Press Release

Pluralsight Announces Second Quarter 2020 Results

July 29, 2020

SILICON SLOPES, Utah, July 29, 2020 (GLOBE NEWSWIRE) -- Pluralsight, Inc. (NASDAQ: PS), the enterprise technology skills and engineering management platform, today announced financial results for the second quarter ended June 30, 2020.

"Our commitment to our customers and each other has never been stronger despite these extraordinary circumstances. I’m proud to see this commitment reflected in our financial performance for the quarter, and I’m confident that our platform will continue to help companies and individuals adapt to the changing remote work environments around the globe," said Aaron Skonnard, co-founder and CEO of Pluralsight. “This need, coupled with our commitment to our customers and our world-class, highly differentiated product offerings allowed us to excel in the current environment."

Second Quarter Financial Highlights

  • Billings - Q2 2020 billings were $89.0 million, an increase of 11% period over period. Q2 2020 billings from business customers were $77.7 million, an increase of 12% period over period.
  • Revenue - Q2 2020 revenue was $94.8 million, an increase of 25% period over period.
  • Gross margin - Q2 2020 gross margin was 79%, compared to 77% in Q2 2019. Q2 2020 non-GAAP gross margin was 81%, compared to 78% in Q2 2019.
  • Net loss per share - GAAP net loss per share for Q2 2020 was $0.28, compared to $0.30 in Q2 2019. Adjusted pro forma net loss per share for Q2 2020 was $0.02, compared to $0.06 in Q2 2019.
  • Cash flows - Cash used in operations was $9.3 million for Q2 2020, compared to $7.2 million in Q2 2019. Free cash flow was negative $18.0 million for Q2 2020, compared to negative $11.1 million in Q2 2019.

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.

Financial Outlook

The following forward-looking statements reflect Pluralsight's expectations as of July 29, 2020.

Third Quarter 2020 Guidance

  • Revenue is expected to be in the range of $95.0 million to $96.0 million.
  • Adjusted pro forma net loss per share is expected to be in the range of $0.05 to $0.06, assuming weighted-average shares outstanding of approximately 144 million.

Full Year 2020 Guidance

  • Revenue is expected to be in the range of $375.0 million to $390.0 million.
  • Adjusted pro forma net loss per share is expected to be in the range of $0.19 to $0.27, assuming weighted-average shares outstanding of approximately 143.5 million.

Guidance for non-GAAP financial measures excludes equity-based compensation, amortization of acquired intangible assets, employer payroll taxes on employee stock transactions, amortization of debt discount and issuance costs, and, as applicable, other special items, which may be significant. Pluralsight has not reconciled its expectations as to 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 expectations of adjusted pro forma net loss per share is not available without unreasonable effort.

Pluralsight’s guidance for the third quarter and full year 2020 reflects its expectations for the periods after taking into account the impact of COVID-19. However, the crisis that this pandemic has created is very fluid, and the situation is constantly evolving. As such, Pluralsight’s actual results may differ materially from such guidance based on a variety of factors, including Pluralsight’s ability to execute its business during this crisis, the impact of the crisis on Pluralsight’s suppliers, customers and partners, governmental action taken in response to COVID-19, and other factors.

Conference Call Information

Pluralsight will host a conference call for analysts and investors to discuss its second quarter 2020 results and outlook for its third quarter and full year 2020, today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time).

Date: July 29, 2020
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: 1883129

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 1883129.

About Pluralsight

Pluralsight is the leading technology skills and engineering management platform. Trusted by forward-thinking companies of every size in every industry, Pluralsight helps individuals and businesses transform with technology through its Skills and Flow products. Skills helps build technology skills at scale with expert-authored courses on today’s most important technologies, including cloud, artificial intelligence, machine learning, data science, and security, among others. Skills also offers analytics and Skill IQ and Role IQ assessments. Flow complements Skills by providing visibility and analytics into software development workflows to accelerate the delivery of products and services.

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 the quotations of management and statements regarding our future financial and operating performance, and our financial outlook for the third quarter and full year 2020. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: our ability to attract and retain customers; our ability to expand our course library and develop new platform features; the demand for, and market acceptance of our platform; competition; our ability to improve sales management and execution; our expectations of the potential impact the COVID-19 pandemic may have on our business; and other 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 Annual Report on Form 10-K/A filed with the SEC on March 2, 2020 and in our quarterly report on Form 10-Q filed with the SEC on July 29, 2020, 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 represents total revenue plus the change in deferred revenue in the period, as presented in our condensed consolidated statements of cash flows, less the change in contract assets and unbilled accounts receivable in the period. Billings in any particular period represents 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 new and existing 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 expenses, 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 is 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, amortization of acquired intangible assets, and employer payroll taxes on employee stock transactions.

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

Non-GAAP operating expenses. We define non-GAAP operating expenses as operating expenses less equity-based compensation, amortization of acquired intangible assets, and employer payroll taxes on employee stock transactions, and, as applicable, other special items.

Non-GAAP operating loss. We define non-GAAP operating loss as loss from operations plus equity-based compensation, amortization of acquired intangible assets, employer payroll taxes on employee stock transactions, and, as applicable, other special items.

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 Pluralsight, Inc. adjusted for 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 equity-based compensation, amortization of acquired intangible assets, employer payroll taxes on employee stock transactions, amortization of debt discount and issuance costs, and, as applicable, other special items. 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 provided by (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,
    2020   2019   2020   2019
                 
Revenue   $ 94,765     $ 75,862     $ 187,411     $ 145,479  
Cost of revenue(1)(2)   19,717     17,803     38,725     34,515  
Gross profit   75,048     58,059     148,686     110,964  
Operating expenses(1)(2):                
Sales and marketing   57,759     50,046     120,174     94,217  
Technology and content   29,514     24,819     59,658     45,090  
General and administrative   22,996     20,575     46,367     42,766  
Total operating expenses   110,269     95,440     226,199     182,073  
Loss from operations   (35,221 )   (37,381 )   (77,513 )   (71,109 )
Other income (expense):                
Interest expense   (7,241 )   (7,346 )   (14,390 )   (9,024 )
Other income, net   2,267     4,106     4,437     5,782  
Loss before income taxes   (40,195 )   (40,621 )   (87,466 )   (74,351 )
Income tax benefit (expense)   465     (143 )   223     (297 )
Net loss   $ (39,730 )   $ (40,764 )   $ (87,243 )   $ (74,648 )
Less: Net loss attributable to non-controlling interests   (9,801 )   (11,637 )   (21,995 )   (26,446 )
Net loss attributable to Pluralsight, Inc.   $ (29,929 )   $ (29,127 )   $ (65,248 )   $ (48,202 )
Net loss per share, basic and diluted(3)   $ (0.28 )   $ (0.30 )   $ (0.62 )   $ (0.56 )
Weighted-average shares of Class A common stock used in computing basic and diluted net loss per share   107,153     97,608     105,899     86,827  

(1) Includes equity-based compensation as follows:

    Three Months Ended June 30,   Six Months Ended June 30,
    2020   2019   2020   2019
                 
Cost of revenue   $ 296     $ 133     $ 566     $ 217  
Sales and marketing   10,878     7,952     20,400     14,228  
Technology and content   6,884     5,137     13,220     8,847  
General and administrative   8,367     9,510     17,817     19,708  
Total equity-based compensation   $ 26,425     $ 22,732     $ 52,003     $ 43,000  

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

    Three Months Ended June 30,   Six Months Ended June 30,
    2020   2019   2020   2019
                 
Cost of revenue   $ 1,209     $ 702     $ 2,418     $ 1,227  
Sales and marketing   50     29     100     29  
Technology and content   161     176     337     353  
Total amortization of acquired intangible assets   $ 1,420     $ 907     $ 2,855     $ 1,609  


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,
    2020   2019   2020   2019
                 
Billings   $ 89,034     $ 80,552     $ 179,312     $ 158,480  
Billings from business customers   $ 77,695     $ 69,104     $ 158,167     $ 136,260  
% of billings from business customers   87 %   86 %   88 %   86 %

Non-GAAP Financial Measures

    Three Months Ended June 30,   Six Months Ended June 30,
    2020   2019   2020   2019
                 
Reconciliation of gross profit to non-GAAP gross profit:                
Gross profit   $ 75,048     $ 58,059     $ 148,686     $ 110,964  
Equity-based compensation   296     133     566     217  
Amortization of acquired intangible assets   1,209     702     2,418     1,227  
Employer payroll taxes on employee stock transactions   15     13     32     16  
Non-GAAP gross profit   $ 76,568     $ 58,907     $ 151,702     $ 112,424  
Gross margin   79 %   77 %   79 %   76 %
Non-GAAP gross margin   81 %   78 %   81 %   77 %


    Three Months Ended June 30,   Six Months Ended June 30,
    2020   2019   2020   2019
                 
Reconciliation of operating expenses to non-GAAP operating expenses:                
Sales and marketing   $ 57,759     $ 50,046     $ 120,174     $ 94,217  
Less: Equity-based compensation   (10,878 )   (7,952 )   (20,400 )   (14,228 )
Less: Amortization of acquired intangible assets   (50 )   (29 )   (100 )   (29 )
Less: Employer payroll taxes on employee stock transactions   (329 )   (533 )   (821 )   (1,141 )
Non-GAAP sales and marketing   $ 46,502     $ 41,532     $ 98,853     $ 78,819  
Sales and marketing as a percentage of revenue   61 %   66 %   64 %   65 %
Non-GAAP sales and marketing as a percentage of revenue   49 %   55 %   53 %   54 %
                 
Technology and content   $ 29,514     $ 24,819     $ 59,658     $ 45,090  
Less: Equity-based compensation   (6,884 )   (5,137 )   (13,220 )   (8,847 )
Less: Amortization of acquired intangible assets   (161 )   (176 )   (337 )   (353 )
Less: Employer payroll taxes on employee stock transactions   (381 )   (434 )   (852 )   (914 )
Non-GAAP technology and content   $ 22,088     $ 19,072     $ 45,249     $ 34,976  
Technology and content as a percentage of revenue   31 %   33 %   32 %   31 %
Non-GAAP technology and content as a percentage of revenue   23 %   25 %   24 %   24 %
                 
General and administrative   $ 22,996     $ 20,575     $ 46,367     $ 42,766  
Less: Equity-based compensation   (8,367 )   (9,510 )   (17,817 )   (19,708 )
Less: Employer payroll taxes on employee stock transactions   (272 )   (349 )   (670 )   (702 )
Less: Secondary offering costs   (1,260 )       (1,260 )   (918 )
Less: Acquisition-related costs       (835 )       (835 )
Non-GAAP general and administrative   $ 13,097     $ 9,881     $ 26,620     $ 20,603  
General and administrative as a percentage of revenue   24 %   27 %   25 %   29 %
Non-GAAP general and administrative as a percentage of revenue   14 %   13 %   14 %   14 %
Reconciliation of loss from operations to non-GAAP operating loss:                
Loss from operations   $ (35,221 )   $ (37,381 )   $ (77,513 )   $ (71,109 )
Equity-based compensation   26,425     22,732     52,003     43,000  
Amortization of acquired intangible assets   1,420     907     2,855     1,609  
Employer payroll taxes on employee stock transactions   997     1,329     2,375     2,773  
Secondary offering costs   1,260         1,260     918  
Acquisition-related costs       835         835  
Non-GAAP operating loss   $ (5,119 )   $ (11,578 )   $ (19,020 )   $ (21,974 )


    Three Months Ended June 30,   Six Months Ended June 30,
    2020   2019   2020   2019
                 
Adjusted pro forma net loss per share                
Numerator:                
Net loss attributable to Pluralsight, Inc.   $ (29,929 )   $ (29,127 )   $ (65,248 )   $ (48,202 )
Net loss attributable to non-controlling interests   (9,801 )   (11,637 )   (21,995 )   (26,446 )
Equity-based compensation   26,425     22,732     52,003     43,000  
Amortization of acquired intangibles   1,420     907     2,855     1,609  
Employer payroll taxes on employee stock transactions   997     1,329     2,375     2,773  
Secondary offering costs   1,260         1,260     918  
Acquisition-related costs       835         835  
Amortization of debt discount and issuance costs   6,684     6,749     13,275     8,294  
Adjusted pro forma net loss   $ (2,944 )   $ (8,212 )   $ (15,475 )   $ (17,219 )
Denominator:                
Weighted-average shares of Class A common stock outstanding   107,153     97,608     105,899     86,827  
Weighted-average LLC Units of Pluralsight Holdings that are convertible into Class A common stock   35,276     39,006     35,702     48,923  
Adjusted pro forma weighted-average common shares outstanding, basic and diluted   142,429     136,614     141,601     135,750  
Adjusted pro forma net loss per share   $ (0.02 )   $ (0.06 )   $ (0.11 )   $ (0.13 )


Reconciliation of net cash (used in) provided by operating activities to free cash flow:                
Net cash (used in) provided by operating activities   $ (9,250 )   $ (7,184 )   $ 9,045     $ (1,648 )
Less: Purchases of property and equipment   (6,626 )   (2,457 )   (20,520 )   (4,590 )
Less: Purchases of content library   (2,113 )   (1,504 )   (3,793 )   (2,441 )
Free cash flow   $ (17,989 )   $ (11,145 )   $ (15,268 )   $ (8,679 )


PLURALSIGHT, INC.

Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

    June 30,
 2020
  December 31,
 2019
         
Assets        
Current assets:        
Cash and cash equivalents   $ 87,982     $ 90,515  
Short-term investments   318,483     332,234  
Accounts receivable, net   61,578     101,576  
Deferred contract acquisition costs   17,745     18,331  
Prepaid expenses and other current assets   14,764     14,174  
Total current assets   500,552     556,830  
Restricted cash and cash equivalents   21,622     28,916  
Long-term investments   122,224     105,805  
Property and equipment, net   60,788     22,896  
Right-of-use assets   62,982     15,804  
Content library, net   11,017     8,958  
Intangible assets, net   19,787     22,631  
Goodwill   262,532     262,532  
Deferred contract acquisition costs, noncurrent   7,164     5,982  
Other assets   1,709     1,599  
Total assets   $ 1,070,377     $ 1,031,953  
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable   $ 5,985     $ 10,615  
Accrued expenses   38,950     40,703  
Accrued author fees   11,711     11,694  
Lease liabilities   7,752     5,752  
Deferred revenue   207,575     215,137  
Total current liabilities   271,973     283,901  
Deferred revenue, noncurrent   18,813     19,517  
Convertible senior notes, net   483,503     470,228  
Lease liabilities, noncurrent   76,340     11,167  
Other liabilities   70     980  
Total liabilities   850,699     785,793  
Stockholders' equity:        
Preferred stock        
Class A common stock   11     10  
Class B common stock   2     2  
Class C common stock   1     1  
Additional paid-in capital   693,768     641,128  
Accumulated other comprehensive income   1,154     225  
Accumulated deficit   (523,629 )   (458,381 )
Total stockholders’ equity attributable to Pluralsight, Inc.   171,307     182,985  
Non-controlling interests   48,371     63,175  
Total stockholders’ equity   219,678     246,160  
Total liabilities and stockholders' equity   $ 1,070,377     $ 1,031,953  


PLURALSIGHT, INC.

Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

    Three Months Ended June 30,   Six Months Ended June 30,
    2020   2019   2020   2019
                 
Operating activities                
Net loss   $ (39,730 )   $ (40,764 )   $ (87,243 )   $ (74,648 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                
Depreciation of property and equipment   3,225     2,332     5,868     4,579  
Amortization of acquired intangible assets   1,420     907     2,855     1,609  
Amortization of course creation costs   820     611     1,581     1,190  
Equity-based compensation   26,425     22,732     52,003     43,000  
Amortization of deferred contract acquisition costs   6,316     5,444     12,767     11,311  
Amortization of debt discount and issuance costs   6,684     6,749     13,275     8,294  
Investment discount and premium amortization, net   (52 )   (706 )   (428 )   (706 )
Other   32     275     693     300  
Changes in assets and liabilities, net of acquired assets and liabilities:                
Accounts receivable   (1,107 )   (4,276 )   38,093     7,116  
Deferred contract acquisition costs   (7,492 )   (5,579 )   (13,363 )   (11,430 )
Prepaid expenses and other assets   (497 )   (2,243 )   (211 )   (4,044 )
Right-of-use assets   1,548     1,643     3,038     2,927  
Accounts payable   (2,139 )   18     (4,606 )   1,053  
Accrued expenses and other liabilities   1,719     2,030     (4,612 )   (3,129 )
Accrued author fees   114     564     16     1,299  
Lease liabilities   (949 )   (1,636 )   (2,874 )   (3,372 )
Deferred revenue   (5,587 )   4,715     (7,807 )   13,003  
Net cash (used in) provided by operating activities   (9,250 )   (7,184 )   9,045     (1,648 )
Investing activities                
Purchases of property and equipment   (6,626 )   (2,457 )   (20,520 )   (4,590 )
Purchases of content library   (2,113 )   (1,504 )   (3,793 )   (2,441 )
Cash paid for acquisition, net of cash acquired       (163,871 )       (163,871 )
Purchases of investments   (155,150 )   (317,080 )   (317,012 )   (317,080 )
Proceeds from sales of investments       4,967         4,967  
Proceeds from maturities of investments   155,070         315,605      
Net cash used in investing activities   (8,819 )   (479,945 )   (25,720 )   (483,015 )
Financing activities                
Proceeds from issuance of common stock from employee equity plans   10,179     12,010     10,878     14,631  
Taxes paid related to net share settlement   (1,523 )       (3,873 )    
Proceeds from issuance of convertible senior notes, net of discount and issuance costs       (1,009 )       616,654  
Purchase of capped calls related to issuance of convertible senior notes               (69,432 )
Net cash provided by financing activities   8,656     11,001     7,005     561,853  
Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents   110     (4 )   (157 )   22  
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents   (9,303 )   (476,132 )   (9,827 )   77,212  
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period   118,907     764,415     119,431     211,071  
Cash, cash equivalents, and restricted cash and cash equivalents, end of period   $ 109,604     $ 288,283     $ 109,604     $ 288,283  

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

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


PS Logo.jpg

Source: Pluralsight, Inc.