Pluralsight Inc
Q4 2019 Earnings Call Transcript

Published: 12 Feb 2020

[Operator:]

Good afternoon, ladies and gentlemen. And welcome to the Pluralsight Fourth Quarter and Year End 2019 Earnings Conference Call. At this time, all participants' are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to hand the conference over to your host, Mr. Mark McReynolds, Director of Investor Relations. Please go ahead, sir.

[Mark McReynolds:]

Thank you. Good afternoon. And welcome to Pluralsight's fourth quarter and full year 2019 earnings conference call. With me today are Aaron Skonnard, Co-Founder and CEO and James Budge, CFO. Some of our remarks will include forward-looking statements within the meaning of the federal securities laws. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are included in today's press release and in our SEC filings.

[Aaron Skonnard:]

Thanks Mark. And thanks to everyone for joining our Q4 earnings call. Pluralsight’s fourth quarter capped off a strong second half, further demonstrating that the operational improvements we implemented during the second half of 2019 are working and laying the foundation for durable, long term B2B billings growth above 30%. We ended the year with 37% revenue growth, above the high-end of our guidance and we also produced 33% B2B billings growth. We've now achieved 30% or greater B2B billings growth in 10 out of the last 11 quarters. We began 2020 with nearly a million business users and 18,000 business customers in a new integrated product line to carry the momentum forward from the second half of 2018 through 2020. We made several improvements to our go-to-market in the second half of 2018, which can be boiled down to three primary areas; sales leadership, sales operations and capacity. We added a world class sales leader, Ross Meyercord, who has already made key hires in customer success and professional services leadership. He's also brought additional rigor to our sales operations, including a more frequent and thorough forecast to review process, and more discipline to ensure we consistently channel our efforts and investments toward our most strategic customers, segments and markets.

[James Budge:]

Thanks, Aaron. In Q4, continued momentum drove billings growth of 28% to $128.4 million, our largest quarter in the history of the company. And B2B billings increased by 30% to $113.2 million. Revenue grew by 33% to $88.8 million. For the full year, total billings were $379.1 million, up 29% and B2B billings increased by 33% to $330.1 million. 2019 revenue was above the high end of our range at $316.9 million or 37% growth for the year. As our brand grows, the size of our new deal continues to expand. Landing and expanding is one of the strongest aspects of our business as we work with customers to become a solution that is prioritized at the organization level instead of just a few departments. The evidence that is working is our growing number of customers with larger deal sizes. By the end of Q4, we saw a 41% increase in customers with annual dealings of over 100,000, a 78% increase in customers with annual billings exceeding 500,000 and a 63% increase in customers with annual billings exceeding 1 million. As of the end of Q4, our top 25 customers have now expanded to 18 times their initial purchases, the strong sustained growth in our largest accounts demonstrate the value we continue to provide. And combined with the investment we made in our customer success organization, we experienced less logo churn in Q4 than any other quarter in 2019, which resulted in our net revenue retention remaining above 120% on a trailing 12 month average. In addition to our increasing deal sizes, our total B2B user count increased to almost a million by the end of 2019. B2B customers represent 87% of our total billings. Our B2C billings grew 13% in Q4, which is not unusual for us in the fourth quarter. We still expect mid single digit growth for B2C going forward. Our Q4 gross margin was 80%, up from 77%. And our full year 2019 gross margin was 79%, up from 76%. Net loss per share in Q4 was $0.09 and our full year 2019 net loss per share was $0.30, a significant improvement compared to net loss per share in 2018 of $0.60.

[Aaron Skonnard:]

Thanks, James. We have a lot to be proud of with our Q4 results. Let me start with a few observations from over 120 customer visits I made during the second half of 2019. It is clear to me that tech transformation is in high demand, and is a board level topic in virtually all large enterprises. As I met with customers, I saw a clear demand and opportunity to continue expanding our offerings in three key areas. First, there is real appetite for flow, our fully integrated developer productivity offering from our GitPrime acquisition earlier in 2019. Every customer I visited requested to see the Flow demo and the actionable insights that it can produce. We're excited about the possibilities of cross-selling Flow to our existing customer base, and have a strong pipeline to accelerate growth in 2020.

[Operator:]

Your first question comes from the line of Saket Kalia with Barclays.

[Saket Kalia:]

Aaron, maybe at first for you. Can you just talk a little bit about the competitive environment? We’ve talked about horizontal platforms like LinkedIn learning before. But can you just touch on maybe some of the others in the space like the Courseras and SkillSofts, for example, and what you're seeing from them, as well as the horizontal platforms in some competitive situations?

[Aaron Skonnard:]

In almost every large enterprise account, we see a horizontal solution like the LinkedIn learning or Skillsoft, et cetera, who are providing a more broad learning solution for the non-tech skills. And we come in and provide that vertical solution that's very strategic, it's wanted and valued by the CTO, the CIO. And can be integrated with the horizontal solutions. So we're very compatible and complementary to those horizontal product offerings and it doesn't end usually been a competitive dynamic in those cases. In the lower end of the market, the smaller accounts, we are seeing a little more competition from the content only solutions that are really focused on low price and content only experiences. They don't have the skill assessment capabilities that we have, the analytic solutions that drive insights to technology leaders and of course, they have nothing like Flow. So as we continue forward, I think our competitive positioning further strengthens as our differentiation becomes crystal clear with the new offering that Flow provides as we can now, not only measure learning activity and skill progress and metrics we can now also measure the application of those skills in their actual work.

[Saket Kalia:]

And maybe for my follow-up for James, the pipeline was mentioned a couple of times during the prepared remarks, although pipeline is sort of changing qualitatively. We’ve talked about potentially larger deals and of course longer sales cycles with those larger deals. But are you seeing those types of deals in your pipeline as you enter fiscal 20? Or is it maybe a little bit more balanced across large and midsize deals? Anything you can that you can provide just on the quality of the pipeline, just the diversity of pipeline would be helpful?

[James Budge:]

The simple answer is we have both. So we have ever growing list of large deals that we talked about the size of deals over a million continues to increase. Aaron mentioned the Flow of Skill combo deals, several seven figure deals in the pipeline. So that's good and you're right that does take a little bit longer to get across the finish line in some of the mid size deals, which is why we're delighted that the pipeline in the mid market, the lower end of the big of the enterprise market and even in this low market it continues to expand. So I'd say we're doing quite well as we go into 2020 on all fronts.

[Operator:]

Your next question comes from Brad Sills with BoA Security.

[Brad Sills:]

I wanted to ask about Flow. It sounds like you're seeing some great early traction there. Is there any color you can provide on some of the use cases there? What are customers using Flow for? Maybe some trends you've noticed on some use cases.

[Aaron Skonnard:]

This is a wide open space, because today technology leaders and specifically engineering leaders have no way to objectively measure developer productivity. So like sales leaders use Salesforce to measure sales rep productivity, there's really nothing like this in the engineering realm to help leaders understand the differences between teams and different productivity outcomes. So this is something that all of our customers need to help drive better efficiency across their teams, and they really don't have any way to do it today. So as we're showing up with this new product offering, we're seeing clear demand from at the C level from our customers. I mentioned how in my customer visits we have yet to be declined a demo, because everyone wants to see how it works, they want something like this, be able to start understanding differences in developer productivity across teams, so initial traction is really positive. Like we mentioned in the call, over 100% billings growth this last year, 40% logo growth since the acquisition and that was without an integrated sales force. And the cross selling motion is going to be really strong. We've actually built some new capabilities into each product, Skills and Flow, to start showing what the other products can do through the data. And so that's going to be the hook that helps our reps introduce the other product to each of their existing accounts.

[Brad Sills:]

And then just on the sales operational changes, on the sales hiring. How do you feel about kind of where you are catching up on the capacity? Do you feel like you're there and at this point, it's really a function of getting some of these new hires to productivity with some of the changes you've made in sales ops and training? Or are you still kind of catching up on the hiring front? Thank you.

[James Budge:]

That's great, we really good compared to, particularly compared to where we were a year ago where we were about 20% under the head that we needed. Right now we're right at where we want to be. And it's not just that we have a number of bodies but all of the bodies and great people have gone through a really fantastic sales pick up. As Aaron mentioned, unlike last year they have their territory, they have their accounts, they have their quoted plants, commission plans in hand, and they can really focus on selling for the balance of the quarter. So really in a great spot compared to where we were a year ago.

[Aaron Skonnard:]

And in Q4, we ran all of our existing Pluralsight AEs through a very in depth low boot camp, which started preparing them for selling Flow well before the start of the year. And all of our reps have now gone through that boot camp and are ready to hit the ground running here in early 2020.

[Operator:]

Your next question comes from the line of Terry Tillman with SunTrust Robinson Humphrey.

[Terry Tillman:]

Aaron, it sounds like you've been busy, 120 meetings. We expect you to keep ramping that up and flying a lot. But the first question just relates to kind of leadership additions and then just the focus on operational excellence. If I'm an investor, where do I see a bigger potential impact in ‘20 from just like a go to market perspective? Is it more optimizing on new logos or is it just getting a lot more wall-to-wall expansion and getting a lot more out of existing customers? Could you kind of segment those two and see what could be bigger for the model?

[Aaron Skonnard:]

I’ll start out and then James can follow-up. Since Ross has shown up, we've made a few quick changes. We hired a Chief Customer Officer who will be really focused on retention and also that wall-to-wall expansion you referred to. We've also gone all-in on hunter and farmer in 2020. We started experimenting with it in 2019 throughout the year. We've now fully gone to that coverage model in 2020, which will drive the new customer acquisition while also bringing down the cost of renewal. So we're really excited about all that. And just our continue improvement with our sales operational rigor, I think is also opening up new opportunities that we didn't see before and more insights around where we need to really focus in and flex our executive muscle to drive bigger and larger accounts. And I'll let James pick up the rest.

[James Budge:]

Maybe, the only thing I'd add there Terry is from just a pure dollars perspective. The majority of our billings has come and will continue to come from renewals and expand emotions that we have. But I'd say the biggest opportunity we have for improvements in 2020 probably comes from that new logo expansion that we have. So we've added a lot of reps that go into, Aaron mentioned the hunter farmer model that we experimented with in 2019. We're all in on that in 2020, really ramped up those teams. And I think we'll see a lot of good growth in the new billings motion that we have in 2020.

[Terry Tillman:]

And then just my follow up question relates to partners. You guys have been close with Microsoft for a long while. But whether it relates to other tech partners like Google or AWS, or this potential SI channel. What do you see emerging potential on the partner side that could actually be a good influence on revenue? Thank you.

[Aaron Skonnard:]

We see all of those partners continuing to influence revenue in a positive way moving forward. We're continuing our work with Microsoft, Google and Amazon, and see bright possibilities with each of them as we continue to deepen those partnerships. So that looks really strong. We're also seeing a lot of promising results from our early experiments with Accenture, like we mentioned in today's call and if we did choose another partner who we've been doing similar experiments with, I think here we're likely to see more go-to-market opportunities from those relationships in the near term just based on what we started to see with these large accounts, like Verizon. And longer term, it'll be interesting to see, which of those, whether it's the tech vendor or these Sis delivers the bigger impacts, but both are very promising.

[Operator:]

Your next question comes from the line of Sterling Auty with JP Morgan.

[Sterling Auty:]

I want to follow-up on your comment about the all-in on hunter farmer. Can you gives a sense of how many reps end up coming into 2020 with kind of a different focus, different set of relationships as you move to hunter farmer versus before? Just trying to gauge any risks here of disruption as you shift from previous model to hunter farmer?

[James Budge:]

I would say the experimentation phase in 2019 pushes to about 20 to 25 hunters that we had as we exited the -- as we begin to exit the year, we will have that ramped up to probably 60 to 70 by the end of the first quarter and around 75 by the end of the year. We'll have about 400 reps as we exit 2020, so that's kind of the size and magnitude. We’ll be quite a bit more farmers than we have in 2019 and we’ll be even more, on a percentage basis, higher on the hunter side.

[Sterling Auty:]

And then one follow-up. You talked about the increased scrubbing and scrutiny around the pipeline under your new head of sales. Wondering if you could just describe, what did you learn as you kind of move to that more, or let's say, that higher scrub model?

[James Budge:]

Yes, it’s a few things. One, the cadence and the frequency has certainly been helpful where it's a pretty rigorous process once a week. One, that I think many of us are used to where we have the district managers, if you will, rolling up to the VPs in the various regions. Ross invites all of us to join his call on a weekly basis and we go through each territory we have and talked about the upsides and the down sides of the each area where executives can get involved and all the big accounts, as well as spend plenty of energy on the mid size as well as sort of more of the high frequency deals that typically come in. So just a lot more rigor and conversation would be the biggest factor that I would note. And then Ross does a great job of bringing in the executive team, influencers like Aaron and Nate, who can really go out and make a difference at many of these customers to kind of bring them over the finish line by the end of the quarter. So that's a big thing for me. But I don't know if Aaron you want -- have anything to add…

[Aaron Skonnard:]

Yes, I would just add that I think we've learned that the importance of that weekly routine is what ensures the quality of the predictability of our forecasts. The more we look at the deals, talk about the deals, between Ross and his leaders and eventually the frontline reps, the more where we're able to understand the true size of the opportunity what we can do to go influence it like James was speaking to, and really how to predict what's going to happen a few quarters out. So I’d say our -- because of those learnings, our ability to see more accurately further out is strengthening. Thank you.

[Operator:]

Your next question from Brian Peterson with Raymond James.

[Brian Peterson:]

So it sounds like some of the investments that you've made in the customer success area really helped improve the retention this quarter. Can you just talk about maybe headcount investments or some of systems or processes you put in place, and how we should think about that impacting retention numbers next year?

[James Budge:]

About middle of last year, we had around 40 to 45 customer success managers, and we've amped that up. I think we exited the year around 75, they’ll probably move to around 90 by the end of the first quarter, so within a relatively quick time frame, six to nine months, roughly doubling of that team. I think we talked about in the past where we -- that incremental amount of team has allowed us to expand our coverage motion where we now have many more customers that have a CSM that speaks to them on a regular basis. And I think as you mentioned, we've seen already pretty quickly, maybe a little bit ahead of what we expected kind of the fruits of that labor, which is in the fourth quarter. We had less retention or less -- more retention, less churn in logos than we had at any point in 2019, and that's allowing us to maintain a pretty high net retention and our gross retention actually improved in the fourth quarter relative to the previous quarter. So it feels like we're already back on the upswing there when it comes to retention and churn.

[Brian Peterson:]

And James maybe a follow up on flow. It sounds like that did better than expected this year. Any help on how we should think about that either from a revenue or billings contribution in 2020? Thanks, guys.

[James Budge:]

Yes, I'd say we're in the same spot we were when we bought them, which is always a great place to be, seven months after you buy something oftentimes there's always something that wasn't quite as incredible as you might have thought and everything is turning out to be about as good, or better than what we expected. And what we expected at the time that we acquired GitPrime is that it would produce about $25 million to $30 million of billings in 2020. And here we are in 2020 and that's the same expectation we have. So yes, $25 million to $30 million is what you should expect from that part of our business from Flow billings in 2020.

[Operator:]

Your next question comes from the line of Scott Berg with Needham.

[Scott Berg:]

I guess probably for Aaron. Aaron, your commentary on sales capacity increases and you're in a much better position this year versus last year. But can you talk about productivity of those reps? Yes, you're not hire about a third of your capacity this year or increase capacity by a third. But can we see some productivity increases during that timeframe? Thanks.

[Aaron Skonnard:]

Yes, we expect that you will see improvements in productivity. We've invested significantly in our sales enablement capability at the company. About a year ago, we only had about four or five people in that function and today it's up to 12 to 14. So it's grown pretty significantly and they're the key driver behind the excellent sales kick off we just did last month. And these boot camp trainings that I referred to for Flow and there's ongoing enablement that's operating at a much higher and more effective level than it did in the past. All of that will produce better productivity. We expect those metrics to continue to improve in the future given the investment we're now making.

[Operator:]

Your next question comes from the line of Corey Greendale with First Analysis.

[Corey Greendale:]

It sounds like good news on the logo churn. I was hoping if you can just comment a little bit on either churn or down sell at the high end. I think you said that top 25 were at 18 times your initial purchase. I think last quarter was 23. So is it down fairly, because you have new logos in the top 25 that had bigger initial purchases or were there any like down-sells in the top 25?

[Aaron Skonnard:]

You're right. It is down a little bit. And that's more of a function of the ebb and flow of the top 25, so different customers have come in to that 25. And when they came in, they came in at bigger initial purchases. So not as much expand after the fact. So the overall aggregate amount per year from the top 25 is quite a bit bigger than what it was last quarter or any quarter before that. But it's just a function of what I just mentioned. On the logo churn, we continue to have very little logo churn at the high end of the market. I think as we noted last quarter, we were beginning to see a little bit more logo churn at the lower end of the market for some of the reasons that Aaron mentioned. We've definitely seen that stabilize and in the mid to high end of the market the enterprise, we've definitely seen a reduction in churn from a logo perspective in both of those parts of our business.

[Corey Greendale:]

And other question is just -- as you're ready to go into New Year with the integrated flow. It sounds like there's some very large opportunities. How should we think about the sales cycle given I would think there may be more change management involved than potentially in implementing just standalone Pluralsight. Does that mean there are more decision makers involved in a longer sale cycle?

[James Budge:]

It's not a bad way to think it Corey. But on the flip side, there's actually some amazing pilot capabilities and proof of concepts that we can put out and immediately show benefit, like tangible benefit to technology leader. So that kind of offsets that a little bit. And I think when you add it all up it creates a sales cycle that’s not meaningfully different from our Skills capabilities. It's still probably in the six to nine months when you're looking at big enterprise and more in the four to six months when you're into our commercial segment, and probably not hugely different between our Skills capability and our Flow.

[Aaron Skonnard:]

And just a reminder, Corey, that when we sell in the enterprise at scale with our Skills product, we're selling into the tech leader. We're selling to the CTO, the CIO. So it’s the same person we would bring Flow to and they're ultimately the ones who would be the decision maker. So in those, especially in the large enterprise scenarios, we're finding that we can actually get to that level of influence we need to close the deal much faster with Flow than we were able to do with Skills standalone.

[Corey Greendale:]

Looking forward to seeing a bunch of other companies like having a better R&D efficiency after they adopt for?

[Aaron Skonnard:]

Yes, that's true. Feel free to references in there.

[Operator:]

You next question comes from the line of Jeff Meuler with Baird.

[Jeff Meuler:]

Just as you kind of tend to go through and fix the sales challenges, and I know you listed three areas. But it sounds like you've made a lot of progress and had a really good sales kickoff. And you've caught up a lot on the hiring across the sub-departments in the go-to-market motion. So what are the key kind of steps left that are yet to implement or yet to be fully implemented as you look to address the prior sales challenges?

[Aaron Skonnard:]

I would say that we're mostly there at this point. I mean, it's the continued operational rigor and discipline that we need to continue to demonstrate as a company across all of our segments and all of our sales leaders. But in terms of the big changes, I would say all the big changes that we talked about back at after the end of Q2 have been fully implemented. We have the key leadership positions filled and a new muscle in place developing. Now we just need to strengthen it.

[Jeff Meuler:]

And then, James, just any comment on cash flow. And I know you kind of dial back the cash flow expectations a quarter or two ago. But the account receivable ramped in the quarter looked outsized relative to prior Q4. Is that a timing factor at all or any change in payment terms, which are extending? Thanks.

[James Budge:]

Definitely not change in payment terms. But you’re right, the DSOs and probably went through and calculated in the accounts receivable increase is a little bit higher than we typically would have, and that's reflective of just a really big fourth quarter. And we're seeing it everywhere in our business that the enterprise segment and bigger deals as they become more of a percentage of our overall business, those just take a little bit longer as they may negotiate a 45-day term as opposed to a typical 30-day term, and the more you have of those, it just extends it out a bit longer. Also, when you get into enterprise selling, more and more enterprise selling a lot more of those deals are going to come into the last third of the quarter and the final month, which makes it difficult to collect that before the quarter. And so combination of those couple of things, I think you'll see that come right back down again in the first quarter, because we'll be collecting all those good receivables we had at the end of fourth quarter.

[Operator:]

Your next question comes from the line of Stephen Sheldon with William Blair.

[Stephen Sheldon:]

You talked about creating a new tech literacy SKU for non-tech employees, which I think would represent significant expansion of potential users to your platform. So I guess how far along are you in creating that product? And would the go to market there be any different relative to your other two main product lines?

[Aaron Skonnard:]

Yes, we're really close to the release of this new offering. If you come to Pluralsight Live in Europe next month, we'll be talking about it there in more depth. And we've been experimenting with it and really co-developing it with a lot of our large enterprise customers to-date who had been asking us to move in this direction, so close on timing. In terms of the go to market motion, similar to how we're cross selling from Skills to Flow, we see a very natural way to cross sell from Skills to this digital literacy offering. In most of those large enterprise accounts, we’re selling to the tech leader and the corresponding L&D leader who's responsible for these types of initiatives. So we’re developing a clear sales play on how to take it from our full skills offerings and this digital literacy offering that will then expand across the entire organization, no longer will we just be restricted to the tech population we’ll now be available to the entirety of the organization. So to your point, this does represent a pretty incredible TAM opportunity, TAM expansion opportunity for us as a company.

[Stephen Sheldon:]

And then wanted to ask about your progress and selling more directly to IT leaders. Did you see more traction there in the fourth quarter? And is there any way to quantify roughly how much of your billings is coming through are flowing through IT departments versus HR, and just the general trend there?

[James Budge:]

Yes, I’d say the trends that go back three years, it was probably 70-30 HR versus tech leader, that slipped to where prior to Flow or GitPrime, just on how you want to think about it, started thinking about more as Flow going forward that we're rebranding it. But prior to that, we were probably flipped to where we were more 60-40 tech leader versus HR leader, and you're going to see that percentage grow even higher towards the tech leader, because Flow is a solution for a tech leader. So I think as you get to the end of 2020, it’ll probably start to look like 70-30, maybe to 75-25 tech leader versus HR leader and that will just continue to expand rolling into the the following years.

[Operator:]

Your next question comes from the lineup Brett Knoblauch with Berenberg Capital Market.

[Brett Knoblauch:]

The first one was just on your commentary comparing sales -- comparing Flow to Salesforce, with sales was kind of a quantifiable ROI sort of things like increased lead generation. How are businesses looking at Flow from an ROI perspective?

[Aaron Skonnard:]

There's -- in the end, one of the biggest black boxes in most organizations is how do I measure the ROI from all of the engineering investments that I'm making. It's a really difficult thing for them to answer. So similarly, like with Salesforce, you want to understand how -- by investing more dollars in sales people how does that produce more billings and revenue for the company. Here it's about, okay, if I'm investing more dollars in engineers, how does that produce more impact. Am I actually producing faster progress towards our product outcomes? Am I producing less churn in my code base? Are we actually developing more efficient and more effective work style? And are we able to work through large transformations, refactoring things like that, that actually drive the code base forward in a positive direction. So these are all things that are really hard for a tech leader to measure today, because there's really no metrics, no metrics exist around this, around these things that make it easy to quantify. So you know, leaders sort of look at it and they look at it subjectively and they try to make these determinations and they think, oh, maybe pair programming is better than mob programming, et cetera. These are different styles of how teams work. And there's really no way for leaders to look at the differences and understand if one's actually producing better outcomes in terms of the flow of value in the code. So our entire objective here is to give leaders the tools and the data to start having those conversations to be able to start seeing it. And we'll continue to innovate and providing the better metrics and dashboards to better quantify it. And that's why I think we're seeing such a warm reception here, because this is a very common need and something that people are struggling to figure out, and our solution is the best one on the market today.

[Brett Knoblauch:]

And then did you saw or give a price point for the new Flow/Skill or a combo Flow?

[James Budge:]

Yes, it's not too different. The price per user for Flow is not meaningfully different from what we have from Skills. The realized price per user right now is just over $300 per user, and that's roughly equivalent to what Flow has been able to capture.

[Brett Knoblauch:]

And that's in the combined SKU, because you're saying it’s $300 a user for both Flow and…

[James Budge:]

No, it’d be $300 for one and $300 for the other and if you wanted to combine, it would be closer to double. And then maybe when did you start selling the combined SKU? Was that like Jan 1, or was that starting a bit in Q4?

[James Budge:]

Well, combined offerings just came out maybe a week, two weeks ago. And the combined go to market teams came together beginning of the year. So roughly go to market on an integrated basis about a month now.

[Operator:]

And your final question comes from the line of Josh Baer with Morgan Stanley.

[Josh Baer:]

On B2C, I've noticed as you discounting on the personal SKUs, like $100 on annual and $150 on premium and then we saw the acceleration in B2C billings growth this quarter. And I think one of the highest in several years. Just wondering if there's any change to the strategy around B2C if it's a response at all to the competition at the smaller customer end, or is it a way for Pluralsight to get in the hands of more individuals that could eventually help the land and expand as they become -- as those individuals go into B2B?

[Aaron Skonnard:]

Yes, I think I got it, Josh. But if I missed it here then please come back. But generally B2C and I know you noticed. But it goes to the individual as opposed to selling to a business that pays us. And the fourth quarter has historically been our biggest quarter by far of the year. We'll actually do several million dollars less in aggregate in the first quarter here than we did in the fourth quarter of 2019, and that's no different from the trend of Q4 of ‘18 and to Q1 of ‘19. So fairly consistent and Q4 is a very big quarter for us there, it's also a good quarter of growth. And to your point on the discounting, we always have had a Black Friday discount. We have had it every year in the past. We continued to have one in 2019. And I think that's the discounting that you're mentioning. We're also seeing little bit more churn to your point about moving into B2B. We're seeing a good sure in our opinion, which is more and more of our B2C customers moving into the B2B world, which gives better stickiness, more longevity, the LTV piece of that is much better once you move into a B2B relationship. So all of that is goodness, and I would -- to the very first point you made again, I would just say that the extra discounts we give towards the middle of the fourth quarter around Black Friday kind of events is pretty common for us.

[Josh Baer:]

And just to follow-up on the digital literacy offering, you’re saying that you're close to at least on the new offering. Is there any of that that's embedded in the 2020 outlook? Thanks.

[James Budge:]

Very, very little, tiny small little beans not even worth sharing the number, it’s so small. So if it hits like we expect with somebody opportunities we see in front of us, we would see goodness to the model for sure.

[Operator:]

And I'm showing there are no further questions at this time. I would now like to turn the conference back to Aaron.

[Aaron Skonnard:]

Thank you. To close, I just like to thank all of our customers, partners and our expert authors for your trust in Pluralsight and our team. We're super excited about what 2020 will bring and look forward to speaking with all of you again next quarter. Thanks.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. And you have a wonderful day. You may all disconnect.