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


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


For the quarterly period ended June 30, 20182020


Or


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


For the transition period from _____ to _____


Commission File Number: 001-38498

PLURALSIGHT, INC.
(Exact name of registrant as specified in its charter)
 
Delaware 82-3605465
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)


182 North Union Avenue
Farmington, Utah84025
(Address of principle executive offices, including zip code)


(801) (801) 784-9007
(Registrant'sRegistrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, $0.0001 par value per sharePSNasdaq Global Select Market
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ ☒No ý☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesý☒ No ☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐☒   Accelerated filer  ☐
Non-accelerated filer ý☐ (Do not check if a smaller reporting company) Smaller reporting company  ☐
      Emerging growth company  ý☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

☒
As of July 31, 2018,24, 2020, the registrant had 135,075,370144,465,880 shares of common stock outstanding, consisting of 62,915,660111,924,698 shares of Class A common stock, 58,111,57219,349,269 shares of Class B common stock, and 14,048,13813,191,913 shares of Class C common stock.


   






PLURALSIGHT, INC.
TABLE OF CONTENTS
 
   
  Page
   
PART I. FINANCIAL INFORMATION
   
Item 1.
Financial Statements (unaudited)(Unaudited)
 
 
Condensed Consolidated Balance Sheets as of June 30, 20182020 and December 31, 20172019
23
 
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 20182020 and 20172019
34
 
Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 20182020 and 2017
4
Condensed Consolidated Statements of Redeemable Convertible Preferred Units, Members’ Deficit, and Stockholders' Equity2019
5
 
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019
6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 20182020 and 20172019
69
 
Notes to Condensed Consolidated Financial Statements
710
Item 2.
Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
2429
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
3439
Item 4.
Controls and Procedures
3540
   
PART II. OTHER INFORMATION
   
Item 1.
Legal Proceedings
3641
Item 1A.
Risk Factors
36
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3641
Item 6.
Exhibits
3748
   
Signatures
3849










SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
As used in this Quarterly Report on Form 10-Q, unless expressly indicated or the context otherwise requires, references to "Pluralsight," "we," "us," "our," "the“Pluralsight,” “we,” “us,” “our,” “the Company,"” and similar references refer to Pluralsight, Inc. and its consolidated subsidiaries, including Pluralsight Holdings, LLC, or Pluralsight Holdings.
This Quarterly Report on Form 10-Q, including the section titled "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations,"” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions, generally relate to future events or our future financial or operating performance. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” “target,” “project,” “contemplate,” or the negative version of these words and other comparable terminology that concern our expectations, strategy, plans, intentions, or projections. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our ability to attract new customers and retain and expand our relationships with existing customers;
our ability to expand our course library and develop new platform features;
our future financial performance, including trends in billings, revenue, costs of revenue, gross margin, operating expenses, cash provided by (used in) operating activities, and free cash flow;
the demand for, and market acceptance of, our platform or for cloud-based technology learning solutions in general;
our ability to compete successfully in competitive markets;
our ability to respond to rapid technological changes;
•
our expectations of the impact the novel coronavirus strain named SARS-CoV-2, abbreviated as COVID-19, pandemic may have on our business;
our ability to maintain operations and implement effective measures in response to the COVID-19 pandemic;
our expectations and management of future growth;
our ability to enter new markets and manage our expansion efforts, particularly internationally;
our ability to attract and retain key employees and qualified technical and sales personnel;
our ability to effectively and efficiently protect our brand;
our ability to timely scale and adapt our infrastructure;
our ability to maintain, protect, and enhance our intellectual property and not infringe upon others’ intellectual property;
our ability to successfully identify, acquire, and integrate companies and assets; and
our ability to successfully defend ourselves in legal proceedings;
the amount and timing of any payments we make under the fourth amended and restated limited liability company agreement of Pluralsight Holdings, or the Fourth LLC Agreement, and our Tax Receivable Agreement, or TRA, with the members of Pluralsight Holdings.Holdings; and
our ability to satisfy our obligations under the convertible senior notes.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled "Risk Factors"“Risk Factors” in our prospectus dated May 16, 2018 (File No. 333-224301)Annual Report on Form 10-K/A as filed with the Securities and Exchange Commission, or the SEC, pursuant to Rule 424(b)(4) under the Securities Act of 1933, or the Prospectus.Exchange Act. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. Such risks and uncertainties include the impact of the spread of COVID-19. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements and you should not place undue reliance on our forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.


You should read this Quarterly Report on Form 10-Q in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2017,2019 included in the Prospectus.our Annual Report on Form 10-K/A.




PART I. FINANCIAL INFORMATION


Item 1. Financial Statements (unaudited)(Unaudited)
PLURALSIGHT, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
 June 30,
2020		 December 31,
2019
 June 30, 2018 December 31, 2017    
Assets        
Current assets:        
Cash and cash equivalents $213,645
 $28,267
 $87,982
 $90,515
Accounts receivable, net of allowances of $2,178 and $1,552 as of June 30, 2018 and December 31, 2017, respectively 36,268
 38,229
Short-term investments 318,483
 332,234
Accounts receivable, net of allowances of $5,370 and $3,465 as of June 30, 2020 and December 31, 2019, respectively 61,578
 101,576
Deferred contract acquisition costs 17,745
 18,331
Prepaid expenses and other current assets 8,907
 5,125
 14,764
 14,174
Total current assets 258,820
 71,621
 500,552
 556,830
Restricted cash and cash equivalents 21,622
 28,916
Long-term investments 122,224
 105,805
Property and equipment, net 22,683
 22,457
 60,788
 22,896
Right-of-use assets 62,982
 15,804
Content library, net 8,093
 13,441
 11,017
 8,958
Intangible assets, net 2,111
 2,854
 19,787
 22,631
Goodwill 123,119
 123,119
 262,532
 262,532
Deferred contract acquisition costs, noncurrent 7,164
 5,982
Other assets 1,396
 2,928
 1,709
 1,599
Total assets $416,222
 $236,420
 $1,070,377
 $1,031,953
Liabilities, redeemable convertible preferred units, and stockholders' equity/members’ deficit    
Liabilities and stockholders’ equity    
Current liabilities:        
Accounts payable $6,836
 $6,029
 $5,985
 $10,615
Accrued expenses 24,208
 26,514
 38,950
 40,703
Accrued author fees 8,496
 7,879
 11,711
 11,694
Lease liabilities 7,752
 5,752
Deferred revenue 121,978
 103,107
 207,575
 215,137
Total current liabilities 161,518
 143,529
 271,973
 283,901
Deferred revenue, net of current portion 6,555
 8,194
Long-term debt —
 116,037
Facility financing obligation 7,505
 7,513
Deferred revenue, noncurrent 18,813
 19,517
Convertible senior notes, net 483,503
 470,228
Lease liabilities, noncurrent 76,340
 11,167
Other liabilities 779
 458
 70
 980
Total liabilities 176,357
 275,731
 850,699
 785,793
Commitments and contingencies (Note 8) 
 
Redeemable convertible preferred units:    
Redeemable convertible preferred units, no par value; 48,447,880 units authorized, issued and outstanding as of December 31, 2017 —
 405,766
Stockholders' equity/members’ deficit:    
Preferred stock, $0.0001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2018 —
 —
Class A common stock, $0.0001 par value per share, 1,000,000,000 shares authorized, 62,915,660 shares issued and outstanding as of June 30, 2018; 1,000 shares authorized, issued and outstanding as of December 31, 2017 6
 —
Class B common stock, $0.0001 par value per share, 200,000,000 shares authorized, 58,111,572 shares issued and outstanding as of June 30, 2018 6
 —
Class C common stock, $0.0001 par value per share, 50,000,000 shares authorized, 14,048,138 shares issued and outstanding as of June 30, 2018 1
 —
Commitments and contingencies (Note 12) 

 

Stockholders’ equity:    
Preferred stock, $0.0001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2020 and December 31, 2019 —
 —
Class A common stock, $0.0001 par value per share, 1,000,000,000 shares authorized, 111,875,235 and 104,083,271 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 11
 10
Class B common stock, $0.0001 par value per share, 200,000,000 shares authorized, 19,366,038 and 23,211,418 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 2
 2
Class C common stock, $0.0001 par value per share, 50,000,000 shares authorized, 13,191,913 and 14,269,199 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 1
 1
Additional paid-in capital 436,177
 —
 693,768
 641,128
Members’ capital —
 —
Accumulated other comprehensive (loss) income (16) 25
Accumulated other comprehensive income 1,154
 225
Accumulated deficit (321,704) (445,102) (523,629) (458,381)
Total stockholders' equity attributable to Pluralsight, Inc./members' deficit 114,470
 (445,077)
Total stockholders’ equity attributable to Pluralsight, Inc. 171,307
 182,985
Non-controlling interests 125,395
 —
 48,371
 63,175
Total stockholders' equity/members' deficit 239,865
 (445,077)
Total liabilities, redeemable convertible preferred units, and stockholders' equity/members’ deficit $416,222
 $236,420
Total stockholders’ equity 219,678
 246,160
Total liabilities and stockholders’ equity $1,070,377
 $1,031,953

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





PLURALSIGHT, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
         
Revenue $94,765
 $75,862
 $187,411
 $145,479
Cost of revenue 19,717
 17,803
 38,725
 34,515
Gross profit 75,048
 58,059
 148,686
 110,964
Operating expenses:        
Sales and marketing 57,759
 50,046
 120,174
 94,217
Technology and content 29,514
 24,819
 59,658
 45,090
General and administrative 22,996
 20,575
 46,367
 42,766
Total operating expenses 110,269
 95,440
 226,199
 182,073
Loss from operations (35,221) (37,381) (77,513) (71,109)
Other income (expense):        
Interest expense (7,241) (7,346) (14,390) (9,024)
Other income, net 2,267
 4,106
 4,437
 5,782
Loss before income taxes (40,195) (40,621) (87,466) (74,351)
Income tax benefit (expense) 465
 (143) 223
 (297)
Net loss $(39,730) $(40,764) $(87,243) $(74,648)
Less: Net loss attributable to non-controlling interests (9,801) (11,637) (21,995) (26,446)
Net loss attributable to Pluralsight, Inc. $(29,929) $(29,127) $(65,248) $(48,202)
Net loss per share, basic and diluted $(0.28) $(0.30) $(0.62) $(0.56)
Weighted-average shares of Class A common stock used in computing basic and diluted net loss per share 107,153
 97,608
 105,899
 86,827
  Three Months Ended June 30, Six Months Ended June 30,
  2018 2017 2018 2017
Revenue $53,572
 $38,891
 $103,216
 $76,130
Cost of revenue 15,890
 11,887
 30,776
 23,096
Gross profit 37,682
 27,004
 72,440
 53,034
Operating expenses:        
Sales and marketing 38,933
 23,018
 68,400
 40,844
Technology and content 16,493
 11,326
 29,818
 21,531
General and administrative 19,448
 9,412
 30,740
 15,679
Total operating expenses 74,874
 43,756
 128,958
 78,054
Loss from operations (37,192) (16,752) (56,518) (25,020)
Other (expense) income:        
Interest expense (2,424) (3,597) (6,134) (5,124)
Loss on debt extinguishment (4,085) (1,882) (4,085) (1,882)
Other income, net 48
 21
 35
 69
Loss before income taxes (43,653) (22,210) (66,702) (31,957)
Provision for income taxes (143) (68) (252) (126)
Net loss $(43,796) $(22,278) $(66,954) $(32,083)
Less: Net loss attributable to non-controlling interests (12,706) —
 (12,706) —
Net loss attributable to Pluralsight, Inc. $(31,090) $(22,278) $(54,248) $(32,083)
Less: Accretion of Series A redeemable convertible preferred units (156,750) (21,175) (176,275) (22,825)
Net loss attributable to common shares $(187,840) $(43,453) $(230,523) $(54,908)
Net loss per share, basic and diluted(1)
 $(0.19) 

 $(0.19) 

Weighted-average common shares used in computing basic and diluted net loss per share(1)
 62,252
 

 62,252
 

         
(1) Represents net loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period from May 16, 2018 through June 30, 2018, the period following the reorganization transactions and Pluralsight, Inc.'s initial public offering described in Note 1—Organization and Description of Business. See Note 13—Net Loss Per Share for additional details.


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





PLURALSIGHT, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 Three Months Ended June 30, Six Months Ended June 30,
 Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019
 2018 2017 2018 2017        
Net loss $(43,796) $(22,278) $(66,954) $(32,083) $(39,730) $(40,764) $(87,243) $(74,648)
Other comprehensive (loss) income:        
Foreign currency translation (losses) gains, net (63) 9
 (58) 18
Other comprehensive income (loss):        
Unrealized gains on investments 2,954
 379
 1,389
 379
Foreign currency translation gains (losses), net 73
 (7) (149) 11
Comprehensive loss $(43,859) $(22,269) $(67,012) $(32,065) $(36,703) $(40,392) $(86,003) $(74,258)
Less: Comprehensive loss attributable to non-controlling interests (12,727) —
 (12,727) —
 (9,030) (11,533) (21,684) (26,334)
Comprehensive loss attributable to Pluralsight, Inc. $(31,132) $(22,269) $(54,285) $(32,065) $(27,673) $(28,859) $(64,319) $(47,924)
The accompanying notes are an integral part of these condensed consolidated financial statements.





PLURALSIGHT, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Units, Members’ Deficit, and Stockholders'Stockholders’ Equity
(in thousands, except share/unitshare amounts)
(unaudited)
Three Months Ended June 30, 2020
  
Redeemable
Convertible
Preferred Units
  Members’ Capital Class A Common Stock Class B Common Stock Class C Common Stock 
Additional
Paid-In
Capital
 
Accumulated Other Comprehensive
Income (Loss)
 
Accumulated
Deficit
 Non-Controlling Interests Total
  Units Amount  Units Amount Shares Amount Shares Amount Shares Amount  
Balance at December 31, 2017 48,447,880
 $405,766
  48,407,645
 $—
 —
 $—
 —
 $—
 —
 $—
 $—
 $25
 $(445,102) $—
 $(445,077)
Activity prior to the reorganization transactions:                               
Issuance of warrants to purchase shares of Class A common units —
 —
  —
 984
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 984
Equity-based compensation —
 —
  —
 13,155
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 13,155
Accretion of Series A redeemable convertible preferred units —
 176,275
  —
 (14,139) —
 —
 —
 —
 —
 —
 —
 —
 (162,136) —
 (176,275)
Foreign currency translation losses, net —
 —
  —
 —
 —
 —
 —
 —
 —
 —
 —
 (18) —
 —
 (18)
Net loss —
 —
  —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (42,660) —
 (42,660)
Effect of the reorganization transactions and initial public offering:                               
Effect of the reorganization transactions (48,447,880) (582,041)  (48,407,645) —
 39,110,660
 4
 58,111,572
 6
 14,048,138
 1
 581,952
 —
 —
 —
 581,963
Initial public offering, net of offering costs —
 —
  —
 —
 23,805,000
 2
 —
 —
 —
 —
 324,677
 —
 —
 —
 324,679
Allocation of equity to non-controlling interests —
 —
  —
 —
 —
 —
 —
 —
 —
 —
 (474,007) (4) 339,782
 134,229
 —
Activity subsequent to the reorganization transactions and initial public offering:                               
Settlement of equity appreciation rights —
 —
  —
 —
 —
 —
 —
 —
 —
 —
 (325) —
 —
 —
 (325)
Equity-based compensation —
 —
  —
 —
 —
 —
 —
 —
 —
 —
 7,773
 —
 —
 —
 7,773
Adjustments to non-controlling interests —
 —
  —
 —
 —
 —
 —
 —
 —
 —
 (3,893) —
 —
 3,893
 —
Foreign currency translation losses, net —
 —
  —
 —
 —
 —
 —
 —
 —
 —
 —
 (19) —
 (21) (40)
Net loss —
 —
    —
 —
 —
 —
 —
 —
 —
 —
 —
 (11,588) (12,706) (24,294)
Balance at June 30, 2018 —
 $—
  —
 $—
 62,915,660
 $6
 58,111,572
 $6
 14,048,138
 $1
 $436,177
 $(16) $(321,704) $125,395
 $239,865
  Class A Common Stock Class B Common Stock Class C Common Stock 
Additional
Paid-In
Capital
 
Accumulated Other Comprehensive
Income (Loss)
 
Accumulated
Deficit
 Non-Controlling Interests 
Total Stockholders’ Equity
  Shares Amount Shares Amount Shares Amount 
                       
Balance at March 31, 2020 105,459,701
 $11
 23,010,178
 $2
 14,373,295
 $1
 $659,480
 $(1,102) $(493,700) $56,458
 $221,150
Effect of exchanges of LLC Units 4,929,959
 —
 (3,644,140) —
 (1,285,819) —
 7,699
 —
 —
 (7,699) —
Issuance of common stock under employee stock purchase plan 629,927
 —
 —
 —
 —
 —
 8,348
 —
 —
 —
 8,348
Vesting of restricted stock units 719,556
 —
 —
 —
 104,437
 —
 —
 —
 —
 —
 —
Exercise of common stock options 136,092
 —
 —
 —
 —
 —
 1,831
 —
 —
 —
 1,831
Shares withheld for tax withholding on equity awards —
 —
 —
 —
 —
 —
 (1,523) —
 —
 —
 (1,523)
Equity-based compensation —
 —
 —
 —
 —
 —
 26,575
 —
 —
 —
 26,575
Adjustments to non-controlling interests —
 —
 —
 —
 —
 —
 (8,642) —
 —
 8,642
 —
Other comprehensive income —
 —
 —
 —
 —
 —
 —
 2,256
 —
 771
 3,027
Net loss —
 —
 —
 —
 —
 —
 —
 —
 (29,929) (9,801) (39,730)
Balance at June 30, 2020 111,875,235
 $11
 19,366,038
 $2
 13,191,913
 $1
 $693,768
 $1,154
 $(523,629) $48,371
 $219,678


Three Months Ended June 30, 2019
  Class A Common Stock Class B Common Stock Class C Common Stock Additional
Paid-In
Capital		 Accumulated
Other
Comprehensive Income (Loss)		 Accumulated
Deficit		 Non-Controlling Interests 
Total Stockholders’ Equity
  Shares Amount Shares Amount Shares Amount 
                       
Balance at March 31, 2019 95,096,979
 $10
 29,071,789
 $3
 14,162,311
 $1
 $565,095
 $(31) $(364,798) $85,281
 $285,561
Effect of exchanges of LLC Units 4,469,843
 —
 (4,390,283) (1) (79,560) —
 9,425
 —
 —
 (9,424) —
Issuance of common stock under employee stock purchase plan 622,639
 —
 —
 —
 —
 —
 8,257
 —
 —
 —
 8,257
Vesting of restricted stock units 654,796
 —
 —
 —
 104,105
 —
 —
 —
 —
 —
 —
Exercise of common stock options 252,215
 —
 —
 —
 —
 —
 3,753
 —
 —
 —
 3,753
Forfeiture of unvested LLC Units —
 —
 (17,393) —
 —
 —
 —
 —
 —
 —
 —
Equity-based compensation —
 —
 —
 —
 —
 —
 22,966
 —
 —
 —
 22,966
Adjustments to non-controlling interests —
 —
 —
 —
 —
 —
 (10,032) —
 —
 10,032
 —
Other comprehensive income —
 —
 —
 —
 —
 —
 —
 268
 —
 104
 372
Net loss —
 —
 —
 —
 —
 —
 —
 —
 (29,127) (11,637) (40,764)
Balance at June 30, 2019 101,096,472
 $10
 24,664,113
 $2
 14,186,856
 $1
 $599,464
 $237
 $(393,925) $74,356
 $280,145

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


PLURALSIGHT, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
(in thousands, except share amounts)
(unaudited)
Six Months Ended June 30, 2020
  Class A Common Stock Class B Common Stock Class C Common Stock 
Additional
Paid-In
Capital
 
Accumulated Other Comprehensive
Income (Loss)
 
Accumulated
Deficit
 Non-Controlling Interests 
Total Stockholders’ Equity
  Shares Amount Shares Amount Shares Amount 
                       
Balance at December 31, 2019 104,083,271
 $10
 23,211,418
 $2
 14,269,199
 $1
 $641,128
 $225
 $(458,381) $63,175
 $246,160
Effect of exchanges of LLC Units 5,131,199
 —
 (3,845,380) —
 (1,285,819) —
 8,053
 —
 —
 (8,053) —
Issuance of common stock under employee stock purchase plan 629,927
 —
 —
 —
 —
 —
 8,348
 —
 —
 —
 8,348
Vesting of restricted stock units 1,836,997
 1
 —
 —
 208,533
 —
 (1) —
 —
 —
 —
Exercise of common stock options 193,841
 —
 —
 —
 —
 —
 2,530
 —
 —
 —
 2,530
Shares withheld for tax withholding on equity awards —
 —
 —
 —
 —
 —
 (3,873) —
 —
 —
 (3,873)
Equity-based compensation —
 —
 —
 —
 —
 —
 52,516
 —
 —
 —
 52,516
Adjustments to non-controlling interests —
 —
 —
 —
 —
 —
 (14,933) —
 —
 14,933
 —
Other comprehensive income —
 —
 —
 —
 —
 —
 —
 929
 —
 311
 1,240
Net loss —
 —
 —
 —
 —
 —
 —
 —
 (65,248) (21,995) (87,243)
Balance at June 30, 2020 111,875,235
 $11
 19,366,038
 $2
 13,191,913
 $1
 $693,768
 $1,154
 $(523,629) $48,371
 $219,678


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

























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

Six Months Ended June 30, 2019
  Class A Common Stock Class B Common Stock Class C Common Stock Additional
Paid-In
Capital		 Accumulated
Other
Comprehensive Income (Loss)		 Accumulated
Deficit		 Non-Controlling Interests 
Total Stockholders’ Equity
  Shares Amount Shares Amount Shares Amount 
                       
Balance at December 31, 2018 65,191,907
 $7
 57,490,881
 $6
 14,586,173
 $1
 $456,899
 $(41) $(355,446) $107,167
 $208,593
Cumulative effect of accounting changes —
 —
 —
 —
 —
 —
 —
 —
 9,723
 10,273
 19,996
Effect of exchanges of LLC Units 33,419,553
 3
 (32,809,375) (4) (610,178) —
 58,920
 —
 —
 (58,919) —
Issuance of common stock under employee stock purchase plan 622,639
 —
 —
 —
 —
 —
 8,257
 —
 —
 —
 8,257
Vesting of restricted stock units 1,435,405
 —
 —
 —
 210,861
 —
 —
 —
 —
 —
 —
Exercise of common stock options 426,968
 —
 —
 —
 —
 —
 6,374
 —
 —
 —
 6,374
Forfeiture of unvested LLC Units —
 —
 (17,393) —
 —
 —
 —
 —
 —
 —
 —
Equity component of convertible senior notes, net of issuance costs —
 —
 —
 —
 —
 —
 137,033
 —
 —
 —
 137,033
Purchase of capped calls related to issuance of convertible senior notes —
 —
 —
 —
 —
 —
 (69,432) —
 —
 —
 (69,432)
Equity-based compensation —
 —
 —
 —
 —
 —
 43,582
 —
 —
 —
 43,582
Adjustments to non-controlling interests —
 —
 —
 —
 —
 —
 (42,169) —
 —
 42,169
 —
Other comprehensive income —
 —
 —
 —
 —
 —
 —
 278
 —
 112
 390
Net loss —
 —
 —
 —
 —
 —
 —
 —
 (48,202) (26,446) (74,648)
Balance at June 30, 2019 101,096,472
 $10
 24,664,113
 $2
 14,186,856
 $1
 $599,464
 $237
 $(393,925) $74,356
 $280,145

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




PLURALSIGHT, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
  Six Months Ended June 30,
  2018 2017
Operating activities    
Net loss $(66,954) $(32,083)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation of property and equipment 4,358
 2,626
Amortization of acquired intangible assets 6,665
 4,012
Amortization of course creation costs 930
 671
Equity-based compensation 20,928
 6,091
Provision for doubtful accounts 358
 188
Amortization of debt discount and debt issuance costs 1,215
 306
Debt extinguishment costs 4,180
 931
Deferred tax benefit (64) —
Changes in assets and liabilities:    
Accounts receivable 1,335
 1,833
Prepaid expenses and other assets (3,858) (3,215)
Accounts payable (588) 1,328
Accrued expenses and other liabilities (2,839) 3,641
Accrued author fees 617
 939
Deferred revenue 17,500
 8,782
Net cash used in operating activities (16,217) (3,950)
Investing activities    
Purchases of property and equipment (4,574) (3,025)
Purchases of content library (1,504) (1,229)
Net cash used in investing activities (6,078) (4,254)
Financing activities    
Proceeds from initial public offering, net of underwriting discounts and commissions 332,080
 —
Payments of costs related to initial public offering (3,085) —
Borrowings of long-term debt 20,000
 115,000
Repayments of long-term debt (137,710) (85,000)
Payments of debt extinguishment costs (2,162) —
Payments of debt issuance costs (450) (809)
Payments to settle equity appreciation rights (325) —
Taxes paid related to net share settlement (78) —
Proceeds from the issuance of common units —
 22
Payments of facility financing obligation (8) (8)
Net cash provided by financing activities 208,262
 29,205
Effect of exchange rate change on cash, cash equivalents, and restricted cash (86) 24
Net increase in cash, cash equivalents, and restricted cash 185,881
 21,025
Cash, cash equivalents, and restricted cash, beginning of period 28,477
 19,397
Cash, cash equivalents, and restricted cash, end of period $214,358
 $40,422
Supplemental cash flow disclosure:    
Cash paid for interest $4,271
 $2,572
Cash paid for income taxes, net $172
 $142
Supplemental disclosure of non-cash investing and financing activities:    
Conversion of redeemable convertible preferred units $582,041
 $—
Redeemable convertible preferred unit accretion $176,275
 $22,825
Unpaid capital expenditures $568
 $196
Costs related to initial public offering, accrued but not yet paid $4,009
 $—
Issuance of warrants to purchase shares of Class A common stock $984
 $—
Reconciliation of cash, cash equivalents, and restricted cash:    
Cash and cash equivalents $213,645
 $40,212
Restricted cash included in other assets 713
 210
Total cash, cash equivalents, and restricted cash $214,358
 $40,422
  Six Months Ended June 30,
  2020 2019
     
Operating activities    
Net loss $(87,243) $(74,648)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation of property and equipment 5,868
 4,579
Amortization of acquired intangible assets 2,855
 1,609
Amortization of course creation costs 1,581
 1,190
Equity-based compensation 52,003
 43,000
Amortization of deferred contract acquisition costs 12,767
 11,311
Amortization of debt discount and issuance costs 13,275
 8,294
Investment discount and premium amortization, net (428) (706)
Other 693
 300
Changes in assets and liabilities, net of acquired assets and liabilities:    
Accounts receivable 38,093
 7,116
Deferred contract acquisition costs (13,363) (11,430)
Prepaid expenses and other assets (211) (4,044)
Right-of-use assets 3,038
 2,927
Accounts payable (4,606) 1,053
Accrued expenses and other liabilities (4,612) (3,129)
Accrued author fees 16
 1,299
Lease liabilities (2,874) (3,372)
Deferred revenue (7,807) 13,003
Net cash provided by (used in) operating activities 9,045
 (1,648)
Investing activities    
Purchases of property and equipment (20,520) (4,590)
Purchases of content library (3,793) (2,441)
Cash paid for acquisition, net of cash acquired —
 (163,871)
Purchases of investments (317,012) (317,080)
Proceeds from sales of investments —
 4,967
Proceeds from maturities of investments 315,605
 —
Net cash used in investing activities (25,720) (483,015)
Financing activities    
Proceeds from issuance of common stock from employee equity plans 10,878
 14,631
Taxes paid related to net share settlement (3,873) —
Proceeds from issuance of convertible senior notes, net of discount and issuance costs —
 616,654
Purchase of capped calls related to issuance of convertible senior notes —
 (69,432)
Net cash provided by financing activities 7,005
 561,853
Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents (157) 22
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents (9,827) 77,212
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period 119,431
 211,071
Cash, cash equivalents, and restricted cash and cash equivalents, end of period $109,604
 $288,283
Supplemental cash flow disclosure:    
Cash paid for interest $1,113
 $—
Cash paid for income taxes, net $570
 $228
Supplemental disclosure of non-cash investing and financing activities:    
Lease liabilities arising from obtaining right-of-use assets and tenant improvements $70,313
 $1,591
Unpaid capital expenditures $6,602
 $967
Equity-based compensation capitalized as internal-use software $690
 $582
Unrealized gains on investments $1,389
 $379
Reconciliation of cash, cash equivalents, and restricted cash and cash equivalents as shown in the statement of cash flows:    
Cash and cash equivalents $87,982
 $260,313
Restricted cash and cash equivalents 21,622
 27,970
Total cash, cash equivalents, and restricted cash and cash equivalents $109,604
 $288,283
The accompanying notes are an integral part of these condensed consolidated financial statements.





PLURALSIGHT, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1. Organization and Description of Business
Pluralsight, Inc. was incorporated as a Delaware corporation on December 4, 2017 as a holding company for the purpose of facilitating an initial public offering (“IPO”) and other related transactions in order to carry on the business of Pluralsight Holdings, LLC ("(“Pluralsight Holdings"Holdings”) and its subsidiaries (together with Pluralsight, Inc., the “Company” or "Pluralsight"“Pluralsight”). Pluralsight Holdings is a limited liability company (“LLC”) and was organized on August 29, 2014 in the state of Delaware and is the parent company of Pluralsight, LLC, and its directly and indirectly wholly-owned subsidiaries. Pluralsight, LLC was organized on June 17, 2004 in the state of Nevada. Pluralsight operates a cloud-based technology learning platform that provides a broad range of tools for businesses and individuals, including skill assessments, a curated library of courses, learning paths, and business analytics. As the sole managing member of Pluralsight Holdings, Pluralsight, Inc. operates and controls all the business operations and affairs of Pluralsight.
Initial Public Offering
In May 2018, Pluralsight, Inc. completed anits IPO in which it sold 23,805,000 shares of Class A common stock at a public offering price of $15.00 per share forand used the net proceeds of $332.1 million, after deducting underwriters' discounts and commissions, which Pluralsight, Inc. used to purchase newly-issuednewly issued common limited liability company units ("(“LLC Units"Units”) from Pluralsight Holdings. As of June 30, 2018,Following the Company has reclassified $7.4 million of offering costs into stockholders’ equity as a reduction of the net proceeds received from the IPO.
Reorganization Transactions
Inreorganization transactions completed in connection with the IPO the Company completed the following transactions ("(“Reorganization Transactions"Transactions”):
The amended and restated limited liability company agreement of Pluralsight Holdings ("LLC Agreement") was amended and restated to, among other things: (i) appoint, Pluralsight, Inc. as its sole managing member and (ii) effectuate the conversion of all outstanding redeemable convertible preferred limited liability company units, incentive units, and Class B incentive units into a single class of common units. See Note 9—Stockholders' Equity for additional details.
Certain members of Pluralsight Holdings that were corporations merged with and into Pluralsight, Inc. and certain members of Pluralsight Holdings contributed certain of their LLC Units to Pluralsight, Inc., in each case in exchange for shares of Class A common stock.
The certificate of incorporation of Pluralsight, Inc. was amended and restated to authorize three classes of common stock, Class A common stock, Class B common stock, Class C common stock, and one class of preferred stock. Class B and Class C common stock were issued on a one-for-one basis to the members of Pluralsight Holdings who retained LLC Units ("Continuing Members"). Class B and Class C common stock have voting rights but no economic rights. See Note 9—Stockholders' Equity for additional details.
Asbecame the sole managing member of Pluralsight Holdings,Holdings. As the sole managing member, Pluralsight, Inc. has the sole voting interest in Pluralsight Holdings and controls all of the business operations, affairs, and management of Pluralsight Holdings. Accordingly, Pluralsight, Inc. consolidates the financial results of Pluralsight Holdings and reports the non-controlling interests representing the economic interests held by the other members of the Continuing Members' LLC Units on its consolidated financial statements.Pluralsight Holdings. As of June 30, 2018,2020, Pluralsight, Inc. owned 47.7%78.0% of Pluralsight Holdings and the Continuing Members owned the remaining 52.3%members of Pluralsight Holdings.
As the Reorganization Transactions are considered transactions between entities under common control, the financial statements for periodsHoldings who retained LLC Units prior to the IPO (the “Continuing Members”) owned the remaining 22.0% of Pluralsight Holdings.
Pluralsight operates a cloud-based technology skills and Reorganization Transactions have been adjusted to combineengineering management platform that provides a broad range of tools for businesses and individuals, including skill assessments, a curated library of courses, learning paths, developer productivity metrics, and business analytics. As the previously separate entities for presentation purposes. Prior to the Reorganization Transactions,sole managing member of Pluralsight Holdings, Pluralsight, Inc. had no operations.operates and controls all of the business operations and affairs of Pluralsight.
Secondary Offering
In June 2020, the Company completed a secondary offering, in which certain selling stockholders sold 11,711,009 shares of Class A common stock at a public offering price of $19.50 per share. Pluralsight did not receive any proceeds from the sale of shares by selling stockholders. A total of $1.3 million in costs were incurred by Pluralsight in connection with this offering.
Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("(“U.S. GAAP"GAAP”) and the applicable regulations of the U.S. Securities and Exchange Commission ("SEC"(“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 20172019 included in the prospectus dated May 16, 2018 (File No. 333-224301),Pluralsight, Inc.’s Annual Report on Form 10-K/A, as filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended ("Prospectus"on March 2, 2020 (“Annual Report”).


These unaudited condensed consolidated financial statements include the accounts of Pluralsight, Inc. and its directly and indirectly wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
As discussed in Note 1—Organization and Description of Business, Pluralsight, Inc. consolidates the financial results of Pluralsight Holdings as a Variable Interest Entity ("VIE"(“VIE”). The Company periodically evaluates entities for consolidation either through ownership of a majority voting interest, or through means other than a voting interest, in accordance with the VIE accounting model. AUnder the VIE accounting model, Pluralsight, Inc. is an entitythe primary beneficiary as it has the majority economic interest in whichPluralsight Holdings, and, as the equity investors as a group, if any, lacksole managing member, has decision making authority that significantly affects the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity's economic performance of the entity, while the limited partners have no substantive kick-out or participating rights.
The assets and liabilities of Pluralsight Holdings represent substantially all of the equity investment at risk is insufficient to finance that entity's activities without additional subordinated financial support.consolidated assets and liabilities of Pluralsight, Inc. with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement (“TRA”) as discussed in Note 15—Income Taxes and the obligations under the Company’s convertible senior notes discussed in Note 10—Convertible Senior Notes.
Interim Unaudited Condensed Consolidated Financial Statements
The accompanying interim condensed consolidated balance sheet as of June 30, 2018,2020, and the interim condensed consolidated statements of operations, comprehensive loss, and stockholders’ equity, for the three and six months ended June 30, 20182020 and 2017, the interim condensed consolidated statements of redeemable convertible preferred units, members' deficit, and stockholders' equity for the six months ended June 30, 2018,2019, and the interim condensed consolidated statements of cash flows for the six months ended June 30, 20182020 and 20172019, are unaudited. The condensed consolidated balance sheet as of December 31, 20172019 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments,


which include only normal recurring adjustments, necessary to state fairly the Company'sCompany’s financial position,condition, its operations and cash flows for the periods presented. The historical results are not necessarily indicative of future results, and the results of operations for the three and six months ended June 30, 20182020 are not necessarily indicative of the results to be expected for the full year or any other period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses for the reporting period. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to the determination of the fair value of equity awards, the fair value of warrants to purchase common units,the liability and equity components of the convertible senior notes, the fair value of identified assets and liabilities acquired in business combinations, the useful lives of property and equipment, content library and intangible assets, provisions for doubtful accounts receivable and deferred revenue, accounting for business combinations, impairment of long-lived and intangible assets, including goodwill, andprovisions for doubtful accounts receivable, the standalone selling price (“SSP”) of performance obligations, the determination of the period of benefit for deferred contract acquisition costs, certain accrued expenses, including author fees.fees, and the discount rate used in measuring lease liabilities. These estimates and assumptions are based on the Company’s historical results and management’s future expectations. Actual results could differ from those estimates.
Significant Accounting Policies
The Company’s significant accounting policies are discussed in "Note 1—Description of Business and Note 2—Summary of Significant Accounting Policies”Policies and Recent Accounting Pronouncements in the Prospectus.Annual Report. There have been no significant changes to these policies that have had a material impact on the Company'sCompany’s unaudited condensed consolidated financial statements and related notes during the three months ended June 30, 2020, except as noted below.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The measurement of credit losses for newly recognized financial assets and subsequent changes in the allowance for credit losses are recorded in the statements of operations. The allowance for credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The ASU also amends the impairment model for available-for-sale debt securities and requires any credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down, with changes presented through earnings. The Company adopted the standard effective January 1, 2020 using the modified retrospective approach. The effect of the adoption was not material to the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset. The Company adopted the standard prospectively effective January 1, 2020. As a result of the adoption, the Company capitalizes certain implementation costs that were previously expensed as incurred. These costs will be amortized to expense over the term of the hosting arrangement. The effect of adopting the standard was not material to the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2018, except as noted below.2020.
Deferred Offering Costs
Deferred offering costsIn December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740 and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within the standard are capitalizedrequired to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The standard is effective for interim and consistannual periods beginning after December 15, 2020, with early adoption permitted. The Company early adopted the standard during the three months ended June 30, 2020. The effect of legal, accounting, printing,adopting the standard was not material to the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2020. The standard removes the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and other costs that are directly attributablecomprehensive income, as a result the Company was not required to apply the incremental approach for intraperiod tax allocation during the three months ended June 30, 2020.



Note 3. Revenue
Disaggregation of Revenue
Subscription revenue accounted for approximately 96% and 97% of the Company’s revenue for the three months ended June 30, 2020 and 2019, respectively, and 96% and 98% for the six months ended June 30, 2020 and 2019, respectively.
Revenue by geographic region, based on the physical location of the customer, was as follows (dollars in thousands):
  Three Months Ended June 30, Growth
  2020 2019 Rate
  Amount % Amount % %
           
United States $59,426
 63% $47,255
 62% 26%
Europe, Middle East and Africa(1)
 26,278
 28% 20,904
 28% 26%
Other foreign locations 9,061
 9% 7,703
 10% 18%
Total revenue $94,765
 100% $75,862
 100%  
  Six Months Ended June 30, Growth
  2020 2019 Rate
  Amount % Amount % %
           
United States $117,592
 63% $90,836
 63% 29%
Europe, Middle East and Africa(1)
 52,250
 28% 39,890
 27% 31%
Other foreign locations 17,569
 9% 14,753
 10% 19%
Total revenue $187,411
 100% $145,479
 100%  
(1)Revenue from the United Kingdom represented 11% of revenue for the three months ended June 30, 2020 and 2019, and 12% and 11% of revenue for the six months ended June 30, 2020, and 2019, respectively. No other foreign country accounted for 10% or more of revenue during the three and six months ended June 30, 2020 and 2019 .
Revenue by type of customer, was as follows (dollars in thousands):
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
         
Business customers $82,751
 $64,528
 $164,042
 $123,095
Individual customers 12,014
 11,334
 23,369
 22,384
Total revenue $94,765
 $75,862
 $187,411
 $145,479

Contract Balances
Contract assets represent amounts for which the Company has recognized revenue, pursuant to the IPO. As of December 31, 2017, the balance of deferred offering costs was $2.0Company’s revenue recognition policy, for contracts that have not yet been invoiced to customers where there is a remaining performance obligation, typically for multi-year arrangements. Total contract assets were $1.1 million and included in other assets in the condensed consolidated balance sheets. As$0.8 million as of June 30, 2018,2020 and December 31, 2019, respectively. The change in contract assets reflects the difference in timing between the satisfaction of remaining performance obligations and the Company’s contractual right to bill its customers.
Deferred revenue consists of contract liabilities and includes payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. The Company reclassified $7.4 million of offering costs into stockholders’ equity as a reductionrecognized revenue that was included in the corresponding deferred revenue balance at the beginning of the net proceeds received from the IPO.
Advertising Costs
Advertising costs are expensed as incurred. The Company recorded advertising costsperiod of $3.2$84.0 million and $3.8$65.4 million for the three months ended June 30, 20182020 and 2017,2019, respectively, and $5.8$142.1 million and $6.9$104.9 million for the six months ended June 30, 20182020 and 2017,2019, respectively.
Equity-Based CompensationRemaining Performance Obligations
In connection withAs of June 30, 2020, the IPO,aggregate amount of the transaction price allocated to remaining performance obligations was $303.4 million. The Company granted Class A common stock optionsexpects to certain employees. Equity-based compensation expense for Class A common stock options grantedrecognize 75% of the transaction price over the next 12 months.


Costs to employees is recognized based onObtain a Contract
The following table summarizes the activity of the deferred contract acquisition costs (in thousands):
  Six Months Ended June 30,
  2020 2019
     
Beginning balance $24,313
 $20,212
Capitalization of contract acquisition costs 13,363
 11,430
Amortization of deferred contract acquisition costs (12,767) (11,311)
Ending balance $24,909
 $20,331




Note 4. Cash Equivalents and Investments
Cash equivalents, restricted cash equivalents, and investments consisted of the following (in thousands):
  June 30, 2020
  Amortized Cost Unrealized Gains Unrealized Losses Fair Value
         
Cash equivalents        
Money market funds $64,479
 $—
 $—
 $64,479
Short-term investments        
Commercial paper $31,389
 $—
 $—
 $31,389
U.S. treasury securities 139,887
 57
 (3) 139,941
Corporate notes and obligations 139,380
 719
 (55) 140,044
Foreign government obligations 7,112
 —
 (3) 7,109
Total short-term investments $317,768
 $776
 $(61) $318,483
Restricted cash equivalents        
Money market funds $21,077
 $—
 $—
 $21,077
Long-term investments        
Corporate notes and obligations $120,273
 $1,140
 $(133) $121,280
Certificates of deposit 944
 —
 —
 944
Total long-term investments $121,217
 $1,140
 $(133) $122,224
         
Total cash equivalents, restricted cash equivalents, and investments $524,541
 $1,916
 $(194) $526,263

  December 31, 2019
  Amortized Cost Unrealized Gains Unrealized Losses Fair Value
         
Cash equivalents        
Money market funds $62,085
 $—
 $—
 $62,085
Commercial paper 4,991
 —
 —
 4,991
Total cash equivalents $67,076
 $—
 $—
 $67,076
Short-term investments        
Commercial paper $33,627
 $—
 $—
 $33,627
U.S. treasury securities 149,353
 53
 —
 149,406
Corporate notes and obligations 148,993
 215
 (7) 149,201
Total short-term investments $331,973
 $268
 $(7) $332,234
Restricted cash equivalents        
Money market funds $28,371
 $—
 $—
 $28,371
Long-term investments        
Corporate notes and obligations $78,353
 $121
 $(46) $78,428
U.S. agency obligations 26,436
 1
 (4) 26,433
Certificates of deposit 944
 —
 —
 944
Total long-term investments $105,733
 $122
 $(50) $105,805
         
Total cash equivalents, restricted cash equivalents, and investments $533,153
 $390
 $(57) $533,486




The amortized cost and 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 2018 Employee Stock Purchase Plan ("ESPP") isCompany’s investments based on the Black-Scholes option pricing model fair valuetheir stated maturities consisted of the estimated number of awardsfollowing as of the beginning of the offering period. Equity-based compensation expense is recognized following the straight-line attribution method over the offering period.


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: Prior to the IPO, the fair value of the common units underlying equity awards was determined considering numerous objective and subjective factors and required judgment to determine the fair value as of each grant date. Subsequent to the IPO, the Company determines the fair value of common stock as of each grant date using the market closing price of Pluralsight, Inc.'s 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 the Company. 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, the Company uses 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 the Company does not have sufficient trading history for its common stock. To determine comparable companies, the Company considers public enterprise cloud-based application providers and selects those that are similar in size, stage of life cycle, and financial leverage. The Company 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: The Company has not and does not expect to pay dividends for the foreseeable future.
Non-Controlling Interests
The non-controlling interests balance represents the economic interests of LLC Units of Pluralsight Holdings held by Continuing Members, based on the portion of LLC Units owned by Continuing Members. Income or loss is attributed to the non-controlling interests based on the weighted-average LLC Units outstanding during the period, excluding LLC Units that are subject to time-based vesting requirements. As of June 30, 2018, the non-controlling interests owned 52.3% of the vested LLC Units outstanding. The non-controlling interests' ownership percentage can fluctuate over time as LLC Units vest and as Continuing Members elect to exchange LLC Units for Class A common stock of Pluralsight, Inc.2020 (in thousands): 
Net Loss Per Share
  Amortized Cost Fair Value
     
Due within one year $317,768
 $318,483
Due between one and two years 121,217
 122,224
Total investments $438,985
 $440,707

Basic net loss per share is computed by dividing net loss attributable to Pluralsight, Inc. for the period following the Reorganization Transactions by the weighted-average number of shares of Class A common shares outstanding during the same period after giving effect to weighted-average shares of Class A common stock that remain subject to time-based vesting requirements.
Diluted net loss per share is computed giving effect to all potential weighted-average dilutive shares for the period following the Reorganization Transactions including LLC Units held by Continuing Members that are convertible into Class A common stock, stock options, restricted stock units ("RSUs"), warrants to purchase Class A common stock, and shares issuable under the ESPP for the period after the Reorganization Transactions. The dilutive effect of outstanding awards, if any, is reflected in diluted earnings per share by application of the treasury stock method or if-converted method, as applicable.
Recent Accounting Pronouncements
Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), the Company meets the definition of an emerging growth company. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standardsreviews the individual securities that have different effective dates for public and private companies untilunrealized losses in its investment portfolio on a regular basis to evaluate whether or not any declines in fair value are the Company is no longer an emerging growth company or until the Company affirmatively and irrevocably opts outresult of the extended transition period. As a result, the Company’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Recently Adopted Accounting Pronouncements
In August 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update clarifies how certain cash flows should be classified with the objective of reducing the existing diversity in practice. This update is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December


15, 2019. Early adoption is permitted, including adoption in an interim period. The amendments in this ASU should be applied using a retrospective transition method to each period presented. Among other provisions, the ASU requires that cash payments for certain debt prepayment or debt extinguishment costs be classified as cash outflows for financing activities.credit losses. The Company early adoptedevaluates, among other factors, whether it has the standard during the second quarterintention to sell any of 2018. As a result of the adoption, the Company recorded $2.2 million in payments of debt extinguishment costs within financing activities on the condensed consolidated statements of cash flows for the six months ended June 30, 2018. The retrospective adoption had no material effect on any prior periods.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This update clarifiesthese investments and whether it is more likely than not that transfers between cash and restricted cash are not part of the entity’s operating, investing, and financing activities, and details of those transfers are not reported as cash flow activities in the statements of cash flows. For public business entities, this update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, this update is effective for annual periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption for all entities is permitted. The amendments in this update should be applied using a retrospective transition method to each period presented. The Company early adopted this standard during the year ended December 31, 2017, and retroactively adjusted the consolidated statements of cash flows for all periods presented. The retrospective adoption had no material effect on any prior periods.
In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in the ASU. The ASU is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. During the first quarter of 2018, the Company adopted the ASU prospectively. The adoption of the ASU had no material effect on the unaudited condensed consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. For public business entities that are SEC filers, the ASU is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. For public business entities that are not SEC filers, the ASU is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. For all other entities, the ASU is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. The guidance will apply to the Company’s reporting requirements in performing goodwill impairment testing; however, the Company does not anticipate the adoption of this guidance will have a material impact on its unaudited condensed consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other entities, the ASU is effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The impact to the Company’s unaudited condensed consolidated financial statements will depend on the facts and circumstances of any specific future transactions.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lesseesit will be required to recognize a lease liability and a right-of-use asset for all leases (withsell any of them before recovery of the exception of short-term leases) at the commencement date. For public business entities, the ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018. For all other entities, the amendments inamortized cost basis. Based on this update are effective for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Asevaluation, the Company has electeddetermined that the unrealized losses were primarily related to useinvestments in corporate notes and obligations, and were due to increases in credit spreads and temporary declines in liquidity for the extended transition period availableasset class that were not specific to emerging growth companies, the underlying issuer of the investments. The Company does not anticipate adoptingintend to sell the standard until the fiscal year ended December 31, 2020. The Companyinvestments with unrealized losses and it is currently evaluating the potential changes from this ASU to its future financial reporting and disclosures. As part of its preliminary assessment,not more likely than not that the Company expectswill be required to record right-of-use assets and lease liabilities forsell its operating leases as a result of adoptinginvestments before the standard. While the Company continues to assess all potential impacts under the new standard, including the areas described above, the Company does not know or cannot reasonably estimate quantitative information related to the impactrecovery of the adoption of the new standard on its consolidated financial statements at this time.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40), which will supersede nearly all existing revenue recognition guidance. The core principle behind ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering those goods and services. To achieve this core principle, the ASU provides a model, which involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction prices to the performance obligations in the contract, and recognizing revenue


when (or as) the entity satisfies the performance obligations. The standard also provides guidance on the recognition of costs related to obtaining customer contracts.
The ASU permits adoption either by using a full retrospective approach, in which all comparative periods are presented in accordance with the new standard, or a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures. For public business entities, the standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. For all other entities, the standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted for annual periods beginning after December 15, 2016. As the Company has elected to use the extend transition period available to emerging growth companies, the Company anticipates adopting the standard for the fiscal year ending December 31, 2019. The Company is currently evaluating adoption methods.
The Company is evaluating the impact of the adoption of the new standard on its accounting policies, processes, and system requirements. The Company has assigned internal resources to assist in the evaluation. Furthermore, the Company has made and will continue to make investments in systems to enable timely and accurate reporting under the new standard. While the Company continues to assess all potential impacts under the new standard, there is potential the standard could have an impact on the timing of recognition of revenue and contract acquisition costs. Under the current revenue recognition guidance, the Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the delivery of future services. Under the new standard, the concept of contingent revenue no longer exists. Depending on the outcome of the Company’s evaluation, the timing of when revenue is recognized could change for multi-year subscription agreements.
As part of its preliminary evaluation, the Company has also considered the impact of the standard’s requirements with respect to the capitalization and amortization of incremental costs of obtaining a contract. Under the Company’s current accounting policy, incremental costs of obtaining a contract are expensed as incurred. The new standard requires the capitalization of all incremental costs that are incurred to obtain a contract with a customer that would not have been incurred if the contract had not been obtained, provided the Company expects to recover those costs.amortized cost basis. As a result of this standard, the Company expects to capitalize incremental contract costs.evaluation, 0 credit losses were recorded for investments as of June 30, 2020. The period over which these costs are expected to be recognized is still being evaluated by the Company.
While the Company continues to assess all potential impacts under the new standard, including the areas described above, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the adoption of the new standard on its unaudited condensed consolidated financial statements at this time.investments with unrealized loss positions have been in an unrealized loss position for less than 12 months.
Note 3.5. Fair Value Measurements
The Company measures and records certain financial assets at fair value on a recurring basis. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company’s financial instruments that are measured at fair value on a recurring basis consist of money market funds.funds and investments in available-for-sale debt securities. The following three levels of inputs are used to measure the fair value of financial instruments:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The fair value of the Company’s financial instruments werewas as follows (in thousands):
  June 30, 2020
  Level 1 Level 2 Level 3 Total
         
Cash equivalents        
Money market funds $64,479
 $—
 $—
 $64,479
Short-term investments        
Commercial paper $—
 $31,389
 $—
 $31,389
U.S. treasury securities —
 139,941
 —
 139,941
Corporate notes and obligations —
 140,044
 —
 140,044
Foreign government obligations —
 7,109
 —
 7,109
Total short-term investments $—
 $318,483
 $—
 $318,483
Restricted cash equivalents        
Money market funds $21,077
 $—
 $—
 $21,077
Long-term investments        
Corporate notes and obligations $—
 $121,280
 $—
 $121,280
Certificates of deposit —
 944
 —
 944
Total long-term investments $—
 $122,224
 $—
 $122,224


 June 30, 2018 December 31, 2019
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash and cash equivalents:        
        
Cash equivalents        
Money market funds $206,996
 $—
 $—
 $206,996
 $62,085
 $—
 $—
 $62,085
Commercial paper —
 4,991
 —
 4,991
Total cash equivalents $62,085
 $4,991
 $—
 $67,076
Short-term investments        
Commercial paper $—
 $33,627
 $—
 $33,627
U.S. treasury securities —
 149,406
 —
 149,406
Corporate notes and obligations —
 149,201
 —
 149,201
Total short-term investments $—
 $332,234
 $—
 $332,234
Restricted cash equivalents        
Money market funds $28,371
 $—
 $—
 $28,371
Long-term investments        
Corporate notes and obligations $—
 $78,428
 $—
 $78,428
U.S. agency obligations —
 26,433
 —
 26,433
Certificates of deposit —
 944
 —
 944
Total long-term investments $—
 $105,805
 $—
 $105,805
Convertible Senior Notes
  December 31, 2017
  Level 1 Level 2 Level 3 Total
Cash and cash equivalents:        
Money market funds $25,146
 $—
 $—
 $25,146


As of June 30, 2020, the estimated fair value of the Company’s convertible senior notes, with aggregate principal totaling $593.5 million, was $513.4 million. The Company estimates the fair value based on quoted market prices in an inactive market on the last trading day of the reporting period (Level 2). These convertible senior notes are recorded at face value less unamortized debt discount and transaction costs on the Company’s condensed consolidated balance sheet. Refer to Note 10—Convertible Senior Notes for further information.
Fair Value of Other Financial Instruments
The carrying amounts of the Company’s accounts receivable, accounts payable, accrued expenses, and other liabilities approximate their fair values due to the short maturities of these assets and liabilities.
Note 4.6. Balance Sheet Components
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
  June 30,
2020		 December 31,
2019
     
Prepaid expenses $12,584
 $11,469
Other current assets 2,180
 2,705
Prepaid expenses and other current assets $14,764
 $14,174
  June 30, 2018 December 31, 2017
Prepaid expenses $8,694
 $4,586
Other current assets 213
 539
Prepaid expenses and other current assets $8,907
 $5,125

Accrued Expenses
Accrued expenses consisted of the following (in thousands):
  June 30,
2020		 December 31,
2019
     
Accrued compensation $18,776
 $23,310
Accrued income and other taxes payable 7,010
 7,116
Accrued other current liabilities 13,164
 10,277
Accrued expenses $38,950
 $40,703
  June 30, 2018 December 31, 2017
Accrued compensation $12,976
 $18,568
Accrued income and other taxes payable 4,139
 3,492
Accrued other current liabilities 7,093
 4,454
Accrued expenses $24,208
 $26,514




Note 5.7. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
  June 30,
2020		 December 31,
2019
     
Computer equipment $9,263
 $9,047
Software 546
 2,047
Capitalized internal-use software costs 22,619
 23,021
Furniture and fixtures 5,922
 5,826
Leasehold improvements 9,367
 9,871
Construction in progress 43,178
 4,427
Total property and equipment 90,895
 54,239
Less: Accumulated depreciation (30,107) (31,343)
Property and equipment, net $60,788
 $22,896
  June 30, 2018 December 31, 2017
Computer equipment $8,789
 $7,482
Software 2,026
 1,982
Capitalized internal-use software costs 11,016
 8,631
Furniture and fixtures 5,452
 5,234
Buildings 11,251
 11,251
Leasehold improvements 1,941
 1,324
Construction in progress 594
 587
Total property and equipment 41,069
 36,491
Less: Accumulated depreciation (18,386) (14,034)
Property and equipment, net $22,683
 $22,457

Depreciation expense totaled $2.2$3.2 million and $1.3$2.3 million for the three months ended June 30, 20182020 and 2017,2019, respectively, and $4.4$5.9 million and $2.6$4.6 million for the six months ended June 30, 20182020 and 2017,2019, respectively.
In September 2017,
Note 8. Acquisition of GitPrime, Inc.
On May 9, 2019, the Company committed tocompleted the acquisition of GitPrime, Inc. (“GitPrime”), a plan to expand operationsleading provider of software developer productivity software. Under the terms of the agreement, the Company acquired all of the outstanding stock of GitPrime for approximately $163.8 million in Utahcash, excluding cash acquired and including working capital adjustments.
The Company accounted for the transaction as a result, consolidate certain officesbusiness combination using the acquisition method of subsidiariesaccounting. The Company allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. The excess of the Company. In connection withpurchase consideration over the plan,fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill is attributable to GitPrime’s assembled workforce and synergies acquired, and is not deductible for income tax purposes.
The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):
  Fair Value
   
Cash and cash equivalents $5,290
Accounts receivable 1,798
Other assets acquired 207
Property and equipment 223
Right-of-use assets 549
Goodwill 139,413
Intangible assets 24,800
Lease liabilities (549)
Deferred revenue (1,367)
Other liabilities assumed (1,303)
Total fair value of net assets acquired $169,061

The useful lives, primarily based on the period of benefit to the Company, disposedand fair values of certain furniture, leasehold improvements, and computer equipmentthe identifiable intangible assets at the respective office cease-use dates. Accordingly, the useful lives of assets with a net bookacquisition date were as follows:
  
Fair Value of Intangible Assets Acquired
(in thousands)
 
Useful Lives
(in years)
     
Technology $24,000
 5 years
Customer relationships 800
 4 years
Total fair value of intangible assets acquired $24,800
  



The fair value of $1.8 millionthe technology acquired in the acquisition was determined using the excess earnings model and the customer relationships acquired was determined using a distributor model. These models utilize certain unobservable inputs, including discounted cash flows, historical and projected financial information, customer attrition rates, and technology obsolescence rates, classified as Level 3 measurements as defined by Fair Value Measurement (Topic 820). The Company engaged third-party valuation specialists to assist in management’s analysis of the fair value of the acquired intangibles. All estimates, key assumptions, and forecasts were shortened. reviewed by the Company. While the Company chose to utilize a third-party valuation specialist for assistance, the fair value analysis and related valuations reflect the conclusions of management and not those of any third party.
During the year ended December 31, 2019, the Company incurred acquisition costs of $0.8 million. These costs include legal and accounting fees, and other costs directly related to the acquisition and are classified within general and administrative expenses in the Company’s consolidated statements of operations.
Unaudited Pro Forma Information
The revised useful lives resulted in an increase in depreciationfollowing unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisition occurred on January 1, 2018. It includes pro forma adjustments related to the amortization of acquired intangible assets, equity-based compensation expense, adjustments for ASC 606, and fair value adjustments for deferred revenue. The unaudited pro forma results have been prepared based on estimates and assumptions, which management believes are reasonable, however, the results are not necessarily indicative of $0.2 million and $0.5 million during the three and six months ended June 30,consolidated results of operations had the acquisition occurred on January 1, 2018, respectively.or of future results of operations (in thousands, except per share amounts):
  Three Months Ended
June 30, 2019		 Six Months Ended
June 30, 2019
     
Revenue $77,100
 $149,369
Net loss (42,592) (80,056)
Net loss per share, basic and diluted $(0.31) $(0.60)



Note 6.9. Intangible Assets
Intangible assets, net are summarized as follows (in thousands):
 June 30, 2020
 June 30, 2018 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
      
Content library:            
Acquired content library $32,835
 $30,566
 $2,269
 $32,835
 $32,797
 $38
Course creation costs 12,145
 6,321
 5,824
 20,945
 9,966
 10,979
Total $44,980
 $36,887
 $8,093
 $53,780
 $42,763
 $11,017
Intangible assets:            
Technology $4,500
 $2,434
 $2,066
 $28,500
 $9,323
 $19,177
Trademarks 162
 162
 —
 120
 120
 —
Noncompetition agreements 390
 390
 —
 320
 320
 —
Customer relationships 2,750
 2,750
 —
 3,550
 2,979
 571
Database 40
 40
 —
Domain names 45
 —
 45
 39
 —
 39
Total $7,887
 $5,776
 $2,111
 $32,529
 $12,742
 $19,787


  December 31, 2019
  
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
       
Content library:      
Acquired content library $32,835
 $32,780
 $55
Course creation costs 17,717
 8,814
 8,903
Total $50,552
 $41,594
 $8,958
Intangible assets:      
Technology $28,500
 $6,585
 $21,915
Trademarks 162
 162
 —
Noncompetition agreements 390
 390
 —
Customer relationships 3,550
 2,879
 671
Database 40
 40
 —
Domain names 45
 —
 45
Total $32,687
 $10,056
 $22,631
  December 31, 2017
  
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
Content library:      
Acquired content library $32,835
 $24,643
 $8,192
Course creation costs 10,640
 5,391
 5,249
Total $43,475
 $30,034
 $13,441
Intangible assets:      
Technology $4,500
 $2,080
 $2,420
Trademarks 1,162
 773
 389
Noncompetition agreements 390
 390
 —
Customer relationships 2,750
 2,750
 —
Database 40
 40
 —
Domain names 45
 —
 45
Total $8,887
 $6,033
 $2,854

Intangible assets are amortized using the straight-line method over the estimated useful lives. Amortization expense of acquired intangible assets was $3.3$1.4 million and $2.0$0.9 million for the three months ended June 30, 2018,2020 and 2017,2019, respectively, and $6.7$2.9 million and $4.0$1.6 million for the six months ended June 30, 20182020 and 2017,2019, respectively. Amortization expense of course creation costs was $0.5$0.8 million and $0.4$0.6 million for the three months ended June 30, 2018,2020 and 2017,2019, respectively, and $0.9$1.6 million and $0.7$1.2 million for the six months ended June 30, 20182020 and 2017,2019, respectively.
In December 2017, the Company committed to a plan to retire the website of an acquired subsidiary in order to provide a more unified user experienceBased on the Pluralsight platform. Accordingly, the estimated useful lives of certainrecorded content library and trademarkintangible assets were adjusted. The revised useful lives resulted in an increase inat June 30, 2020, estimated amortization expense of $1.5 million and $3.0 million during the three and six months ended June 30, 2018, respectively. The fully-amortized assets were disposed of in June 2018.is expected to be as follows (in thousands):

Year Ending December 31, Amortization
   
2020 (remaining six months)4,426
20218,502
20227,640
20236,978
20243,015
2025204
Total$30,765


Note 10. Convertible Senior Notes

Convertible Senior Notes

In March 2019, Pluralsight, Inc. issued $633.5 million aggregate principal amount of 0.375% convertible senior notes due in 2024 (the “Notes”), in a private placement to qualified institutional buyers exempt from registration under the Securities Act. The net proceeds from the issuance of the Notes were $616.7 million after deducting the initial purchasers’ discounts and estimated issuance costs.
Note 7. Credit Facilities
Silicon Valley Bank Credit Agreement
On November 17, 2014,The Notes are governed by an indenture (the “Indenture”) between the Company, entered intoas the amendedissuer, and restated credit agreement (“Second AmendedU.S. Bank National Association, as trustee. The Notes are Pluralsight, Inc.’s senior unsecured obligations and Restated Credit Agreement”) with a lending syndicate, which was led by Silicon Valley Bank. The agreement provided for a total term loanrank senior in right of $100.0 million and a revolving linepayment to any of creditits indebtedness that is expressly subordinated in right of uppayment to $10.0 million, which was usedthe Notes; equal in right of payment to finance the acquisitions of Code School LLC and Smarterer, Inc.
Under the termsany of the Second AmendedCompany’s unsecured indebtedness then existing and Restated Credit Agreement,future liabilities that are not so subordinated; effectively junior in right of payment to any of the Company was requiredCompany’s secured indebtedness, to maintain compliance with certain negativethe extent of the value of the assets securing such indebtedness; and affirmative covenants, includingstructurally junior to all indebtedness and other liabilities (including trade payables) of its subsidiaries. The Indenture does not contain any financial covenants and covenants relating toor restrictions on the payments of dividends, the incurrence of other indebtedness, or the issuance or repurchase of securities by the Company or any of its subsidiaries. The Notes mature on March 1, 2024 unless earlier repurchased or converted. Interest is payable semi-annually in arrears on March 1 and September 1 of each year.
The Notes have an initial conversion rate of 25.8023 shares of the Company’s Class A common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $38.76 per share of its Class A common stock and is subject to adjustment if certain events occur. Following certain corporate events that occur prior to the maturity date, the


Company will increase the conversion rate for a holder who elects to convert its Notes in connection with such corporate event. Additionally, upon the occurrence of a material adverse change,corporate event that constitutes a “fundamental change” per the maintenanceIndenture, holders of depository accounts, the dispositionNotes may require the Company to repurchase for cash all or a portion of assets, mergers, acquisitions, investments,their Notes at a purchase price equal to 100% of the grantingprincipal amount of liens,the Notes plus accrued and unpaid interest.
Holders of the Notes may convert all or any portion of their Notes at any time prior to the close of business on December 1, 2023, in integral multiples of $1,000 principal amount, only under the following circumstances:
During any calendar quarter commencing after the calendar quarter ended on June 30, 2019 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
During the 5 business day period after any 5 consecutive trading day period (the “measurement period”) in which the trading price as defined in the Indenture per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the paymentconversion rate on each such trading day; or
Upon the occurrence of dividends. On March 1, 2017,specified corporate events described in the Company entered intoIndenture. These events include a waiver and amendment to the Second Amended and Restated Credit Agreement with its lenders, which providedchange in control transaction, or a waiver on certain events of default that occurred in fiscal quarter ended September 30, 2016, for failure to comply with the consolidated total leverage ratio covenant. The Second Amended and Restated Credit Agreement was secured with a lien against substantially allrecapitalization, liquidation, or delisiting of the assetsCompany’s Class A common stock.
On or after December 1, 2023, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at the conversion rate at any time irrespective of the Company.
The outstanding borrowings under the Second Amended and Restated Credit Agreement of $82.5 million were repaid in full in June 2017. The repaymentforegoing conditions. Upon conversion, holders will receive cash, shares of the borrowings resulted inCompany’s Class A common stock or a loss on extinguishmentcombination of $1.9 million.
Guggenheim Credit Agreement
In June 2017, the Company entered into a long-term debt facility with Guggenheim Corporate Funding, LLC pursuant to a credit agreement (“Guggenheim Credit Agreement”), consisting of a term loan facility of $115.0 millioncash and a revolving credit facility of $5.0 million from Guggenheim Corporate Funding, LLC. Upon signing the Guggenheim Credit Agreement, the Company borrowed the $115.0 million term loan capacity available and used the majority of the proceeds to repay the full outstanding borrowings of $82.5 million under the Second Amended and Restated Credit Agreement with Silicon Valley Bank.
In February 2018, the Company amended the Guggenheim Credit Agreement and increased its term loan facility and its borrowings thereunder by an additional $20.0 million. In connection with the amendment, the Company issued warrants to the lenders to purchase 424,242 shares of Class A common stock, at an exercise pricethe Company’s election.
During the three months ended June 30, 2020, the conditions allowing holders of $8.25 per share. See Note 9—Stockholders' Equitythe Notes to convert were not met. The Notes are therefore not currently convertible and are classified as long-term debt.
The Company accounts for additional details.the Notes as separate liability and equity components. The warrants were measured atCompany determined the carrying amount of the liability component as the present value of its cash flows using a discount rate of approximately 5.5% based on comparable debt transactions for similar companies. The estimated interest rate was applied to the Notes, which resulted in a fair value of the liability component of $492.7 million upon issuance, calculated as the present value of future contractual payments based on the $633.5 million aggregate principal amount. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, is amortized to interest expense over the term of the Notes using the effective interest method. The $140.8 million difference between the gross proceeds received from issuance of the Notes of $633.5 million and the estimated fair value of $1.0the liability component represents the equity component, or the conversion option, of the Notes and was recorded in additional paid-in capital. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
The Company allocated issuance costs related to the issuance of the Notes to the liability and equity components using the same proportions as the initial carrying value of the Notes. Issuance costs attributable to the liability component were $13.1 million and are being amortized to interest expense using the effective interest method over the term of the Notes. Issuance costs attributable to the equity components were $3.7 million and are netted with the equity component of the Notes in stockholders’ equity on the datecondensed consolidated balance sheets.
In September 2019, Pluralsight, Inc. repurchased a total of issuance and were recorded as debt issuance costs.
Under$40.0 million in aggregate principal of its Notes for approximately $35.0 million in cash. The Company first allocated the termscash paid to repurchase the Notes to the liability component based on the estimated fair value of that component immediately prior to the extinguishment. The difference between the fair value of the Guggenheim Credit Agreement, the Company was required to maintain compliance with certain negative and affirmative covenants, including financial covenants and covenants relating to the incurrence of other indebtedness, the occurrence of a material adverse change, the disposition of assets, mergers, acquisitions and investments, the granting of liens,liability component and the payment of dividends. In addition, on a quarterly basis, the Company was required to maintain a maximum ratio of indebtedness to total recurring revenue for the most recent trailing twelve-month period ranging from 0.55 to 1 to 0.65 to 1. The Company was also required to maintain $10.0 million in liquidity, including amounts available under revolving loan commitments ascarrying value of the last day of any calendar month. The Guggenheim Credit Agreement was secured with a lien against substantially all of the assets of the Company.
Interest accrued under the credit agreement at an adjusted LIBOR rate plus 8.50%. Adjusted LIBOR was defined as greater LIBOR raterepurchased Notes resulted in effect for each interest period divided by 1 minus the Statutory Reserves (if any) for such Eurodollar borrowing for such interest period, and with respect to the term loan only, a minimum LIBOR floor of 1.00%. Under these borrowings, the Company elected to pay 2.50% of the interest due on each interest payment date in-kind rather than in cash.
A portion of the net proceeds from the IPO were used to repay the outstanding principal balance of $137.7 million and extinguish the Guggenheim Credit Agreement in May 2018. The Company incurred a loss on debt extinguishment of $4.1$1.0 million. The remaining consideration of approximately $3.0 million was allocated to the reacquisition of the equity component and recorded as a reduction of stockholders’ equity.
The net carrying value of the liability component of the Notes was as follows (in thousands):
  June 30,
2020
   
Principal $593,500
Less: Unamortized debt discount (100,631)
Less: Unamortized issuance costs (9,366)
Net carrying amount $483,503


The net carrying value of the equity component of the Notes was as follows (in thousands):
  June 30,
2020
   
Proceeds allocated to the conversion option (debt discount) $140,776
Less: Issuance costs (3,743)
Less: Reacquisition of conversion option related to the repurchases of convertible senior notes (2,965)
Net carrying amount $134,068
The interest expense recognized related to the Notes was as follows (in thousands):
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
         
Contractual interest expense $556
 $594
 $1,113
 $726
Amortization of debt issuance costs and discount 6,684
 6,749
 13,275
 8,294
Total $7,240
 $7,343
 $14,388
 $9,020

Capped Calls
In connection with the offering of the Notes, the Company entered into privately-negotiated capped call transactions (“Capped Calls”) with certain counterparties. The Capped Calls each have an initial strike price of approximately $38.76 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $58.50 per share, subject to certain adjustments. As of June 30, 2020, the Capped Calls cover, subject to anti-dilution adjustments, 15,313,665 shares of the Company’s Class A common stock. The Capped Calls are generally intended to reduce or offset the potential dilution from shares of Class A common stock issued upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. As the Capped Call transactions are considered indexed to the Company’s own stock and are considered equity classified, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $69.4 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital on the condensed consolidated balance sheets.
In connection with the repurchase of the convertible senior notes in September 2019, the Company terminated a portion of its existing Capped Calls that cover 1,032,092 shares of the Company’s Class A common stock, which corresponds to the number of shares underlying the principal amount of Notes that were repurchased. The Company received proceeds of $1.3 million in connection with the repayment.portion of the Capped Calls that were terminated in September 2019.
Intercompany Convertible Promissory Note with Pluralsight Holdings
In connection with the issuance of the Notes, Pluralsight, Inc. entered into an intercompany convertible promissory note with Pluralsight Holdings, whereby Pluralsight, Inc. provided the net proceeds from the issuance of the Notes to Pluralsight Holdings. The terms of the convertible promissory note mirror the terms of the Notes issued by Pluralsight, Inc. The intent of the convertible promissory note is to maintain the parity of shares of Class A common stock with LLC Units as required by the LLC Agreement in order to preserve the Company’s legal structure. This note was amended in September 2019 in connection with the Repurchase. All effects of the convertible promissory note on the condensed consolidated financial statements have been eliminated in consolidation.
Note 11. Leases
The Company’s debt consistedCompany leases office space under non-cancellable operating leases with lease terms expiring between 2020 and 2035. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at the election of the followingCompany to renew or extend the lease for an additional three to five years. These optional periods have not been considered in the determination of the right-of-use assets or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options.
The Company performed evaluations of its contracts and determined that each of its identified leases are operating leases. The components of operating lease expense were as follows:


  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
         
Operating lease expense $2,267
 $1,506
 $4,067
 $2,966
Variable lease expense 142
 84
 315
 144
Short-term lease expense 187
 69
 458
 86
Total lease expense $2,596
 $1,659
 $4,840
 $3,196

Variable lease expense consists of the Company’s proportionate share of operating expenses, property taxes, and insurance and is classified as lease expense due to the Company’s election to not separate lease and non-lease components.
Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended June 30, 2020 and 2019 was $1.8 million and $1.3 million, respectively, and $3.5 million and $2.7 million for the six months ended June 30, 2020 and 2019, respectively, and was included in net cash used in operating activities in the consolidated statements of cash flows.
As of June 30, 2020, the maturities of the Company’s operating lease liabilities were as follows (in thousands):
Year Ending December 31,  
   
2020 (remaining six months)$3,177
202111,808
202211,776
202311,305
202410,574
Thereafter100,176
Total lease payments148,816
Less: Imputed interest(64,724)
Lease liabilities$84,092

 December 31, 2017
Principal borrowings outstanding$116,620
Less: Debt issuance costs, net of amortization(583)
Net carrying amount$116,037
As of June 30, 2020, the weighted average remaining lease term is 13.3 years and the weighted average discount rate used to determine operating lease liabilities was 8.2%.
The Company has various sublease agreements with third parties. These subleases have remaining lease terms of up to two years. Sublease income, which is recorded within other income, was $0.1 million during the three months ended June 30, 2020 and 2019.
In August 2018, the Company entered into a non-cancellable lease agreement to rent office space for the Company’s headquarters in Draper, Utah for a period of 15 years. In May 2020, certain construction milestones were met and as a result the lease agreement was amended to establish the rent commencement date and define the basic rent for the lease beginning in July 2020. The lease commencement date occurred during the three months ended June 30, 2020. At the commencement date, the Company classified the lease as an operating lease and recorded a lease liability of $70.3 million with a corresponding right-of-use asset and an increase to property and equipment for tenant improvements that were deemed lease incentives. The lease liability was measured using an estimated incremental borrowing rate derived from comparable market data. The lease agreement provides the Company with 3 extension periods of five years each. The Company did not include these extension periods in the lease term as the extension options are not reasonably certain to be exercised.
In connection with the lease agreement, the Company is required to maintain a deposit of $16.0 million with a financial institution for the benefit of the landlord to secure the Company’s obligations under the lease. The deposit is recorded within restricted cash and cash equivalents on the condensed consolidated balance sheets. The lease agreement provides for both a partial and full release of the deposit funds to the Company, provided the Company meets certain liquidity and other financial conditions. Additionally, as of June 30, 2020 and December 31, 2019, the Company recorded a deposit of $4.3 million and $11.6 million, respectively, into restricted cash and cash equivalents on its condensed consolidated balance sheet for use in constructing tenant improvements in connection with the Draper headquarters.


Note 8.12. Commitments and Contingencies
Letters of Credit
As of June 30, 20182020 and December 31, 2017,2019, the Company had a total of $0.7$2.1 million and $0.2 million, respectively, in letters of credit outstanding.outstanding with financial institutions. These outstanding letters of credit were issued for purposes of securing certain of the Company’s obligations under facility leases. The letters of credit arewere collateralized by a portion$1.3 million of the Company’s cash, as of June 30, 2020 and


December 31, 2019, respectively, which is reflected as restricted cash and classified within other assetscash equivalents on the condensed consolidated balance sheets.
Lease Commitments
The Company is committed under certain operating leases with third parties for office space. These leases expire at various times through 2024. The Company recognizes rent expense on a straight-line basis over the lease period. Payments made under the Company’s lease for its corporate headquarters in Farmington, Utah are not recorded as rent expense in the condensed consolidated statements of operations. These payments are effectively recorded as repayments of the financing obligation and interest expense in the condensed consolidated statements of operations as the Company did not qualify for sale-leaseback accounting upon completion of the facilities build out and is considered to be the owner of the buildings for accounting purposes.
At June 30, 2018, future minimum lease payments, including lease payments for the Company’s facilities in Farmington, Utah, were as follows (in thousands):
Years Ending December 31, 
2018 (remaining six months)$2,672
20194,885
20202,867
20211,912
20221,745
Thereafter2,370
Total future minimum lease payments$16,451
Rent expense under operating leases was $1.1 million and $0.4 million for the three months ended June 30, 2018 and 2017, respectively, and $2.2 million and $0.8 million for the six months ended June 30, 2018 and 2017, respectively.
Other Commitments
The Company has also entered into certain non-cancellable agreements primarily related to cloud infrastructure and software subscriptions in the ordinary course of business. There have been no material changes in the Company'sCompany’s commitments and contingencies, as disclosed in the Prospectus.Annual Report.
Legal Proceedings
In August 2019, a class action complaint was filed by a stockholder of the Company in the U.S. District Court for the Southern District of New York against the Company, and certain of the Company’s officers alleging violation of securities laws and seeking unspecified damages. In October 2019, the action was transferred to the U.S. District Court for the District of Utah and in March 2020, a lead plaintiff was appointed. An amended complaint was filed in June 2020. The amended complaint names us as defendants, along with certain of the Company’s officers, members of the Board of Directors, and Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC, the lead underwriters from the Company’s March 2019 common stock offering. A response from the defendants to the amended complaint is due August 2020.
The Company believes this suit is without merit and intends to defend it vigorously. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision. If an unfavorable outcome were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.
In March 2020, a derivative lawsuit was filed by a shareholder in the United States District Court for the District of Delaware as an outgrowth of the aforementioned class action. It includes as defendants certain of the Company’s officers and the Board of Directors, alleging violations of fiduciary duties to the Company. The Company is named as a nominal defendant. On May 18, 2020, the Court entered a stipulated order that stays the derivative lawsuit until the class action is dismissed with prejudice, the defendants’ motion to dismiss the class action complaint is denied, or the defendants file an answer to the class action complaint.
The Company is involved in other legal proceedings from time to time arising in the normal course of business. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision. Management believes that the outcome of these proceedings will not have a material impact on the Company’s financial position,condition, results of operations, or liquidity.
Warranties and Indemnification
The performance of the Company’s cloud-based technology learningskills platform is typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable. The Company’s contractual arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third party’sthird-party’s intellectual property rights. In addition, the Company has some contractual arrangements with provisions for indemnifying customers against liabilities in the case of breaches of the Company’s platform or the other systems or networks used in the Company’s business, including those of vendors, contractors, or others with which the Company has strategic relationships. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any material liabilities related to such obligations in the accompanying condensed consolidated financial statements.
The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines, and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.


Note 9. Stockholders' Equity
Amendment and Restatement of Certificate of Incorporation
In connection with the Reorganization Transactions, the certificate of incorporation of Pluralsight, Inc. was amended and restated to, among other things, provide for the (i) authorization of 1,000,000,000 shares of Class A common stock with a par value of $0.0001 per share; (ii) authorization of 200,000,000 shares of Class B common stock with a par value of $0.0001 per share; (iii) authorization of 50,000,000 shares of Class C common stock with a par value of $0.0001 per share; (iv) authorization of 100,000,000 shares of undesignated preferred stock that may be issued from time to time; and (v) establishment of a classified board of directors, divided into three classes, each of whose members will serve for staggered three-year terms.
Holders of Class A and Class B common stock are entitled to one vote per share and holders of Class C common stock are entitled to ten votes per share. Except as otherwise required by applicable law, holders of Class A common stock, Class B common stock, and Class C common stock vote together as a single class on all matters on which stockholders generally are entitled to vote. Holders of Class B and Class C common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company. Shares of Class B and Class C common stock may only be issued to the extent necessary to maintain the one-to-one ratio between the number of LLC Units held by the Continuing Members and the number of Class B or Class C common shares held by the Continuing Members. Shares of Class B and Class C common stock are transferable only together with an equal number of LLC Units. Subject to certain limitations and exceptions, Continuing Members may exchange or redeem LLC Units and shares of Class B or Class C common stock, as applicable, for, at the option of Pluralsight, Inc., cash or shares of Class A common stock, on a one-for-one basis.
Pluralsight, Inc. must at all times maintain a ratio of one LLC Unit for each share of Class A common stock issued, and Pluralsight Holdings must at all times maintain a one-to-one ratio between the number of shares of Class B or Class C common stock owned by the Continuing Members and the number of LLC Units owned by the Continuing Members.
Recapitalization of Pluralsight Holdings
In connection with the Reorganization Transactions and the amendment and restatement of the LLC Agreement, all membership interests in Pluralsight Holdings were converted into a single-class of common LLC Units and certain holders of LLC Units elected to exchange LLC Units for Class A common stock of Pluralsight, Inc. The following is a summary of the shares converted or exchanged in connection with the Reorganization Transactions:
•48,407,645 common units of Pluralsight Holdings outstanding prior to the Reorganization Transactions were converted on a one-for-one basis into LLC Units.
•48,447,880 redeemable convertible preferred units of Pluralsight Holdings outstanding prior to the Reorganization Transactions were converted on a one-for-one basis into LLC Units.
•15,783,689 incentive units of Pluralsight Holdings outstanding prior to the Reorganization Transactions were converted into 12,667,778 LLC Units after giving effect to the threshold price and catch-up price per unit.
•3,000,000 Class B incentive units of Pluralsight Holdings outstanding prior to the Reorganization Transactions were converted into 1,747,067 LLC Units after giving effect to the threshold price and catch-up price per unit.
In connection with the recapitalization, a total of 39,110,660 LLC Units were exchanged for shares of Class A common stock of Pluralsight, Inc. In addition, the Company issued 58,111,572 shares of Class B common stock and 14,048,138 shares of Class C common stock to the Continuing Members on a one-for-one basis to the corresponding LLC Units held by the Continuing Members.
The amended and restated LLC Agreement requires that Pluralsight Holdings at all times maintain (i) a one-to-one ratio between the number of outstanding shares of Class A common stock of Pluralsight, Inc. and the number of LLC Units and (ii) a one-to-one ratio between the number of shares of Class B or Class C common stock owned by the Continuing Members and the number of LLC Units held by the Continuing Members.
Redeemable Convertible Preferred Units Conversion
As described in Note 1—Organization and Description of Business, in connection with the Reorganization Transactions, the LLC Agreement of Pluralsight Holdings was amended and restated to, among other things, effectuate the conversion of 48,447,880 redeemable convertible preferred units into LLC Units of Pluralsight Holdings. Prior to the Reorganization Transactions, Series A redeemable convertible preferred units were redeemable at the option of the holder at an amount equal to the greater of the original issuance price or the aggregate fair value of the Series A redeemable convertible preferred units. Accordingly, prior to the Reorganization Transactions, the Series A redeemable convertible preferred units were accreted to the fair value on the date of conversion of the IPO price of $15.00 per share, or $412.5 million.


As the redeemable convertible preferred units were converted into common LLC Units of Pluralsight Holdings, and are no longer redeemable at the option of the holder, the Company reclassified the carrying value of the redeemable convertible preferred units of $582.0 million on the date of the Reorganization Transactions to stockholders' equity.
Initial Public Offering
As described in Note 1—Organization and Description of Business, in May 2018, Pluralsight, Inc. completed an IPO of 23,805,000 shares of Class A common stock at a public offering price of $15.00 per share. Pluralsight, Inc. received proceeds of $332.1 million, net of underwriting discounts and commissions, which Pluralsight, Inc. used to purchase newly-issued LLC Units of Pluralsight Holdings at a price per unit equal to the IPO price per share.
Warrants to Purchase Shares of Class A Common Stock
In connection with the first amendment of the Guggenheim Credit Agreement, the Company issued warrants to the lenders to purchase 424,242 shares of Class A common stock of Pluralsight, Inc. at an exercise price of $8.25 per share. See Note 7—Credit Facilities for additional details. The warrants are fully vested and exercisable, in whole or in part, prior to their expiration. The warrants will expire at the earlier of (i) the acquisition of the Company by another entity or (ii) six months after the effectiveness of the IPO. The warrants were measured at the fair value on the date of issuance, which was determined to be $1.0 million using a Black-Scholes option pricing model and a probability-weighted expected return methodology. As the warrants are exercisable for shares of the Company’s Class A common stock, the Company recorded the warrants within stockholders’ equity.
Note 10.13. Non-Controlling Interests
In connection with the Reorganization Transactions, Pluralsight, Inc. became the sole managing member of Pluralsight Holdings and as a result consolidates the results of operations of Pluralsight Holdings. The non-controlling interests balance represents the economic interests of the LLC Units held by Continuing Members, based on theother members of Pluralsight Holdings. As these members exchange these LLC Units for shares of Class A common stock, these LLC Units are then owned by Pluralsight, Inc. and a portion of LLC Units owned by Continuing Members. Following the Reorganization Transactions,non-controlling interests balance is reclassified to additional paid-in capital. During the totalthree months ended June 30, 2020, the adjustments to the non-controlling interests were $3.8 million and were primarily related to equity-based compensation and the issuance and settlement of equity-based awards. Income or loss is attributed to the non-controlling interests based on the weighted-average ownership percentages of LLC Units outstanding during the period, excluding LLC Units that are subject to time-based vesting requirements.


As of June 30, 2018,2020, the non-controlling interests of Pluralsight Holdings owned 52.3%22.0% of the outstanding LLC Units, with the remaining 47.7%78.0% owned by Pluralsight, Inc. The ownership of the LLC Units is summarized as follows:
  June 30, 2018
  Units Ownership %
Pluralsight, Inc.'s ownership of LLC Units(1)
 62,326,654
 47.7%
LLC Units owned by the Continuing Members(2)
 68,275,082
 52.3%
  130,601,736
 100.0%
  June 30, 2020 December 31, 2019
  Units Ownership % Units Ownership %
         
Pluralsight, Inc.’s ownership of LLC Units 111,875,235
 78.0% 104,083,271
 74.3%
LLC Units owned by the Continuing Members(1)
 31,589,215
 22.0% 35,936,804
 25.7%
  143,464,450
 100.0% 140,020,075
 100.0%
(1)Excludes 589,006968,736 and 1,543,813 LLC Units still subject to time-based vesting requirements.
(2) Excludes 3,884,628 LLC Units still subject to time-based vesting requirements.requirements as of June 30, 2020 and December 31, 2019, respectively.
Note 11.14. Equity-Based Compensation
Incentive Unit Plan
Certain employees and directors were granted incentive units in Pluralsight Holdings, pursuant to the Incentive Unit Plan ("2013 Plan"). In connection with the Reorganization Transactions, all outstanding incentive units were converted into LLC Units of Pluralsight Holdings and certain holders of incentive units elected to exchange LLC Units for shares of Class A common stock of Pluralsight, Inc. Shares of Class A common stock and LLC Units issued as a result of the exchange or conversion of unvested incentive units remain subject to the same time-based vesting requirements that existed prior to the Reorganization Transactions. In connection with the IPO, the 2013 Plan was terminated.
The shares of unvested Class A common stock following the exchange of unvested incentive units are summarized as follows:
  Unvested Shares 
Weighted-
Average
Grant Date
Fair Value
Unvested Class A common shares outstanding following the Reorganization Transactions 605,390
 $6.55
Vested (16,384) 4.96
Unvested Class A common shares outstanding—June 30, 2018 589,006
 $6.59


The shares of unvested LLC Units following the conversion of unvested incentive units are summarized as follows:
  Unvested Units 
Weighted-
Average
Grant Date
Fair Value
Unvested LLC Units outstanding following the Reorganization Transactions 3,942,674
 $7.73
Vested (58,046) 5.37
Unvested LLC Units outstanding—June 30, 2018 3,884,628
 $7.77
The Company evaluated the conversion and exchange of incentive units as part of the Reorganization Transactions and concluded the conversion and exchange was not a modification of the original incentive units. Accordingly, the Company will continue to recognize equity-based compensation using the grant date fair value as measured on the original grant date of the incentive units. As of June 30, 2018, total unrecognized equity-based compensation related to all unvested Class A common shares and unvested LLC Units was $28.3 million, which is expected to be recognized over a weighted-average period of 2.6 years. The total fair value of Class A common shares and LLC Units vested during the period from the date of the Reorganization Transactions to June 30, 2018 was $1.6 million. If a forfeiture of an unvested LLC Unit occurs, the associated shares of Class B common stock or Class C common stock, as applicable, are also forfeited.
Equity Incentive Plans
In June 2017, Pluralsight Holdings adopted the 2017 Equity Incentive Plan ("(“2017 Plan"Plan”) and issued RSUs to employees. In connection with the IPO, the 2017 Plan was terminated. In May 2018, Pluralsight, Inc. adopted the 2018 Equity Incentive Plan ("(“2018 Plan"Plan”). The 2018 Plan provides for the grant of nonstatutory stock options, restricted stock, RSUs, stock appreciation rights, performance units, and performance shares to employees, directors, and consultants of the Company. A total of 22,149,995 shares of Class A common stock are reserved for issuance under the 2018 Plan. The number of shares available for issuance under the 2018 Plan also includes an annual increase on the first day of each fiscal year, beginning in 2019, equal to the lesser of: (i) 14,900,000 shares, (ii) 5.0% of the outstanding shares of capital stock as of the last day of the immediately preceding fiscal year, or (iii) a lower number of shares determined by the 2018 Plan'sPlan administrator.
In connection with The number of shares available under the IPO, the 20172018 Plan was terminated. At the time the 2017 Plan was terminated, a total of 4,508,835 RSUs grantedalso includes shares under the 2017 Plan remained outstanding. With the establishment of the 2018 Plan, the Company no longer grants equity-based awards under the 2017 Plan and any shares that expire, terminate, are forfeited or repurchased by the Company, or are withheld by the Company to cover tax withholding obligations,obligations. As of June 30, 2020, a total of 20,011,454 shares were available for issuance under the 2017 Plan, will automatically be transferred to the 2018 Plan up to 4,508,835 shares.Plan.
Stock Options
In connection with the IPO, the Company granted to employees stock options under the 2018 Plan to purchase shares of Class A common stock at an exercise price equal to the IPO price of $15.00 per share. TheAs of June 30, 2020, these options have fully vested.
In connection with the GitPrime acquisition, the stock options willgranted to GitPrime employees under GitPrime’s 2015 and 2018 Equity Incentive Plans were replaced with options to purchase shares of the Company’s Class A common stock, subject to appropriate adjustments to the number of shares issuable pursuant to such options and the exercise price of such options as provided in the Merger Agreement. The options are subject to time-based vesting conditions and continue to vest ratably in equal six-month periods over athe remaining vesting period of the original award ranging from two years from the IPO date.to four years.
The following table summarizes the stock option activity for the six months ended June 30, 2018:2020:
  Stock Options Outstanding 
Weighted-
Average
Exercise Price
 
Weighted-
Average
Remaining Contractual Term
(in years)
 
Aggregate Intrinsic Value
(in millions)
         
Outstanding as of December 31, 2019 4,361,718
 $14.55
    
Granted —
 —
    
Exercised (193,841) 13.05
    
Forfeited or cancelled (16,277) 7.28
    
Outstanding as of June 30, 2020 4,151,600
 $14.65
 7.9 $14.1
Vested and exercisable as of June 30, 2020 4,075,135
 $14.90
 7.9 $12.8

  Stock Options Outstanding 
Weighted-
Average
Exercise Price
 
Weighted-
Average
Remaining Contractual Term
(in years)
 
Aggregate Intrinsic Value
(in millions)
Balance as of December 31, 2017 —
 
    
Granted 5,236,155
 $15.00
    
Forfeited or cancelled (3,979) 15.00
    
Balance as of June 30, 2018 5,232,176
 $15.00
 9.9 $49.4
The total intrinsic value of options exercised during the six months ended June 30, 2020 was $1.3 million. As of June 30, 2018, no options were vested or exercisable. The2020, the total unrecognized equity-based compensation cost related to the stock options was $39.0$2.3 million, which is expected to be recognized over a weighted-average period of 1.91.8 years.


The grant date fair value of the stock options was determined using the Black Scholes model with the following assumptions:
Dividend yieldNone
Volatility55.0%
Risk-free interest rate2.97%
Expected term (years)5.63
RSUs
The Company has granted RSUs to employees under the 2018 Plan and previously under the 2017 Plan. RSUs represent the right to receive shares of Pluralsight Inc.’s Class A common stock at a specified future date. RSUsRestricted share units of Pluralsight Holdings under the 2017 Plan are generally subject to both a service condition and a liquidity condition.condition, whereas RSUs under the 2018 Plan are generally subject to a service condition.conditions only. The service condition isconditions are generally satisfied over four years, whereby 25% of


the share units satisfy this condition on the first anniversary of the grant date and then ratably on a quarterly basis thereafter through the end of the vesting period. The liquidity condition for RSUs granted under the 2017 Plan is deemed a performance condition and was satisfied upon the occurrence of a qualifying event, which is defined as a change of control transaction or upon expiration of athe lock-up period following the IPO. PriorRSUs with both performance and service conditions, including shares issued under the 2017 Plan, are recognized using the accelerated attribution method. RSUs issued under the 2018 Plan are primarily subject to the IPO, the Company 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, the Company recorded a cumulative adjustment to equity-based compensation expense totaling $7.8 million. The remaining unrecognized equity-based compensation expense related to RSUs will beservice conditions only and are recognized over the remaining requisite service period using the straight-line attribution method.
Under the 2017 Plan, all RSUsrestricted share units granted were initially RSUsrestricted share units of Pluralsight Holdings. In connection with the IPO, all RSUsrestricted share units were converted into RSUs of Pluralsight, Inc., except for Class B RSUs, which remain RSUsrestricted share units of Pluralsight Holdings and representthat convey the right to receive LLC Units and corresponding shares of Class C common stock of Pluralsight, Inc. upon vesting.
The activity for RSUs of Pluralsight, Inc. and restricted share units of Pluralsight Holdings for the six months ended June 30, 20182020 was as follows:
  
Number of
RSUs or Units
 
Weighted-Average
Grant Date Fair
Value
     
RSUs of Pluralsight, Inc.:    
Balance at December 31, 2019 7,672,038
 $22.71
Granted 6,219,477
 19.35
Forfeited or cancelled (483,563) 20.86
Vested (1,895,152) 24.43
Balance at June 30, 2020 11,512,800
 $20.69
     
Restricted Share Units of Pluralsight Holdings:    
Balance at December 31, 2019 1,312,500
 $8.24
Vested (375,000) 8.24
Balance at June 30, 2020 937,500
 $8.24
  Number of RSUs 
Weighted-Average
Grant Date Fair
Value
RSUs of Pluralsight, Inc.    
Balance at December 31, 2017 2,178,450
 $7.06
Granted 3,059,010
 10.22
Forfeited or cancelled (167,675) 7.28
Balance at June 30, 2018 5,069,785
 $8.96
RSUs of Pluralsight Holdings    
Balance at December 31, 2017 and June 30, 2018 3,000,000
 $8.24

As of June 30, 2018,2020, the total unrecognized equity-based compensation cost related to the RSUs, including RSUsthe restricted share units of Pluralsight Holdings, was $59.6$199.0 million, which is expected to be recognized over a weighted-average period of 3.23.0 years.
401(k) Equity Match
In May 2020, the Compensation Committee of the Board of Directors of Pluralsight, Inc. approved the issuance of Class A common shares to pay the Company’s 401(k) matching contributions to employees during the year ended December 31, 2020. The Company's matching contribution is equal to 50% of eligible wages contributed up to a maximum of 6%. As of June 30, 2020, the Company had recorded a matching liability of $0.2 million that is expected to be settled in shares of Class A common stock on a quarterly basis.
Employee Stock Purchase Plan
In May 2018, Pluralsight Inc.'s board’s Board of directorsDirectors adopted the ESPP. A total of 2,970,000 shares of Class A common stock were initially reserved for issuance under the ESPP. The number of shares of Class A common stock available for issuance under the ESPP will be increased on the first day of each fiscal year beginning in 2019 equal to the lesser of: (i) 2,970,000 shares of Class A common stock, (ii) 1.5% of the outstanding shares of all classes of common stock of the Company on the last day of the immediately preceding fiscal year, or (iii) an amount determined by the plan administrator. As of June 30, 2020, the total number of shares available for issuance under the ESPP was 4,386,452.
The ESPP generally provides for consecutive overlapping 24-month offering periods comprised of four4 six-month purchase periods. The offering periods are scheduled to start on the first trading day on or after May 31 and November 30 of each year. The first offering period commenced on the IPO date and is scheduled to end on the first trading day on or after May 31, 2020.
The ESPP permits participants to elect to purchase shares of Class A common stock through fixed contributions from eligible compensation paid during each purchase period during an offering period, provided that this fixed contribution amount will not exceed 75.0% of the eligible compensation a participant receives during a purchase period or $12,500 (increased to $25,000 for purposes of the first purchase period under the ESPP).$12,500. A participant may purchase a maximum of 5,000 shares during each purchase period. Amounts deducted and accumulated by the participant will be used to purchase shares of Class A common stock at the end of each purchase period. The purchase price of the shares will be 85% of the lower of the fair market value of Class A common stock on the first trading day of each offering period or on the purchase date, except for the first offering period, during which the purchase price of the shares will be 85% of the lower of (i) the IPO price or (ii) the fair market value of common stock on the


purchase date. If the fair market value of the common stock on any purchase date within an offering period is lower than the stock price as of the beginning of the offering period, the offering period will immediately reset after the purchase of shares on such purchase date and participants will automatically be re-enrolled in a new offering period.


Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment.
The initial offering period began on the IPO date. As of June 30, 2018,2020, a total of 2,876,7881,953,706 shares were issuable to employees based on contribution elections made under the ESPP and no shares had yet been purchased.ESPP. As of June 30, 2018,2020, total unrecognized equity-based compensation costs was $15.6$17.5 million, which is expected to be recognized over a weighted-average period of 1.91.7 years.
The fair valueESPP employee payroll contributions accrued at June 30, 2020 and December 31, 2019 totaled $1.5 million and $1.6 million, respectively, and are included within accrued expenses in the condensed consolidated balance sheets. Employee payroll contributions ultimately used to purchase shares under the ESPP will be reclassified to stockholders’ equity at the end of the purchase right forperiod.
Incentive Unit Plan
The Company granted incentive units of Pluralsight Holdings to certain employees and directors prior to its IPO pursuant to the ESPP is estimated on the date of grant using the Black-Scholes model with the following assumptions:
Dividend yieldNone
Volatility55.0%
Risk-free interest rate2.05%—2.50%
Expected term (years)0.5—2.0
Equity Appreciation Rights
Incentive Unit Plan (“2013 Plan”). In connection with the IPO, the Company elected to settle all vested equity appreciation rights ("EARs") for a cash payment of $0.3 million. The EARs vest upon satisfaction of both timeReorganization Transactions and a liquidity condition, which was satisfied upon completion of the IPO. The remaining unvested EARs were cancelled on the date of the IPO. Prior to the IPO, the 2013 Plan was terminated and all outstanding incentive units were converted into LLC Units of Pluralsight Holdings. In addition, certain holders elected to exchange LLC Units for shares of Class A common stock of Pluralsight, Inc. Shares of Class A common stock and LLC Units issued as a result of the exchange or conversion of unvested incentive units remain subject to the same time-based vesting requirements that existed prior to the Reorganization Transactions, and as such the Company continues to record equity-based compensation expense for unvested awards.
The activity of EARsunvested LLC Units during the six months ended June 30, 2020 was not probable and noas follows:
  Unvested Units 
Weighted-
Average
Grant Date
Fair Value
     
Unvested LLC Units outstanding—December 31, 2019 1,543,813
 $8.72
Vested (575,077) 8.44
Unvested LLC Units outstanding—June 30, 2020 968,736
 $8.89

As of June 30, 2020, total unrecognized equity-based compensation related to the EARs had been recognized.all unvested LLC Units was $6.5 million, which is expected to be recognized over a weighted-average period of 1.0 year. The Company recognized $0.1 million in compensation cost on the date of the IPO measured using the grant datetotal fair value of Class A common shares and LLC Units vested during the award using a Black-Scholes model.six months ended June 30, 2020 was $10.0 million.
Equity-Based Compensation Expense
Equity-based compensation expense was classified as follows in the accompanying condensed consolidated statements of operations (in thousands):
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
         
Cost of revenue $296
 $133
 $566
 $217
Sales and marketing 10,878
 7,952
 20,400
 14,228
Technology and content 6,884
 5,137
 13,220
 8,847
General and administrative 8,367
 9,510
 17,817
 19,708
Total equity-based compensation $26,425
 $22,732
 $52,003
 $43,000

  Three Months Ended June 30, Six Months Ended June 30,
  2018 2017 2018 2017
Cost of revenue $46
 $5
 $46
 $10
Sales and marketing 4,432
 715
 4,971
 1,379
Technology and content 2,668
 526
 3,049
 990
General and administrative 10,409
 3,133
 12,862
 3,712
Total equity-based compensation $17,555
 $4,379
 $20,928
 $6,091
Equity-based compensation costs capitalized as internal-use software was $0.3 million and $0.2 million for the three months ended June 30, 2020 and 2019, respectively, and $0.7 million and $0.6 million for the six months ended June 30, 2020 and 2019, respectively.
Note 12.15. Income Taxes
As a result of the Reorganization Transactions, Pluralsight, Inc. becameis the sole managing member of Pluralsight Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Pluralsight Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Pluralsight Holdings is passed through to, and included in, the taxable income or loss of its members, including Pluralsight, Inc. following the Reorganization Transactions,, on a pro rata basis.basis, except as otherwise provided under Section 704 of the Internal Revenue Code. Pluralsight, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income of Pluralsight Holdings following the Reorganization Transactions.Holdings. The Company is also subject to taxes in foreign jurisdictions.


The tax provision for interim periods is determined using an estimate of the Company'sCompany’s annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of its annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The quarterly tax provision and estimate of the Company'sCompany’s annual effective tax rate are subject to variation due to several factors including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how the Company conducts business, and tax law developments.
For the three months ended June 30, 20182020 and 20172019 the Company'sCompany’s estimated effective tax rate was (0.5)%1.2% and (0.3)(0.5)%, respectively. For the six months ended June 30, 20182020 and 2017,2019 the Company'sCompany’s estimated effective tax rate was (0.5)%0.3% and (0.4)(0.6)%, respectively. The variations between the Company'sCompany’s estimated effective tax rate and the U.S. statutory rate are primarily due to the portion of the Company'sCompany’s earnings (or loss) attributable to non-controlling interests following the Reorganization Transactions and the full domestic valuation allowance.


In addition, a portion of the Company’s state valuation allowance was released as a result of the Company meeting the conditions to file a unitary tax return in certain state jurisdictions, which resulted in an income tax benefit during the three and six months ended June 30, 2020.
The Company is subject to income tax in the U.S. as well as other tax jurisdictions in which the Company operates. The provision for income taxes consists primarily of income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business. The Company'sCompany’s U.S. operations have resulted in losses, and as such, the Company maintains a full valuation allowance against substantially all its U.S. deferred tax assets, including the deferred tax assets acquired in connection with the Reorganization Transactions as described below.assets. While the Company believes its current valuation allowance is appropriate, the Company assesses the need for an adjustment to the valuation allowance on a quarterly basis. The assessment is based on estimates of future sources of taxable income for the jurisdictions in which the Company operates and the periods over which deferred tax assets will be realizable. In the event the Company determines that it will be able to realize all or part of its net deferred tax assets in the future, all or part of the valuation allowance will be reversedreleased in the period in which the Company makes such determination. The release of all or part of the valuation allowance against deferred tax assets may cause greater volatility in the effective tax rate in the periods in which it is reversed.released.
Tax Receivable Agreement and Reorganization Transactions
In connection with the Reorganization Transactions, certain members of Pluralsight Holdings ("Former Members") exchanged LLC Units for shares of Class A common stock of Pluralsight, Inc. As a result of this exchange, the Company acquired certain tax attributes held by the Former Members. Additionally, the Company could obtain future increases in its tax basis of the assets of Pluralsight Holdings when LLC Units are redeemed or exchanged by the Continuing Members. This increase in tax basis may have the effect of reducing the amounts paid in the future to various tax authorities. The increase in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
On the date of the IPO, the Company entered into a Tax Receivable Agreement ("TRA"(“TRA”) with Continuing Members that provides for a payment to the Continuing Members of 85% of the amount of tax benefits, if any, that Pluralsight, Inc. realizes, or is deemed to realize as a result of redemptions or exchanges of LLC Units.
The Company maintains a full valuation allowance against deferred tax assets related toDuring the tax attributes generated as a result of redemptions of LLC Units or exchanges described above until it is determined that the benefits are more-likely-than-not to be realized. As of June 30, 2018, no members of the TRA had exchanged LLC Units for Class A common shares and therefore the Company had not recorded any liabilities under the TRA.
Tax Reform Legislation
On December 22, 2017, the Tax Cuts and Jobs Act ("Tax Act") was enacted in the United States resulting in a reduction of the corporate income tax rate to 21%. In addition, the Tax Act limits the deductibility of interest expense, implements a modified territorial tax system, and imposes a one-time repatriation tax on deemed repatriated untaxed earnings and profits of U.S.-owned foreign subsidiaries ("Toll Charge").
In the fourth quarter of 2017, the Company recorded a provisional Toll Charge and remeasured its deferred tax assets and liabilities to reflect the lower corporate income tax rate. The amounts were computed based on information available to the Company; however, there is still uncertainty as to the application of the Tax Act. As of June, 30, 2018, the Company had not yet completed its analysis of the effects of the Tax Act, including the Toll Charge computation. The analysis is expected to be completed within one year of the enactment date of the Tax Act. Because the Company has recorded a full valuation allowance in the United States, changes to the reported impact of the Tax Act based on additional guidance or further analysis are not expected to materially affect the effective tax rate in future periods. No adjustments to the provisional amounts recorded in the fourth quarter of 2017 had been made as of June 30, 2018.
As a result of the Toll Charge, all previously unremitted earnings have now been subject to federal tax in the United States; however, the Company plans to, and has the ability to, indefinitely reinvest such earnings in their respective foreign jurisdictions; therefore, no additional tax liability such as state or withholding tax has been provided for on such earnings.
The Company continues to analyze the effects of new taxes due on certain foreign income, such as GILTI (global intangible low-taxed income), BEAT (base-erosion anti-abuse tax), FDII (foreign-derived intangible income) and limitations on interest expense deductions (if certain conditions apply) that became effective starting January 1, 2018, and other provisions of the Tax Act. The Company has delayed finalizing its GILTI policy election under SAB 118 until it has the necessary information available to analyze and make an informed policy decision. Because the Company is still evaluating the GILTI provisions and the future taxable income that is subject to GILTI, the Company has included GILTI related to current-year operations only in its estimated annual effective tax rate for the three and six months ended June 30, 2018 and2020, certain Continuing Members exchanged 5,131,199 LLC Units for shares of Class A common stock. The Company has concluded that, based on applicable accounting standards, it is more-likely-than-not that its deferred tax assets subject to the TRA will not be realized; therefore, the Company has not provided additional GILTI onrecorded a TRA liability related to the tax savings it may realize from the utilization of deferred items.tax assets arising from the exchanges that have occurred through June 30, 2020. The total unrecorded TRA liability as of June 30, 2020 is approximately $295.3 million.


Note 13.16. Net Loss Per Share
The following table presents the calculation of basic and diluted net loss per share for the periods following the Reorganization Transactions (in thousands, except per share amounts):
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
         
Numerator:        
Net loss $(39,730) $(40,764) $(87,243) $(74,648)
Less: Net loss attributable to non-controlling interests (9,801) (11,637) (21,995) (26,446)
Net loss attributable to Pluralsight, Inc. $(29,929) $(29,127) $(65,248) $(48,202)
Denominator:        
Weighted-average shares of Class A common stock outstanding, basic and diluted 107,153
 96,708
 105,899
 86,827
Net loss per share:        
Net loss per share, basic and diluted $(0.28) $(0.30) $(0.62) $(0.56)

  May 16, 2018 through June 30, 2018
  
Numerator:  
Net Loss $(24,294)
Less: Net loss attributable to non-controlling interests (12,706)
Net loss attributable to Pluralsight, Inc. $(11,588)
Denominator:  
Weighted-average common shares outstanding 62,847
Less: Weighted-average common shares subject to time-based vesting (595)
Weighted-average common shares outstanding, basic and diluted 62,252
Net loss per share, basic and diluted $(0.19)
Shares of Class B and Class C common stock do not share in the earnings or losses of Pluralsight and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B and Class C common stock under the two-class method has not been presented.


During the period from May 16, 2018 throughthree and six months ended June 30, 2018,2020, the Company incurred net losses and, therefore, the effect of the Company’s potentially dilutive securities were not included in the calculation of diluted loss per share as the effect would be anti-dilutive.
The following table contains outstanding share/unit totals with a potentially dilutive impact (in thousands):
  As of June 30, 2018
2020
LLC Units held by Continuing Members 72,16032,558

Stock options 5,2324,152

RSUs of Pluralsight, Inc. 5,07011,513

RSUsRestricted Share Units of Pluralsight Holdings 3,000938

Shares issuablePurchase rights committed under the ESPP 2,8771,954
Unvested Class A common shares589
Warrants to purchase Class A common shares424

Total 89,35251,115


The Notes will not have an impact on the Company’s diluted earnings per share until the average market share price of Class A common stock exceeds the conversion price of $58.50 per share, as the Company intends and has the ability to settle the principal amount of the Notes in cash upon conversion. The Company is required under the treasury stock method to compute the potentially dilutive shares of common stock related to the Notes for periods it reports net income. However, upon conversion, until the average market price of the Company’s common stock exceeds the cap price of $58.50 per share, exercise of the Capped Calls will mitigate dilution from the Notes from the conversion price up to the cap price. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive under the treasury stock method.
Note 14. Segment and Geographic Information17. Related Party Transactions
The Company operates in a single operating segment. Operating segments are defined as components ofutilizes an enterprise for which separate financial information is regularly evaluatedaircraft owned by the chief operating decision makers, who in the Company’s case areChief Executive Officer on an as-needed basis. The Company has agreed to reimburse the Chief Executive Officer and Chief Financial Officer, in deciding how to allocate resources and assess performance.for use of the private aircraft for business purposes at an hourly rate per flight hour. The chief operating decision makers evaluatereimbursement rate was approved by the Company’s financial informationBoard of Directors based upon a review of comparable chartered aircraft rates. The Company accrued less than $0.1 million as of June 30, 2020 and resources and assessapproximately $0.3 million as of December 31, 2019 included within accrued expenses on the performance of these resources on a consolidated basis. Since the Company operates in one operating segment, all required financial segment information can be found in the unaudited condensed consolidated financial statements.
Revenue by geographic region, based onbalance sheets. A total of $0.5 million and $0.6 million has been paid under the physical location of the customer, was as follows (dollars in thousands):
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
United States$33,955
 $25,109
 $65,533
 $48,720
United Kingdom5,756
 4,254
 11,088
 8,453
Other foreign locations13,861
 9,528
 26,595
 18,957
Total revenue$53,572
 $38,891
 $103,216
 $76,130
Percentage of revenue generated outside of the United States37% 35% 37% 36%
With the exception of the United Kingdom, no other foreign country accounted for 10% or more of revenuearrangement during the three months ended June 30, 2018 and 2017, and the six months ended June 30, 20182020 and 2017.

2019, respectively.

Tax Receivable Agreement
Note 15. Subsequent Events
In July 2018,On the date of the IPO, the Company entered into a new non-cancellable operating lease agreement to rent office space in Dublin, IrelandTRA with Continuing Members that provides for a periodpayment to the Continuing Members of one year. Total minimum lease payments85% of the amount of tax benefits, if any, that Pluralsight, Inc. realizes, or is deemed to realize as a result of redemptions or exchanges of LLC Units. As discussed in Note 15—Income Taxes, no amounts were paid or payable to Continuing Members under the lease agreement are approximately $1.3 million.TRA as it is more-likely-than-not that the Company’s tax benefits obtained from exchanges subject to the TRA will not be realized.





Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements included in the Prospectus.our Annual Report. As discussed in the section titled "Special“Special Note Regarding Forward-Looking Statements,"” the following discussion contains forward-looking statements that involve risks and uncertainties.uncertainties, including statements regarding the ongoing and potential impact of the COVID-19 pandemic and related public health measures on our business. 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 section titled “Risk Factors” in the Prospectus.our Annual Report.
Overview
We are a leading provider of technology skillskills development solutions for businesses and individuals. We enable businessesengineering management platform committed to innovateclosing 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 an era of rapid technological change and digital transformation by equipping their employees with the latestreal-time providing technology skills. We provide businessesleaders with visibility into the technical strengthscapabilities of their workforce, allowing themteams and confidence their teams will deliver on critical objectives. Our platform empowers teams to better align resources, provide targeted skill development in linekeep up with company goals,the pace of technological change, puts the right people on the right projects and advance the skills of individuals and teams.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 have extended our offering to include new content areas and additional features that have enabled us to expandwhich expanded our addressable market, attractattracted new users, and deependeepened our foothold within businesses. 
We have expanded our platform both organically through internal initiatives and through acquisitions, which have all been focused on adding content and capabilities to our offerings. AllIn 2019, we completed the acquisition of our featuresGitPrime, and content areas are fully integrated intowe believe the addition of GitPrime, now Pluralsight Flow, enhances our platform allowing a seamlessby measuring software developer productivity. Pluralsight Flow aggregates data from code commits, pull requests and unified experience for our customers.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 product offeringplatform have allowed us to accelerate our revenue growth and enabled us to strengthen our relationships with our business customers.customers and increase our revenue over time. We derive substantially all 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 as well as throughand 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 that 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.
COVID-19 Update
On March 11, 2020 COVID-19 was characterized by the World 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 May 2018,efforts to mitigate the harmful effects of the COVID-19 pandemic and curtail the spread of the virus, federal, state and local authorities continue implementing safety measures, including the closure of businesses deemed “non-essential;” social distancing; international border closures; and travel restrictions. Since March 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; and restricting employee travel. 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.
To encourage technology learners around the world to stay safe, stay home and invest in themselves while social distancing during the COVID-19 pandemic, we offered full access to our platform of technology skill development courses for free throughout the month of April 2020 to new users who did not already have a paid subscription. As a result, our #FREEapril campaign introduced more than a million new users to our platform who viewed over 2.5 million courses during the month of April.


The COVID-19 pandemic has impacted our business and financial operations. In June 2020, the National Bureau of Economic Research announced that the United States is officially in a recession as a result of the impacts of COVID-19 on the United States’ economy. The duration and magnitude of the recession and the extent to which the COVID-19 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; the measures implemented or suggested by governing bodies to slow the spread of the virus; 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 some of our prospective and existing customers’ technology related spending, which has affected our revenue and billings growth rates. Additionally, 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 in extended pay periods and a short-term negative impact on our cash flows. 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 a temporary reduction 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.
Secondary Offering
In June 2020, we completed our initial publica secondary offering, or IPO, in which we issued andcertain stockholders sold 23,805,00011,711,009 shares of Class A common stock. Thestock at a public offering price of $19.50 per share toshare. We did not receive any proceeds from the public was $15.00. We received net proceedssale of $332.1 million, after deducting underwriting discounts and commissions.shares by selling stockholders.
Key Business Metrics
We monitor billings and certain related key business metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017 2020 2019 2020 2019
                
 (dollars in thousands) (dollars in thousands)
Billings $65,297
 $46,029
 $120,716
 $84,912
 $89,034
 $80,552
 $179,312
 $158,480
Billings from business customers $54,623
 $35,845
 $99,875
 $65,172
 $77,695
 $69,104
 $158,167
 $136,260
% of billings from business customers 84% 78% 83% 77% 87% 86% 88% 86%
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 existingnew and newexisting customers. Billings represent our total revenue plus the change in deferred revenue in the period, as presented in our condensed consolidated statements of cash flows.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.
As our billings continue to grow in absolute terms, we expect our billings growth rate tomay decline over the long term as we achieve scale in our business. As we 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.
During the three and six months ended June 30, 2020, our billings growth rate declined compared to prior results, primarily due to the global economic effects of the COVID-19 pandemic. As a result, we expect that the recent decline in our billings growth rate during the three and six months ended June 30, 2020, and any future declines in billings resulting from the COVID-19


pandemic, will reduce the growth rate of our revenue in future periods. Given the economic uncertainty and ongoing impact from COVID-19 pandemic, we cannot predict the impact on our billings growth rate in the foreseeable future.
Components of Results of Operations
Revenue
We derive substantially all of our revenue from the sale of subscriptions to our platform. A small portion of ourWe also derive revenue is derived from providing professional services, which generally consist of content creationimplementation, integration, or other consulting services. Amounts that have been invoiced are initially recorded as deferred revenue and are recognized ratably as revenue over the subscription period. Subscription terms generally range from one year to three years for business customers and one month to one year for individual customers, and begin on the date access to our platform is made available to the customer. Nearly allMost of our subscriptions to business customers are billed in annual installments even if customers are contractually committed to 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.
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 fees, amortization of our content library, hosting and delivery fees, merchant processing fees, depreciation of capitalized software development costs for internal-use software, and employee-related costs, including equity-based compensation expense associated with our customer support organization, and third-party transcription costs.professional services organizations.
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 costscost of author fees, andthe 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.
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 that category.
We expect that our operating expenses may fluctuate as a percentage of our revenue from period to period depending on the timing of expenditures. We expect operating expenses to decrease as a percentage of revenue over the long term.
Due to the effects of the COVID-19 pandemic, we have taken measures to reduce operating expenses, including delaying planned hiring activities and curtailing discretionary spending. In addition, the restrictions resulting from the pandemic have and will reduce travel expenses and the costs associated with our customer events, which are transitioning to virtual-only experiences in the near term.
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. Commissions earned by our sales force are expensed as incurred. Other sales and marketing costs include user events, search engine and email marketing, content syndication, lead generation, and online banner and video advertising. 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. 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;compensation; professional fees for external legal, accounting, recruiting, and other consulting services; and allocated overhead costs. We are incurring additional general and administrative expenses as a result of operating as a public company and our UP-C structure, including additional expenses related to compliance with the rules and regulations of the SEC, additional insurance expenses, investor relations activities, and professional services. In addition, we expect to increase the size of our general and administrative function to support our increased compliance requirements and the growth of our business. As a result, 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.
Other Income (Expense) Income


Other income (expense) income consists primarily of interest expense on the Notes and other long-term debt, gains or losses on foreign currency transactions, and interest income earned on our cash, cash equivalents, and cash equivalents. We repaid our long-term debt following the completion of the IPO, and as a result, we expect interest expense to decrease.investments.
Results of Operations
The following tables set forth selected unaudited condensed consolidated statements of operations data and such data as a percentage of revenue for each of the periods indicated:
  Three Months Ended June 30, Six Months Ended June 30,
  2018 2017 2018 2017
         
  (in thousands)
Revenue $53,572
 $38,891
 $103,216
 $76,130
Cost of revenue(1)(2)
 15,890
 11,887
 30,776
 23,096
Gross profit 37,682
 27,004
 72,440
 53,034
Operating expenses(1)(2):
 
 
 
 
Sales and marketing 38,933
 23,018
 68,400
 40,844
Technology and content 16,493
 11,326
 29,818
 21,531
General and administrative 19,448
 9,412
 30,740
 15,679
Total operating expenses 74,874
 43,756
 128,958
 78,054
Loss from operations (37,192) (16,752) (56,518) (25,020)
Other (expense) income: 
 
 
 
Interest expense (2,424) (3,597) (6,134) (5,124)
Loss on debt extinguishment (4,085) (1,882) (4,085) (1,882)
Other income, net 48
 21
 35
 69
Loss before income taxes (43,653) (22,210) (66,702) (31,957)
Provision for income taxes (143) (68) (252) (126)
Net loss $(43,796) $(22,278) $(66,954) $(32,083)



  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
         
  (in thousands)
Revenue $94,765
 $75,862
 $187,411
 $145,479
Cost of revenue(1)(2)
 19,717
 17,803
 38,725
 34,515
Gross profit 75,048
 58,059
 148,686
 110,964
Operating expenses(1)(2):
        
Sales and marketing 57,759
 50,046
 120,174
 94,217
Technology and content 29,514
 24,819
 59,658
 45,090
General and administrative 22,996
 20,575
 46,367
 42,766
Total operating expenses 110,269
 95,440
 226,199
 182,073
Loss from operations (35,221) (37,381) (77,513) (71,109)
Other income (expense):        
Interest expense (7,241) (7,346) (14,390) (9,024)
Other income, net 2,267
 4,106
 4,437
 5,782
Loss before income taxes (40,195) (40,621) (87,466) (74,351)
Income tax benefit (expense) 465
 (143) 223
 (297)
Net loss $(39,730) $(40,764) $(87,243) $(74,648)
(1)Includes equity-based compensation expense as follows:
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017 2020 2019 2020 2019
                
 (in thousands) (in thousands)
Cost of revenue $46
 $5
 $46
 $10
 $296
 $133
 $566
 $217
Sales and marketing 4,432
 715
 4,971
 1,379
 10,878
 7,952
 20,400
 14,228
Technology and content 2,668
 526
 3,049
 990
 6,884
 5,137
 13,220
 8,847
General and administrative 10,409
 3,133
 12,862
 3,712
 8,367
 9,510
 17,817
 19,708
Total equity-based compensation $17,555
 $4,379
 $20,928
 $6,091
 $26,425
 $22,732
 $52,003
 $43,000
(2)Includes amortization of acquired intangible assets as follows:
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017 2020 2019 2020 2019
                
 (in thousands) (in thousands)
Cost of revenue $2,961
 $1,642
 $5,923
 $3,284
 $1,209
 $702
 $2,418
 $1,227
Sales and marketing 194
 161
 389
 322
 50
 29
 100
 29
Technology and content 177
 176
 353
 352
 161
 176
 337
 353
General and administrative —
 27
 —
 54
Total amortization of acquired intangible assets $3,332
 $2,006
 $6,665
 $4,012
 $1,420
 $907
 $2,855
 $1,609


 Three Months Ended June 30, Six Months Ended June 30,
 Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019
 2018 2017 2018 2017        
Revenue 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %
Cost of revenue 30
 31
 30
 30
 21
 23
 21
 24
Gross profit 70
 69
 70
 70
 79
 77
 79
 76
Operating expenses: 
 
 
 
        
Sales and marketing 73
 59
 66
 54
 61
 66
 64
 65
Technology and content 31
 29
 29
 28
 31
 33
 32
 31
General and administrative 36
 24
 30
 21
 24
 27
 25
 29
Total operating expenses 140
 112
 125
 103
 116
 126
 121
 125
Loss from operations (70) (43) (55) (33) (37) (49) (42) (49)
Other (expense) income: 
 
 
 
Other income (expense):        
Interest expense (5) (9) (6) (7) (8) (10) (8) (6)
Loss on debt extinguishment (8) (5) (4) (2)
Other income, net —
 —
 —
 —
 2
 5
 2
 4
Loss before income taxes (83) (57) (65) (42) (43) (54) (48) (51)
Provision for income taxes —
 —
 —
 —
 —
 —
 —
 —
Net loss (83)% (57)% (65)% (42)% (43)% (54)% (48)% (51)%
Comparison of the Three Months Ended June 30, 20182020 and 20172019
Revenue
  Three Months Ended June 30, Change
  2018 2017 Amount %
         
  (dollars in thousands)
Revenue $53,572
 $38,891
 $14,681
 38%


  Three Months Ended June 30, Change
  2020 2019 Amount %
         
  (dollars in thousands)
Revenue $94,765
 $75,862
 $18,903
 25%
Revenue was $53.6$94.8 million for the three months ended June 30, 2018,2020, compared to $38.9$75.9 million for the three months ended June 30, 2017,2019, an increase of $14.7$18.9 million, or 38%25%. The increase in revenue was primarily due to a $14.2$18.2 million, or 49%28%, increase in revenue from business customers, driven by ana net increase of 2,293194 business customers from 13,21417,735 business customers as of June 30, 20172019 to 15,50717,929 business customers as of June 30, 2018,2020, as well as increased sales to our existing business customers. In addition, there was an increase of $0.5 million in revenue from individual customers.
Cost of Revenue and Gross Profit
 Three Months Ended June 30, Change Three Months Ended June 30, Change
 2018 2017 Amount % 2020 2019 Amount %
                
 (dollars in thousands) (dollars in thousands)
Cost of revenue $15,890
 $11,887
 $4,003
 34% $19,717
 $17,803
 $1,914
 11%
Gross profit 37,682
 27,004
 10,678
 40% 75,048
 58,059
 16,989
 29%
Cost of revenue was $15.9$19.7 million for the three months ended June 30, 2018,2020, compared to $11.9$17.8 million for the three months ended June 30, 2017,2019, an increase of $4.0$1.9 million, or 34%11%. The increase in cost of revenue was primarily due to an increase of $1.8$0.8 million in author fees,employee compensation costs, including $0.2 million in equity-based compensation expense, as we added headcount to support our growth. In addition, there was an increase of $1.5$0.7 million in amortization of acquired intangible assets and course creation costs, and an increase of $0.3$0.5 million in depreciation of capitalized software development costs.expense.
Gross profit was $37.7$75.0 million for the three months ended June 30, 2018,2020, compared to $27.0$58.1 million for the three months ended June 30, 2017,2019, an increase of $10.7$17.0 million, or 40%29%. The increase in gross profit was the result of the increase in our revenue during the three months ended June 30, 2018.2020. Gross margin increased from 69%77% for the three months ended June 30, 20172019 to 70%79% for the three months ended June 30, 2018.2020 due to a decrease in author fees as a percentage of revenue.


Operating Expenses
 Three Months Ended June 30, Change Three Months Ended June 30, Change
 2018 2017 Amount % 2020 2019 Amount %
                
 (dollars in thousands) (dollars in thousands)
Sales and marketing $38,933
 $23,018
 $15,915
 69% $57,759
 $50,046
 $7,713
 15%
Technology and content 16,493
 11,326
 5,167
 46% 29,514
 24,819
 4,695
 19%
General and administrative 19,448
 9,412
 10,036
 107% 22,996
 20,575
 2,421
 12%
Total operating expenses $74,874
 $43,756
 
 
 $110,269
 $95,440
 $14,829
 16%
Sales and Marketing
Sales and marketing expenses were $38.9$57.8 million for the three months ended June 30, 2018,2020, compared to $23.0$50.0 million for the three months ended June 30, 2017,2019, an increase of $15.9$7.7 million, or 69%15%. The increase was primarily due to an increase of $13.3$10.3 million in employee compensation costs, including an additional $3.7 million in equity-based compensation expense, as we added headcount to support our growth. Of the total increase in equity-based compensation expense, approximately $1.6 million was related to a cumulative catch-up adjustment recorded upon completion of the IPO. In addition, there was an increase of $0.9 million related to allocated overhead costs primarily driven by our headcount growth, and an increase of $0.6 million due to additional travel expenses related to additional headcount.
Technology and Content
Technology and content expenses were $16.5 million for three months ended June 30, 2018, compared to $11.3 million for the three months ended June 30, 2017, an increase of $5.2 million, or 46%. The increase was primarily due to an increase of $4.6 million in employee compensation costs, including an additional $2.1$2.9 million in equity-based compensation, as we added headcount to support our growth. Of the total increaseThese increases were partially offset by a decrease of $1.4 million in equity-based compensation expense, approximately $0.9marketing and events costs and a decrease of $1.0 million was related to a cumulative catch-up adjustment recorded upon completion of the IPO. In addition, there was an increase of $0.5 million related to allocated overhead costs primarily driven by our headcount growth.in travel expenses.
GeneralTechnology and AdministrativeContent
GeneralTechnology and administrativecontent expenses were $19.4$29.5 million for the three months ended June 30, 2018,2020, compared to $9.4$24.8 million for the three months ended June 30, 2017,2019, an increase of $10.0$4.7 million, or 107%19%. The increase was due to an increase of $6.1 million in employee compensation costs, including $1.7 million in equity-based compensation, as we added headcount to support our growth. These increases were partially offset by a decrease of $0.5 million in in travel expenses.
General and Administrative
General and administrative expenses were $23.0 million for the three months ended June 30, 2020, compared to $20.6 million for the three months ended June 30, 2019, an increase of $2.4 million, or 12%. The increase was primarily due to an increase of $8.8$2.2 million in employee compensation costs, including an additional $7.3 million in equity-based compensation expense, as we added headcount to support our growth. Of the total increaseIn addition, we incurred $1.3 million in costs associated with a secondary offering in June 2020. These increases were partially offset by a decrease of $1.1 million in equity-based compensation, expense, approximately $5.3 million


was related to a cumulative catch-up adjustment recorded upon completionas certain stock options granted at the time of the IPO. In addition, there was an increase of $1.0 million related to allocated overhead costs primarily driven by our headcount growth.IPO have become fully vested.
Other Income (Expense) Income
 Three Months Ended June 30, Change Three Months Ended June 30, Change
 2018 2017 Amount % 2020 2019 Amount %
                
 (dollars in thousands) (dollars in thousands)
Interest expense $(2,424) $(3,597) $1,173
 (33)% $(7,241) $(7,346) $105
 (1)%
Loss on debt extinguishment (4,085) (1,882) (2,203) 117 %
Other income, net 48
 21
 27
 129 % 2,267
 4,106
 (1,839) (45)%
Interest expense decreased slightly as a result of the reduction in the principal balance of our Notes in September 2019.
Other income, net decreased primarily as a result of a decrease of market interest rates earned on our repayment of long-term debt in May 2018. In connection with the repayment, we incurred a loss on debt extinguishment of $4.1 million.investments.
Comparison of the Six Months Ended June 30, 20182020 and 20172019
Revenue
  Six Months Ended June 30, Change
  2018 2017 Amount %
         
  (dollars in thousands)
Revenue $103,216
 $76,130
 $27,086
 36%
  Six Months Ended June 30, Change
  2020 2019 Amount %
         
  (dollars in thousands)
Revenue $187,411
 $145,479
 $41,932
 29%
Revenue was $103.2$187.4 million for the six months ended June 30, 2018,2020, compared to $76.1$145.5 million for the six months ended June 30, 2017,2019, an increase of $27.1$41.9 million, or 36%29%. The increase in revenue was primarily due to a $26.1$40.9 million, or 47%33%, increase in revenue from business customers, driven by ana net increase of 2,293194 business customers from 13,21417,735 business customers as of June 30, 20172019 to 15,50717,929 business customers as of June 30, 2018,2020, as well as increased sales to our existing business customers. In addition, there was an increase of $1.0 million in revenue from individual customers.


Cost of Revenue and Gross Profit
 Six Months Ended June 30, Change Six Months Ended June 30, Change
 2018 2017 Amount % 2020 2019 Amount %
                
 (dollars in thousands) (dollars in thousands)
Cost of revenue $30,776
 $23,096
 $7,680
 33% $38,725
 $34,515
 $4,210
 12%
Gross profit 72,440
 53,034
 19,406
 37% 148,686
 110,964
 37,722
 34%
Cost of revenue was $30.8$38.7 million for the six months ended June 30, 2018,2020, compared to $23.1$34.5 million for the six months ended June 30, 2017,2019, an increase of $7.7$4.2 million, or 33%12%. The increase in cost of revenue was primarily due to an increase of $3.2$1.7 million in author fees,employee compensation costs, including $0.3 million in equity-based compensation expense, as we added headcount to support our growth. In addition, there was an increase of $2.9$1.6 million in amortization of acquired intangible assets and course creation costs, an increase of $0.5 million in depreciation of capitalized software development costs primarily due to an increase in amounts capitalized for internal-use software related to features added to our platform, and an increase of $0.3$1.3 million in hosting and delivery fees to accommodate our growing customer base.author fees.
Gross profit was $72.4$148.7 million for the six months ended June 30, 2018,2020, compared to $53.0$111.0 million for the six months ended June 30, 2017,2019, an increase of $19.4$37.7 million, or 37%34%. The increase in gross profit was the result of the increase in our revenue during the six months ended June 30, 2018.2020. Gross margin remained consistent at 70%increased from 76% for each of the six months ended June 30, 2017 and 2018.


2019 to 79% for the six months ended June 30, 2020 due to a decrease in author fees as a percentage of revenue.
Operating Expenses
 Six Months Ended June 30, Change Six Months Ended June 30, Change
 2018 2017 Amount % 2020 2019 Amount %
                
 (dollars in thousands) (dollars in thousands)
Sales and marketing $68,400
 $40,844
 $27,556
 67% $120,174
 $94,217
 $25,957
 28%
Technology and content 29,818
 21,531
 8,287
 38% 59,658
 45,090
 14,568
 32%
General and administrative 30,740
 15,679
 15,061
 96% 46,367
 42,766
 3,601
 8%
Total operating expenses $128,958
 $78,054
 
 
 $226,199
 $182,073
 $44,126
 24%
Sales and Marketing
Sales and marketing expenses were $68.4$120.2 million for the six months ended June 30, 2018,2020, compared to $40.8$94.2 million for the six months ended June 30, 2017,2019, an increase of $27.6$26.0 million, or 67%28%. The increase was primarily due to an increase of $22.2$24.3 million in employee compensation costs, including an increase$6.2 million in equity-based compensation, expense of $3.6 million, as we added headcount to support our growth. Of the increase in equity-based compensation expense, approximately $1.6 million was related to a cumulative catch-up adjustment recorded upon completion of the IPO. In addition, there was an increase of $1.8$1.6 million related to allocatedin overhead costs primarily driven by our headcount growth, an increase of $1.1 million due to additional travel expenses related to additional headcount, and an increase of $1.0 million in marketing and event costs, including for Pluralsight LIVE, our annual user conference.growth.
Technology and Content
Technology and content expenses were $29.8$59.7 million for the six months ended June 30, 2018,2020, compared to $21.5$45.1 million for the six months ended June 30, 2017,2019, an increase of $8.3$14.6 million, or 38%32%. The increase was due to an increase of $16.1 million in employee compensation costs, including $4.3 million in equity-based compensation, as we added headcount to support our growth. These increases were partially offset by an increase of $0.8 million in capitalized software development costs and a decrease of $0.5 million in travel expenses.
General and Administrative
General and administrative expenses were $46.4 million for the six months ended June 30, 2020, compared to $42.8 million for the six months ended June 30, 2019, an increase of $3.6 million, or 8%. The increase was primarily due to an increase of $7.2$3.1 million in employee compensation costs, including an increase in equity-based compensation expense of $2.1 million, as we added headcount to support our growth. Of the total increase in equity-based compensation expense, approximately $0.9 million was related to a cumulative catch-up adjustment recorded upon completion of the IPO. In addition, there was an increase of $0.9$1.1 million related to allocatedin overhead costs primarily driven by our headcount growth.
General and Administrative
General and administrative expenses These increases were $30.7 million for the six months ended June 30, 2018, compared to $15.7 million for the six months ended June 30, 2017, an increasepartially offset by a decrease of $15.1 million, or 96%. The increase was primarily due to an increase of $12.2 million in employee compensation costs, including an additional $9.1$1.9 million in equity-based compensation expense, primarily due to additional headcount to support our growth. Of the total increase in equity-based compensation expense, approximately $5.3 million was related toand a cumulative catch-up adjustment recorded upon completiondecrease of the IPO. In addition, there was an increase of $2.0$0.8 million related to allocated overhead costs primarily driven byassociated with our headcount growth, an increase of $0.3 million for professional services, and an increase of $0.3 million due to additional travel expenses related to increased headcount.merger with GitPrime in May 2019.
Other Income (Expense) Income
 Six Months Ended June 30, Change Six Months Ended June 30, Change
 2018 2017 Amount % 2020 2019 Amount %
                
 (dollars in thousands) (dollars in thousands)
Interest expense $(6,134) $(5,124) $(1,010) 20 % $(14,390) $(9,024) $(5,366) 59 %
Loss on debt extinguishment (4,085) (1,882) (2,203) 117 %
Other income, net 35
 69
 (34) (49)% 4,437
 5,782
 (1,345) (23)%


Interest expense increased primarily as a result of increased borrowingsthe increase in contractual interest expense and amortization of long-term debt discount and higher interest rates. The interest rate onissuance costs related to the long-term debt outstanding during the six months ended June 30, 2017 was Adjusted LIBOR plus an applicable margin of up to 4.50%, whereas the interest rate on the long-term outstanding during the six months ended June 30, 2018, until the date of repaymentNotes issued in May 2018, was Adjusted LIBOR plus 8.50%. We also incurredMarch 2019.
Other income, net decreased primarily as a loss on debt extinguishment resulting from the repayment of our long-term debt in May 2018. This loss is primarily the result of a prepayment premium and unamortized debt issuance costsdecrease of market interest rates earned on the date of extinguishment.our investments.


Non-GAAP Financial Measures
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017 2020 2019 2020 2019
                
 (dollars in thousands) (dollars in thousands)
Non-GAAP gross profit $40,689
 $28,651
 $78,409
 $56,328
 $76,568
 $58,907
 $151,702
 $112,424
Non-GAAP gross margin 76% 74% 76% 74% 81% 78% 81% 77%
Non-GAAP operating loss $(16,305) $(10,367) $(28,925) $(14,917) $(5,119) $(11,578) $(19,020) $(21,974)
Free cash flow $(9,234) $(10,967) $(22,295) $(8,204) $(17,989) $(11,145) $(15,268) $(8,679)
Non-GAAP Gross Profit and Non-GAAP Gross Margin
Non-GAAP gross profit is a non-GAAP financial measure that we define as gross profit plus equity-based compensation, amortization of acquired intangible assets, and amortizationemployer payroll taxes related to acquired intangible assets.employee stock transactions. We define non-GAAP gross margin as our non-GAAP gross profit divided by our revenue. We believe non-GAAP gross profit and non-GAAP gross margin are useful to investors as they eliminate the impact of certain non-cash expenses and allow a direct comparison of these measures between periods without the impact of non-cash expenses. We believe these non-GAAP measures are useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics generally eliminate the effects of certain non-cash items that may vary from company to company for reasons unrelated to overall profitability.profitability or operating performance.
See the section below titled “—Reconciliation of Non-GAAP Financial Measures” for information regarding the limitations of using our non-GAAP gross profit and non-GAAP gross margin as a financial measuremeasures and for a reconciliation of our non-GAAP gross profit to gross profit, the most directly comparable financial measure calculated in accordance with GAAP.
Non-GAAP Operating Loss
Non-GAAP operating loss is a non-GAAP financial measure that we define as loss from operations plus equity-based compensation, and amortization related toof acquired intangible assets.assets, employer payroll taxes on employee stock transactions, and, as applicable, other special items such as acquisition related costs and secondary offering costs. We believe non-GAAP operating loss provides investors with useful information on period-to-period performance as evaluated by management and comparison with our past financial performance. We believe non-GAAP operating loss is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.
See the section below titled “—Reconciliation of Non-GAAP Financial Measures” for information regarding the limitations of using our non-GAAP operating loss as a financial measure and for a reconciliation of our non-GAAP operating loss to loss from operations, the most directly comparable financial measure calculated in accordance with GAAP.
Free Cash Flow
We define free cash flow as net cash used in(used in) provided by operating activities less purchases of property and equipment and purchases of our content library and other intangible assets. We consider free cash flow to be an important measure because it measures the amount of cash we spend or generate and reflects changes in our working capital. For the three months ended June 30, 2018 and 2017, and for the six months ended June 30, 2018 and 2017, our free cash flow included cash paid for interest on our long-term debt of $1.8 million, $1.4 million, $4.3 million, and $2.6 million, respectively. We repaid all amounts outstanding under our credit facilities in May 2018, and therefore have eliminated cash paid for interest on our long-term debt. For each of the periods presented, our free cash flow was negative as a result of our continued investments to support the growth of our business. 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.
See the section below titled “—Reconciliation of Non-GAAP Financial Measures” for information regarding the limitations of using free cash flow as a financial measure and for a reconciliation of free cash flow to net cash used in operations, the most directly comparable financial measure calculated in accordance with GAAP.
Reconciliation of Non-GAAP Financial Measures
We use non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, and free cash flow in conjunction with traditional GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our boardBoard of directorsDirectors concerning our financial performance. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, and free cash flow should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.


We compensate for these limitations by providing a reconciliation of non-GAAP gross profit, non-GAAP operating loss, and free cash flow to the related GAAP financial measures, gross profit, loss from operations, and net cash used in(used in) provided by operating activities, respectively. We encourage investors and others to review our financial information in its entirety, not to rely


on any single financial measure and to view non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, and free cash flow in conjunction with their respective related GAAP financial measures.
The following table provides a reconciliation of gross profit to non-GAAP gross profit:
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017 2020 2019 2020 2019
                
 (dollars in thousands) (dollars in thousands)
Gross profit $37,682
 $27,004
 $72,440
 $53,034
 $75,048
 $58,059
 $148,686
 $110,964
Equity-based compensation 46
 5
 46
 10
 296
 133
 566
 217
Amortization of acquired intangible assets 2,961
 1,642
 5,923
 3,284
 1,209
 702
 2,418
 1,227
Employer payroll taxes on employee stock transactions 15
 13
 32
 16
Non-GAAP gross profit $40,689
 $28,651
 $78,409
 $56,328
 $76,568
 $58,907
 $151,702
 $112,424
Gross margin 70% 69% 70% 70% 79% 77% 79% 76%
Non-GAAP gross margin 76% 74% 76% 74% 81% 78% 81% 77%
The following table provides a reconciliation of loss from operations to non-GAAP operating loss:
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017 2020 2019 2020 2019
                
 (in thousands) (in thousands)
Loss from operations $(37,192) $(16,752) $(56,518) $(25,020) $(35,221) $(37,381) $(77,513) $(71,109)
Equity-based compensation 17,555
 4,379
 20,928
 6,091
 26,425
 22,732
 52,003
 43,000
Amortization of acquired intangible assets 3,332
 2,006
 6,665
 4,012
 1,420
 907
 2,855
 1,609
Employer payroll taxes on employee stock transactions 997
 1,329
 2,375
 2,773
Secondary offering costs 1,260
 —
 1,260
 918
Acquisition-related costs —
 835
 —
 835
Non-GAAP operating loss $(16,305) $(10,367) $(28,925) $(14,917) $(5,119) $(11,578) $(19,020) $(21,974)
The following table provides a reconciliation of net cash used in(used in) provided by operating activities to free cash flow:
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017 2020 2019 2020 2019
                
 (in thousands) (in thousands)
Net cash used in operating activities $(5,793) $(8,904) $(16,217) $(3,950)
Net cash (used in) provided by operating activities $(9,250) $(7,184) $9,045
 $(1,648)
Less: Purchases of property and equipment (2,706) (1,457) (4,574) (3,025) (6,626) (2,457) (20,520) (4,590)
Less: Purchases of content library (735) (606) (1,504) (1,229) (2,113) (1,504) (3,793) (2,441)
Free cash flow $(9,234) $(10,967) $(22,295) $(8,204) $(17,989) $(11,145) $(15,268) $(8,679)
Liquidity and Capital Resources
As of June 30, 2018,2020, our principal sources of liquidity were cash, cash equivalents, and restricted cash and cash equivalents, and investments totaling $214.4$550.3 million, which were held for working capital purposes. Our cash equivalents and investments are comprised primarily of highly liquid investments in money market funds.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 private sales of equity securities, long-term debt facilities, and our net cash provided by operating activities. In May 2018, we completed our IPO, in which we issued and sold 23,805,000 shares of Class A common stock at a price of $15.00 per share. We received net proceeds of $332.1 million, after underwriting discounts and commissions.
Following the IPO, we repaid our outstanding long-term debt of $137.7 million and incurred a loss on debt extinguishment of $4.1 million in connection with the repayment.
For the three and six months ended June 30, 2018 and 2017, our free cash flow was negative as a result of our continued investments to support the growth of our business. We expect our free cash flow to improve as we experience greater scale in our business and improve operational efficiency, as well as eliminate cash paid for interest as a result of the debt repayment in May 2018. We expect to generate positive free cash flow over the long term.


We believe our existing cash, cash equivalents, and restricted cash and cash equivalents, 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, and the continuing market acceptance of our platform.platform, future acquisitions, and the economic effects of the COVID-19 pandemic. 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 with members of Pluralsight Holdings who did not exchange their limited liability company unitsLLC Units of Pluralsight Holdings in the reorganization transactions entered into in connection with the IPO,Reorganization Transactions, or the TRA Members. As a result of the TRA, we will be obligated to pass along some of thesecertain 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 six months ended June 30, 20182020 and 2017:2019:
  Six Months Ended June 30,
  2018 2017
     
  (in thousands)
Net cash used in operating activities $(16,217) $(3,950)
Net cash used in investing activities (6,078) (4,254)
Net cash provided by financing activities 208,262
 29,205
Effect of exchange rate change on cash, cash equivalents, and restricted cash (86) 24
Net increase in cash, cash equivalents, and restricted cash $185,881
 $21,025
  Six Months Ended June 30,
  2020 2019
     
  (in thousands)
Net cash provided by (used in) operating activities $9,045
 $(1,648)
Net cash used in investing activities (25,720) (483,015)
Net cash provided by financing activities 7,005
 561,853
Effect of exchange rate change on cash, cash equivalents, and restricted cash and cash equivalents (157) 22
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents $(9,827) $77,212
Operating Activities
Cash used inprovided by operating activities for the six months ended June 30, 20182020 of $16.2$9.0 million was primarily due to a net loss of $67.0$87.2 million, partially offset by equity-based compensation of $20.9$52.0 million, a favorable changeamortization of debt discount and issuance costs of $13.3 million, amortization of deferred contract acquisition costs of $12.8 million, net changes in operating assets and liabilities of $12.2$7.7 million, amortization of acquired intangible assets of $6.7 million, amortization of course creation costs of $0.9 million, and depreciation of property and equipment of $4.4$5.9 million, and amortization of acquired intangibles assets of $2.9 million. The net change in operating assets and liabilities was primarily due to a favorable changedecrease in the deferred revenue balanceaccounts receivable of $17.5$38.1 million and a decrease in accounts receivableright-of-use assets of $1.3$3.0 million, partially offset by an increase in prepaiddeferred contract acquisition costs of $13.4 million, a decrease in deferred revenue of $7.8 million, a decrease in accounts payable of $4.6 million, a decrease in accrued expenses and other liabilities of $3.9$4.6 million, and a decrease in accrued expenseslease liabilities of $2.8$2.9 million.
Cash used in operating activities for the six months ended June 30, 20172019 of $4.0$1.6 million was primarily due to a net loss of $32.1$74.6 million, partially offset by equity-based compensation of $6.1$43.0 million, amortization of acquired intangible assetsdeferred contract acquisition costs of $4.0$11.3 million, amortization of course creationdebt discount and debt issuance costs of $0.7$8.3 million, a favorable change in operating assets and liabilities of $13.3$3.4 million, and depreciation of property and equipment of $2.6$4.6 million. The net changeschange in operating assets and liabilities resulted fromwas primarily due to an increase in the deferred revenue balance of $8.8$13.0 million, a decrease in accounts receivable of $7.1 million, and a decrease in right-of-use assets of $2.9 million, partially offset by an increase in deferred contract acquisition costs of $11.4 million, an increase in prepaid expenses of $4.0 million, a decrease in lease liabilities of $3.4 million, and a decrease in accrued expenses and other liabilities of $3.6 million, and accounts payable of $1.3 million, and a decrease in accounts receivable of $1.8 million, partially offset by prepaid expenses of $3.2$3.1 million.
Investing Activities
Cash used in investing activities for the six months ended June 30, 20182020 of $6.1$25.7 million relatedwas due to purchases of property and equipment of $20.5 million and purchases of our content library of $3.8 million. The increase in purchases of property and equipment is largely due to cash paid for the construction of our new global headquarters in Utah, which was approximately $14.9 million during the six months ended June 30, 2020. In addition, we had purchases of investments of $317.0 million, partially offset by proceeds from maturities of short-term investments of $315.6 million.
Cash used in investing activities for the six months ended June 30, 2019 of $483.0 million was due to purchases of investments of $317.1 million, purchase of a business of $163.9 million, purchases of property and equipment of $4.6 million, and purchases of our content library of $1.5 million.
Cash used in investing activities for the six months ended June 30, 2017$2.4 million, partially offset by sales of $4.3 million was related to purchasesinvestments of property and equipment of $3.0 million and purchases of our content library of $1.2$5.0 million.
Financing Activities
Cash provided by financing activities for the six months ended June 30, 20182020 of $208.3$7.0 million was due to $332.1 million in net proceeds from the IPO, $20.0issuance of common stock from employee equity plans of $10.9 million, in borrowings of long-term debt, partially offset by repayments of long-term debt of $137.7 million, payments of offering coststaxes paid related to the IPOnet share settlement of $3.1 million, and payments of debt extinguishment costs of $2.2$3.9 million.
Cash provided by financing activities for the six months ended June 30, 20172019 of $29.2$561.9 million was due to $115.0net proceeds from the issuance of the Notes of $616.7 million in borrowingsand proceeds from the issuance of long-term debt,common stock from employee equity plans of $14.6 million, partially offset by repaymentsthe purchase of long-term debtthe Capped Calls of $85.0 million and payments of debt issuance costs of $0.8$69.4 million.





Commitments and Contractual Obligations
A portion of the net proceeds from the IPO were used to repay the outstanding principal balance of $137.7 million under our credit agreement with Guggenheim Corporate Funding LLC, or the Guggenheim Credit Agreement, and extinguish the debt in May 2018. The Company incurred a loss on debt extinguishment of $4.1 million in connection with the repayment. Outside of the repayment of the debt outstanding under the Guggenheim Credit Agreement and routine transactions made in the ordinary course of business, thereThere have been no material changes to the contractual obligations as disclosed in the Prospectus.our Annual Report. Refer to “Note 10—Convertible Senior Notes”, “Note 11—Leases”, and “Note 12—Commitments and Contingencies” of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding our commitments and contractual obligations.
Off-Balance Sheet Arrangements
ThroughAs of June 30, 2018,2020, and December 31, 2019, 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. Critical accounting policies and estimates are those that we consider critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
The Company'sCompany’s significant accounting policies are discussed in "Index to the Consolidated Financial Statements—Description of Business and “Note 2—Summary of Significant Accounting Policies"Policies and Recent Accounting Pronouncements” in the Prospectus.our Annual Report. There have been no significant changes to these policies for the three months ended June 30, 2018,2020, except as noted in "Note“Note 2—Summary of Significant Accounting Policies"Policies and Recent Accounting Pronouncements” of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
JOBS Act Accounting Election
We meet the definition of an emerging growth company under the Jumpstart Our Business Startups Act of 2012, which permits us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.
Recent Accounting Pronouncements
See "Note“Note 2—Summary of Significant Accounting Policies"Policies and Recent Accounting Pronouncements” of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We have operations in the United States and internationally, and we are exposed to market risk in the ordinary course of business. Our market risk is primarily a result of fluctuations in foreign currency exchange rates and variable interest rates.
Foreign Currency Exchange Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound Sterling, Euro, Swedish Krona,and the Australian Dollar, Singapore Dollar, and Indian Rupee.Dollar. Due to the relative size of our international operations to date, our foreign currency exposure has been fairly limited and thus we have not instituted a hedging program. We expect our international operations to continue to grow in the near term and we are continually monitoring our foreign currency exposure to determine when we should begin a hedging program. Today, our international contracts are mostly denominated in U.S. dollars, while our international operating expenses are often denominated in local currencies. In the future, we plan to begin denominating certain of our international contracts in local currencies, and over time, an increasing portion of our international contracts may be denominated in local currencies. Additionally, as we expand our international operations a larger portion of our operating expenses will be denominated in local currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may affect our results of operations when translated into U.S. dollars. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical condensed consolidated financial statements for any of the periods presented.


Interest Rate Sensitivity
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. As of June 30, 2018,2020, we had cash, cash equivalents, and restricted cash and cash equivalents, and investments of $214.4$550.3 million, which consisted primarily of bank deposits and money market funds. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations of interest income have not been significant.


As of June 30, 2020, we had $593.5 million in aggregate principal amount of Notes outstanding. The Notes have a fixed annual interest rate of 0.375%, and, therefore, we do not have economic interest rate exposure on the Notes. However, the values of the Notes are exposed to interest rate risk. Generally, the fair value of our fixed interest rate Notes will increase as interest rates fall and decrease as interest rates rise. As of June 30, 2020, the fair value of the Notes was estimated to be $513.4 million. We carry the Notes as face value less unamortized discount on our balance, and we present the fair value for required disclosure purposes only.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a–15(e) and Rule 15d–15(e) under the Exchange Act that are designed to ensureprovide reasonable assurance that information required to be disclosed by a companythe Company in the reports that it fileswe file or submitssubmit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensureprovide reasonable assurance that information required to be disclosed by a companythe Company in the reports that it fileswe file or submitssubmit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2018.2020. Based on the evaluation of our disclosure controls and procedures as of June 30, 2018,2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at theto provide reasonable assurance level.that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (a) reported within the time periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the effects that the COVID-19 pandemic may have on our internal controls to minimize the impact on their design and operating effectiveness.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected.





PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are, from time to time, subject to legal proceedings and claims arising from the normal course of business activities, and an unfavorable resolution of any of these matters could materially affect our future business, results of operations, financial condition, and cash flows.
The information required by this item is provided in Note 12 to our financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Future litigation may be necessary, among other things, to defend ourselves or our users by determining the scope, enforceability, and validity of third-party proprietary rights or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Item 1A. Risk Factors
For a discussion of potential risks and uncertainties, see the information in the section titled "Risk Factors"“Risk Factors” in our Annual Report, which section is incorporated herein by reference. The following risk factors supplement and should be read in conjunction with those risk factors referenced above. In addition to the risk factors below, unforeseen effects from COVID-19 and the resulting global economic impacts may give rise to additional risks or amplify many of the risks discussed in this Item 1A.
Risks Related to Our Business and Our Industry

The impact of the COVID-19 pandemic has and may continue to materially adversely affect our stock price, business operations, and overall financial performance.
Since December 2019, when COVID-19 was first reported in China, it has spread globally and the WHO declared it as a pandemic in March 2020. This pandemic has and may continue to adversely affect worldwide economic activity, business operations, and financial markets. The duration and magnitude of the extent to which the COVID-19 pandemic continues to impact our stock price, business operations, and overall financial performance is unknown at this time and will depend on 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; the measures implemented or suggested by governing bodies, such as cities, counties, states, countries, and the WHO, to slow the spread of COVID-19 (for example, the closure of businesses deemed “non-essential;” social distancing; international border closures; and travel restrictions); 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 COVID-19-driven recession in the Prospectus.United States; how quickly and to what extent normal economic and operating activities can resume; and other factors that are not predictable. Even after the COVID-19 pandemic has subsided, we may continue experiencing adverse effects to our business as a result of its global economic impact, including the current recession in the United States. If we are not able to sufficiently manage and effectively respond to the ongoing impact the of COVID-19 outbreak, our business will be harmed.
Since March 2020 we have taken precautionary measures and operational modifications to protect our employees, contractors, and their families, including: converting customer events, such as Pluralsight LIVE Europe, to virtual-only experiences; temporarily closing our offices and implementing a mandatory worldwide work-from-home policy; banning all employee travel; eliminating discretionary spending; and limiting the hiring of additional personnel. In addition, we may deem it advisable to alter, postpone, convert to virtual-only or cancel entirely future in-person customer, employee or industry events. Such restrictions hinder our ability to interact with our prospective and existing customers in-person and host conferences and events in-person, which has and may continue to impact sales of our products and services, decrease customer satisfaction and the effectiveness of our support activities, extend sales cycles and increase attrition rates. We actively monitor COVID-19-related developments and may take further actions that alter our business operations as may be required by local, state or federal authorities or that we determine are in the best interests of our personnel, customers, vendors and stockholders. The extent these measures will negatively affect our sales and marketing efforts, sales cycles, personnel productivity, or customer retention, any of which could harm our financial performance and business operations, is indeterminable at this time.
Item 2. Unregistered SalesTechnology spending by our customers or prospective customers has been and may continue to be impacted by conditions presented by the COVID-19 pandemic, including the recession in the United States. These conditions have and may continue to cause them to reduce or delay their purchasing decisions, limit their ability to purchase our offerings, reduce their ability to provide payment under existing contracts, prolong payment periods, decrease our customer retention, or delay our ability to provision our products and services, all of Equity Securitieswhich could adversely affect our results of operations, future sales, and Useoverall financial performance. For example, we experienced a decrease in our dollar-based net retention rate during the first half of Proceeds2020, in part due to the impact of COVID-19, and because we calculate that metric on a twelve-month trailing period, the cumulative impact of the decrease for will manifest for at least the remainder of the year. COVID-19 may also impact our dollar-based net retention rate in future quarters. Further, travel restrictions and our work-from-home mandate as a result of the COVID-19 pandemic hinders
Recent Sales
our ability to interact with our prospective and existing customers in-person and host conferences and events in-person, which has and may continue to impact sales of Unregistered Securitiesour products and services, decrease customer satisfaction and the effectiveness of our support activities, extend sales cycles and increase attrition rates.
In connectionThe conditions presented by the COVID-19 pandemic may affect provisioning of goods and services by our suppliers and vendors, including Amazon Web Services and internet service providers. For example, the COVID-19 pandemic could cause some of our third-party providers to shut down their business, experience security incidents that impact our business, delay performance or delivery of goods and services, or experience interference with the Reorganization Transactionssupply chain of hardware required by their systems and the IPO, Pluralsight, Inc. issued 58,111,572 sharesservices, any of Class B common stock and 14,048,138 shares of Class C common stock to members of Pluralsight Holdings who retained common limited liability company units of Pluralsight Holdings, or LLC Units.which could materially adversely affect our business. In addition, a totalthe COVID-19 pandemic has resulted in more personnel working from home and conducting work via the internet and if the network and infrastructure of 39,110,660 shares of Class A common stock were issued to shareholders of certain members of Pluralsight Holdings that were corporations that merged into Pluralsight, Inc. and certain members of Pluralsight Holdings who exchanged their LLC Units for shares of Class A common stock of Pluralsight, Inc. None of the foregoing transactions involved any underwriters. The issuances of shares of Class A and Class B common stock described in this paragraph were made in reliance on Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder. The members of Pluralsight Holdings who retained LLC Units have the right, from time to time and subjectinternet providers becomes overburdened by increased usage or is otherwise unreliable or unavailable, our personnel’s access to the terms of the exchange agreement,internet to exchange their LLC Units, along with a corresponding number of sharesconduct business could be negatively impacted. Limitations on access or disruptions to services or goods provided by or to some of our Class B or Class C common stock, as applicable, for shares of Pluralsight, Inc.'s Class A common stock on a one-for-on basis, subjectsuppliers and vendors upon which our platform and business operations relies, could interrupt our ability to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and similar transactions.
From April 1, 2018 through May 17, 2018 (the filing dateprovide our offerings, decrease the productivity of our registration statementworkforce, and significantly harm our business operations, financial performance and results of Form S-8), we issued 1,824,575 RSUs to employees underoperations.
Moreover, the 2017 Plan. The issuanceincrease in remote working may also result in privacy, data protection, data security, and fraud risks, and our understanding of applicable legal and regulatory requirements, as well as the foregoing securities did not involve any underwriters or underwriting discounts or commissions and the securities were deemed to be exemptlatest guidance from registration under the Securities Act in reliance upon Rule 701 promulgated under Section 3(b) of the Securities Act.
Use of Proceeds from Public Offering of Common Stock
On May 21, 2018, we closed the IPO, in which we sold 23,805,000 shares of Class A common stock at a price to the public of $15.00 per share, including shares soldregulatory authorities in connection with the full exerciseCOVID-19 pandemic may be subject to legal or regulatory challenge. Our platform and the other systems or networks used in our business have experienced and may continue experiencing an increase in attempted cyber-attacks, targeted intrusion, ransomware, and phishing campaigns seeking to take advantage of shifts to personnel working remotely using their household or personal internet networks and leverage fears promulgated by the COVID-19 pandemic. The success of any of these unauthorized attempts could substantially impact our platform, the proprietary and other confidential data contained therein or otherwise stored or processed in our operations, and ultimately on our business. Any actual or perceived security incident also may cause us to incur increased expenses to improve our security controls and to remediate security vulnerabilities. Although we retain errors and omissions insurance coverage for certain security and privacy damages and claim expenses, this coverage may be insufficient to compensate us for all liabilities that we may incur as a result of any actual or potential security breach, and we cannot be certain that insurance coverage will continue to be available to us on economically reasonable terms, or at all, or that an insurer will not deny coverage as to any future claim. One or more claims that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
In the event a significant number of our employees, authors, or members of our key personnel become unavailable due to the COVID-19 pandemic, our business could be harmed, employee morale and cohesion could suffer, and our financial performance could be materially negatively impacted. Further, preservation of our company culture, efforts to collaborate, and the productivity of personnel could be compromised by the physical distance and lack of in-person interaction created by social distancing, travel restrictions, our global work-from-home mandate, and other measures responsive to the COVID-19 pandemic, which could harm our business.
In the event financial markets continue to worsen from impacts of the underwriters' optionCOVID-19 pandemic, investments in some financial instruments may pose risks arising from credit and market liquidity concerns. The long-term effects to purchase additional shares. The offerthe global securities markets of pandemics and sale of allother public health crises, including the ongoing COVID-19 pandemic, are difficult to estimate or predict. Concerns regarding the economic impact of the sharesCOVID-19 pandemic has caused extreme volatility in financial and other capital markets throughout the world, which has and may continue to materially adversely impact our stock price. Further, such volatility in the IPO were registered underglobal capital markets could increase the Securities Act pursuantcost of capital and could adversely impact our access to a registration statementcapital.
The global COVID-19 outbreak and its long-term impacts on our business are not fully ascertainable at this time and difficult to predict. If our plans to ensure our business functions continue to operate effectively during and after this pandemic are unsuccessful or inadequate, our business, results of operations, financial condition, and stock price could be harmed. Further, to the extent the COVID-19 pandemic adversely affects our business, results of operations, or financial condition, it may also have the effect of heightening many of the risks described in this “Risk Factors” section as well as the risk factors described in our most recent Annual Report on Form S-1 (File No. 333-224301), which was declared effective by10-K/A filed on March 2, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC, which are incorporated by reference.
The market in which we participate is competitive, and if we do not compete effectively, our results of operations could be harmed.
The market for professional skill development is highly competitive, rapidly evolving, and fragmented, and we expect competition to continue increasing in the future. A significant number of companies developed, or are developing, products and services that compete or will compete with our offerings. This competition could result in decreased revenue, increased pricing

pressure, increased sales and marketing expenses, and loss of market share, any of which could adversely affect our business, results of operations, and financial condition.
We face competition from consumer-centric SaaS solutions, legacy enterprise SaaS solutions, in-person instructor-led training, or ILT, and free solutions. We compete directly or indirectly with:
•individual-focused e-learning services, such as Udemy, and Udacity;
•legacy e-learning services, such as Skillsoft and Cornerstone OnDemand;
•productivity and employee development software services, such as Microsoft/LinkedIn;
•ILT vendors, such as Global Knowledge, General Assembly, and New Horizons;
•software development productivity tools, such as Code Climate, Waydev, and BlueOptima; and
•free solutions, such as YouTube.
Many of our competitors and potential competitors are larger and have greater brand name recognition, longer operating histories, larger marketing budgets, established customer relationships, access to larger customer bases, and significantly greater resources for the development of their solutions. In addition, some of our competitors consolidated and continued consolidation among them may subject us to increased competitive pressures that may harm our results of operations. Further, we face potential competition from participants in adjacent markets that may enter our markets by leveraging related technologies and partnering with or acquiring other companies or providing alternative approaches to provide similar results. We may face competition from companies entering our market, including large technology companies, that could expand their offerings or acquire one of our competitors. While these companies may not currently focus on May 16, 2018. The shares were soldour market, they may have significantly greater financial resources and longer operating histories than we do. As a result, our competitors and potential competitors may respond more quickly and effectively than we can to new or changing opportunities, technologies, or customer requirements. Further, some potential customers, particularly large enterprises, may elect to develop their own internal solutions that address their technology skill development needs.
Our ability to compete is subject to the risk of future disruptive technologies. If new technologies emerge delivering skill development solutions at lower prices, with greater feature sets, more efficiently, or more conveniently, such technologies could adversely impact our ability to compete. With the introduction of new technologies and market entrants, we expect competition to intensify in the future.
Some of our principal competitors offer solutions at a lower price or for free, which may result in pricing pressures on us. Many of our competitors offering free solutions are also integrating features found previously only with paid solutions, which layers additional pressure on our pricing and feature development. If we do not maintain our pricing levels and competitive differentiation in the market, our results of operations could be negatively impacted.
If we fail to retain and recruit key employees or qualified technical and sales personnel, our business could be harmed.
We believe our success depends on the continued employment of our senior management and other key employees. We also rely on our leadership team in the areas of technology, content, marketing, sales, services and general and administrative functions. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, such as the resignation of our Chief Experience Officer whose departure became effective July 13, 2020, which could disrupt our business. Challenges attracting and recruiting key senior personnel upon the departure of an aggregate offering priceexecutive team member, implementation of approximately $357.1 million. We raised $332.1 million in net proceeds after deducting $25.0 million in underwriters' discountsany team member reorganization coinciding with such departure, training and commissions but before deducting offering costs. As of June 30, 2018, we have reclassified approximately $7.4 million in offering costs into stockholders' equity as a reductiononboarding any newly hired employees, and the impacts of the net proceeds received fromexecutive team member’s departure on employee morale, could have a serious adverse effect on our business.
Our future success depends on our ability to continue enhancing and introducing new content and platform features, which makes attracting and retaining qualified personnel with the IPO.requisite education, background, and industry experience crucial. As we expand our business globally, our continued success will also depend, in part, on our ability to attract and retain qualified sales, marketing, and operational personnel capable of supporting a larger and more diverse worldwide customer base. The managing underwritersloss of a significant number of our IPO weretechnology, content or sales personnel and their services could be disruptive to our development efforts or customer relationships. In addition, if any of our key employees joins a competitor or decides to otherwise compete with us, we may experience a material disruption of our operations and business strategy, which may cause us to lose customers or increase operating expenses and may divert our attention as we seek to recruit replacements for the departed employees.
We are engaged in legal proceedings that could cause us to incur unforeseen expenses and occupy a significant amount of our management’s time and attention.
From time to time, we are subject to litigation or claims, including securities class actions and shareholder derivative lawsuits, which are typically expensive to defend. Resolving, disputing and litigating legal claims could cause us to incur unforeseen expenses and occupy a significant amount of management’s time and attention, which could negatively affect our business operations and financial condition. For example, a class action complaint was filed in August 2019 by a stockholder in the U.S. District Court for

the Southern District of New York against us and some of our officers alleging violation of securities laws and seeking unspecified damages. The action was transferred to the U.S. District Court for the District of Utah in October 2019 and in March 2020, a lead plaintiff was appointed. An amended complaint was filed on June 3, 2020. The amended complaint names us as defendants, along with certain of our officers, members of our Board of Directors, and Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC. No paymentsLLC, the lead underwriters from our March 2019 common stock offering.
We believe this lawsuit is without merit and intend to defend the case vigorously. We are unable to estimate a range of loss, if any, that could result were made by usthere to directors, officers,be an adverse final decision. If an unfavorable outcome were to occur in this case, it is possible that the impact could be material to our results of operations in the period(s) in which any such outcome becomes probable and estimable. While we have insurance for this class action and other types of claims, there is no assurance that our available insurance will be sufficient to cover these claims. For more information, please see Note 12 to our financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q.
Adverse economic conditions in the United States and international countries has and may continue to adversely impact our business and results of operations.
Unfavorable general economic conditions, such as the existing COVID-19 pandemic-driven recession or persons owning ten percenteconomic slowdown in the United States or in one or more of our other major markets, has and may continue to adversely affect demand for our platform. Changing macroeconomic conditions may affect our business in a number of ways. For example, spending patterns of businesses are sensitive to the general economic climate. Technology spending by our customers or prospective customers has been and may continue to be impacted by conditions presented by the COVID-19 pandemic as customers may deem subscriptions to our platform discretionary. During the first half of 2020, we have seen and may continue to see customers or prospective customers reduce or delay their purchasing decisions, limit their ability to purchase our offerings, reduce their ability to provide payment under existing contracts, prolong payment periods, decrease our customer retention, or delay our ability to provision our products and services, all of which could adversely affect our results of operations, future sales, and overall financial performance. Subscriptions for our platform may be considered discretionary by many of our current and potential customers. As a result, businesses considering whether to purchase or renew subscriptions to our products may be influenced by macroeconomic factors.
There is significant uncertainty, which has intensified as a result of the conditions presented by the COVID-19 pandemic, about the future relationship between the United States and other countries with respect to trade policies, treaties, government relations, and tariffs. The current U.S. presidential administration called for substantial changes to U.S. foreign trade policy with China and other countries, including the possibility of imposing greater restrictions on international trade and significant increases in tariffs on goods imported into the United States. Many of our customers who conduct business in China may be impacted by these policies. If the United States’ relationship with China deteriorates or results in trade protection measures, retaliatory actions, tariffs, or increased barriers, policies that favor domestic industries, or heightened import or export licensing requirements or restrictions, then our operations and business may be adversely affected due to such changes in the economic and political ecosystem.
Risks Related to Our Class A Common Stock
The Continuing Members have the right to have their LLC Units exchanged for shares of Class A common stock and any disclosure of such exchange or the subsequent sale of such Class A common stock may cause volatility in our stock price.
As of June 30, 2020, we had an aggregate of 32,557,951 shares of Class A common stock issuable upon exchange of LLC Units that are held by the Continuing Members. Under the Fourth LLC Agreement, the Continuing Members will be entitled to have their LLC Units exchanged for shares of our Class A common stock.
We cannot predict the timing, size, or disclosure of any future issuances of our Class A common stock resulting from the exchange of LLC Units or the effect, if any, that future issuances, disclosure, if any, or sales of shares of our Class A common stock may have on the market price of our Class A common stock. Sales or distributions of substantial amounts of our Class A common stock, or the perception that such sales or distributions could occur, may cause the market price of our Class A common stock to their associates,decline.
The multi-class structure of our common stock has the effect of concentrating voting control with Aaron Skonnard, our co-founder, Chief Executive Officer, and Chairman, which limits or precludes your influence as a stockholder on corporate matters and may have a negative impact on the price of our Class A common stock.
Our Class C common stock has 10 votes per share, our Class B common stock has one vote per share, and our Class A common stock, our publicly traded stock, has one vote per share. Aaron Skonnard, our co-founder, Chief Executive Officer, and Chairman, personally and through his associated entities, holds all our issued and outstanding Class C common stock, and as of June 30, 2020 holds approximately 50.3% of the combined voting power of our outstanding capital stock. As restricted share units of Pluralsight Holdings held by Mr. Skonnard vest over time, he will receive additional LLC Units and Class C common stock with 10 votes per share. As a result, Mr. Skonnard and his associated entities have the ability to control or significantly influence any action requiring the general approval of our stockholders, including the election and removal of our directors, amendments to our affiliates,amended and restated certificate of incorporation and amended and restated bylaws, the approval of any merger, consolidation, sale of all

or substantially all of our assets, or other than paymentsmajor corporate transaction. Many of these actions may be taken even if they are opposed by other stockholders. This concentration of ownership and voting power may delay, defer, or prevent an acquisition by a third party or other change of control of us and may make some transactions more difficult or impossible without his support, even if such events are in the ordinary coursebest interests of other stockholders. This concentration of voting power with Mr. Skonnard and his associated entities may have a negative impact on the price of our Class A common stock.
As our Chief Executive Officer, Mr. Skonnard controls our day-to-day management and the implementation of major strategic investments of our company, subject to authorization and oversight by our board of directors. As a board member and officer, Mr. Skonnard owes fiduciary duties to us and our stockholders, including those of care and loyalty, and must act in good faith and with a view to the interests of the corporation. As a stockholder, even a controlling stockholder, Mr. Skonnard is entitled to vote his shares, and shares over which he has voting control, in his own interests, which may not always be in the interests of our stockholders generally. Because Mr. Skonnard, personally and through his associated entities, holds his economic interest in our business primarily through Pluralsight Holdings, rather than through the public company, he may have conflicting interests with holders of shares of our Class A common stock. For example, Mr. Skonnard may have a different tax position from us, which could influence his decisions regarding whether and when we should dispose of assets or incur new or refinance existing indebtedness, especially in light of the existence of the TRA, and whether and when we should undergo certain changes of control within the meaning of the TRA or terminate the TRA. In addition, the structuring of future transactions may take into consideration these tax or other considerations even where no similar benefit would accrue to officersus. See the section entitled “Certain Relationships and Related Party Transactions—Tax Receivable Agreement” incorporated by reference to our definitive proxy statement on Schedule 14A filed on March 18, 2020 for salaries.additional information. In addition, Mr. Skonnard’s significant ownership in us and resulting ability to effectively control or significantly influence us may discourage someone from making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which you as a holder of shares of our Class A common stock might otherwise receive a premium for your shares over the then-current market price.
Pluralsight Inc. usedIn addition, in July 2017, Standard & Poor’s announced that they would cease allowing most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Affected indices include the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Under the announced policies, our multi-class capital structure makes us ineligible for inclusion in any of these indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track these indices will not invest in our stock. Because of our dual class structure, we may be excluded from these indexes and we cannot assure you that other stock indexes will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors.
Although we do not rely on the "controlled company" exemption under the rules and regulations of Nasdaq, we have the right to use such exemption and therefore we could in the future avail ourselves of certain reduced corporate governance requirements.
Aaron Skonnard and his associated entities, collectively, hold a majority of the voting power of our outstanding capital stock, and therefore we are considered a "controlled company" as that term is set forth in the rules and regulations of Nasdaq. Under these rules, a company of which more than 50% of the voting power is held by a person or group of persons acting together is a "controlled company" and may elect not to comply with certain rules and regulations of Nasdaq regarding corporate governance, including:
the requirement that a majority of its board of directors consist of independent directors;
the requirement that its director nominees be selected or recommended for the board's selection by a majority of the board's independent directors in a vote in which only independent directors participate or by a nominating committee comprised solely of independent directors, in either case, with board resolutions or a written charter, as applicable, addressing the nominations process and related matters as required under the federal securities laws; and
the requirement that its compensation committee be composed entirely of independent directors with a written charter addressing the committee's purposes and responsibilities.
These requirements would not apply to us if, in the future, we choose to avail ourselves of the "controlled company" exemption. Although we qualify as a "controlled company," we do not currently rely on these exemptions and we fully comply with all corporate governance requirements under the rules and regulations of Nasdaq, including any phase-in periods specified thereunder. However, if we were to utilize some or all of these exemptions, we would not comply with certain of the net proceedscorporate governance standards of Nasdaq, which could adversely affect the protections for other stockholders.
Our stock price may continue being volatile, and it may decline regardless of our operating performance.
Prior to our IPO, there was no public market for shares of our Class A common stock. On May 17, 2018, we sold shares of our Class A common stock to the public at $15.00 per share. From May 17, 2018, the date that shares of our Class A common stock began trading on Nasdaq, through June 30, 2020, the market price for our Class A common stock has ranged from $6.59 per

share to $38.37 per share. The market price of our Class A common stock may continue fluctuating significantly in response to numerous factors, many of which are beyond our control, including, among others:
actual or anticipated fluctuations in our revenue and other results of operations, including as a result of the addition or loss of any number of customers;
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;
the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;
failure of securities analysts to initiate or maintain coverage of us, changes in ratings and financial estimates and the publication of other news by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
changes in operating performance and stock market valuations of SaaS-based software or other technology companies, or those in our industry in particular;
the size of our public float;
price and volume fluctuations in the trading of our Class A common stock and in the overall stock market, including as a result of trends in the economy as a whole;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business or industry, including data privacy, data protection, and information security;
lawsuits threatened or filed against us for claims relating to intellectual property, employment issues, or otherwise;
actual or perceived security breaches;
changes in our board of directors or management;
short sales, hedging, and other derivative transactions involving our Class A common stock;
sales of large blocks of our Class A common stock including sales by our executive officers, directors, and significant stockholders;
the impact of the COVID-19 pandemic on our business operations and overall financial performance; and
other events or factors, including changes in general economic, industry, and market conditions, and trends, as well as any natural disasters, which may affect our operations.
Following a period of volatility in the market price of our securities, we became the subject of securities litigation. For example, in August 2019, a class action complaint was filed by a stockholder in the U.S. District Court for the Southern District of New York against us and certain of our officers alleging violation of securities laws and seeking unspecified damages. In October 2019, the action was transferred to the U.S. District Court for the District of Utah and in March 2020, a lead plaintiff was appointed. An amended complaint was filed on June 3, 2020. The amended complaint names us as defendants, along with certain of our officers, members of our Board of Directors, and Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC, the lead underwriters from our March 2019 common stock offering. We believe this lawsuit is without merit and intend to defend the case vigorously. We are unable to estimate a range of loss, if any, that could result were there to be an adverse final decision. If an unfavorable outcome were to occur in this case, it is possible that the impact could be material to our results of operations in the period(s) in which any such outcome becomes probable and estimable. While we have insurance for this lawsuit and other types of claims, there is no assurance that our available insurance will be sufficient to cover these claims.
We may experience more such litigation following future periods of volatility. This type of litigation may result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business and financial condition.
Future sales of shares by existing stockholders could cause our stock price to decline.
Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our Class A common stock in the public market following our offering in June 2020, the market price of our Class A common stock could decline.  
If securities or industry analysts do not publish research or reports about our business, or if they downgrade our common stock, the price of our Class A common stock could decline.
The trading market for our Class A common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not influence or control these analysts. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price could decline. In addition, if our results of operations fail to meet the forecast of analysts, our stock price could decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our stock price and trading volume to decline.
Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans, or otherwise could dilute all other stockholders.

We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. For example, we expect to grant equity awards under our equity incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make ainvestments in complementary companies, products, or technologies, and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital contributionstock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our Class A common stock to decline.
Our estimates of our total addressable market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business may not grow at similar rates.
Our prospectus dated June 9, 2020 (File No. 333-239009) as filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act includes estimates of our total addressable market opportunity and forecasts of market growth, which are based in part on industry sources. Our total addressable market opportunity estimates and growth forecasts, whether obtained from industry sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. Our publicly announced estimates and forecasts relating to the size and expected growth of our market may prove to be inaccurate. Even if the market in which we compete meets our size estimates and forecasted growth, our business may not grow at similar rates.
We generally do not intend to pay dividends.
We generally do not intend to pay dividends to the holders of our Class A common stock for the foreseeable future, except possibly in connection with maintaining certain aspects of our UP-C structure. See the section entitled “—Risks Related to Our Organizational Structure—The disparity between the U.S. corporate tax rate and the U.S. tax rate applicable to non-corporate members of Pluralsight Holdings may complicate our ability to maintain our intended capital structure, which could impose transaction costs on us and require management attention” incorporated by reference to our Annual Report on Form 10-K/A filed on March 2, 2020. Our ability to pay dividends on our Class A common stock may be restricted by the terms of any future debt incurred or preferred securities issued by us or our subsidiaries or law. Payments of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our business, financial condition, and results of operations, current and anticipated cash needs, plans for expansion and any legal or contractual limitation on our ability to pay dividends. As a result, any capital appreciation in exchange for 23,805,000 LLC Unitsthe price of Pluralsight Holdings. As its sole managing member, Pluralsight, Inc. causedour Class A common stock may be your only source of gain on your investment in our Class A common stock.
If, however, we decide to pay a dividend in the future, we would likely need to cause Pluralsight Holdings to usemake distributions to Pluralsight, Inc. in an amount sufficient to cover cash dividends, if any, declared by us.
Deterioration in the net proceeds it receivedconsolidated financial condition, earnings, or cash flow of Pluralsight Holdings for any reason could limit or impair its ability to pay cash distributions or other distributions to us. In addition, our ability to pay dividends in the future is dependent upon our receipt of cash from Pluralsight Inc.Holdings and its subsidiaries. Pluralsight Holdings and its subsidiaries may be restricted from distributing cash to repay allus by, among other things, law or the documents governing our existing or future indebtedness.
Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or other employees.
Our amended and restated bylaws provide that, for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees of ours or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the $137.7 millionDelaware General Corporation Law, our amended and restated certificate of outstanding long-term debtincorporation, or our amended and restated bylaws, or (iv) any other action asserting a claim that is governed by the internal affairs doctrine, the exclusive forum shall be a state or federal court located within the State of Delaware, in substantially all cases. Our amended and restated bylaws also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for any action asserting a claim arising pursuant to the Securities Act, such a provision known as a “Federal Forum Provision.” Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and consented to these provisions. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees.
In light of the decision issued by the Delaware Supreme Court in Salzburg et al. v. Matthew Sciabacucchi, No. 346, 2019 (Del.), finding Federal Forum Provisions are valid under Delaware law, which decision overruled the Guggenheim Credit Agreementdecision issued by the Delaware Court of Chancery in Matthew Sciabacucchi v. Matthew B. Salzberg et al., C.A. No. 2017-0931-JTL (Del. Ch.), we intend to enforce the Federal Forum Provision in our amended and a prepayment premium of $2.1 million. In addition, Pluralsight Inc. caused Pluralsight Holdingsrestated bylaws.
If we face relevant litigation and are unable to settle outstanding equity appreciation rights for $0.3 million and payenforce these provisions, we may incur additional costs of $7.4 million associated with the offering.resolving such matters in other jurisdictions, which could harm our business, financial condition, or results of operations.





Item 6. Exhibits
    Incorporated by Reference Filed or Furnished Herewith
Exhibit
Number
 Description Form File No. Exhibit Number 
Filing Date
with SEC
 
3.1 
Amended and Restated Certificate of Incorporation of the Registrant.
         X
3.2 
Amended and Restated Bylaws of the Registrant.
         X
4.1 
Form of Class A common stock certificate of the Registrant.
 S-1/A 333-224301 4.1 May 7, 2018  
10.1 
Tax Receivable Agreement, between the Registrant, Pluralsight Holdings, LLC, and other parties thereto, dated May 15, 2018.
         X
10.2 
Fourth Amended and Restated Limited Liability Company Agreement of Pluralsight Holdings, dated May 16, 2018.
         X
10.3 
Amended and Restated Registration Rights Agreement, between the Registrant and the investor parties thereto, dated May 16, 2018.
         X
31.1 
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         X
31.2 
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         X
32.1* 
Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         X
32.2* 
Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         X
101.INS XBRL Instance Document         X
101.SCH XBRL Taxonomy Extension Schema Document         X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document         X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document         X
101.LAB XBRL Taxonomy Extension Label Linkbase Document         X
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document         X
Incorporated by ReferenceFiled or Furnished Herewith
Exhibit
Number
DescriptionFormFile No.Exhibit Number
Filing Date
with SEC
10.1
First Amendment to Office Lease, between Highline Office 1, L.C. and Pluralsight, LLC, dated as of November 6, 2018.
X
10.2
Second Amendment to Office Lease, between Highline Office 1, L.C. and Pluralsight, LLC, dated as of February 15, 2019.
X
10.3
Third Amendment to Office Lease, between Highline Office 1, L.C. and Pluralsight, LLC, dated as of May 20, 2020.
X
10.4+
Separation Agreement, dated July 9, 2020, between the Pluralsight, LLC and Nate Walkingshaw.
X
31.1
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1*
Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2*
Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INSInline XBRL Instance DocumentX
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


+Indicates a management contract or compensatory plan.

*The certifications attached as Exhibit 32.1 and 32.2 accompanying this Quarterly Report on Form 10-Q, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Pluralsight, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
PLURALSIGHT,INC.
  
 By:/s/ Aaron Skonnard
August 1, 2018Date:July 29, 2020 
Aaron Skonnard
Chief Executive Officer


 
PLURALSIGHT,INC.
  
 By:/s/ James Budge
August 1, 2018Date:July 29, 2020 
James Budge
Chief Financial Officer



49