Document
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)

ý    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

Or

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-38498
 
PLURALSIGHT, INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
82-3605465
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)

182 North Union Avenue
Farmington, Utah 84025
(Address of principle executive offices, including zip code)

(801) 784-9007
(Registrant's telephone number, including area code)
 
 
 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
 
 
 
 
 
Class A Common Stock, $0.0001 par value per share
 
PS
 
Nasdaq Global Select Market
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
 
 
 
Accelerated filer
  
Non-accelerated filer
 
ý
 
 
 
Smaller reporting company
  
 
 
 
 
 
 
Emerging growth company
  
ý
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
As of October 28, 2019, the registrant had 140,628,827 shares of common stock outstanding, consisting of 101,791,676 shares of Class A common stock, 24,442,952 shares of Class B common stock, and 14,394,199 shares of Class C common stock.

 
 
 




PLURALSIGHT, INC.
TABLE OF CONTENTS
 
 
 
 
 
 
Page
 
 
 
PART I. FINANCIAL INFORMATION
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II. OTHER INFORMATION
 
 
 
Item 1.
Item 1A.
Item 2.
Item 6.
 
 
 






SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
As used in this Quarterly Report on Form 10-Q, unless expressly indicated or the context otherwise requires, references to “Pluralsight,” “we,” “us,” “our,” “the Company,” and similar references refer to Pluralsight, Inc. and its consolidated subsidiaries, including Pluralsight Holdings, LLC, or Pluralsight Holdings.
This Quarterly Report on Form 10-Q, including the section titled “Management's Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions, generally relate to future events or our future financial or operating performance. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” “target,” “project,” “contemplate,” or the negative version of these words and other comparable terminology that concern our expectations, strategy, plans, intentions, or projections. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: 
our ability to attract new customers and retain and expand our relationships with existing customers;
our ability to expand our course library and develop new platform features;
our future financial performance, including trends in billings, revenue, costs of revenue, gross margin, operating expenses, and free cash flow;
the demand for, and market acceptance of, our platform or for cloud-based technology learning solutions in general;
our ability to compete successfully in competitive markets;
our ability to respond to rapid technological changes;
our expectations and management of future growth;
our ability to enter new markets and manage our expansion efforts, particularly internationally;
our ability to attract and retain key employees and qualified technical and sales personnel;
our ability to improve sales management and execution;
our ability to effectively and efficiently protect our brand;
our ability to timely scale and adapt our infrastructure;
our ability to maintain, protect, and enhance our intellectual property and not infringe upon others’ intellectual property;
our ability to successfully identify, acquire, and integrate companies and assets;
our ability to successfully defend ourselves in legal proceedings;
the amount and timing of any payments we make under the fourth amended and restated limited liability company agreement of Pluralsight Holdings, or the Fourth LLC Agreement, and our Tax Receivable Agreement, or TRA, with the members of Pluralsight Holdings;
our use of net proceeds from our convertible note offering in March 2019;
our ability to satisfy our obligations under the convertible senior notes;
our ability to successfully integrate GitPrime, Inc.'s ("GitPrime") operations;
our ability to implement our plans, forecasts and other expectations with respect to GitPrime's business; and
our ability to realize the anticipated benefits of the acquisition of GitPrime, including the possibility that the expected benefits from the acquisition will not be realized within the expected time period.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors” in our Annual Report on Form 10-K/A as filed with the Securities and Exchange Commission, or the SEC, under the Exchange Act. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements and you should not place undue reliance on our forward-looking statements.

1




The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
You should read this Quarterly Report on Form 10-Q in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018 included in our Annual Report on Form 10-K/A.


2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
PLURALSIGHT, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(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 of allowances of $2,909 and $2,501 as of September 30, 2019 and December 31, 2018, respectively
 
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

Commitments and contingencies (Note 12)
 

 

Stockholders' equity:
 
 
 
 
Preferred stock, $0.0001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2019 and December 31, 2018
 

 

Class A common stock, $0.0001 par value per share, 1,000,000,000 shares authorized, 101,638,179 shares issued and outstanding as of September 30, 2019; 65,191,907 shares issued and outstanding as of December 31, 2018
 
10

 
7

Class B common stock, $0.0001 par value per share, 200,000,000 shares authorized, 24,442,952 shares issued and outstanding as of September 30, 2019; 57,490,881 shares issued and outstanding as of December 31, 2018
 
2

 
6

Class C common stock, $0.0001 par value per share, 50,000,000 shares authorized, 14,289,762 shares issued and outstanding as of September 30, 2019; 14,586,173 shares issued and outstanding as of December 31, 2018
 
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

The accompanying notes are an integral part of these condensed consolidated financial statements.

3




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
 
 
 
 
(Restated)
 
 
 
(Restated)
 
 
 
 
 
 
 
 
 
Revenue
 
$
82,620

 
$
61,553

 
$
228,099

 
$
164,769

Cost of revenue
 
17,825

 
15,347

 
52,336

 
46,166

Gross profit
 
64,795

 
46,206

 
175,763

 
118,603

Operating expenses:
 
 
 
 
 
 
 
 
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(1)
 
$
(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(1)
 
101,407

 
62,472

 
91,741

 
62,400

________________________
(1)
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, 2018 reflect only the activity for the portion of the period following Pluralsight, Inc.'s initial public offering and the Reorganization Transactions described in Note 1—Organization and Description of Business. See Note 17—Net Loss Per Share for additional details.
The accompanying notes are an integral part of these condensed consolidated financial statements.

4




PLURALSIGHT, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
(Restated)
 
 
 
(Restated)
 
 
 
 
 
 
 
 
 
Net loss
 
$
(45,802
)
 
$
(34,323
)
 
$
(121,127
)
 
$
(112,701
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Unrealized gains on investments
 
19

 

 
398

 

Foreign currency translation losses, net
 
(90
)
 
(39
)
 
(79
)
 
(97
)
Comprehensive loss
 
$
(45,873
)
 
$
(34,362
)
 
$
(120,808
)
 
$
(112,798
)
Less: Comprehensive loss attributable to non-controlling interests
 
(13,092
)
 
(18,001
)
 
(39,670
)
 
(31,932
)
Comprehensive loss attributable to Pluralsight, Inc.
 
$
(32,781
)
 
$
(16,361
)
 
$
(81,138
)
 
$
(80,866
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5




PLURALSIGHT, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Units, Members’ Deficit, and Stockholders' Equity
(in thousands, except share/unit amounts)
(unaudited)
Three Months Ended September 30, 2019
 
Redeemable
Convertible
Preferred Units
 
 
Members’ Capital
 
Class A Common Stock
 
Class B Common Stock
 
Class C Common Stock
 
Additional
Paid-In
Capital
 
Accumulated Other Comprehensive
Income (Loss)
 
Accumulated
Deficit
 
Non-Controlling Interests
 
Total
 
Units
 
Amount
 
 
Units
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2019

 
$

 
 

 
$

 
101,096,472

 
$
10

 
24,664,113

 
$
2

 
14,186,856

 
$
1

 
$
599,558

 
$
237

 
$
(394,048
)
 
$
74,346

 
$
280,106

Effect of exchanges of LLC Units

 

 
 

 

 
116,709

 

 
(116,709
)
 

 

 

 
238

 

 

 
(238
)
 

Vesting of restricted stock units

 

 
 

 

 
399,052

 

 

 

 
102,906

 

 

 

 

 

 

Exercise of common stock options

 

 
 

 

 
25,946

 

 

 

 

 

 
245

 

 

 

 
245

Forfeiture of unvested LLC Units

 

 
 

 

 

 

 
(104,452
)
 

 

 

 

 

 

 

 

Repurchases of equity component of convertible senior notes

 

 
 

 

 

 

 

 

 

 

 
(2,965
)
 

 

 

 
(2,965
)
Settlement of capped calls related to repurchases of convertible senior notes

 

 
 

 

 

 

 

 

 

 

 
1,284

 

 

 

 
1,284

Equity-based compensation

 

 
 

 

 

 

 

 

 

 

 
25,009

 

 

 

 
25,009

Adjustments to non-controlling interests

 

 
 

 

 

 

 

 

 

 

 
(7,656
)
 

 

 
7,656

 

Other comprehensive loss

 

 
 

 

 

 

 

 

 

 

 

 
(52
)
 

 
(19
)
 
(71
)
Net loss

 

 
 

 

 

 

 

 

 

 

 

 

 
(32,729
)
 
(13,073
)
 
(45,802
)
Balance at September 30, 2019

 
$

 
 

 
$

 
101,638,179

 
$
10

 
24,442,952

 
$
2

 
14,289,762

 
$
1

 
$
615,713

 
$
185

 
$
(426,777
)
 
$
68,672

 
$
257,806

The accompanying notes are an integral part of these condensed consolidated financial statements.






















6






PLURALSIGHT, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Units, Members’ Deficit, and Stockholders' Equity (Continued)
(in thousands, except share/unit amounts)
(unaudited)
Three Months Ended September 30, 2018
 
 
Redeemable
Convertible
Preferred Units
 
 
Members’ Capital
 
Class A Common Stock
 
Class B Common Stock
 
Class C Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive Income (Loss)
 
Accumulated
Deficit
 
Non-Controlling Interests
 
Total
 
 
Units
 
Amount
 
 
Units
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2018
 

 
$

 
 

 
$

 
62,915,660

 
$
6

 
58,111,572

 
$
6

 
14,048,138

 
$
1

 
$
437,274

 
$
(16
)
 
$
(322,801
)
 
$
125,395

 
$
239,865

Effect of the Rescission Transactions
 

 

 
 

 

 
(605,390
)
 

 
455,217

 

 
150,173

 

 

 

 

 

 

Equity-based compensation, as restated
 

 

 
 

 

 

 

 

 

 

 

 
20,744

 

 

 

 
20,744

Adjustments to non-controlling interests, as restated
 

 

 
 

 

 

 

 

 

 

 

 
(11,582
)
 

 

 
11,582

 

Foreign currency translation losses
 

 

 
 

 

 

 

 

 

 

 

 

 
(18
)
 

 
(21
)
 
(39
)
Other
 

 

 
 

 

 

 

 

 

 

 

 
27

 

 

 

 
27

Net loss, as restated
 

 

 
 

 

 

 

 

 

 

 

 

 

 
(16,343
)
 
(17,980
)
 
(34,323
)
Balance at September 30, 2018, as restated
 

 
$

 
 

 
$

 
62,310,270

 
$
6

 
58,566,789

 
$
6

 
14,198,311

 
$
1

 
$
446,463

 
$
(34
)
 
$
(339,144
)
 
$
118,976

 
$
226,274

The accompanying notes are an integral part of these condensed consolidated financial statements.














7




PLURALSIGHT, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Units, Members’ Deficit, and Stockholders' Equity (Continued)
(in thousands, except share/unit amounts)
(unaudited)
Nine Months Ended September 30, 2019
 
Redeemable
Convertible
Preferred Units
 
 
Members’ Capital
 
Class A Common Stock
 
Class B Common Stock
 
Class C Common Stock
 
Additional
Paid-In
Capital
 
Accumulated Other Comprehensive (Loss) Income
 
Accumulated
Deficit
 
Non-Controlling Interests
 
Total
 
Units
 
Amount
 
 
Units
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018

 
$

 
 

 
$

 
65,191,907

 
$
7

 
57,490,881

 
$
6

 
14,586,173

 
$
1

 
$
456,899

 
$
(41
)
 
$
(355,446
)
 
$
107,167

 
$
208,593

Impact of the adoption of ASC 606

 

 
 

 

 

 

 

 

 

 

 

 

 
10,033

 
10,601

 
20,634

Effect of exchanges of LLC Units

 

 
 

 

 
33,536,262

 
3

 
(32,926,084
)
 
(4
)
 
(610,178
)
 

 
59,158

 

 

 
(59,157
)
 

Issuance of common stock under employee stock purchase plans

 

 
 

 

 
621,463

 

 

 

 

 

 
8,257

 

 

 

 
8,257

Vesting of restricted stock units

 

 
 

 

 
1,835,633

 

 

 

 
313,767

 

 

 

 

 

 

Exercise of common stock options

 

 
 

 

 
452,914

 

 

 

 

 

 
6,619

 

 

 

 
6,619

Forfeiture of unvested LLC Units

 

 
 

 

 

 

 
(121,845
)
 

 

 

 

 

 

 

 

Equity component of convertible senior notes, net of issuance costs

 

 
 

 

 

 

 

 

 

 

 
137,033

 

 

 

 
137,033

Purchase of capped calls related to issuance of convertible senior notes

 

 
 

 

 

 

 

 

 

 

 
(69,432
)
 

 

 

 
(69,432
)
Repurchases of equity component of convertible senior notes

 

 
 

 

 

 

 

 

 

 

 
(2,965
)
 

 

 

 
(2,965
)
Settlement of capped calls related to repurchases of convertible senior notes

 

 
 

 

 

 

 

 

 

 

 
1,284

 

 

 

 
1,284

Equity-based compensation

 

 
 

 

 

 

 

 

 

 

 
68,591

 

 

 

 
68,591

Adjustments to non-controlling interests

 

 
 

 

 

 

 

 

 

 

 
(49,731
)
 

 

 
49,731

 

Other comprehensive income

 

 
 

 

 

 

 

 

 

 

 

 
226

 

 
93

 
319

Net loss

 

 
 

 

 

 

 

 

 

 

 

 

 
(81,364
)
 
(39,763
)
 
(121,127
)
Balance at September 30, 2019

 
$

 
 

 
$

 
101,638,179

 
$
10

 
24,442,952

 
$
2

 
14,289,762

 
$
1

 
$
615,713

 
$
185

 
$
(426,777
)
 
$
68,672

 
$
257,806

The accompanying notes are an integral part of these condensed consolidated financial statements.








8




PLURALSIGHT, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Units, Members’ Deficit, and Stockholders' Equity (Continued)
(in thousands, except share/unit amounts)
(unaudited)
Nine Months Ended September 30, 2018
 
 
Redeemable
Convertible
Preferred Units
 
 
Members’ Capital
 
Class A Common Stock
 
Class B Common Stock
 
Class C Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive Income (Loss)
 
Accumulated
Deficit
 
Non-Controlling Interests
 
Total
 
 
Units
 
Amount
 
 
Units
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
48,447,880

 
$
405,766

 
 
48,407,645

 
$

 

 
$

 

 
$

 

 
$

 
$

 
$
25

 
$
(445,102
)
 
$

 
$
(445,077
)
Activity prior to the Reorganization Transactions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of warrants to purchase Class A common units
 

 

 
 

 
984

 

 

 

 

 

 

 

 

 

 

 
984

Equity-based compensation, as restated
 

 

 
 

 
22,278

 

 

 

 

 

 

 

 

 

 

 
22,278

Accretion of Series A redeemable convertible preferred units, as restated
 

 
176,275

 
 

 
(23,262
)
 

 

 

 

 

 

 

 

 
(153,013
)
 

 
(176,275
)
Foreign currency translation losses
 

 

 
 

 

 

 

 

 

 

 

 

 
(18
)
 

 

 
(18
)
Net loss, as restated
 

 

 
 

 

 

 

 

 

 

 

 

 

 
(51,783
)
 

 
(51,783
)
Effect of the Reorganization Transactions and initial public offering:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Effect of the Reorganization Transactions
 
(48,447,880
)
 
(582,041
)
 
 
(48,407,645
)
 

 
39,110,660

 
4

 
58,111,572

 
6

 
14,048,138

 
1

 
581,952

 

 

 

 
581,963

Initial public offering, net of offering costs
 

 

 
 

 

 
23,805,000

 
2

 

 

 

 

 
324,704

 

 

 

 
324,706

Allocation of equity to non-controlling interests
 

 

 
 

 

 

 

 

 

 

 

 
(474,007
)
 
(4
)
 
339,782

 
134,229

 

Activity subsequent to the Reorganization Transactions and initial public offering:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of the Rescission Transactions
 

 

 
 

 

 
(605,390
)
 

 
455,217

 

 
150,173

 

 

 

 

 

 

Settlement of equity appreciation rights
 

 

 
 

 

 

 

 

 

 

 

 
(325
)
 

 

 

 
(325
)
Equity-based compensation, as restated
 

 

 
 

 

 

 

 

 

 

 

 
30,818

 

 

 

 
30,818

Adjustments to non-controlling interests, as restated
 

 

 
 

 

 

 

 

 

 

 

 
(16,679
)
 

 

 
16,679

 

Foreign currency translation losses
 

 

 
 

 

 

 

 

 

 

 

 

 
(37
)
 

 
(42
)
 
(79
)
Net loss, as restated
 

 

 
 

 

 

 

 

 

 

 

 

 

 
(29,028
)
 
(31,890
)
 
(60,918
)
Balance at September 30, 2018, as restated
 

 
$

 
 

 
$

 
62,310,270

 
$
6

 
58,566,789

 
$
6

 
14,198,311

 
$
1

 
$
446,463

 
$
(34
)
 
$
(339,144
)
 
$
118,976

 
$
226,274

The accompanying notes are an integral part of these condensed consolidated financial statements.

9




PLURALSIGHT, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
 
 
 
(Restated)
 
 
 
 
 
Operating activities
 
 
 
 
Net loss
 
$
(121,127
)
 
$
(112,701
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation of property and equipment
 
6,471

 
6,331

Amortization of acquired intangible assets
 
3,044

 
7,721

Amortization of course creation costs
 
1,841

 
1,437

Equity-based compensation
 
67,657

 
52,982

Amortization of deferred contract acquisition costs
 
17,317

 

Amortization of debt discount and issuance costs
 
15,120

 
1,215

Investment discount and premium amortization, net
 
(1,771
)
 

Loss on debt extinguishment
 
950

 
4,085

Other
 
(178
)
 
507

Changes in assets and liabilities, net of acquired assets and liabilities:
 
 
 
 
Accounts receivable
 
1,858

 
(10,352
)
Deferred contract acquisition costs
 
(18,668
)
 

Prepaid expenses and other assets
 
(3,660
)
 
(2,990
)
Accounts payable
 
(2,486
)
 
928

Accrued expenses and other liabilities
 
6,067

 
6,912

Accrued author fees
 
1,292

 
1,452

Deferred revenue
 
22,461

 
28,190

Net cash used in operating activities
 
(3,812
)
 
(14,283
)
Investing activities
 
 
 
 
Purchases of property and equipment
 
(7,619
)
 
(6,576
)
Purchases of content library
 
(3,822
)
 
(2,345
)
Cash paid for acquisition, net of cash acquired
 
(163,771
)
 

Purchases of investments
 
(529,653
)
 

Proceeds from sales of investments
 
4,967

 

Proceeds from maturities of short-term investments
 
112,995

 

Net cash used in investing activities
 
(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
)
 

Proceeds from terminations of capped calls related to repurchases of convertible senior notes
 
1,284

 

Proceeds from issuance of common stock from employee equity plans
 
14,876

 

Proceeds from initial public offering, net of underwriting discounts and commissions
 

 
332,080

Payments of costs related to initial public offering
 

 
(7,083
)
Borrowings of long-term debt
 

 
20,000

Repayments of long-term debt
 

 
(137,710
)
Payments of debt extinguishment costs
 

 
(2,179
)
Payments of debt issuance costs
 

 
(450
)
Payments to settle equity appreciation rights
 


(325
)
Taxes paid related to net share settlement
 

 
(78
)
Other
 
(10
)
 
(13
)
Net cash provided by financing activities
 
528,372

 
204,242

Effect of exchange rate changes on cash, cash equivalents, and restricted cash
 
(109
)
 
(136
)
Net (decrease) increase in cash, cash equivalents, and restricted cash
 
(62,452
)
 
180,902

Cash, cash equivalents, and restricted cash, beginning of period
 
211,071

 
28,477

Cash, cash equivalents, and restricted cash, end of period
 
$
148,619

 
$
209,379

The accompanying notes are an integral part of these condensed consolidated financial statements.


10




PLURALSIGHT, INC.
Condensed Consolidated Statements of Cash Flows (Continued)
(in thousands)
(unaudited)
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
 
 
 
(Restated)
 
 
 
 
 
Supplemental cash flow disclosure:
 
 
 
 
Cash paid for interest
 
$
1,126

 
$
4,271

Cash paid for income taxes, net
 
$
539

 
$
338

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
 
Property acquired under build-to-suit agreements
 
$
22,461

 
$

Unpaid capital expenditures
 
$
752

 
$
252

Equity-based compensation capitalized as internal-use software
 
$
934

 
$
114

Unrealized gains on investments
 
$
398

 
$

Conversion of redeemable convertible preferred units
 
$

 
$
582,041

Redeemable convertible preferred unit accretion
 
$

 
$
176,275

Costs related to initial public offering, accrued but not yet paid
 
$

 
$
607

Issuance of warrants to purchase shares of Class A common stock
 
$

 
$
984

Reconciliation of cash, cash equivalents and restricted cash as shown in the statement of cash flows:
 
 
 
 
Cash and cash equivalents
 
$
120,871

 
$
208,626

Restricted cash
 
27,748

 
753

Total cash, cash equivalents, and restricted cash
 
$
148,619

 
$
209,379

The accompanying notes are an integral part of these condensed consolidated financial statements.


11




PLURALSIGHT, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1. Organization and Description of Business
Pluralsight, Inc. was incorporated as a Delaware corporation on December 4, 2017 as a holding company for the purpose of facilitating an initial public offering (“IPO”) and other related transactions in order to carry on the business of Pluralsight Holdings, LLC (“Pluralsight Holdings”) and its subsidiaries (together with Pluralsight, Inc., the “Company” or “Pluralsight”). Pluralsight Holdings is a limited liability company (“LLC”) and was organized on August 29, 2014 in the state of Delaware and is the parent company of Pluralsight, LLC, and its directly and indirectly wholly-owned subsidiaries. Pluralsight, LLC was organized on June 17, 2004 in the state of Nevada. Pluralsight operates a cloud-based technology skills platform that provides a broad range of tools for businesses and individuals, including skill assessments, a curated library of courses, learning paths, developer productivity metrics, and business analytics. As the sole managing member of Pluralsight Holdings, Pluralsight, Inc. operates and controls all of the business operations and affairs of Pluralsight.
Initial Public Offering
In May 2018, Pluralsight, Inc. completed its IPO, in which it sold 23,805,000 shares of Class A common stock at a public offering price of $15.00 per share for net proceeds of $332.1 million, after deducting underwriters' discounts and commissions, which Pluralsight, Inc. used to purchase newly issued common limited liability company units (“LLC Units") from Pluralsight Holdings. In connection with the IPO, the Company reclassified $7.4 million of offering costs into stockholders’ equity as a reduction of the net proceeds received from the IPO.
Reorganization Transactions
In connection with the IPO, the Company completed the following transactions (“Reorganization Transactions”):
The limited liability company agreement of Pluralsight Holdings (“LLC Agreement”) was amended and restated to, among other things: (i) appoint Pluralsight, Inc. as its sole managing member and (ii) effectuate the conversion of all outstanding redeemable convertible preferred limited liability company units, incentive units, and Class B incentive units of Pluralsight Holdings into a single class of common units. See Note 13—Stockholders' Equity for additional details.
Certain members of Pluralsight Holdings that were corporations merged with and into Pluralsight, Inc. and certain members of Pluralsight Holdings contributed certain of their LLC Units to Pluralsight, Inc., in each case in exchange for shares of Class A common stock.
The certificate of incorporation of Pluralsight, Inc. was amended and restated to authorize three classes of common stock, Class A common stock, Class B common stock, Class C common stock, and one class of preferred stock. Class B and Class C common stock were issued on a one-for-one basis to the members of Pluralsight Holdings who retained LLC Units (“Continuing Members”). Class B and Class C common stock have voting rights but no economic rights. See Note 13—Stockholders' Equity for additional details.
As the sole managing member of Pluralsight Holdings, Pluralsight, Inc. has the sole voting interest in Pluralsight Holdings and controls all of the business operations, affairs, and management of Pluralsight Holdings. Accordingly, Pluralsight, Inc. consolidates the financial results of Pluralsight Holdings and reports the non-controlling interests of the Continuing Members' LLC Units on its consolidated financial statements. As of September 30, 2019, Pluralsight, Inc. owned 73.4% of Pluralsight Holdings and the Continuing Members owned the remaining 26.6% of Pluralsight Holdings.
As the Reorganization Transactions are considered transactions between entities under common control, the financial statements for periods prior to the IPO and Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes. Prior to the Reorganization Transactions, Pluralsight, Inc. had no operations.
Secondary Offering
In March 2019, the Company completed a secondary offering, in which certain stockholders sold 15,592,234