GlobeNewswire Inc | Jul 29, 2020 04:01PM EDT

July 29, 2020

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 June30, 2020.

"Our commitment to our customers and each other has never been stronger despite these extraordinary circumstances. Im proud to see this commitment reflected in our financial performance for the quarter, and Im 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 July29, 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.

Pluralsights 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, Pluralsights actual results may differ materially from such guidance based on a variety of factors, including Pluralsights ability to execute its business during this crisis, the impact of the crisis on Pluralsights 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: July29, 2020Time: 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: 1883129

A live audio webcast of the conference call will also be accessible from the Pluralsight website atinvestors.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 1883129.

About Pluralsight

Pluralsightis the leading technology skills and engineering management platform. Trusted by forward-thinking companies of every size in every industry,Pluralsighthelps individuals and businesses transform with technology through its Skills and Flow products. Skills helps build technology skills at scale with expert-authored courses on todays 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 Managements 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 July29, 2020, which is available on our website at investors.pluralsight.com and on the SECs 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 Pluralsights 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^ 19,717 17,803 38,725 34,515 (1)(2)Gross profit 75,048 58,059 148,686 110,964 Operating expenses^(1)(2):Sales and 57,759 50,046 120,174 94,217 marketingTechnology and 29,514 24,819 59,658 45,090 contentGeneral and 22,996 20,575 46,367 42,766 administrativeTotal operating 110,269 95,440 226,199 182,073 expensesLoss from (35,221 ) (37,381 ) (77,513 ) (71,109 )operationsOther income (expense):Interest expense (7,241 ) (7,346 ) (14,390 ) (9,024 )Other income, 2,267 4,106 4,437 5,782 netLoss before (40,195 ) (40,621 ) (87,466 ) (74,351 )income taxesIncome taxbenefit 465 (143 ) 223 (297 )(expense)Net loss $ (39,730 ) $ (40,764 ) $ (87,243 ) $ (74,648 )Less: Net lossattributable to (9,801 ) (11,637 ) (21,995 ) (26,446 )non-controllinginterestsNet lossattributable to $ (29,929 ) $ (29,127 ) $ (65,248 ) $ (48,202 )Pluralsight,Inc.Net loss pershare, basic and $ (0.28 ) $ (0.30 ) $ (0.62 ) $ (0.56 )diluted^(3)Weighted-averageshares of ClassA common stockused in 107,153 97,608 105,899 86,827 computing basicand diluted netloss per share

(1) Includes equity-based compensation as follows:

Three Months Ended June Six Months Ended June 30, 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 6,884 5,137 13,220 8,847 contentGeneral and 8,367 9,510 17,817 19,708 administrativeTotal equity-based $ 26,425 $ 22,732 $ 52,003 $ 43,000 compensation

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

Three Months Ended Six Months Ended June June 30, 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 ofacquired intangible $ 1,420 $ 907 $ 2,855 $ 1,609 assets

PLURALSIGHT, INC.

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

Key Business Metrics

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

Non-GAAP Financial Measures

Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Reconciliation ofgross profit to non-GAAP grossprofit:Gross profit $ 75,048 $ 58,059 $ 148,686 $ 110,964 Equity-based 296 133 566 217 compensationAmortization ofacquired 1,209 702 2,418 1,227 intangible assetsEmployer payrolltaxes on employee 15 13 32 16 stocktransactionsNon-GAAP gross $ 76,568 $ 58,907 $ 151,702 $ 112,424 profitGross margin 79 % 77 % 79 % 76 %Non-GAAP gross 81 % 78 % 81 % 77 %margin

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

Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Adjusted pro forma net loss per shareNumerator: Net loss attributable $ (29,929 ) $ (29,127 ) $ (65,248 ) $ (48,202 )to Pluralsight, Inc.Net loss attributableto non-controlling (9,801 ) (11,637 ) (21,995 ) (26,446 )interestsEquity-based 26,425 22,732 52,003 43,000 compensationAmortization of 1,420 907 2,855 1,609 acquired intangiblesEmployer payroll taxeson employee stock 997 1,329 2,375 2,773 transactionsSecondary offering 1,260 ? 1,260 918 costsAcquisition-related ? 835 ? 835 costsAmortization of debtdiscount and issuance 6,684 6,749 13,275 8,294 costsAdjusted pro forma net $ (2,944 ) $ (8,212 ) $ (15,475 ) $ (17,219 )lossDenominator: Weighted-average sharesof Class A common stock 107,153 97,608 105,899 86,827 outstandingWeighted-average LLCUnits of PluralsightHoldings that are 35,276 39,006 35,702 48,923 convertible into ClassA common stockAdjusted pro formaweighted-average common 142,429 136,614 141,601 135,750 shares outstanding,basic and dilutedAdjusted pro forma net $ (0.02 ) $ (0.06 ) $ (0.11 ) $ (0.13 )loss per share

Reconciliation ofnet cash (used in)provided by operatingactivities to freecash flow:Net cash (used in)provided by $ (9,250 ) $ (7,184 ) $ 9,045 $ (1,648 )operatingactivitiesLess: Purchases ofproperty and (6,626 ) (2,457 ) (20,520 ) (4,590 )equipmentLess: Purchases of (2,113 ) (1,504 ) (3,793 ) (2,441 )content libraryFree cash flow $ (17,989 ) $ (11,145 ) $ (15,268 ) $ (8,679 )

PLURALSIGHT, INC.

Condensed Consolidated Balance Sheets(in thousands)(unaudited)

June 30, December 31, 2020 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 171,307 182,985 Pluralsight, Inc.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 Six Months Ended June 30, 30, 2020 2019 2020 2019 Operating activities Net loss $ (39,730 ) $ (40,764 ) $ (87,243 ) $ (74,648 )Adjustments toreconcile net loss tonet cash (used in) provided by operatingactivities:Depreciation of 3,225 2,332 5,868 4,579 property and equipmentAmortization ofacquired intangible 1,420 907 2,855 1,609 assetsAmortization of course 820 611 1,581 1,190 creation costsEquity-based 26,425 22,732 52,003 43,000 compensationAmortization ofdeferred contract 6,316 5,444 12,767 11,311 acquisition costsAmortization of debtdiscount and issuance 6,684 6,749 13,275 8,294 costsInvestment discount andpremium amortization, (52 ) (706 ) (428 ) (706 )netOther 32 275 693 300 Changes in assets andliabilities, net of acquired assets andliabilities:Accounts receivable (1,107 ) (4,276 ) 38,093 7,116 Deferred contract (7,492 ) (5,579 ) (13,363 ) (11,430 )acquisition costsPrepaid expenses and (497 ) (2,243 ) (211 ) (4,044 )other assetsRight-of-use assets 1,548 1,643 3,038 2,927 Accounts payable (2,139 ) 18 (4,606 ) 1,053 Accrued expenses and 1,719 2,030 (4,612 ) (3,129 )other liabilitiesAccrued 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 (9,250 ) (7,184 ) 9,045 (1,648 )activitiesInvesting activities Purchases of property (6,626 ) (2,457 ) (20,520 ) (4,590 )and equipmentPurchases of content (2,113 ) (1,504 ) (3,793 ) (2,441 )libraryCash paid foracquisition, net of ? (163,871 ) ? (163,871 )cash acquiredPurchases of (155,150 ) (317,080 ) (317,012 ) (317,080 )investmentsProceeds from sales of ? 4,967 ? 4,967 investmentsProceeds frommaturities of 155,070 ? 315,605 ? investmentsNet cash used in (8,819 ) (479,945 ) (25,720 ) (483,015 )investing activitiesFinancing activities Proceeds from issuanceof common stock from 10,179 12,010 10,878 14,631 employee equity plansTaxes paid related to (1,523 ) ? (3,873 ) ? net share settlementProceeds from issuanceof convertible senior ? (1,009 ) ? 616,654 notes, net of discountand issuance costsPurchase of cappedcalls related to ? ? ? (69,432 )issuance of convertiblesenior notesNet cash provided by 8,656 11,001 7,005 561,853 financing activitiesEffect of exchange ratechanges on cash, cashequivalents, and 110 (4 ) (157 ) 22 restricted cash andcash equivalentsNet (decrease) increasein cash, cashequivalents, and (9,303 ) (476,132 ) (9,827 ) 77,212 restricted cash andcash equivalentsCash, cash equivalents,and restricted cash and 118,907 764,415 119,431 211,071 cash equivalents,beginning of periodCash, cash equivalents,and restricted cash and $ 109,604 $ 288,283 $ 109,604 $ 288,283 cash equivalents, endof period

Investor Relations Contact:Mark McReynoldsInvestor RelationsPluralsight801-784-9007ir@pluralsight.com

Media Contact:DJ AndersonCommunications/PressPluralsight801-784-9007dj@pluralsight.com