Press Release

Pluralsight Announces Third Quarter 2020 Results

November 5, 2020

SILICON SLOPES, Utah, Nov. 05, 2020 (GLOBE NEWSWIRE) -- Pluralsight, Inc. (NASDAQ: PS), the technology workforce development company, today announced financial results for the third quarter ended September 30, 2020.

“We’re proud of the progress we made in the quarter while still in the midst of the COVID-19 pandemic. We handily beat our revenue, earnings, and cash expectations in Q3 and have raised our annual expectations for each.” said Aaron Skonnard, co-founder and CEO of Pluralsight. “Q3 billings came in lighter than we expected, but we had strong participation and enthusiasm at our PS LIVE customer event in October. With the pipeline generated from PS LIVE and our new products and capabilities, we remain confident in our outlook.”

Third Quarter Financial Highlights

  • Billings - Q3 2020 billings were $100.0 million, an increase of 9% period over period. Q3 2020 billings from business customers were $88.6 million, an increase of 10% period over period.
  • Revenue - Q3 2020 revenue was $99.5 million, an increase of 20% period over period.
  • Gross margin - Q3 2020 gross margin was 79%, compared to 78% in Q3 2019. Q3 2020 non-GAAP gross margin was 81%, compared to 80% in Q3 2019.
  • Net loss per share - GAAP net loss per share for Q3 2020 was $0.24, compared to $0.32 in Q3 2019. Adjusted pro forma net loss per share for Q3 2020 was $0.00, compared to $0.08 in Q3 2019.
  • Cash flows - Cash used in operations was $2.4 million for Q3 2020, compared to $2.2 million in Q3 2019. Free cash flow was negative $14.9 million for Q3 2020, compared to negative $6.6 million in Q3 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 November 5, 2020.

Full Year 2020 Guidance

  • Revenue is expected to be in the range of $387.0 million to $390.0 million.
  • Adjusted pro forma net loss per share is expected to be in the range of $0.12 to $0.14, 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 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 third quarter 2020 results and outlook for the full year 2020, today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time).

Date: November 5, 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: 3430067

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 3430067.

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 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 November 5, 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 (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,
    2020   2019   2020   2019
                 
Revenue   $ 99,465     $ 82,620     $ 286,876     $ 228,099  
Cost of revenue(1)(2)   20,426     17,829     59,151     52,344  
Gross profit   79,039     64,791     227,725     175,755  
Operating expenses(1)(2):                
Sales and marketing   57,206     55,797     177,380     150,014  
Technology and content   29,345     27,847     89,003     72,937  
General and administrative   20,366     20,844     66,733     63,610  
Total operating expenses   106,917     104,488     333,116     286,561  
Loss from operations   (27,878 )   (39,697 )   (105,391 )   (110,806 )
Other income (expense):                
Interest expense   (7,409 )   (7,412 )   (21,799 )   (16,436 )
Loss on debt extinguishment       (950 )       (950 )
Other income, net   1,992     3,001     6,429     8,783  
Loss before income taxes   (33,295 )   (45,058 )   (120,761 )   (119,409 )
Income tax expense   (476 )   (404 )   (253 )   (701 )
Net loss   $ (33,771 )   $ (45,462 )   $ (121,014 )   $ (120,110 )
Less: Net loss attributable to non-controlling interests   (6,410 )   (12,983 )   (28,405 )   (39,429 )
Net loss attributable to Pluralsight, Inc.   $ (27,361 )   $ (32,479 )   $ (92,609 )   $ (80,681 )
Net loss per share, basic and diluted   $ (0.24 )   $ (0.32 )   $ (0.85 )   $ (0.88 )
Weighted-average shares of Class A common stock used in computing basic and diluted net loss per share   115,196     101,407     109,009     91,741  

(1) Includes equity-based compensation as follows:

    Three Months Ended September 30,   Nine Months Ended September 30,
    2020   2019   2020   2019
                 
Cost of revenue   $ 312     $ 138     $ 878     $ 355  
Sales and marketing   10,908     8,739     31,308     22,967  
Technology and content   6,361     6,666     19,581     15,513  
General and administrative   6,633     9,114     24,450     28,822  
Total equity-based compensation   $ 24,214     $ 24,657     $ 76,217     $ 67,657  

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

    Three Months Ended September 30,   Nine Months Ended September 30,
    2020   2019   2020   2019
                 
Cost of revenue   $ 1,208     $ 1,209     $ 3,626     $ 2,436  
Sales and marketing   50     50     150     79  
Technology and content   122     176     459     529  
Total amortization of acquired intangible assets   $ 1,380     $ 1,435     $ 4,235     $ 3,044  


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,
    2020   2019   2020   2019
                 
Billings   $ 100,022     $ 92,123     $ 279,334     $ 250,603  
Billings from business customers   $ 88,599     $ 80,707     $ 246,766     $ 216,967  
% of billings from business customers   89 %   88 %   88 %   87 %

Non-GAAP Financial Measures

    Three Months Ended September 30,   Nine Months Ended September 30,
    2020   2019   2020   2019
                 
Reconciliation of gross profit to non-GAAP gross profit:                
Gross profit   $ 79,039     $ 64,791     $ 227,725     $ 175,755  
Equity-based compensation   312     138     878     355  
Amortization of acquired intangible assets   1,208     1,209     3,626     2,436  
Employer payroll taxes on employee stock transactions   10     2     42     18  
Non-GAAP gross profit   $ 80,569     $ 66,140     $ 232,271     $ 178,564  
Gross margin   79 %   78 %   79 %   77 %
Non-GAAP gross margin   81 %   80 %   81 %   78 %


PLURALSIGHT, INC.

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

    Three Months Ended September 30,   Nine Months Ended September 30,
    2020   2019   2020   2019
                 
Reconciliation of operating expenses to non-GAAP operating expenses:                
Sales and marketing   $ 57,206     $ 55,797     $ 177,380     $ 150,014  
Less: Equity-based compensation   (10,908 )   (8,739 )   (31,308 )   (22,967 )
Less: Amortization of acquired intangible assets   (50 )   (50 )   (150 )   (79 )
Less: Employer payroll taxes on employee stock transactions   (161 )   (71 )   (982 )   (1,212 )
Non-GAAP sales and marketing   $ 46,087     $ 46,937     $ 144,940     $ 125,756  
Sales and marketing as a percentage of revenue   58 %   68 %   62 %   66 %
Non-GAAP sales and marketing as a percentage of revenue   46 %   57 %   51 %   55 %
                 
Technology and content   $ 29,345     $ 27,847     $ 89,003     $ 72,937  
Less: Equity-based compensation   (6,361 )   (6,666 )   (19,581 )   (15,513 )
Less: Amortization of acquired intangible assets   (122 )   (176 )   (459 )   (529 )
Less: Employer payroll taxes on employee stock transactions   (192 )   (65 )   (1,044 )   (979 )
Non-GAAP technology and content   $ 22,670     $ 20,940     $ 67,919     $ 55,916  
Technology and content as a percentage of revenue   30 %   34 %   31 %   32 %
Non-GAAP technology and content as a percentage of revenue   23 %   25 %   24 %   25 %
                 
General and administrative   $ 20,366     $ 20,844     $ 66,733     $ 63,610  
Less: Equity-based compensation   (6,633 )   (9,114 )   (24,450 )   (28,822 )
Less: Employer payroll taxes on employee stock transactions   (182 )   (195 )   (852 )   (897 )
Less: Secondary offering costs           (1,260 )   (918 )
Less: Acquisition-related costs   (341 )       (341 )   (835 )
Non-GAAP general and administrative   $ 13,210     $ 11,535     $ 39,830     $ 32,138  
General and administrative as a percentage of revenue   20 %   25 %   23 %   28 %
Non-GAAP general and administrative as a percentage of revenue   13 %   14 %   14 %   14 %
Reconciliation of loss from operations to non-GAAP operating loss:                
Loss from operations   $ (27,878 )   $ (39,697 )   $ (105,391 )   $ (110,806 )
Equity-based compensation   24,214     24,657     76,217     67,657  
Amortization of acquired intangible assets   1,380     1,435     4,235     3,044  
Employer payroll taxes on employee stock transactions   545     333     2,920     3,106  
Secondary offering costs           1,260     918  
Acquisition-related costs   341         341     835  
Non-GAAP operating loss   $ (1,398 )   $ (13,272 )   $ (20,418 )   $ (35,246 )


PLURALSIGHT, INC.

Key Business Metrics and Non-GAAP Financial Measures (cont.)
(in thousands, except per share amounts)
(unaudited)

    Three Months Ended September 30,   Nine Months Ended September 30,
    2020   2019   2020   2019
                 
Adjusted pro forma net loss per share                
Numerator:                
Net loss attributable to Pluralsight, Inc.   $ (27,361 )   $ (32,479 )   $ (92,609 )   $ (80,681 )
Net loss attributable to non-controlling interests   (6,410 )   (12,983 )   (28,405 )   (39,429 )
Equity-based compensation   24,214     24,657     76,217     67,657  
Amortization of acquired intangibles   1,380     1,435     4,235     3,044  
Employer payroll taxes on employee stock transactions   545     333     2,920     3,106  
Secondary offering costs           1,260     918  
Acquisition-related costs   341         341     835  
Amortization of debt discount and issuance costs   6,853     6,826     20,128     15,120  
Loss on debt extinguishment       950         950  
Adjusted pro forma net loss   $ (438 )   $ (11,261 )   $ (15,913 )   $ (28,480 )
Denominator:                
Weighted-average shares of Class A common stock outstanding   115,196     101,407     109,009     91,741  
Weighted-average LLC Units of Pluralsight Holdings that are convertible into Class A common stock   28,932     36,791     33,437     44,834  
Adjusted pro forma weighted-average common shares outstanding, basic and diluted   144,128     138,198     142,446     136,575  
Adjusted pro forma net loss per share   $     $ (0.08 )   $ (0.11 )   $ (0.21 )


Reconciliation of net cash (used in) provided by operating activities to free cash flow:                
Net cash (used in) provided by operating activities   $ (2,352 )   $ (2,175 )   $ 6,693     $ (3,823 )
Less: Purchases of property and equipment   (10,706 )   (3,029 )   (31,226 )   (7,619 )
Less: Purchases of content library   (1,803 )   (1,381 )   (5,596 )   (3,822 )
Free cash flow   $ (14,861 )   $ (6,585 )   $ (30,129 )   $ (15,264 )


PLURALSIGHT, INC.

Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

    September 30, 2020   December 31, 2019
         
Assets        
Current assets:        
Cash and cash equivalents   $ 100,882     $ 90,515  
Short-term investments   304,077     332,234  
Accounts receivable, net   76,492     101,576  
Deferred contract acquisition costs   19,469     18,331  
Prepaid expenses and other current assets   18,847     14,174  
Total current assets   519,767     556,830  
Restricted cash and cash equivalents   17,337     28,916  
Long-term investments   114,623     105,805  
Property and equipment, net   65,058     22,896  
Right-of-use assets   61,719     15,804  
Content library, net   11,880     8,958  
Intangible assets, net   18,416     22,631  
Goodwill   262,532     262,532  
Deferred contract acquisition costs, noncurrent   8,317     5,982  
Other assets   1,940     1,599  
Total assets   $ 1,081,589     $ 1,031,953  
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable   $ 7,041     $ 10,615  
Accrued expenses   47,090     40,703  
Accrued author fees   11,988     11,694  
Lease liabilities   9,184     5,752  
Deferred revenue   207,823     215,137  
Total current liabilities   283,126     283,901  
Deferred revenue, noncurrent   21,138     19,517  
Convertible senior notes, net   490,355     470,228  
Lease liabilities, noncurrent   75,393     11,167  
Other liabilities   69     980  
Total liabilities   870,081     785,793  
Stockholders' equity:        
Preferred stock        
Class A common stock   12     10  
Class B common stock   1     2  
Class C common stock   1     1  
Additional paid-in capital   724,184     641,128  
Accumulated other comprehensive income   1,166     225  
Accumulated deficit   (550,990 )   (458,381 )
Total stockholders’ equity attributable to Pluralsight, Inc.   174,374     182,985  
Non-controlling interests   37,134     63,175  
Total stockholders’ equity   211,508     246,160  
Total liabilities and stockholders' equity   $ 1,081,589     $ 1,031,953  


PLURALSIGHT, INC.

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

    Three Months Ended September 30,   Nine Months Ended September 30,
    2020   2019   2020   2019
                 
Operating activities                
Net loss   $ (33,771 )   $ (45,462 )   $ (121,014 )   $ (120,110 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                
Depreciation of property and equipment   2,998     2,417     8,866     6,996  
Amortization of acquired intangible assets   1,380     1,435     4,235     3,044  
Amortization of course creation costs   883     651     2,464     1,841  
Equity-based compensation   24,214     24,657     76,217     67,657  
Amortization of deferred contract acquisition costs   6,251     6,006     19,018     17,317  
Amortization of debt discount and issuance costs   6,853     6,826     20,128     15,120  
Investment discount and premium amortization, net   496     (1,065 )   68     (1,771 )
Loss on debt extinguishment       950         950  
Other   (104 )   (478 )   589     (178 )
Changes in assets and liabilities, net of acquired assets and liabilities:                
Accounts receivable   (14,581 )   (5,258 )   23,512     1,858  
Deferred contract acquisition costs   (9,128 )   (7,238 )   (22,491 )   (18,668 )
Prepaid expenses and other assets   (4,026 )   535     (4,237 )   (3,509 )
Right-of-use assets   1,449     1,412     4,487     4,339  
Accounts payable   1,480     (3,573 )   (3,126 )   (2,520 )
Accrued expenses and other liabilities   11,492     8,317     6,880     5,188  
Accrued author fees   277     (7 )   293     1,292  
Lease liabilities   (730 )   (1,758 )   (3,604 )   (5,130 )
Deferred revenue   2,215     9,458     (5,592 )   22,461  
Net cash (used in) provided by operating activities   (2,352 )   (2,175 )   6,693     (3,823 )
Investing activities                
Purchases of property and equipment   (10,706 )   (3,029 )   (31,226 )   (7,619 )
Purchases of content library   (1,803 )   (1,381 )   (5,596 )   (3,822 )
Cash paid for acquisition, net of cash acquired       100         (163,771 )
Purchases of investments   (110,118 )   (212,573 )   (427,130 )   (529,653 )
Proceeds from sales of investments               4,967  
Proceeds from maturities of investments   131,225     112,995     446,830     112,995  
Net cash provided by (used in) investing activities   8,598     (103,888 )   (17,122 )   (586,903 )
Financing activities                
Proceeds from issuance of common stock from employee equity plans   3,863     245     14,741     14,876  
Taxes paid related to net share settlement   (1,732 )       (5,605 )    
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  
Net cash provided by (used in) financing activities   2,131     (33,471 )   9,136     528,382  
Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents   238     (130 )   81     (108 )
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents   8,615     (139,664 )   (1,212 )   (62,452 )
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period   109,604     288,283     119,431     211,071  
Cash, cash equivalents, and restricted cash and cash equivalents, end of period   $ 118,219     $ 148,619     $ 118,219     $ 148,619  


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.