Pluralsight Holdings for Class A common stock   (12,706 )       (12,706 )    
Equity-based compensation   17,555     4,379     20,928     6,091  
Amortization of acquired intangibles   3,332     2,006     6,665     4,012  
Loss on debt extinguishment   4,085     1,882     4,085     1,882  
Adjusted pro forma net loss   $ (18,824 )   $ (14,011 )   $ (35,276 )   $ (20,098 )
                 
Denominator:                
Adjusted pro forma weighted-average common shares outstanding, basic and diluted(1)   89,006     47,786     68,819     47,784  
                 
Adjusted pro forma net loss per share   $ (0.21 )   $ (0.29 )   $ (0.51 )   $ (0.42 )
                 
Reconciliation of net cash used in operating activities to free cash flow:                
Net cash used in operating activities   $ (5,793 )   $ (8,904 )   $ (16,217 )   $ (3,950 )
Less: purchases of property and equipment   (2,706 )   (1,457 )   (4,574 )   (3,025 )
Less: purchases of content library   (735 )   (606 )   (1,504 )   (1,229 )
Free cash flow   $ (9,234 )   $ (10,967 )   $ (22,295 )   $ (8,204 )

(1) Reflects the weighted-average shares of Class A common stock outstanding for each period presented, assuming the full exchange of LLC Units of Pluralsight Holdings into shares of Class A common stock.

         
         
PLURALSIGHT, INC.

Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
         
    June 30, 2018   December 31, 2017
Assets        
Current assets:        
Cash and cash equivalents   $ 213,645     $ 28,267  
Accounts receivable, net   36,268     38,229  
Prepaid expenses and other current assets   8,907     5,125  
Total current assets   258,820     71,621  
Property and equipment, net   22,683     22,457  
Content library, net   8,093     13,441  
Intangible assets, net   2,111     2,854  
Goodwill   123,119     123,119  
Other assets   1,396     2,928  
Total assets   $ 416,222     $ 236,420  
Liabilities, redeemable convertible preferred units, and stockholders' equity/members’ deficit        
Current liabilities:        
Accounts payable   $ 6,836     $ 6,029  
Accrued expenses   24,208     26,514  
Accrued author fees   8,496     7,879  
Deferred revenue   121,978     103,107  
Total current liabilities   161,518     143,529  
Deferred revenue, net of current portion   6,555     8,194  
Long-term debt       116,037  
Facility financing obligation   7,505     7,513  
Other liabilities   779     458  
Total liabilities   176,357     275,731  
Redeemable convertible preferred units       405,766  
Stockholders' equity/members’ deficit:        
Preferred stock        
Class A common stock   6      
Class B common stock   6      
Class C common stock   1      
Additional paid-in capital   436,177      
Members’ capital        
Accumulated other comprehensive (loss) income   (16 )   25  
Accumulated deficit   (321,704 )   (445,102 )
Total stockholders' equity attributable to Pluralsight, Inc./members' deficit   114,470     (445,077 )
Non-controlling interests   125,395      
Total stockholders' equity/members' deficit   239,865     (445,077 )
Total liabilities, redeemable convertible preferred units, and stockholders' equity/members’ deficit   $ 416,222     $ 236,420  


     
PLURALSIGHT, INC.

Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
     
    Six Months Ended June 30,
    2018   2017
Operating activities        
Net loss   $ (66,954 )   $ (32,083 )
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation of property and equipment   4,358     2,626  
Amortization of acquired intangible assets   6,665     4,012  
Amortization of course creation costs   930     671  
Equity-based compensation   20,928     6,091  
Provision for doubtful accounts   358     188  
Amortization of debt discount and debt issuance costs   1,215     306  
Debt extinguishment costs   4,180     931  
Deferred tax benefit   (64 )    
Changes in assets and liabilities:        
Accounts receivable   1,335     1,833  
Prepaid expenses and other assets   (3,858 )   (3,215 )
Accounts payable   (588 )   1,328  
Accrued expenses and other liabilities   (2,839 )   3,641  
Accrued author fees   617     939  
Deferred revenue   17,500     8,782  
Net cash used in operating activities   (16,217 )   (3,950 )
Investing activities        
Purchases of property and equipment   (4,574 )   (3,025 )
Purchases of content library   (1,504 )   (1,229 )
Net cash used in investing activities   (6,078 )   (4,254 )
Financing activities        
Proceeds from initial public offering, net of underwriting discounts and commissions   332,080      
Payments of costs related to initial public offering   (3,085 )    
Borrowings of long-term debt   20,000     115,000  
Repayments of long-term debt   (137,710 )   (85,000 )
Payments of debt extinguishment costs   (2,162 )    
Payments of debt issuance costs   (450 )   (809 )
Payments to settle equity appreciation rights   (325 )    
Taxes paid related to net share settlement   (78 )    
Proceeds from the issuance of common units       22  
Payments of facility financing obligation   (8 )   (8 )
Net cash provided by financing activities   208,262     29,205  
Effect of exchange rate change on cash, cash equivalents, and restricted cash   (86 )   24  
Net increase in cash, cash equivalents, and restricted cash   185,881     21,025  
Cash, cash equivalents, and restricted cash, beginning of period   28,477     19,397  
Cash, cash equivalents, and restricted cash, end of period   $ 214,358     $ 40,422  
         
Reconciliation of cash, cash equivalents, and restricted cash:        
Cash and cash equivalents   $ 213,645     $ 40,212  
Restricted cash included in other assets   713     210  
Total cash, cash equivalents, and restricted cash   $ 214,358     $ 40,422  


Investor Relations Contact:
Mark McReynolds
Investor Relations
Pluralsight
801-784-9007
mark-mcreynolds@pluralsight.com 

Media Contact:
DJ Anderson
Communications/Press
Pluralsight
801-784-9007
dj@pluralsight.com 

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Source: Pluralsight, Inc.