Pluralsight Announces Second Quarter 2020 Results

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

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

Second Quarter Financial Highlights

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

For information regarding the non-GAAP financial measures discussed in this press release, please see the section titled “Non-GAAP Financial Measures.” Reconciliations between GAAP and non-GAAP financial measures are provided in the tables of this press release.

Financial Outlook

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

Third Quarter 2020 Guidance

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

Full Year 2020 Guidance

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

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

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

Conference Call Information

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

Date:	July 29, 2020
Time:	2:30 p.m. MT (4:30 p.m. ET)
Webcast:	https://investors.pluralsight.com/
Dial-in number:	[phone] or [phone], conference ID: 1883129

A live audio webcast of the conference call will also be accessible from the Pluralsight website at investors.pluralsight.com. A telephonic replay of the call will be available three hours after the call, will run for seven days, and may be accessed by dialing [phone] or [phone] and entering the passcode 1883129.

About Pluralsight

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

Pluralsight and the Pluralsight logo are trademarks of Pluralsight, LLC in the United States and in jurisdictions throughout the world.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws that involve risks and uncertainties, including the quotations of management and statements regarding our future financial and operating performance, and our financial outlook for the third quarter and full year 2020. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: our ability to attract and retain customers; our ability to expand our course library and develop new platform features; the demand for, and market acceptance of our platform; competition; our ability to improve sales management and execution; our expectations of the potential impact the COVID-19 pandemic may have on our business; and other market, political, economic, and business conditions.

Additional risks and uncertainties that could affect our financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K/A filed with the SEC on March 2, 2020 and in our quarterly report on Form 10-Q filed with the SEC on July 29, 2020, which is available on our website at investors.pluralsight.com and on the SEC’s website at www.sec.gov. Additional information will also be set forth in other filings that we make with the SEC from time to time. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

Key Business Metrics

Billings. Billings represents total revenue plus the change in deferred revenue in the period, as presented in our condensed consolidated statements of cash flows, less the change in contract assets and unbilled accounts receivable in the period. Billings in any particular period represents amounts invoiced to customers and reflects subscription renewals and upsells to existing customers plus sales to new customers. We use billings to measure our ability to sell subscriptions to our platform to both new and existing customers. We use billings from business customers and our percentage of billings from business customers to measure and monitor our ability to sell subscriptions to our platform to business customers.

Non-GAAP Financial Measures

Pluralsight has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). Pluralsight uses the non-GAAP financial measures of non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating loss, adjusted pro forma net loss, adjusted pro forma net loss per share, and free cash flow in analyzing its financial results and believes that the use of these metrics is useful to investors as an additional tool to evaluate ongoing operating results and trends and in comparing Pluralsight’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures.

The presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. A reconciliation of our historical non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the financial statement tables included in this press release, and investors are encouraged to review these reconciliations.

Non-GAAP gross profit. We define non-GAAP gross profit as gross profit plus equity-based compensation, amortization of acquired intangible assets, and employer payroll taxes on employee stock transactions.

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

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

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

Adjusted pro forma net loss and adjusted pro forma net loss per share. We define adjusted pro forma net loss as net loss attributable to Pluralsight, Inc. adjusted for the reallocation of loss attributable to non-controlling interests from the assumed exchange of LLC Units of Pluralsight Holdings for newly-issued shares of Class A common stock of Pluralsight, Inc. and further adjusted for equity-based compensation, amortization of acquired intangible assets, employer payroll taxes on employee stock transactions, amortization of debt discount and issuance costs, and, as applicable, other special items. We define adjusted pro forma net loss per share as adjusted pro forma net loss divided by the weighted-average shares of Class A common stock outstanding, assuming the full exchange of all outstanding LLC Units of Pluralsight Holdings for newly-issued shares of Class A common stock of Pluralsight, Inc.

Free cash flow. We define free cash flow as cash provided by (used in) operating activities less purchases of property and equipment and purchases of our content library.

PLURALSIGHT, INC.

Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Revenue		$	94,765			$	75,862			$	187,411			$	145,479
Cost of revenue(1)(2)		19,717				17,803				38,725				34,515
Gross profit		75,048				58,059				148,686				110,964
Operating expenses(1)(2):
Sales and marketing		57,759				50,046				120,174				94,217
Technology and content		29,514				24,819				59,658				45,090
General and administrative		22,996				20,575				46,367				42,766
Total operating expenses		110,269				95,440				226,199				182,073
Loss from operations		(35,221		)		(37,381		)		(77,513		)		(71,109		)
Other income (expense):
Interest expense		(7,241		)		(7,346		)		(14,390		)		(9,024		)
Other income, net		2,267				4,106				4,437				5,782
Loss before income taxes		(40,195		)		(40,621		)		(87,466		)		(74,351		)
Income tax benefit (expense)		465				(143		)		223				(297		)
Net loss		$	(39,730	)		$	(40,764	)		$	(87,243	)		$	(74,648	)
Less: Net loss attributable to non-controlling interests		(9,801		)		(11,637		)		(21,995		)		(26,446		)
Net loss attributable to Pluralsight, Inc.		$	(29,929	)		$	(29,127	)		$	(65,248	)		$	(48,202	)
Net loss per share, basic and diluted(3)		$	(0.28	)		$	(0.30	)		$	(0.62	)		$	(0.56	)
Weighted-average shares of Class A common stock used in computing basic and diluted net loss per share		107,153				97,608				105,899				86,827

(1) Includes equity-based compensation as follows:

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

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

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

PLURALSIGHT, INC.

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

Key Business Metrics

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Billings		$	89,034			$	80,552			$	179,312			$	158,480
Billings from business customers		$	77,695			$	69,104			$	158,167			$	136,260
% of billings from business customers		87		%		86		%		88		%		86		%

Non-GAAP Financial Measures

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

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

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

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

PLURALSIGHT, INC.

Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

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

PLURALSIGHT, INC.

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

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

Investor Relations Contact:
Mark McReynolds
Investor Relations
Pluralsight
801-784-9007
[e-mail]

Media Contact:
DJ Anderson
Communications/Press
Pluralsight
801-784-9007
[e-mail]