Press Release

Pluralsight Announces Third Quarter 2019 Results

October 30, 2019
  • Third quarter revenue grew 34 percent period over period to $82.6 million
  • Third quarter billings grew 28 percent period over period to $92.1 million

SILICON SLOPES, Utah , Oct. 30, 2019 (GLOBE NEWSWIRE) -- Pluralsight, Inc. (NASDAQ: PS), the enterprise technology skills company, today announced financial results for the third quarter ended September 30, 2019.

“We had a solid quarter and improved many of our growth metrics demonstrating that the operational improvements we put into motion at the beginning of the quarter are working. I’m happy with the progress we made in the quarter, and recognize we still have work to do,” said Aaron Skonnard, co-founder and CEO of Pluralsight. “B2B billings grew 32%, total billings grew 28%, revenue grew 34% and our guidance for 2019 remains inside the range we provided and reiterated earlier in the year.”

Third Quarter Financial Highlights

  • Billings - Q3 2019 billings were $92.1 million, an increase of 28% period over period. Q3 2019 billings from business customers were $80.7 million, an increase of 32% period over period.
  • Revenue - Q3 2019 revenue was $82.6 million, an increase of 34% period over period.
  • Gross margin - Q3 2019 gross margin was 78%, compared to 75% in Q3 2018. Q3 2019 non-GAAP gross margin was 80%, compared to 77% in Q3 2018.
  • Net loss per share - GAAP net loss per share for Q3 2019 was $0.32, compared to $0.26 in Q3 2018. Adjusted pro forma net loss per share for Q3 2019 was $0.08, compared to $0.10 in Q3 2018.
  • Cash flows - Cash used in operations was $2.2 million for Q3 2019, compared to cash provided by operations of $1.9 million in Q3 2018. Free cash flow was negative $6.6 million for Q3 2019, compared to negative free cash flow of $0.9 million in Q3 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.

Financial Outlook

The following forward-looking statements reflect Pluralsight's expectations as of October 30, 2019.

Full Year 2019 Guidance

  • Revenue is expected to be in the range of $314 million to $316 million.
  • Adjusted pro forma net loss per share is expected to be in the range of $0.37 to $0.35, assuming weighted-average shares outstanding of approximately 137 million.

Guidance for non-GAAP financial measures excludes equity-based compensation, amortization of acquired intangible assets, employer payroll taxes on employee stock transactions, secondary offering costs, acquisition-related costs, amortization of debt discount and issuance costs, and loss on debt extinguishment. 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.

Conference Call Information

Pluralsight will host a conference call for analysts and investors to discuss its second quarter 2019 results and outlook for its full year 2019, today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time).

Date: October 30, 2019
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: 2080527

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 2080527.

About Pluralsight

Pluralsight is an enterprise technology skills platform that delivers a unified, end-to-end learning experience for businesses across the globe. Through a subscription service, companies are empowered to move at the speed of technology, increasing proficiency, innovation, and efficiency. Founded in 2004 and trusted by Fortune 500 companies, Pluralsight provides customers with on-demand access to a digital ecosystem of learning tools, including adaptive skill tests, directed learning paths, expert-authored courses, interactive labs and analytics. For more information, visit pluralsight.com.

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 full year 2019 and future periods. 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; our ability to successfully integrate GitPrime into our platform; 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 to improve sales management and execution; 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 Annual Report on Form 10-K/A filed with the SEC on June 27, 2019 and in our quarterly report on Form 10-Q filed with the SEC on October 30, 2019, 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 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 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, secondary offering costs, and acquisition-related costs.

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, secondary offering costs, acquisition-related costs, amortization of debt discount and issuance costs, 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) provided by 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 September 30,   Nine Months Ended September 30,
    2019   2018   2019   2018
                 
Revenue   $ 82,620     $ 61,553     $ 228,099     $ 164,769  
Cost of revenue(1)(2)   17,825     15,347     52,336     46,166  
Gross profit   64,795     46,206     175,763     118,603  
Operating expenses(1)(2):                
Sales and marketing   55,727     42,632     149,852     113,956  
Technology and content   27,799     18,137     72,829     49,858  
General and administrative   20,817     19,818     63,591     57,112  
Total operating expenses   104,343     80,587     286,272     220,926  
Loss from operations   (39,548 )   (34,381 )   (110,509 )   (102,323 )
Other (expense) income:                
Interest expense   (7,778 )   (342 )   (17,499 )   (6,476 )
Loss on debt extinguishment   (950 )       (950 )   (4,085 )
Other income, net   2,878     654     8,532     689  
Loss before income taxes   (45,398 )   (34,069 )   (120,426 )   (112,195 )
Provision for income taxes   (404 )   (254 )   (701 )   (506 )
Net loss   $ (45,802 )   $ (34,323 )   $ (121,127 )   $ (112,701 )
Less: Net loss attributable to non-controlling interests   (13,073 )   (17,980 )   (39,763 )   (31,890 )
Net loss attributable to Pluralsight, Inc.   $ (32,729 )   $ (16,343 )   $ (81,364 )   $ (80,811 )
Less: Accretion of Series A redeemable convertible preferred units               (176,275 )
Net loss attributable to shares of Class A common stock   $ (32,729 )   $ (16,343 )   $ (81,364 )   $ (257,086 )
Net loss per share, basic and diluted(3)   $ (0.32 )   $ (0.26 )   $ (0.89 )   $ (0.47 )
Weighted-average shares of Class A common stock used in computing basic and diluted net loss per share(3)   101,407     62,472     91,741     62,400  

(1) Includes equity-based compensation as follows:

    Three Months Ended September 30,   Nine Months Ended September 30,
    2019   2018   2019   2018
                 
Cost of revenue   $ 138     $ 56     $ 355     $ 145  
Sales and marketing   8,739     5,612     22,967     13,507  
Technology and content   6,666     3,700     15,513     8,652  
General and administrative   9,114     11,262     28,822     30,678  
Total equity-based compensation   $ 24,657     $ 20,630     $ 67,657     $ 52,982  

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

    Three Months Ended September 30,   Nine Months Ended September 30,
    2019   2018   2019   2018
                 
Cost of revenue   $ 1,209     $ 880     $ 2,436     $ 6,803  
Sales and marketing   50         79     389  
Technology and content   176     176     529     529  
Total amortization of acquired intangible assets   $ 1,435     $ 1,056     $ 3,044     $ 7,721  

(3) Net loss per share, basic and diluted and weighted-average common shares used in computing basic and diluted net loss per share for the nine months ended September 30, 2019 reflect only the activity for the portion of the period following Pluralsight, Inc.'s initial public offering and the related reorganization transactions.

PLURALSIGHT, INC.

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

Key Business Metrics

    Three Months Ended September 30,   Nine Months Ended September 30,
    2019   2018   2019   2018
                 
Billings   $ 92,123     $ 72,243     $ 250,603     $ 192,959  
Billings from business customers   $ 80,707     $ 61,143     $ 216,967     $ 161,018  
% of billings from business customers   88 %   85 %   87 %   83 %

Non-GAAP Financial Measures

    Three Months Ended September 30,   Nine Months Ended September 30,
    2019   2018   2019   2018
                 
Reconciliation of gross profit to non-GAAP gross profit:                
Gross profit   $ 64,795     $ 46,206     $ 175,763     $ 118,603  
Equity-based compensation   138     56     355     145  
Amortization of acquired intangible assets   1,209     880     2,436     6,803  
Employer payroll taxes on employee stock transactions   2         18      
Non-GAAP gross profit   $ 66,144     $ 47,142     $ 178,572     $ 125,551  
Gross margin   78 %   75 %   77 %   72 %
Non-GAAP gross margin   80 %   77 %   78 %   76 %
Reconciliation of loss from operations to non-GAAP operating loss:                
Loss from operations   $ (39,548 )   $ (34,381 )   $ (110,509 )   $ (102,323 )
Equity-based compensation   24,657     20,630     67,657     52,982  
Amortization of acquired intangible assets   1,435     1,056     3,044     7,721  
Employer payroll taxes on employee stock transactions   333         3,106      
Secondary offering costs           918      
Acquisition-related costs           835      
Non-GAAP operating loss   $ (13,123 )   $ (12,695 )   $ (34,949 )   $ (41,620 )


    Three Months Ended September 30,   Nine Months Ended September 30,
    2019   2018   2019   2018
                 
Adjusted pro forma net loss per share                
Numerator:                
GAAP net loss attributable to shares of Class A common stock   $ (32,729 )   $ (16,343 )   $ (81,364 )   $ (257,086 )
Accretion of Series A redeemable convertible preferred units               176,275  
Reallocation of net loss attributable to non-controlling interests from the assumed exchange of LLC Units of Pluralsight Holdings for Class A common stock   (13,073 )   (17,980 )   (39,763 )   (31,890 )
Equity-based compensation   24,657     20,630     67,657     52,982  
Amortization of acquired intangibles   1,435     1,056     3,044     7,721  
Employer payroll taxes on employee stock transactions   333         3,106      
Secondary offering costs           918      
Acquisition-related costs           835      
Amortization of debt discount and issuance costs   6,826         15,120     126  
Loss on debt extinguishment   950         950     4,085  
Adjusted pro forma net loss   $ (11,601 )   $ (12,637 )   $ (29,497 )   $ (47,787 )
Denominator:                
Weighted-average shares of Class A common stock outstanding   101,407     62,472     91,741     31,314  
Weighted-average LLC Units of Pluralsight Holdings that are convertible into Class A common stock   36,791     68,734     44,834     58,529  
Adjusted pro forma weighted-average common shares outstanding, basic and diluted   138,198     131,206     136,575     89,843  
Adjusted pro forma net loss per share   $ (0.08 )   $ (0.10 )   $ (0.22 )   $ (0.53 )


Reconciliation of net cash (used in) provided by operating activities to free cash flow:                
Net cash (used in) provided by operating activities   $ (2,171 )   $ 1,934     $ (3,812 )   $ (14,283 )
Less: Purchases of property and equipment   (3,029 )   (2,002 )   (7,619 )   (6,576 )
Less: Purchases of content library   (1,381 )   (841 )   (3,822 )   (2,345 )
Free cash flow   $ (6,581 )   $ (909 )   $ (15,253 )   $ (23,204 )
                                 

PLURALSIGHT, INC.

Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

    September 30,
 2019
  December 31,
 2018
         
Assets        
Current assets:        
Cash and cash equivalents   $ 120,871     $ 194,306  
Short-term investments   328,602      
Accounts receivable, net   63,001     63,436  
Deferred contract acquisition costs, net   17,128      
Prepaid expenses and other current assets   12,664     8,323  
Total current assets   542,266     266,065  
Restricted cash   27,748     16,765  
Long-term investments   84,210      
Property and equipment, net   56,471     31,641  
Content library, net   8,207     7,050  
Intangible assets, net   24,057     1,759  
Goodwill   261,622     123,119  
Deferred contract acquisition costs, noncurrent, net   4,435      
Other assets   1,530     1,064  
Total assets   $ 1,010,546     $ 447,463  
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable   $ 4,664     $ 7,160  
Accrued expenses   37,635     32,047  
Accrued author fees   11,294     10,002  
Deferred revenue   177,523     157,695  
Total current liabilities   231,116     206,904  
Deferred revenue, noncurrent   17,586     14,886  
Convertible senior notes, net   463,656      
Facility financing obligations   38,225     15,777  
Other liabilities   2,157     1,303  
Total liabilities   752,740     238,870  
Stockholders' equity:        
Preferred stock        
Class A common stock   10     7  
Class B common stock   2     6  
Class C common stack   1     1  
Additional paid-in capital   615,713     456,899  
Accumulated other comprehensive income (loss)   185     (41 )
Accumulated deficit   (426,777 )   (355,446 )
Total stockholders’ equity attributable to Pluralsight, Inc.   189,134     101,426  
Non-controlling interests   68,672     107,167  
Total stockholders’ equity   257,806     208,593  
Total liabilities and stockholders' equity   $ 1,010,546     $ 447,463  

PLURALSIGHT, INC.

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

    Three Months Ended September 30,   Nine Months Ended September 30,
    2019   2018   2019   2018
                 
Operating activities                
Net loss   $ (45,802 )   $ (34,323 )   $ (121,127 )   $ (112,701 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                
Depreciation of property and equipment   2,275     1,973     6,471     6,331  
Amortization of acquired intangible assets   1,435     1,056     3,044     7,721  
Amortization of course creation costs   651     507     1,841     1,437  
Equity-based compensation   24,657     20,630     67,657     52,982  
Amortization of deferred contract acquisition costs   6,006         17,317      
Amortization of debt discount and issuance costs   6,826         15,120     1,215  
Investment discount and premium amortization, net   (1,065 )       (1,771 )    
Loss on debt extinguishment   950         950     4,085  
Other   (478 )   118     (178 )   507  
Changes in assets and liabilities, net of acquired assets and liabilities:                
Accounts receivable   (5,258 )   (11,687 )   1,858     (10,352 )
Deferred contract acquisition costs   (7,238 )       (18,668 )    
Prepaid expenses and other assets   534     868     (3,660 )   (2,990 )
Accounts payable   (3,556 )   1,516     (2,486 )   928  
Accrued expenses and other liabilities   8,441     9,751     6,067     6,912  
Accrued author fees   (7 )   835     1,292     1,452  
Deferred revenue   9,458     10,690     22,461     28,190  
Net cash (used in) provided by operating activities   (2,171 )   1,934     (3,812 )   (14,283 )
Investing activities                
Purchases of property and equipment   (3,029 )   (2,002 )   (7,619 )   (6,576 )
Purchases of content library   (1,381 )   (841 )   (3,822 )   (2,345 )
Cash paid for acquisition, net of cash acquired   100         (163,771 )    
Purchases of investments   (212,573 )       (529,653 )    
Proceeds from sales of investments           4,967      
Proceeds from maturities of short-term investments   112,995         112,995      
Net cash used in investing activities   (103,888 )   (2,843 )   (586,903 )   (8,921 )
Financing activities                
Proceeds from issuance of convertible senior notes, net of discount and issuance costs           616,654      
Purchase of capped calls related to issuance of convertible senior notes           (69,432 )    
Repurchases of convertible senior notes   (35,000 )       (35,000 )    
Proceeds from terminations of capped calls related to repurchases of convertible senior notes   1,284         1,284      
Proceeds from issuance of common stock from employee equity plans   245         14,876      
Proceeds from initial public offering, net of underwriting discounts and commissions               332,080  
Payments of costs related to initial public offering       (3,998 )       (7,083 )
Borrowings of long-term debt               20,000  
Repayments of long-term debt               (137,710 )
Payments of debt extinguishment costs       (17 )       (2,179 )
Payments of debt issuance costs               (450 )
Payments to settle equity appreciation rights               (325 )
Taxes paid related to net share settlement               (78 )
Other   (4 )   (5 )   (10 )   (13 )
Net cash (used in) provided by financing activities   (33,475 )   (4,020 )   528,372     204,242  
Effect of exchange rate changes on cash, cash equivalents, and restricted cash   (130 )   (50 )   (109 )   (136 )
Net (decrease) increase in cash, cash equivalents, and restricted cash   (139,664 )   (4,979 )   (62,452 )   180,902  
Cash, cash equivalents, and restricted cash, beginning of period   288,283     214,358     211,071     28,477  
Cash, cash equivalents, and restricted cash, end of period   $ 148,619     $ 209,379     $ 148,619     $ 209,379  

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.