Pluralsight stock ($PS) dropped by more than 22% after the publication of its earning results. Despite beating the revenue estimates ($99.5 million vs 95.4 million) and releasing a better than expected adjusted earning per share ($0.00 against a loss of $0.06), Pluralsight deceived investors.
The investors clearly sanctionned its fading growth in billings: only 9% against 11% in Q2.
Pluralsight has now a market cap of $2.13 billion (5.8x its FY20 revenue), losing $600 million in one day. This move is driven both by disappointing figures and by the downgrading of JP Morgan, from Overweight to Neutral, with a far lower price target ($29.00 → $20.00). In 2018, Pluralsight IPOed at $15.00 per share.
What is Pluralsight?
Pluralsight is a "technology skills platform" that "elps companies "to adapt and to thrive in the digital age by enabling technologist to keep pace with change".
The evolution of the company can be understood through this timeline:
A few weeks ago, Pluralsight has acquired DevelopIntelligence, a company focused on training and consulting that will make about $10 million in annual revenue.
A company that relies on big businesses
The EdTech industry shifts towards businesses. More especially, big ones. Pluralsight is no exception to that. Like its European counterpart Kahoot!, which developed mainly in schools but plans to make 60% of its revenue with its corporate solutions, Pluralsight relies on broad adoption by individuals to make business customers pay at the end.
70% of the 2020 Fortune 500 companies across all industries are now Pluralsight customers:
James Budge (CEO) said during the earning call:
"We have, I think, around 50 to 55 customers now paying us over $1 million. As I mentioned, that's up 86% year-over-year. So really good improvement there.
The average increase for our top 25 customers, just to give you another number, from their first purchase to what they're paying us now is on average about 40x their original purchase. [...] We continue to add at the high end and high-end of commercial that is where all the goodness is in our business. [...]
And as we go into our pipeline, here in the fourth quarter. I won't give you an exact amount, but we have probably about 50% more deals, over $1 million to be had in the fourth quarter than any quarter we've ever had. So not only is the strength as the overall numbers of the overall weighted pipeline, not only does that look really good, but the qualitative aspects of the pipeline as well as far as having more and more large transactions from upsells is we think -- something we think is a really good indicator."
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