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

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

For the quarterly period ended June 30, 2020

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 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 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
 
 
 
 
Smaller reporting company
  
 
 
 
 
 
 
Emerging growth company
  
 
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
As of July 24, 2020, the registrant had 144,465,880 shares of common stock outstanding, consisting of 111,924,698 shares of Class A common stock, 19,349,269 shares of Class B common stock, and 13,191,913 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 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, cash provided by (used in) operating activities, 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 of the impact the novel coronavirus strain named SARS-CoV-2, abbreviated as COVID-19, pandemic may have on our business;
our ability to maintain operations and implement effective measures in response to the COVID-19 pandemic;
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 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; and
our ability to satisfy our obligations under the convertible senior notes.
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. Such risks and uncertainties include the impact of the spread of COVID-19. 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.
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.

1




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, 2019 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)
 
 
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 of allowances of $5,370 and $3,465 as of June 30, 2020 and December 31, 2019, respectively
 
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

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 June 30, 2020 and December 31, 2019
 

 

Class A common stock, $0.0001 par value per share, 1,000,000,000 shares authorized, 111,875,235 and 104,083,271 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
 
11

 
10

Class B common stock, $0.0001 par value per share, 200,000,000 shares authorized, 19,366,038 and 23,211,418 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
 
2

 
2

Class C common stock, $0.0001 par value per share, 50,000,000 shares authorized, 13,191,913 and 14,269,199 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
 
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

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 June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Revenue
 
$
94,765

 
$
75,862

 
$
187,411

 
$
145,479

Cost of revenue
 
19,717

 
17,803

 
38,725

 
34,515

Gross profit
 
75,048

 
58,059

 
148,686

 
110,964

Operating expenses:
 
 
 
 
 
 
 
 
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
 
$
(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


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 June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Net loss
 
$
(39,730
)
 
$
(40,764
)
 
$
(87,243
)
 
$
(74,648
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Unrealized gains on investments
 
2,954

 
379

 
1,389

 
379

Foreign currency translation gains (losses), net
 
73

 
(7
)
 
(149
)
 
11

Comprehensive loss
 
$
(36,703
)
 
$
(40,392
)
 
$
(86,003
)
 
$
(74,258
)
Less: Comprehensive loss attributable to non-controlling interests
 
(9,030
)
 
(11,533
)
 
(21,684
)
 
(26,334
)
Comprehensive loss attributable to Pluralsight, Inc.
 
$
(27,673
)
 
$
(28,859
)
 
$
(64,319
)
 
$
(47,924
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5




PLURALSIGHT, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(unaudited)
Three Months Ended June 30, 2020
 
 
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 Stockholders Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2020
 
105,459,701

 
$
11

 
23,010,178

 
$
2

 
14,373,295

 
$
1

 
$
659,480

 
$
(1,102
)
 
$
(493,700
)
 
$
56,458

 
$
221,150

Effect of exchanges of LLC Units
 
4,929,959

 

 
(3,644,140
)
 

 
(1,285,819
)
 

 
7,699

 

 

 
(7,699
)
 

Issuance of common stock under employee stock purchase plan
 
629,927

 

 

 

 

 

 
8,348

 

 

 

 
8,348

Vesting of restricted stock units
 
719,556

 

 

 

 
104,437

 

 

 

 

 

 

Exercise of common stock options
 
136,092

 

 

 

 

 

 
1,831

 

 

 

 
1,831

Shares withheld for tax withholding on equity awards
 

 

 

 

 

 

 
(1,523
)
 

 

 

 
(1,523
)
Equity-based compensation
 

 

 

 

 

 

 
26,575

 

 

 

 
26,575

Adjustments to non-controlling interests
 

 

 

 

 

 

 
(8,642
)
 

 

 
8,642

 

Other comprehensive income
 

 

 

 

 

 

 

 
2,256

 

 
771

 
3,027

Net loss
 

 

 

 

 

 

 

 

 
(29,929
)
 
(9,801
)
 
(39,730
)
Balance at June 30, 2020
 
111,875,235

 
$
11

 
19,366,038

 
$
2

 
13,191,913

 
$
1

 
$
693,768

 
$
1,154

 
$
(523,629
)
 
$
48,371

 
$
219,678


Three Months Ended June 30, 2019
 
 
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 Stockholders Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2019
 
95,096,979

 
$
10

 
29,071,789

 
$
3

 
14,162,311

 
$
1

 
$
565,095

 
$
(31
)
 
$
(364,798
)
 
$
85,281

 
$
285,561

Effect of exchanges of LLC Units
 
4,469,843

 

 
(4,390,283
)
 
(1
)
 
(79,560
)
 

 
9,425

 

 

 
(9,424
)
 

Issuance of common stock under employee stock purchase plan
 
622,639

 

 

 

 

 

 
8,257

 

 

 

 
8,257

Vesting of restricted stock units
 
654,796

 

 

 

 
104,105

 

 

 

 

 

 

Exercise of common stock options
 
252,215

 

 

 

 

 

 
3,753

 

 

 

 
3,753

Forfeiture of unvested LLC Units
 

 

 
(17,393
)
 

 

 

 

 

 

 

 

Equity-based compensation
 

 

 

 

 

 

 
22,966

 

 

 

 
22,966

Adjustments to non-controlling interests
 

 

 

 

 

 

 
(10,032
)
 

 

 
10,032

 

Other comprehensive income
 

 

 

 

 

 

 

 
268

 

 
104

 
372

Net loss
 

 

 

 

 

 

 

 

 
(29,127
)
 
(11,637
)
 
(40,764
)
Balance at June 30, 2019
 
101,096,472

 
$
10

 
24,664,113

 
$
2

 
14,186,856

 
$
1

 
$
599,464

 
$
237

 
$
(393,925
)
 
$
74,356

 
$
280,145


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

6




PLURALSIGHT, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
(in thousands, except share amounts)
(unaudited)
Six Months Ended June 30, 2020
 
 
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 Stockholders Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019
 
104,083,271

 
$
10

 
23,211,418

 
$
2

 
14,269,199

 
$
1

 
$
641,128

 
$
225

 
$
(458,381
)
 
$
63,175

 
$
246,160

Effect of exchanges of LLC Units
 
5,131,199

 

 
(3,845,380
)
 

 
(1,285,819
)
 

 
8,053

 

 

 
(8,053
)
 

Issuance of common stock under employee stock purchase plan
 
629,927

 

 

 

 

 

 
8,348

 

 

 

 
8,348

Vesting of restricted stock units
 
1,836,997

 
1

 

 

 
208,533

 

 
(1
)
 

 

 

 

Exercise of common stock options
 
193,841

 

 

 

 

 

 
2,530

 

 

 

 
2,530

Shares withheld for tax withholding on equity awards
 

 

 

 

 

 

 
(3,873
)
 

 

 

 
(3,873
)
Equity-based compensation
 

 

 

 

 

 

 
52,516

 

 

 

 
52,516

Adjustments to non-controlling interests
 

 

 

 

 

 

 
(14,933
)
 

 

 
14,933

 

Other comprehensive income
 

 

 

 

 

 

 

 
929

 

 
311

 
1,240

Net loss
 

 

 

 

 

 

 

 

 
(65,248
)
 
(21,995
)
 
(87,243
)
Balance at June 30, 2020
 
111,875,235

 
$
11

 
19,366,038

 
$
2

 
13,191,913

 
$
1

 
$
693,768

 
$
1,154

 
$
(523,629
)
 
$
48,371

 
$
219,678



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
























7




PLURALSIGHT, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
(in thousands, except share amounts)
(unaudited)

Six Months Ended June 30, 2019
 
 
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 Stockholders Equity
 
 
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

Cumulative effect of accounting changes
 

 

 

 

 

 

 

 

 
9,723

 
10,273

 
19,996

Effect of exchanges of LLC Units
 
33,419,553

 
3

 
(32,809,375
)
 
(4
)
 
(610,178
)
 

 
58,920

 

 

 
(58,919
)
 

Issuance of common stock under employee stock purchase plan
 
622,639

 

 

 

 

 

 
8,257

 

 

 

 
8,257

Vesting of restricted stock units
 
1,435,405

 

 

 

 
210,861

 

 

 

 

 

 

Exercise of common stock options
 
426,968

 

 

 

 

 

 
6,374

 

 

 

 
6,374

Forfeiture of unvested LLC Units
 

 

 
(17,393
)
 

 

 

 

 

 

 

 

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
)
Equity-based compensation
 

 

 

 

 

 

 
43,582

 

 

 

 
43,582

Adjustments to non-controlling interests
 

 

 

 

 

 

 
(42,169
)
 

 

 
42,169

 

Other comprehensive income
 

 

 

 

 

 

 

 
278

 

 
112

 
390

Net loss
 

 

 

 

 

 

 

 

 
(48,202
)
 
(26,446
)
 
(74,648
)
Balance at June 30, 2019
 
101,096,472

 
$
10

 
24,664,113

 
$
2

 
14,186,856

 
$
1

 
$
599,464