PLURALSIGHT, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections entitled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" included elsewhere in this Annual Report on Form 10-K. This section of the Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons of 2019 to 2018 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K/A for the year endedDecember 31, 2019 and are hereby incorporated by reference herein and considered part of this Annual Report on Form 10-K only to the extent referenced. Overview We are a leading technology workforce development platform committed to closing the global technology skills gap. Learners on our platform can quickly acquire today's most valuable technology skills through on-demand, high-quality learning experiences delivered by subject-matter experts. Skills can be measured and assessed in real-time providing technology leaders with visibility into the capabilities of their teams and confidence their teams will deliver on critical objectives. Our platform empowers teams to keep up with the pace of technological change, puts the right people on the right projects and boosts productivity. We started operations in 2004 and focused initially on in-person instructor-led training. Anticipating the increasing demand for online solutions, we began offering online courses in 2008 and shifted entirely to an online delivery model in 2011. Since 2011, we extended our offering to include new content areas and additional features which expanded our addressable market, attracted new users, and deepened our foothold within businesses. We expanded our platform both organically through internal initiatives and through acquisitions, which have been focused on adding content and capabilities to our offerings. In 2019, we completed the acquisition of GitPrime, and we believe the addition of GitPrime, now Pluralsight Flow, enhances our platform by measuring software developer productivity. Pluralsight Flow aggregates data from code commits, pull requests and tickets, and packages this data into actionable metrics. Pluralsight Flow enables technology leaders to enhance skills and drive productivity by identifying talent and areas of improvement within their teams. Our additions and improvements to our platform have enabled us to strengthen our relationships with our business customers and increase our revenue over time. We derive a substantial majority of our revenue from the sale of subscriptions to our platform. We sell subscriptions to our platform primarily to business customers through our direct sales team and our website. We also sell subscriptions to our skills development platform to individual customers directly through our website. In addition, small teams often represent the "top of the funnel" for larger deployments, bringing our technology into their workplaces and proliferating usage of our platform within their companies. We are focused on attracting businesses, particularly large enterprises, to our platform and expanding their use of our platform over time. We believe there exists a significant opportunity to drive sales to large enterprises, including expanding relationships with existing customers and attracting new customers. Our ability to attract large enterprises to our platform and to expand their use of our platform will be important for the success of our business and our results of operations. InOctober 2020 , we acquired DevelopIntelligence, a provider of strategic skills consulting and virtual instructor-led training for IT, software development, and engineering teams. We believe the acquisition will enable us to create tailored, hands-on upskilling solutions to further drive digital transformation efforts. 63 -------------------------------------------------------------------------------- Table of Contents We achieved significant growth in recent periods. For the years endedDecember 31, 2020 , 2019, and 2018, our revenue totaled$391.9 million ,$316.9 million , and$232.0 million , respectively, which represents year-over-year growth of 24%, 37%, and 39%, respectively. Our revenue from business customers for the same periods was$343.8 million ,$271.8 million , and$188.2 million , respectively, representing year-over-year growth of 26%, 44%, and 50%. Our net loss for the years endedDecember 31, 2020 , 2019, and 2018, was$164.1 million ,$163.6 million , and$146.8 million , respectively, which reflects our substantial investments in the future growth of our business. InDecember 2020 , we entered into an Agreement and Plan of Merger, or the Merger Agreement, withPluralsight Holdings, LLC , aDelaware limited liability company and subsidiary of the Company, orPluralsight Holdings and, together with the Company the Pluralsight Parties,Lake Holdings, LP , aDelaware limited partnership, or Parent I,Lake Guarantor, LLC , aDelaware limited liability company, or Parent II and together with Parent I, the Parent Entities,Lake Merger Sub I, Inc. , aDelaware corporation and wholly owned subsidiary of Parent I, or Merger Sub I, andLake Merger Sub II, LLC , aDelaware limited liability company and wholly owned subsidiary of Parent II, or Merger Sub II and together with Merger Sub I, the Merger Subs and, together with the Parent Entities, the Buyer Parties, providing for the merger of Merger Sub II with and intoPluralsight Holdings , or the Holdings Merger, withPluralsight Holdings continuing as the surviving entity in the Holdings Merger. The Merger Agreement also provides for the merger of Merger Sub I with and into the Company, or the Company Merger and, together with the Holdings Merger, the Mergers, withPluralsight continuing as the surviving corporation in the Company Merger. The Parent Entities and the Merger Subs are affiliates ofVista Equity Partners Fund VII, L.P. , aCayman Islands exempted limited partnership, or Vista. For more information regarding legal proceedings regarding the Mergers, please see Note 12 to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. COVID-19 Update OnMarch 11, 2020 COVID-19 was characterized by theWorld Health Organization ("WHO") as a global pandemic. The unpredictability of the COVID-19 pandemic continues to have a widespread impact on economies, governments, communities, and business practices. In efforts to mitigate the harmful effects of the COVID-19 pandemic and curtail the spread of the virus, federal, state and local authorities have implemented and may continue implementing safety measures, including the closure of businesses deemed "non-essential;" social distancing; international border closures; and travel restrictions. SinceMarch 2020 , responsive measures we have undertaken include shifting customer events to virtual-only experiences; temporarily closing our offices and implementing a mandatory work-from-home policy for our worldwide workforce; restricting employee travel, encouraged vendors to reduce their fees and costs, limited the hiring of additional personnel and pushed market and merit raises until 2021. We actively monitor the situation closely and our response to the COVID-19 pandemic continues to evolve with a focus on the best interests of our employees, customers, vendors and stockholders. The ongoing effects of these operational modifications on our financial performance, including revenue, billings and results of operations are unknown and may not be realized until future reporting periods. The COVID-19 pandemic has impacted and may continue to impact our business and financial operations. The duration and magnitude of the COVID-19-driven global recession and the extent to which the pandemic continues to impact our business operations and overall financial performance remains unknown at this time. Certain developments, some of which are uncertain and not within our control, including the span and spread of the outbreak; the severity and transmission rate of the virus and emergence of new strains; the measures implemented or suggested by governing bodies to slow the spread of the virus; the extent and effectiveness of containment actions, including vaccines and their distribution; travel restrictions; international border closures; the effect on our vendors, customers, and community; the global economy and political conditions; the health of our employees, contractors, and their families; the duration of the recession; how quickly and to what extent normal economic and operating activities can resume; and other factors that are not predictable. After the COVID-19 pandemic has subsided, we may continue experiencing adverse effects to our business, including those resulting from the COVID-19 pandemic-driven recession. The economic effects of the COVID-19 pandemic has financially constrained and may continue to financially constrain some of our prospective and existing customers' technology related spending, which has affected our revenue and billings growth rates, causing a decline in our dollar-based net retention rate in 2020. Additionally, 64 -------------------------------------------------------------------------------- Table of Contents some customers' ability to pay in accordance with our agreed upon payment terms has been compromised by the financial hardships presented by the COVID-19 pandemic, which has resulted and continues to result in extended pay periods. As a result, we have made and will continue to make adjustments to our expenses and cash flow to correlate with potential declines in billings and cash collections from customers. These adjustments include the restriction of employee travel and other non-essential operating costs, and temporary reductions in hiring. Our platform is provided under a subscription-based model, and as a result, the effect of the COVID-19 pandemic on our results of operations and financial condition may not be fully realized until future periods. Key Business Metrics We monitor business customers, billings, dollar-based net retention rate, and certain related key business metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions. Year Ended December 31, 2020 2019 2018 (dollars in thousands)
Business customers (end of period) 17,599 17,942 16,756
Billings $ 430,422 $ 379,051 $ 293,583
Billings from business customers $ 380,788 $ 330,143 $ 248,159
% of billings from business customers 88 % 87 % 85 %
Dollar-based net retention rate 109 % 123 % 128 %
Business Customers
We use the number of business customers to measure and monitor the growth of our
business and the success of our sales and marketing activities and believe that
the growth of our business customer base is indicative of our long-term billings
and revenue growth potential. We define a business customer as a unique account
in our customer relationship management system that had an active paying
subscription at the end of the period presented. Each unique account in our
customer relationship management system is considered a unique business customer
as the system does not create unique accounts for individual customers, and, in
some cases, there may be more than one business customer within a single
organization.
Billings
We use billings to measure and monitor our ability to provide our business with
the working capital generated by upfront payments from our customers and our
ability to sell subscriptions to our platform to both new and existing
customers. Billings represent our total revenue plus the change in deferred
revenue in the period, as presented in our consolidated statements of cash
flows, less the change in contract assets and unbilled accounts receivable in
the period. Billings in any particular period represent amounts invoiced to our
customers and reflect subscription renewals and upsells to existing customers
plus sales to new customers. Our pricing and subscription periods vary for
business customers and individual customers. Subscription periods for our
business customers generally range from one to three years, with a majority
being one year. We typically invoice our business customers in advance in annual
installments. Subscription periods for our individual customers range from one
month to one year and we typically invoice them in advance in monthly or annual
installments.
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. We believe that billings from business
customers will be a significant source of future revenue growth and a key factor
affecting our long-term performance. We expect our billings from business
customers to continue to increase as a percentage of billings over the long
term.
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During 2020, our billings growth rate declined compared to prior results due in
part to the global economic effects of the COVID-19 pandemic. As we generally
recognize revenue from subscription fees ratably over the term of the contract,
due to the difference in timing of billings received and when we recognize
revenue, changes to our billings and billings growth rates are not immediately
reflected in our revenue and revenue growth rates. As a result, we expect that
the decline in our billings growth rate during 2020 will reduce the growth rate
of our revenue in future periods.
Dollar-Based Net Retention Rate
Our ability to upsell our platform across our business customers, particularly
our enterprise customers, and expand such customers' usage of our platform
across their organizations, is further highlighted by our strong dollar-based
net retention rate. We use our dollar-based net retention rate to measure our
ability to retain and expand the revenue generated from our existing business
customers. Our dollar-based net retention rate compares our subscription revenue
from the same set of customers across comparable periods. We calculate our
dollar-based net retention rate on a trailing four-quarter basis. To calculate
our dollar-based net retention rate, we first calculate the subscription revenue
in one quarter from a cohort of customers that were customers at the beginning
of the same quarter in the prior fiscal year, or cohort customers. We repeat
this calculation for each quarter in the trailing four-quarter period. The
numerator for dollar-based net retention rate is the sum of subscription revenue
from cohort customers for the four most recent quarters, or numerator period,
and the denominator is the sum of subscription revenue from cohort customers for
the four quarters preceding the numerator period. Dollar-based net retention
rate is the quotient obtained by dividing the numerator by the denominator.
Components of Results of Operations
Revenue
We derive substantially all of our revenue from the sale of subscriptions to our
platform. Amounts that have been invoiced are initially recorded as deferred
revenue and are generally recognized ratably as revenue over the subscription
period. Subscription terms typically range from one year to three years for
business customers and from one month to one year for individual customers, and
such terms begin on the date access to our platform is made available to the
customer. Most of our subscriptions to business customers are billed in annual
installments even if customers are contractually committed by multi-year
agreements. Subscriptions that allow the customer to take software on-premise
without significant penalty are recognized at a point in time when the software
is made available to the customer. We also derive revenue from providing
professional services, which generally consist of consulting, integration, or
other services, such as instructor-led training and content creation.
Cost of Revenue, Gross Profit and Gross Margin
Cost of revenue includes certain direct costs associated with delivering our
platform and includes costs for author and instructor fees, amortization of our
content library and other acquired intangibles, hosting and delivery fees,
merchant processing fees, depreciation of capitalized software development costs
for internal-use software, employee-related costs, including equity-based
compensation expense associated with our customer support and professional
services organizations, and third-party transcription costs.
Gross profit, or revenue less cost of revenue, and gross margin, or gross profit
as a percentage of revenue, has been and will continue to be affected by various
factors, including the mix of subscriptions we sell, the cost of author fees,
the costs associated with third-party hosting services, and the extent to which
we expand our customer support and professional services organizations. We
expect our gross margin to increase over the long term primarily due to a
decrease in author fees as a percentage of revenue, although our gross margin
may fluctuate from period to period depending on the interplay of the factors
described above.
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Operating Expenses
Our operating expenses are classified as sales and marketing, technology and
content, and general and administrative. For each of these categories, the
largest component is employee-related costs, which include salaries and bonuses,
equity-based compensation expense, and employee benefit costs. We allocate
shared overhead costs such as information technology infrastructure and
facility-related costs based on headcount in each category.
Sales and Marketing
Sales and marketing expenses consist primarily of employee compensation costs of
our sales and marketing employees, including salaries, benefits, bonuses,
commissions, equity-based compensation expense, and allocated overhead costs.
Other sales and marketing costs include user events, search engine and email
marketing, content syndication, lead generation, and online banner and video
advertising. The increases in sales and marketing expenses were driven primarily
by increased employee compensation costs as we added headcount to support our
growth as well as increased marketing and event related costs, including for
Pluralsight LIVE, our user conference. We expect that our sales and marketing
expenses will increase in absolute dollars for the foreseeable future and, in
the near term, may increase as a percentage of our revenue as we hire additional
sales and marketing personnel, increase our marketing activities, and grow our
domestic and international operations. Additionally, our sales and marketing
expenses may fluctuate as a percentage of our revenue from period to period
depending on the timing of expenditures. However, we expect sales and marketing
expenses to decrease as a percentage of revenue over the long term.
Technology and Content
Technology costs consist principally of research and development activities
including personnel costs, consulting services, other costs associated with
platform development efforts, and allocated overhead costs. Content costs
consist principally of personnel costs and other activities associated with
content development, course production, curriculum direction, and allocated
overhead costs. Technology and content costs are expensed as incurred, except
for certain costs relating to the development of internal-use software,
including software used to upgrade and enhance our platform and applications
supporting our business, which are capitalized and amortized over the estimated
useful lives of one to three years. The increases in technology and content
expenses were driven primarily by increased employee compensation costs as we
added headcount to support our growth. We expect that our technology and content
expenses will increase in absolute dollars for the foreseeable future and, in
the near term, may increase as a percentage of our revenue as we continue to
increase the functionality of and enhance our platform and develop new content
and features. Additionally, our technology and content expense may fluctuate as
a percentage of our revenue from period to period depending on the timing of
expenditures. However, we expect technology and content expenses to decrease as
a percentage of revenue over the long term.
General and Administrative
General and administrative expenses consist of personnel costs and related
expenses for executive, finance, legal, people operations, and administrative
personnel, including salaries, benefits, bonuses, and equity-based compensation
expense; professional fees for external legal, accounting, recruiting, and other
consulting services; and allocated overhead costs. The increases in general and
administrative expenses were driven primarily by increased employee compensation
costs as we added headcount to support our growth. We have incurred additional
general and administrative expenses as a result of our organizational structure,
including additional tax, accounting, and legal expenses, and operating as a
public company, including expenses related to compliance with the rules and
regulations of the SEC and listing standards of the applicable stock exchange,
additional insurance expenses, investor relations activities, and increased
legal, audit, and consulting fees. We expect that our general and administrative
expenses will increase in absolute dollars for the foreseeable future and, in
the near term, may increase as a percentage of our revenue. Additionally, our
general and administrative expenses may fluctuate as a percentage of our revenue
from period to period depending on the timing of expenditures. However, we
expect general and administrative expenses to decrease as a percentage of
revenue over the long term.
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Other Income (Expense)
Other income (expense) consists primarily of interest expense on the Notes and
other long-term debt, losses related to the extinguishment of our long-term
debt, interest income on cash, cash equivalents, and investments, and gains or
losses on foreign currency transactions.
Results of Operations
The following tables set forth selected consolidated statements of operations
data and such data as a percentage of revenue for each of the periods indicated:
Year Ended December 31,
2020 2019 2018
(in thousands)
Revenue $ 391,865 $ 316,910 $ 232,029
Cost of revenue(1)(2) 82,552 71,353 62,615
Gross profit 309,313 245,557 169,414
Operating expenses(1)(2):
Sales and marketing 238,165 207,085 158,409
Technology and content 118,785 102,902 69,289
General and administrative 95,651 85,560 78,418
Total operating expenses 452,601 395,547 306,116
Loss from operations (143,288) (149,990) (136,702)
Other income (expense):
Interest expense (29,322) (23,565) (6,826)
Loss on debt extinguishment - (950) (4,085)
Other income, net 8,411 11,749 1,504
Loss before income taxes (164,199) (162,756) (146,109)
Income tax benefit (expense) 108 (823) (664)
Net loss $ (164,091) $ (163,579) $ (146,773)
________________________(1)Includes equity-based compensation expense as follows:
Year Ended December 31,
2020 2019 2018
(in thousands)
Cost of revenue $ 1,213 $ 548 $ 205
Sales and marketing 41,168 30,677 19,096
Technology and content 26,222 21,430 12,038
General and administrative 31,250 37,782 41,153
Total equity-based compensation $ 99,853 $ 90,437 $ 72,492
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________________________
(2)Includes amortization of acquired intangible assets as follows:
Year Ended December 31,
2020 2019 2018
(in thousands)
Cost of revenue $ 5,458 $ 3,645 $ 7,586
Sales and marketing 296 129 389
Technology and content 580 705 706
Total amortization of acquired intangible assets $ 6,334 $ 4,479 $ 8,681
Year Ended December 31,
2020 2019 2018
Revenue 100 % 100 % 100 %
Cost of revenue 21 23 27
Gross profit 79 77 73
Operating expenses:
Sales and marketing 61 65 68
Technology and content 30 32 30
General and administrative 24 27 34
Total operating expenses 115 124 132
Loss from operations (36) (47) (59)
Other income (expense):
Interest expense (7) (7) (3)
Loss on debt extinguishment - - (2)
Other income, net 2 4 1
Loss before income taxes (41) (50) (63)
Income tax benefit (expense) - - -
Net loss (41) % (50) % (63) %
Comparison of the Years Ended December 31, 2020 and 2019
Revenue
Year Ended December 31, Change
2020 2019 Amount %
(dollars in thousands)
Revenue $ 391,865 $ 316,910 $ 74,955 24 %
Revenue was $391.9 million for the year ended December 31, 2020 , compared to
$316.9 million for the year ended December 31, 2019 , an increase of $75.0
million , or 24%. The increase in revenue was primarily due to a $72.0 million ,
or 26%, increase in revenue from business customers, driven by sales to new
business customers, as well as increased sales to our existing business
customers as evidenced by our dollar-based net retention rate of 109% for the
year ended December 31, 2020 . In addition, there was an increase of $3.0 million
in revenue from individual customers.
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Cost of Revenue and Gross Profit
Year Ended December 31, Change
2020 2019 Amount %
(dollars in thousands)
Cost of revenue $ 82,552 $ 71,353 $ 11,199 16 %
Gross profit 309,313 245,557 63,756 26 %
Cost of revenue was $82.6 million for the year ended December 31, 2020 , compared
to $71.4 million for the year ended December 31, 2019 , an increase of $11.2
million , or 16%. The increase in cost of revenue was primarily due to an
increase of $3.8 million in employee compensation costs, including $0.7 million
in equity-based compensation expense, as we added headcount to support our
growth. In addition, there was an increase of $2.7 million in amortization of
acquired intangible assets and course creation costs, an increase of $2.4
million in author fees, an increase of $1.9 million in hosting and delivery
costs, and an increase of $1.9 million in depreciation of capitalized software
development costs.
Gross profit was $309.3 million for the year ended December 31, 2020 , compared
to $245.6 million for the year ended December 31, 2019 , an increase of $63.8
million , or 26%. The increase in gross profit was the result of the increase in
our revenue during the year ended December 31, 2020 . Gross margin increased from
77% for the year ended December 31, 2019 to 79% for the year ended December 31,
2020 primarily due to a decrease in author fees as a percentage of revenue.
Operating Expenses
Year Ended December 31, Change
2020 2019 Amount %
(dollars in thousands)
Sales and marketing $ 238,165 $ 207,085 $ 31,080 15 %
Technology and content 118,785 102,902 15,883 15 %
General and administrative 95,651 85,560 10,091 12 %
Total operating expenses $ 452,601 $ 395,547 Sales and Marketing Sales and marketing expenses were$238.2 million for the year endedDecember 31, 2020 , compared to$207.1 for the year endedDecember 31, 2019 , an increase of$31.1 million , or 15%. The increase was primarily due to an increase of$41.1 million in employee compensation costs, including$10.5 million in equity-based compensation expense, as we added headcount to support our growth. In addition, there was an increase of$2.3 million in amortization of deferred contract acquisition costs. These increases were partially offset by a decrease of$5.6 million in travel expenses as a result of the COVID-19 pandemic and an increase of$6.9 million in deferred contract acquisition costs. Technology and Content Technology and content expenses were$118.8 million for the year endedDecember 31, 2020 , compared to$102.9 for the year endedDecember 31, 2019 , an increase of$15.9 million , or 15%. The increase was primarily due to an increase of$20.4 million in employee compensation costs, including$4.8 million in equity-based compensation, as we added headcount to support our growth. These increases were partially offset by a decrease of$2.0 million in travel expenses as a result of the COVID-19 pandemic, an increase of$1.2 million in capitalized software development costs, and an increase of$1.1 million in capitalized content creation costs. 70 -------------------------------------------------------------------------------- Table of Contents General and Administrative General and administrative expenses were$95.7 million for the year endedDecember 31, 2020 , compared to$85.6 million for the year endedDecember 31, 2019 , an increase of$10.1 million , or 12%. The increase was primarily due to an increase of$9.5 million in employee compensation costs, as we added headcount to support our growth. In addition, there was an increase of$7.6 million in acquisition-related costs and an increase of$1.7 million in allocated overhead costs primarily driven by our headcount growth. These increases were partially offset by a decrease of$6.5 million in equity-based compensation, as certain stock options granted at the time of the IPO fully vested and a decrease of$2.1 million in travel expenses as a result of the COVID-19 pandemic. Other Income (Expense) Year Ended December 31, Change 2020 2019 Amount % (dollars in thousands) Interest expense$ (29,322) $ (23,565) $ (5,757) 24 %
Loss on debt extinguishment - (950)
950 NM
Other income, net 8,411 11,749 (3,338) (28) %
Interest expense increased primarily as a result of the interest expense and
amortization of debt discount and issuance costs related to the Notes issued in
March 2019 . We repurchased $40.0 million in aggregate principal of the Notes in
September 2019 , resulting in the loss on debt extinguishment. Other income, net
consists largely of income from our investments. The decline in other income was
driven largely by decreases in market interest rates for debt securities.
Quarterly Results of Operations
The following tables set forth selected unaudited quarterly consolidated
statements of operations data for each of the eight quarters in the period ended
December 31, 2020 , as well as the percentage of revenue that each line item
represents for each quarter. The information for each of these quarters has been
prepared on the same basis as our audited annual consolidated financial
statements and, in the opinion of management, includes all adjustments, which
consist only of normal recurring adjustments necessary for the fair statement of
the results of operations for these periods in accordance with GAAP. This data
should be read in conjunction with our audited consolidated financial
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statements and related notes included elsewhere in this Annual Report on Form
10-K. These quarterly results of operations are not necessarily indicative of
our results of operations for a full year or any future period.
Three Months Ended
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
2019 2019 2019 2019 2020 2020 2020 2020
(in thousands, except per share amounts)
Revenue $ 69,617 $ 75,862 $ 82,620 $ 88,811 $ 92,646 $ 94,765 $ 99,465 $ 104,989
Cost of revenue (1)(2) 16,712 17,803 17,829 19,009 19,008 19,717 20,426 23,401
Gross profit 52,905 58,059 64,791 69,802 73,638 75,048 79,039 81,588
Operating expenses (1)(2):
Sales and marketing 44,171 50,046 55,797 57,071 62,415 57,759 57,206 60,785
Technology and content 20,271 24,819 27,847 29,965 30,144 29,514 29,345 29,782
General and administrative 22,191 20,575 20,844 21,950 23,371 22,996 20,366 28,918
Total operating expenses 86,633 95,440 104,488 108,986 115,930 110,269 106,917 119,485
Loss from operations (33,728) (37,381) (39,697) (39,184) (42,292) (35,221) (27,878) (37,897)
Other income (expense):
Interest expense (1,678) (7,346) (7,412) (7,129) (7,149) (7,241) (7,409) (7,523)
Loss on debt extinguishment - - (950) - - - - -
Other income, net 1,676 4,106 3,001 2,966 2,170 2,267 1,992 1,982
Loss before income taxes (33,730) (40,621) (45,058) (43,347) (47,271) (40,195) (33,295) (43,438)
Income tax (expense)
benefit (154) (143) (404) (122) (242) 465 (476) 361
Net loss $ (33,884) $ (40,764) $ (45,462) $ (43,469) $ (47,513) $ (39,730) $ (33,771) $ (43,077) Net loss per share, basic and diluted$ (0.25) $ (0.30) $ (0.32) $ (0.31) $ (0.34) $ (0.28) $ (0.24) $ (0.30) ________________________
(1)Includes equity-based compensation expense as follows:
Three Months Ended
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
2019 2019 2019 2019 2020 2020 2020 2020
(in thousands)Cost of revenue$ 84 $ 133 $ 138 $ 193 $ 270 $ 296 $ 312 $ 335 Sales and marketing 6,276 7,952 8,739 7,710 9,522 10,878 10,908 9,860 Technology and content 3,710 5,137 6,666 5,917 6,336 6,884 6,361 6,641 General and administrative 10,198 9,510 9,114 8,960 9,450 8,367 6,633 6,800 Total equity-based compensation$ 20,268 $ 22,732 $ 24,657 $ 22,780 $ 25,578 $ 26,425 $ 24,214 $ 23,636 ________________________
(2)Includes amortization of acquired intangible assets as follows:
Three Months Ended
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
2019 2019 2019 2019 2020 2020 2020 2020
(in thousands)Cost of revenue$ 525 $ 702 $ 1,209 $ 1,209 $ 1,209 $ 1,209 $ 1,208 $ 1,832 Sales and marketing - 29 50 50 50 50 50 146 Technology and content 177 176 176 176 176 161 122 121 Total amortization of acquired intangible assets$ 702 $ 907 $ 1,435 $ 1,435 $ 1,435 $ 1,420 $ 1,380 $ 2,099 72
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Three Months Ended
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
2019 2019 2019 2019 2020 2020 2020 2020
Revenue 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %
Cost of revenue 24 23 22 21 21 21 21 22
Gross profit 76 77 78 79 79 79 79 78
Operating expenses:
Sales and marketing 63 66 68 64 67 61 58 58
Technology and content 29 33 34 34 33 31 30 28
General and administrative 32 27 25 25 25 24 20 28
Total operating expenses 124 126 127 123 125 116 108 114
Loss from operations (48) (49) (49) (44) (46) (37) (29) (36)
Other income (expense):
Interest expense (2) (10) (9) (8) (8) (8) (7) (7)
Loss on debt extinguishment - - (1) - - - - -
Other income, net 2 5 4 3 2 2 2 2
Loss before income taxes (48) (54) (55) (49) (52) (43) (34) (41)
Income tax (expense) benefit - - - - - - - -
Net loss (48) % (54) % (55) % (49) % (52) % (43) % (34) % (41) %
Quarterly Revenue Trends
Our quarterly revenue increased sequentially for all periods presented due
primarily to increases in billings from sales of subscriptions to our platform
to business customers.
Quarterly Costs and Expenses Trends
Cost of revenue generally increased sequentially for all periods presented due
primarily to the continued expansion of our content library and related author
fees, hosting and delivery, and increased employee headcount within our customer
support and professional services organizations.
Our operating expenses have generally increased sequentially across the quarters
presented, primarily due to the addition of personnel to support our growth,
however operating expenses decreased during the three months ended June 30, 2020
and September 30, 2020 due in large part to decreased costs related to the
COVID-19 pandemic.
Key Business Metrics
Three Months Ended
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
2019 2019 2019 2019 2020 2020 2020 2020
(dollars in thousands)
Business customers(1) (end
of period) 17,213 17,735 17,747 17,942 17,830 17,929 17,663 17,599
Billings(2) $ 77,928 $ 80,552 $ 92,123 $ 128,448 $ 90,278 $ 89,034 $ 100,022 $ 151,088
Billings from business
customers $ 67,156 $ 69,104 $ 80,707 $ 113,176 $ 80,472 $ 77,695 $ 88,599 $ 134,022
% of billings from business
customers 86 % 86 % 88 % 88 % 89 % 87 % 89 % 89 %
________________________(1)See the section entitled "-Key Business Metrics-Business customers" for additional information. (2)See the section entitled "-Key Business Metrics-Billings" for additional information.
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Liquidity and Capital Resources
As of December 31, 2020 , our principal sources of liquidity were cash, cash
equivalents, restricted cash and investments totaling $503.7 million , which were
held for working capital purposes. This amount does not include $25.0 million we
spent in January 2021 in connection with the acquisition of Next Tech, subject
to customary working capital adjustments that are expected to be finalized
within 90 days of the closing date. Our cash equivalents and investments are
comprised primarily of highly liquid investments in money market funds, U.S.
treasury securities, U.S. government agency securities, commercial paper, and
corporate debt securities. Since our inception, we have financed our operations
primarily through sales of equity securities, long-term debt facilities, and our
net cash provided by operating activities.
Our free cash flow for the year ended December 31, 2020 was negative as a result
of our continued investments to support the growth of our business. We expect to
continue such investments in order to sustain our growth. We expect that our
cash, cash equivalents, and restricted cash balances, will enable us to make
such investments for the foreseeable future. We expect our free cash flow to
improve as we experience greater scale in our business and improve operational
efficiency. We expect to generate positive free cash flow over the long term.
We believe our existing cash, cash equivalents, restricted cash, and
investments, as well as our projected cash flows from operations, will be
sufficient to meet our projected operating requirements for at least the next
12 months. Our future capital requirements will depend on many factors,
including our pace of growth, subscription renewal activity, the timing and
extent of spend to support the expansion of sales and marketing activities,
technology and content efforts, the continuing market acceptance of our
platform, and future acquisitions. We may be required to seek additional equity
or debt financing. In the event that additional financing is required from
outside sources, we may not be able to raise it on terms acceptable to us, or at
all. If we are unable to raise additional capital when desired, our business,
results of operations, and financial condition would be adversely affected.
In connection with the IPO and our UP-C structure, we entered into the TRA. As a
result of the TRA, we are obligated to pass along some of these tax benefits and
cash flows by making future payments to the TRA Members. Although the actual
timing and amount of any payments we make to the TRA Members under the TRA will
vary, such payments may be significant. Any payments we make to TRA Members
under the TRA will generally reduce the amount of overall cash flow that might
have otherwise been available to us and, to the extent that we are unable to
make payments under the TRA for any reason, the unpaid amounts generally will be
deferred and will accrue interest until paid by us. To date, we have not made
any payments under the TRA. We do not expect to make or accrue payments to TRA
Members in the near future as payments to TRA members are not owed until the tax
benefits generated by TRA Members are more-likely-than-not to be realized.
The following table shows cash flows for the years ended December 31, 2020 ,
2019, and 2018:
Year Ended December 31,
2020 2019 2018
(in thousands)
Net cash provided by (used in) operating
activities $ 9,090 $ (11,729) $ (5,896)
Net cash provided by (used in) investing
activities 4,545 (616,721) (12,136)
Net cash provided by financing activities 18,426 536,760 200,789
Effect of exchange rate changes on cash, cash
equivalents, and restricted cash 449 50 (163)
Net increase (decrease) in cash, cash equivalents,
and restricted cash $ 32,510 $ (91,640) $ 182,594
Operating Activities
Cash provided by operating activities for the year ended December 31, 2020 of
$9.1 million was primarily due to a net loss of $164.1 million and an
unfavorable change in operating assets and liabilities of $2.2 million , offset
by equity-based compensation of $99.9 million , amortization of debt discount and
issuance costs of $27.1 million ,
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amortization of deferred contract acquisition costs of $25.9 million ,
depreciation of property and equipment of $12.3 million , and amortization of
acquired intangible assets of $6.3 million . The net change in operating assets
and liabilities was primarily due to an increase in deferred contract
acquisition costs of $35.0 million , an increase in accounts receivable of $17.0
million , and an increase in prepaid expenses and other assets of $10.4 million ,
partially offset by a increase in deferred revenue of $41.1 million , an increase
in accrued expenses and other liabilities of $17.9 million , and a decrease in
right-of-use assets of $5.6 million .
Cash used in operating activities for the year ended December 31, 2019 of $11.7
million was primarily due to a net loss of $163.6 million , partially offset by
equity-based compensation of $90.4 million , amortization of deferred contract
acquisition costs of $23.6 million , amortization of debt discount and issuance
costs of $21.7 million , depreciation of property and equipment of $9.5 million ,
amortization of acquired intangible assets of $4.5 million , and a favorable
change in operating assets and liabilities of $0.8 million . The net change in
operating assets and liabilities was primarily due to an increase in deferred
revenue of $62.2 million , an increase in accrued expenses and other liabilities
of $5.9 million , and a decrease in right-of-use assets of $5.6 million ,
partially offset by an increase in accounts receivable of $37.3 million , an
increase in deferred contract acquisition costs of $27.7 million , a decrease in
operating lease liabilities of $6.7 million , and an increase in prepaid expenses
and other assets $5.7 million .
Cash used in operating activities for the year ended December 31, 2018 of $5.9
million was primarily due to a net loss of $146.8 million , partially offset by
equity-based compensation of $72.5 million , a favorable change in operating
assets and liabilities of $43.4 million , amortization of acquired intangible
assets of $8.7 million , depreciation of property and equipment of $8.3 million ,
debt extinguishment costs of $4.2 million , amortization of course creation costs
of $2.0 million , and amortization of debt discount and debt issuance costs of
$1.2 million . The net change in operating assets and liabilities was primarily
due to an increase in the deferred revenue balance of $61.6 million and an
increase in accrued expenses of $8.0 million , partially offset by an increase in
accounts receivable of $26.2 million .
Investing Activities
Cash provided by investing activities for the year ended December 31, 2020 of
$4.5 million was due to proceeds from maturities of short-term investments of
$576.6 million , partially offset by purchases of investments of $491.3 million ,
purchase of a business for net cash of $37.5 million , purchases of property and
equipment of $35.4 million , and purchases of our content library of $7.8
million . The increase in purchases of property and equipment was largely due to
cash paid for the construction of tenant improvements at our new global
headquarters in Utah , which was approximately $24.1 million during the year
ended December 31, 2020 .
Cash used in investing activities for the year ended December 31, 2019 of $616.7
million was primarily due to purchases of investments of $694.2 million , the
purchase of a business of $163.8 million , purchases of property and equipment of
$11.2 million , and purchases of our content library of $5.3 million , partially
offset by proceeds from maturities of short-term investments of $252.8 million
and proceeds from the sale of investments of $5.0 million .
Cash used in investing activities for the year ended December 31, 2018 of $12.1
million was related to purchases of property and equipment of $8.8 million and
purchases of our content library of $3.3 million .
Financing Activities
Cash provided by financing activities for the year ended December 31, 2020 of
$18.4 million was due to proceeds from the issuance of common stock from
employee equity plans of $26.4 million , partially offset by taxes paid related
to net share settlement of $8.0 million .
Cash provided by financing activities for the year ended December 31, 2019 of
$536.8 million was primarily due to net proceeds from the issuance of the Notes
of $616.7 million and proceeds from the issuance of common stock from employee
equity plans of $24.8 million , partially offset by the purchase of Capped Calls
of $69.4 million and the repurchases of the Notes of $35.0 million .
Cash provided by financing activities for the year ended December 31, 2018 of
$200.8 million was due to net proceeds from the IPO of $332.1 million ,
borrowings of long-term debt of $20.0 million , and proceeds from
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issuance of common stock from employee equity plans of $13.4 million , partially
offset by repayments of long-term debt of $137.7 million , taxes paid related to
net share settlement of $16.9 million , and payments of costs related to the IPO
of $7.1 million .
Commitments and Contractual Obligations
Our principal commitments and contractual obligations consist of obligations
under leases for office facilities. The following table summarizes our
non-cancellable contractual obligations as of December 31, 2020 :
Payments due by period
Less than 1 More than 5
Total Year 1-3 Years 3-5 Years Years
(in thousands)
Convertible senior notes $ 593,500 $ - $ - $ 593,500 $ -
Interest obligations for
convertible senior notes 7,790 2,226 4,451 1,113 -
Lease obligations 146,612 12,184 23,550 19,297 91,581
Other contractual obligations 29,968 21,586 8,382 - -
Total $ 777,870 $ 35,996 $ 36,383 $ 613,910 $ 91,581
The contractual commitment amounts in the table above are associated with
agreements that are enforceable and legally binding. Obligations under contracts
that we can cancel without a significant penalty are not included in the table
above.
The table above excludes any obligations under the TRA. As a result of the
exchanges made under our structure, we may incur a TRA liability, however, we
have not and do not expect to record a TRA liability until the tax benefits
associated with the exchanges are more-likely-than-not to be realized. Had the
tax benefits been more-likely-than-not to be realized, the estimated incremental
TRA liability that could result from past exchanges would have been $345.1
million as of December 31, 2020 .
On December 11, 2020 , in connection with the execution into the Merger
Agreement, Pluralsight and Pluralsight Holdings entered into an amendment to the
TRA (the "TRA Amendment"). The TRA Amendment establishes that the parties to the
TRA will be entitled to receive an aggregate amount of $127.0 million in
connection with the closing of the Merger in full satisfaction of Pluralsight's
payment obligation under the TRA in connection with a change of control of
Pluralsight . As this payment is subject to the closing of the Merger, a TRA
liability is not recorded as of December 31, 2020 .
Purchase orders, which represent authorizations to purchase rather than binding
agreements, are not included in the table above. The other contractual
obligation amounts in the table above are associated with agreements that are
enforceable and legally binding and that specify all significant terms,
including fixed or minimum services to be used, fixed, minimum, or variable
price provisions, and the approximate timing of the transaction. Obligations
under contracts that we can cancel without significant penalty are not included
in the table above.
In the ordinary course of business, we enter into agreements in which we may
agree to indemnify customers, vendors, lessors, partners, lenders, equity
interest holders, and other parties with respect to certain matters, including
losses resulting from claims of intellectual property infringement, damages to
property or persons, business losses, or other liabilities. In addition, we have
entered into indemnification agreements with our directors, executive officers,
and other officers that will require us to indemnify them against liabilities
that may arise by reason of their status or service as directors, officers, or
employees. No demands have been made upon us to provide indemnification under
such agreements and there are no claims that we are aware of that could have a
material effect on our consolidated financial statements.
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Off-Balance Sheet Arrangements
Through December 31, 2020 , we did not have any relationships with unconsolidated
organizations or financial partnerships, such as structured finance or special
purpose entities that would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of these financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported revenue generated and
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe that the
accounting policies discussed below are critical to understanding our historical
and future performance, as these policies relate to the more significant areas
involving management's judgments and estimates.
Revenue Recognition
We derive a substantial majority of our revenue from subscription services
(which include support services) by providing customers access to our platform.
We implemented the provisions of Accounting Standards Update, or ASU, 2014-09
(referred to collectively as "ASC 606") effective January 1, 2019 using the
modified retrospective transition method as discussed below under the section
"Recent Accounting Pronouncements."
Following the adoption of ASC 606, we recognize revenue when control of these
services is transferred to its customers, in an amount that reflects the
consideration we expect to be entitled to in exchange for the services. Sales
and other taxes collected from customers to be remitted to government
authorities are excluded from revenue. We account for revenue contracts with
customers by applying the following steps:
•identification of the contract, or contracts, with a customer;
•identification of the performance obligations in a contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the
contract; and
•recognition of revenue when, or as, performance obligations are satisfied.
Our subscription arrangements generally do not provide customers with the right
to take possession of the software supporting the platform and, as a result, are
accounted for as service arrangements. Access to our platform represents a
series of distinct services as we continually provide access to, and fulfills
our obligation to, the end customer over the subscription term. The series of
distinct services represents a single performance obligation that is satisfied
over time. Accordingly, the fixed consideration related to subscription revenue
is generally recognized on a straight-line basis over the contract term,
beginning on the date that the service is made available to the customer. Our
subscription contracts typically vary from one month to three years. Our
arrangements are generally noncancellable and nonrefundable.
Subscriptions that allow the customer to take software on-premise without
significant penalty are treated as time-based licenses. These arrangements
generally include access to the software over the license term, access to
unspecified future product updates, maintenance, and support. Revenue for
on-premise software subscriptions is recognized at a point in time when the
software is made available to the customer. Revenue for access to unspecified
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future products, maintenance and support included with on-premise software
subscriptions is recognized ratably over the contract term beginning on the date
that the software is made available to the customer.
We also derive revenue from providing professional services, which generally
consist of consulting, integration, or other services, such as instructor-led
training and content creation. These services are distinct from subscription
services. Revenue from professional services is generally recognized as services
are performed.
Some contracts with customers contain multiple performance obligations. For
these contracts, we account for individual performance obligations separately,
if they are distinct. The transaction price is allocated to the separate
performance obligations on a relative standalone selling price basis. We
determine standalone selling prices considering market conditions and based on
overall pricing objectives such as observable standalone selling prices, and
other factors, including the value of contracts, types of services sold,
customer demographics, and the number and types of users within such contracts.
Capitalized Software Development Costs
We capitalize certain development costs incurred in connection with the
development of our platform and software used in operations. Costs incurred in
the preliminary stages of development are expensed as incurred. Once software
has reached the development stage, internal and external costs of application
development are capitalized until the software is substantially complete and
ready for its intended use. Capitalization ceases upon completion of all
substantial testing. We also capitalize costs related to specific upgrades and
enhancements when it is probable the expenditures will result in additional
functionality. We capitalized costs of $9.8 million , $8.5 million , and
$5.9 million for the years ended December 31, 2020 , 2019, and 2018,
respectively, which were included in property and equipment. Maintenance and
training costs are expensed as incurred.
Equity-Based Compensation
We incur equity-based compensation expense primarily from incentive units, RSUs,
stock options, and purchase rights issued under the Employee Stock Purchase
Plan, or ESPP. Equity awards to employees are measured and recognized in the
consolidated financial statements based on the fair value of the award on the
grant date. For awards subject to service conditions only, the fair value of the
award on the grant date is expensed on a straight-line basis over the requisite
service period of the award. For awards subject to both service and performance
conditions, we record expense when the performance condition becomes probable.
Expense is recognized using the accelerated attribution method (on a
tranche-by-tranche basis) for awards with a graded vesting schedule that are
subject to both service and performance conditions. We record forfeitures
related to equity-based compensation for our awards based on actual forfeitures
as they occur.
The grant date fair value of RSUs is determined using the market closing price
of our Class A common stock on the date of grant. RSUs granted prior to the IPO
vest upon the satisfaction of both a service condition and a liquidity
condition. The liquidity condition was satisfied by the IPO, following the
expiration of the lock-up period, which occurred in November 2018 . Awards
granted subsequent to the IPO are not subject to the liquidity condition. Prior
to the IPO, we had not recorded any equity-based compensation expense associated
with the RSUs as the liquidity condition was not deemed probable. Following the
completion of the IPO, we recorded a cumulative adjustment to equity-based
compensation expense totaling $17.1 million . The remaining unrecognized
equity-based compensation expense related to RSUs granted prior to the IPO will
be recognized over the remaining requisite service period, using the accelerated
attribution method. RSUs granted subsequent to the IPO subject to service
conditions only will be recognized over the remaining requisite service period,
using the straight-line method.
Equity-based compensation expense for Class A common stock options granted to
employees is recognized based on the fair value of the awards granted,
determined using the Black-Scholes option pricing model. Equity-based
compensation expense is recognized as expense on a straight-line basis over the
requisite service period.
Equity-based compensation expense related to purchase rights issued under the
ESPP is based on the Black-Scholes option pricing model fair value of the
estimated number of awards as of the beginning of the offering period.
Equity-based compensation expense is recognized following the straight-line
attribution method over the offering period.
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The Black-Scholes option pricing model is affected by the share price and a
number of assumptions, including the award's expected life, risk-free interest
rate, the expected volatility of the underlying stock, and expected dividends.
The assumptions used in the Black-Scholes pricing model are estimated as
follows:
•Fair Value of Common Stock: We determine the fair value of common stock as of
each grant date using the market closing price of our Class A common stock on
the date of grant.
•Risk-free Interest Rate: The risk-free interest rate is derived from the
implied yield available on U.S. Treasury zero-coupon issues with remaining terms
similar to the expected term of the options.
•Expected Term: The expected term is estimated using the simplified method due
to a lack of historical exercise activity for us. The simplified method
calculates the expected term as the mid-point between the vesting date and the
contractual expiration date of the award. For the ESPP, we use the period from
the beginning of the offering period to the end of each purchase period.
•Volatility: The price volatility factor is based on the historical volatilities
of comparable companies as we do not have sufficient trading history for our
common stock. To determine comparable companies, we consider public enterprise
cloud-based application providers and select those that are similar in size,
stage of life cycle, and financial leverage. We will continue to use this
process until a sufficient amount of historical information regarding volatility
becomes available, or until circumstances change such that the identified
companies are no longer relevant, in which case, more suitable companies whose
share prices are publicly available would be utilized in the calculation.
•Dividend Yield: We have not and do not expect to pay dividends for the
foreseeable future.
We also recorded equity-based compensation expense when we or a holder of an
economic interest in us purchases shares from an employee for an amount in
excess of the fair value of the common units at the time of purchase. We
recognize any excess value transferred in these transactions as equity-based
compensation expense in the consolidated statement of operations.
Business Combinations
We include the results of operations of the businesses that we acquire as of the
respective dates of acquisition. We allocate the fair value of the purchase
price of our acquisitions to the assets acquired and liabilities assumed based
on their estimated fair values. The excess of the fair value of the purchase
price over the fair values of these identifiable assets and liabilities is
recorded as goodwill. The determination of the value and useful lives of the
intangible assets acquired involves certain judgments and estimates. These
judgments can include, but are not limited to, the cash flows that an asset is
expected to generate in the future and the appropriate weighted average cost of
capital.
Content Library , Intangible Assets, and Goodwill
The content library assets have been acquired from our network of independent
authors (course creation costs) and through various business combinations. We
amortize the content library and other intangible assets acquired from our
authors or in business combinations on a straight-line basis over their
estimated useful lives, which is generally five years.
Periodically we assess potential impairment of our long-lived assets, which
include our content library and intangible assets. We perform an impairment
review whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors we consider important which could trigger
an impairment review include, but are not limited to, significant
under-performance relative to historical or projected future results of
operations, significant changes in the manner of our use of acquired assets or
our overall business strategy, and significant industry or economic trends. When
we determine that the carrying value of a long-lived asset (or asset group) may
not be recoverable based upon the existence of one or more of the above
indicators, we determine the recoverability by comparing the carrying amount of
the asset to net future undiscounted cash flows that the asset is
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expected to generate and recognize an impairment charge equal to the amount by
which the carrying amount exceeds the fair value of the asset.
Goodwill represents the excess of the purchase price in a business combination
over the fair value of net tangible and intangible assets acquired. We test
goodwill for impairment annually as of October 1 , or whenever events or changes
in circumstances indicate that goodwill may be impaired. We initially assess
qualitative factors to determine whether the existence of events or
circumstances leads to a determination that it is more-likely-than-not that the
fair value of our sole reporting unit is less than its carrying amount. If,
after assessing the totality of events or circumstances, we determine it is
more-likely-than-not that the fair value of the reporting unit is less than its
carrying amount, then we perform a quantitative analysis by comparing the book
value of net assets to the fair value of the reporting unit. If the fair value
is determined to be less than the book value, an impairment charge is recorded.
In assessing the qualitative factors, we consider the impact of certain key
factors including macroeconomic conditions, industry and market considerations,
management turnover, changes in regulation, litigation matters, changes in
enterprise value, and overall financial performance.
Recent Accounting Pronouncements
See Note 2 to Pluralsight, Inc.'s consolidated financial statements included
elsewhere in this Annual Report on Form 10-K for more information.
Social Impact
We believe technology has the power to create freedom, equality, and opportunity
around the globe. Pluralsight One is our social impact initiative dedicated to
closing the technology skills gap. Pluralsight One was launched in 2017 as a
social enterprise to lead our global social impact strategy in support of our
mission to democratize technology skills.
Pluralsight One uses our platform to further our mission by focusing on four
pillars:
•Opportunity: Increase access to technology skill development and promote
inclusion across the globe.
•Education: Revolutionize the way the world learns and address the root issues
contributing to the increasing technology skills gap to prevent nonprofit
organizations, educators and the populations they support from becoming left
behind.
•Employability: Equip individuals with the technology skills they need to access
dignified employment, thrive, and keep pace in any industry.
•Innovation: Invest in catalytic solutions that accelerate our mission and the
missions of nonprofits around the world.
We take action on these pillars through product, volunteerism, and investments:
•Product: Pluralsight One creates freedom, equality and opportunity by helping
nonprofits, educators, and the communities they support develop the technology
skills needed to build better lives and a better future for us all.
•Volunteerism: Pluralsight One empowers the Pluralsight community to transfer
skills that meet identified community needs and create lasting impact through
volunteerism and mentorship opportunities.
•Investments: Pluralsight One fuels innovation and amplifies impact by funding
solutions and programs that scale.
In 2020, Pluralsight One's advocacy efforts successfully resulted in Utah's
Legislature allocating $7.5 million . Pluralsight One also issued a statewide
product grant to support 10,000 K-12 educators and staff with technology skills
development. Pluralsight One committed over $1 million in COVID-19 emergency
response grants in support
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of partners and regional emergency response efforts and joined UNESCO's Global
Education Coalition and Global Skills Academy in support of their goal to
provide learning opportunities to one million youth experiencing disruptions to
their learning due to COVID by summer of 2021.
Two of our co-founders, Aaron Skonnard and Frederick Onion , have donated and may
donate in the future a portion of their Pluralsight equity to the Pluralsight
One fund, Silicon Valley Community Foundation a corporate advised fund owned and
operated by a 501(c)(3) public charity operated in the United States , EIN#
20-5205488. We have advisory privileges over the fund, with the ability to
recommend investment strategy of the donated assets, and the ability to
recommend cash grants to support qualified charities, however we do not control
the Pluralsight One Fund sponsors, and accordingly we do not consolidate the
donor advised fund's activities into our consolidated financial statements.
More information regarding Pluralsight One and our annual impact report is
available on our website at https://www.pluralsightone.org/impact. Information
contained on, or that can be accessed through, this website is not intended to
be incorporated by reference into this Annual Report on Form 10-K and references
to this website address are inactive textual references only.
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