Pluralsight Announces Fourth Quarter and Year End 2018 Results

Wall Street Business News

  • Fourth quarter billings grew 42 percent period over period to $100.6 million; full year 2018 billings grew 43 percent year over year to $293.6 million
  • Fourth quarter revenue grew 42 percent period over period to $67.3 million; full year 2018 revenue grew 39 percent year over year to $232.0 million

SILICON SLOPES, Utah, Feb. 13, 2019 (GLOBE NEWSWIRE) — Pluralsight, the enterprise technology skills company, today announced financial results for the fourth quarter and full year ended December 31, 2018.

“Pluralsight’s fourth quarter capped off a milestone year for the company, highlighted by strong customer additions and 42% revenue growth. We achieved our seventh consecutive quarter of greater than 50% growth in B2B billings, while continuing to demonstrate the inherent levers to profitability in our model,” said Aaron Skonnard, co-founder and CEO of Pluralsight.

Fourth Quarter Financial Highlights

  • Billings – Q4 2018 billings were $100.6 million, an increase of 42% period over period. Q4 2018 billings from business customers were $87.1 million, an increase of 51% period over period.
  • Revenue – Q4 2018 revenue was $67.3 million, an increase of 42% period over period.
  • Gross margin – Q4 2018 gross margin was 76%, compared to 70% in Q4 2017. Q4 2018 non-GAAP gross margin was 77%, compared to 75% in Q4 2017.
  • Net loss per share – GAAP net loss per share for Q4 2018 was $0.24. Adjusted pro forma net loss per share for Q4 2018 was $0.09, compared to $0.53 in Q4 2017.
  • Cash flows – Cash provided by operations was $8.4 million for Q4 2018, compared to cash used in operations of $1.3 million in Q4 2017. Free cash flow was $5.2 million for Q4 2018, compared to negative free cash flow of $3.4 million in Q4 2017.

Full Year 2018 Financial Highlights

  • Billings – 2018 billings were $293.6 million, an increase of 43% year over year. Billings from business customers for 2018 were $248.2 million, an increase of 52% year over year.
  • Revenue – 2018 revenue was $232.0 million, an increase of 39% year over year.
  • Gross margin – 2018 gross margin was 73%, compared to 70% in 2017. Non-GAAP gross margin for 2018 was 76%, compared to 74% in 2017.
  • Net loss per share – GAAP net loss per share for 2018 was $0.65. Adjusted pro forma net loss per share for 2018 was $0.60, compared to $1.34 in 2017.

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

Pluralsight is providing the following financial guidance for the first quarter 2019, and the full year 2019:

First Quarter 2019 guidance:

  • Revenue is expected to be in the range of $68.0 million to $68.5 million.
  • Adjusted pro forma net loss per share is expected to be in the range of $0.09 to $0.08, assuming weighted-average shares outstanding of approximately 135 million.

Full Year 2019 guidance:

  • Revenue is expected to be in the range of $306 million to $314 million.
  • Adjusted pro forma net loss per share is expected to be in the range of $0.32 to $0.26, assuming weighted-average shares outstanding of approximately 137 million.

Guidance for non-GAAP financial measures excludes equity-based compensation, amortization of acquired intangible assets, and employer payroll taxes on employee stock transactions. 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.

Conference Call Information

Pluralsight will host a conference call for analysts and investors to discuss its fourth quarter and full year 2018 results and outlook for its first quarter and full year 2019, today at 2:30 p.m., Mountain time (4:30 p.m. Eastern time).

Date: February 13, 2019
Time: 2:30 p.m. MT (4:30 p.m. ET)
Webcast: https://investors.pluralsight.com/
Dial-in number: (877) 350-6732 or (629) 228-0693, conference ID: 8291428
   

A live audio webcast of the conference call will also be accessible from the Pluralsight website at investors.pluralsight.com. A telephonic replay of the call will be available three hours after the call, will run for seven days, and may be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the passcode 8291428.

About Pluralsight

Pluralsight is an enterprise technology skills platform that delivers a unified, end-to-end learning experience for businesses across the globe. Through a subscription service, companies are empowered to move at the speed of technology, increasing proficiency, innovation and efficiency. Founded in 2004 and trusted by Fortune 500 companies, Pluralsight provides members with on-demand access to a digital ecosystem of learning tools, including adaptive skill tests, directed learning paths, expert-authored courses, interactive labs and analytics.  For more information, visit pluralsight.com.

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 statements regarding our future financial and operating performance, including our financial outlook for the first quarter 2019, and the full year 2019. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the pace of market adoption of cloud-based learning solutions; our ability to expand our course library and develop new platform features; competition; our ability to attract and retain customers; our ability to increase sales of subscriptions to our platform to customers; our ability to expand our sales and marketing capabilities; and general 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 final prospectus filed with the SEC on May 17, 2018 (File No. 333-224301), 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. 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 existing and new 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 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 loss. We define non-GAAP operating loss as loss from operations plus equity-based compensation, amortization of acquired intangible assets, and employer payroll taxes on employee stock transactions.

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, and loss on debt extinguishment. 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
December 31,
  Year Ended
December 31,
    2018   2017   2018   2017
Revenue   $ 67,260     $ 47,408     $ 232,029     $ 166,824  
Cost of revenue(1)(2)   16,443     14,150     62,550     49,828  
Gross profit   50,817     33,258     169,479     116,996  
Operating expenses(1)(2):                
Sales and marketing   43,851     33,224     153,643     103,478  
Technology and content   18,953     15,314     65,998     49,293  
General and administrative   20,213     12,198     68,351     46,971  
Total operating expenses   83,017     60,736     287,992     199,742  
Loss from operations   (32,200 )   (27,478 )   (118,513 )   (82,746 )
Other (expense) income:                
Interest expense   (350 )   (3,289 )   (6,826 )   (11,665 )
Loss on debt extinguishment           (4,085 )   (1,882 )
Other income (expense), net   815     (43 )   1,504     81  
Loss before income taxes   (31,735 )   (30,810 )   (127,920 )   (96,212 )
Provision for income taxes   (158 )   (108 )   (664 )   (324 )
Net loss   $ (31,893 )   $ (30,918 )   $ (128,584 )   $ (96,536 )
Less: Net loss attributable to non-controlling interests   (16,633 )       (44,917 )    
Net loss attributable to Pluralsight, Inc.   $ (15,260 )   $ (30,918 )   $ (83,667 )   $ (96,536 )
Less: Accretion of Series A redeemable convertible preferred units       (6,600 )   (176,275 )   (63,800 )
Net loss attributable to common shares   $ (15,260 )   $ (37,518 )   $ (259,942 )   $ (160,336 )
Net loss per share, basic and diluted(3)   $ (0.24 )       $ (0.65 )    
Weighted-average common shares used in computing basic and diluted net loss per share(3)   63,494         62,840      
                     

(1) Includes equity-based compensation expense as follows:

    Three Months Ended
December 31,
  Year Ended
December 31,
    2018   2017   2018   2017
Cost of revenue   $ 54     $ 5     $ 140     $ 20  
Sales and marketing   4,987     614     14,330     2,624  
Technology and content   2,908     477     8,747     1,966  
General and administrative   9,382     1,697     31,086     17,171  
Total equity-based compensation   $ 17,331     $ 2,793     $ 54,303     $ 21,781  
                                 

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

    Three Months Ended
December 31,
  Year Ended
December 31,
    2018   2017   2018   2017
Cost of revenue   $ 783     $ 2,082     $ 7,586     $ 7,008  
Sales and marketing       238     389     721  
Technology and content   177     178     706     706  
General and administrative       10         91  
Total amortization of acquired intangible assets   $ 960     $ 2,508     $ 8,681     $ 8,526  
                                 

(3) Represents net loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the periods following the reorganization transactions and Pluralsight, Inc.’s initial public offering.

PLURALSIGHT, INC.

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

Key Business Metrics

    Three Months Ended
December 31,
  Year Ended
December 31,
    2018   2017   2018   2017
Billings   $ 100,624     $ 70,890     $ 293,583     $ 205,807  
Billings from business customers   $ 87,141     $ 57,873     $ 248,159     $ 162,965  
% of billings from business customers   87 %   82 %   85 %   79 %
                         

Non-GAAP Financial Measures

    Three Months Ended
December 31,
  Year Ended
December 31,
    2018   2017   2018   2017
Reconciliation of gross profit to non-GAAP gross profit:                
Gross profit   $ 50,817     $ 33,258     $ 169,479     $ 116,996  
Equity-based compensation   54     5     140     20  
Amortization of acquired intangible assets   783     2,082     7,586     7,008  
Employer payroll taxes on employee stock transactions   16         16      
Non-GAAP gross profit   $ 51,670     $ 35,345     $ 177,221     $ 124,024  
Gross margin   76 %   70 %   73 %   70 %
Non-GAAP gross margin   77 %   75 %   76 %   74 %
                 
Reconciliation of loss from operations to non-GAAP operating loss:                
Loss from operations   $ (32,200 )   $ (27,478 )   $ (118,513 )   $ (82,746 )
Equity-based compensation   17,331     2,793     54,303     21,781  
Amortization of acquired intangible assets   960     2,508     8,681     8,526  
Employer payroll taxes on employee stock transactions   1,180         1,180      
Non-GAAP operating loss   $ (12,729 )   $ (22,177 )   $ (54,349 )   $ (52,439 )

Adjusted pro forma net loss per share                
Numerator:                
GAAP net loss attributable to common shares   $ (15,260 )   $ (37,518 )   $ (259,942 )   $ (160,336 )
Accretion of Series A redeemable convertible preferred units       6,600     176,275     63,800  
Reallocation of net loss attributable to non-controlling interests from the assumed exchange of LLC Units of Pluralsight Holdings for Class A common stock   (16,633 )       (44,917 )    
Equity-based compensation   17,331     2,793     54,303     21,781  
Amortization of acquired intangibles   960     2,508     8,681     8,526  
Employer payroll taxes on employee stock transactions   1,180         1,180      
Loss on debt extinguishment           4,085     1,882  
Adjusted pro forma net loss   $ (12,422 )   $ (25,617 )   $ (60,335 )   $ (64,347 )
Denominator:                
Weighted-average shares of Class A common stock outstanding   63,494         39,426      
Weighted-average LLC Units of Pluralsight Holdings that are convertible into Class A common stock   69,211     48,329     61,221     47,957  
Adjusted pro forma weighted-average common shares outstanding, basic and diluted   132,705     48,329     100,647     47,957  
                 
Adjusted pro forma net loss per share   $ (0.09 )   $ (0.53 )   $ (0.60 )   $ (1.34 )

Reconciliation of net cash provided by (used in) operating activities to free cash flow:                
Net cash provided by (used in) operating activities   $ 8,387     $ (1,323 )   $ (5,896 )   $ (12,139 )
Less: Purchases of property and equipment   (2,220 )   (1,492 )   (8,796 )   (5,951 )
Less: Purchases of content library   (995 )   (613 )   (3,340 )   (2,382 )
Free cash flow   $ 5,172     $ (3,428 )   $ (18,032 )   $ (20,472 )
                                 

PLURALSIGHT, INC.

Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

    December 31,
    2018   2017
Assets        
Current assets:        
Cash and cash equivalents   $ 194,306     $ 28,267  
Accounts receivable, net   63,436     38,229  
Prepaid expenses and other current assets   8,323     5,125  
Total current assets   266,065     71,621  
Property and equipment, net   31,641     22,457  
Content library, net   7,050     13,441  
Intangible assets, net   1,759     2,854  
Goodwill   123,119     123,119  
Restricted cash   16,765     210  
Other assets   1,064     2,718  
Total assets   $ 447,463     $ 236,420  
Liabilities, redeemable convertible preferred units, and stockholders’ equity/members’ deficit        
Current liabilities:        
Accounts payable   $ 7,160     $ 6,029  
Accrued expenses   32,047     26,514  
Accrued author fees   10,002     7,879  
Deferred revenue   157,695     103,107  
Total current liabilities   206,904     143,529  
Deferred revenue, net of current portion   14,886     8,194  
Long-term debt       116,037  
Facility financing obligations   15,777     7,513  
Other liabilities   1,303     458  
Total liabilities   238,870     275,731  
Redeemable convertible preferred units       405,766  
Stockholders’ equity/members’ deficit:        
Preferred stock        
Class A common stock   7      
Class B common stock   6      
Class C common stock   1      
Additional paid-in capital   452,576      
Accumulated other comprehensive (loss) income   (41 )   25  
Accumulated deficit   (351,123 )   (445,102 )
Total stockholders’ equity attributable to Pluralsight, Inc./members’ deficit   101,426     (445,077 )
Non-controlling interests   107,167      
Total stockholders’ equity/members’ deficit   208,593     (445,077 )
Total liabilities, redeemable convertible preferred units, and stockholders’ equity/members’ deficit   $ 447,463     $ 236,420  
                 

PLURALSIGHT, INC.

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

    Three Months Ended
December 31,
  Year Ended
December 31,
    2018   2017   2018   2017
Operating activities                
Net loss   $ (31,893 )   $ (30,918 )   $ (128,584 )   $ (96,536 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Depreciation of property and equipment   1,987     2,308     8,318     6,675  
Amortization of acquired intangible assets   960     2,508     8,681     8,526  
Amortization of course creation costs   556     412     1,993     1,462  
Equity-based compensation   17,331     2,793     54,303     21,781  
Provision for doubtful accounts   182     119     675     479  
Amortization of debt discount and debt issuance costs       773     1,215     1,847  
Debt extinguishment costs           4,197     931  
Deferred tax benefit   (146 )   (83 )   (244 )   (83 )
Other   153     63     153     63  
Changes in assets and liabilities:                
Accounts receivable   (15,804 )   (13,403 )   (26,156 )   (16,123 )
Prepaid expenses and other assets   (492 )   408     (3,482 )   (2,796 )
Accounts payable   457     173     1,385     2,561  
Accrued expenses and other liabilities   1,061     9,239     7,973     17,960  
Accrued author fees   671     803     2,123     2,131  
Deferred revenue   33,364     23,482     61,554     38,983  
Net cash provided by (used in) operating activities   8,387     (1,323 )   (5,896 )   (12,139 )
Investing activities                
Purchases of property and equipment   (2,220 )   (1,492 )   (8,796 )   (5,951 )
Purchases of content library   (995 )   (613 )   (3,340 )   (2,382 )
Net cash used in investing activities   (3,215 )   (2,105 )   (12,136 )   (8,333 )
Financing activities                
Proceeds from initial public offering, net of underwriting discounts and commissions           332,080      
Payments of costs related to initial public offering       (132 )   (7,083 )   (307 )
Taxes paid related to net share settlement   (16,827 )       (16,905 )    
Proceeds from issuance of common stock from employee equity plans   13,378         13,378      
Borrowings of long-term debt           20,000     115,000  
Repayments of long-term debt           (137,710 )   (85,000 )
Payments of debt extinguishment costs           (2,179 )    
Payments of debt issuance costs       (17 )   (450 )   (854 )
Payments to settle equity appreciation rights           (325 )    
Proceeds from the issuance of common units, net of issuance costs       1,263         4,399  
Redemption of incentive units       (923 )       (3,724 )
Other   (4 )   (4 )   (17 )   (16 )
Net cash (used in) provided by financing activities   (3,453 )   187     200,789     29,498  
Effect of exchange rate change on cash, cash equivalents, and restricted cash   (27 )   16     (163 )   54  
Net increase (decrease) in cash, cash equivalents, and restricted cash   1,692     (3,225 )   182,594     9,080  
Cash, cash equivalents, and restricted cash, beginning of period   209,379     31,702     28,477     19,397  
Cash, cash equivalents, and restricted cash, end of period   $ 211,071     $ 28,477     $ 211,071     $ 28,477  
Reconciliation of cash, cash equivalents, and restricted cash:                
Cash and cash equivalents   $ 194,306     $ 28,267     $ 194,306     $ 28,267  
Restricted cash   16,765     210     16,765     210  
Total cash, cash equivalents, and restricted cash   $ 211,071     $ 28,477     $ 211,071     $ 28,477  
                                 

Investor Relations Contact:
Mark McReynolds
Investor Relations
Pluralsight
801-784-9007
[email protected]

Media Contact:

DJ Anderson
Communications/Press
Pluralsight
801-784-9007
[email protected]

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