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Pluralsight, Inc. (NASDAQ:PS)
Q4 2019 Earnings Call
Feb 12, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to the Pluralsight Fourth Quarter and Year-End 2019 Earnings Conference Call. [Operator Instructions] 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 -- Director of Investor Relations

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. Any forward-looking statements that we make on this call are based on information and assumptions as of today, and we assume no obligation to update these statements.

During this call, we may present both GAAP and non-GAAP financial measures. Except for revenue, balance sheet amounts, cash flow from operations and billings, all financial amounts discussed are non-GAAP and growth rates are compared to the prior year comparable period, unless otherwise stated. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The press release is available on our website at investors.pluralsight.com.

Before we hear from Aaron, I'd like to note that we are holding our second annual Pluralsight LIVE event in London coming up next month. Our annual user event for the EMEA region will be held on March 23 through the 24 at the Park Plaza, Westminster Bridge Hotels in London. The event will provide an excellent opportunity for investors and analysts in Europe to connect with our customers and partners. We'll hold a short breakout session on March 23rd for investors and analysts that join us at LIVE. Please send an email to ir@pluralsight.com or reach out to me directly if you are interested in attending.

And with that, I'll turn the call over to Aaron.

Aaron Skonnard -- Co-Founder and Chief Executive Officer

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 1 million business users and 18,000 business customers in a new integrated product line to carry the momentum forward from the second half of 2019 through 2020.

We made several improvements to our go-to-market in the second half of 2019, 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.

We've also added considerable capacity to our sales and customer success organization to expand our coverage within our customer base. We now have over 330 quota-bearing sales reps who recently participated in a world-class sales kickoff and specialized product trainings, giving us confidence that we have sufficient ramped and enabled capacity as we proceed through 2020.

I'll share more later in the call about our progress with customers, partners and products. But first, I'd like to turn the call over to James to review the numbers. James?

James Budge -- Chief Financial Officer

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 32% 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 this 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 billings 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 purchase. 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 1 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.

We accelerated investment in our go-to-market teams in the second half of 2019 and in turn, we used $11.7 million in operating cash flow for the year, only 3% of billings. We closed the quarter with total cash and investments of $558 million, and our on-balance sheet backlog is expressed by our deferred revenue was $235 million.

Turning now to guidance. For Q1 2020, we expect revenue to be in the range of $88 million to $89 million, an increase of 27% at the midpoint of the range. We expect Q1 net loss per share to be in the range of $0.13 to $0.14, assuming weighted average shares outstanding of approximately 141 million.

For the full-year 2020, we expect revenue to be in the range of $390 million to $400 million, an increase of 25% at the midpoint of the range. We expect our overall and B2B billings growth to accelerate gradually over 2020. And consistent with any business with annual billings that are primarily subscription based, our 2020 revenue growth rates each quarter will roughly follow the trend of billings growth rates from 2019, meaning solid revenue growth to start the year, slowing a bit in Q2 and Q3 before reaccelerating in the fourth quarter and continuing into 2021.

Regarding gross margin, we expect to be 80% gross margins from Q3 and Q4 to be relatively consistent through 2020. 80% gross margin is our long-term target, and we are pleased to achieve it years ahead of plan. And to achieve it while nearly doubling our production of new content in 2019 and increasing our author NPS score to record highs is an accomplishment worth celebrating.

We expect 2020 net loss per share to be in the range of $0.45 to $0.50, assuming weighted average shares outstanding of approximately 143 million. And we expect gradual improvement in our net loss per share as we move through the year consistent with our gradual improvement in billings growth, all helping to create a positive operating cash flow in the fourth quarter.

In summary, we finished the year with strong momentum that we expect to carry forward through 2020.

And with that, I'd like to turn the call back over to Aaron. Aaron?

Aaron Skonnard -- Co-Founder and Chief Executive Officer

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 into 2020.

Second, our customers want our help as a strategic advisor for their tech skill transformation, which should fuel an increased demand among the C-level executives for our high-margin professional services. We see opportunities to continue expanding these offerings to drive top line growth and further strengthen customer retention.

And third, there is a growing demand to help businesses develop digital literacy in their non-tech workforce. Leaders want their entire company to understand the technologies that are critical to the future success of their business, regardless of role. Because of these requests from our customers, and the opportunity to expand our TAM, we have piloted a new SKU that will likely release later in the year to address the growing demand for tech literacy and our largest enterprise customers. I'm confident the combination of these products and services, with our existing best-in-class platform, will continue to meet the growing demands for tech transformation.

Accenture is an example of how these product offerings can work at scale. With over 500,000 people serving some of the largest businesses in the world, Accenture drives innovation to improve the way the world works and lives. We've been working with Accenture on a companywide initiative to improve the digital literacy of their workforce. This curated Pluralsight experience will enhance every employee's ability to think critically across multiple technologies and add value to their clients. We anticipate that we will be able to replicate this strategy with many of Accenture's customers. An example from Q4 where Accenture's influence was helpful was Verizon, where we teamed up to align tech roles and role-based skill development pathways. The Verizon deal was one of our largest to date and demonstrates the type of scale we can reach with outstanding partners like Accenture, Fujitsu, and others.

Speaking of partners, we continue to be encouraged by our progress with Microsoft, Google and Amazon. With Microsoft, we completed the content for the five newest Azure Role IQs. Our platform now includes eight Azure Role IQs, over 40 Skill IQs and over 200 courses that all align with Microsoft's role-based Azure certification. In 2018, these courses were accessed over 1.4 million times with over 750,000 hours of content watched and over 100,000 skills assessed using Skill IQ.

We continue to invest in our sales collaboration with our top partners, deepening our relationship with existing customers by aligning with important cloud initiatives, as well as expanding to new customers to support them on their cloud journey. Our unmatched content and strong partnerships reinforce our leadership position in cloud skills.

Now, let me give you an update on our progress with Flow. GitPrime was our ninth acquisition and our fastest integration to date. Given the complex technology we integrated into our platform, achieving a unified product offering just seven months after the acquisition is a remarkable achievement by Nate and his team. Our combined Skills and Flow offering get tech leaders the same level of metrics, actionable data and insights that other functions like sales and HR have been able to rely on for years with systems like Salesforce and Workday. Flow is a product that shows developer productivity metrics, such as code impact and code churn. The insights from these metrics are market leading, and have never been available to technology leaders before now. This also helps developers remove roadblocks and become more efficient. We're excited about how we are helping lead and improve in the growing and critically important area of developer productivity.

With Skills and Flow, our customers understand how their teams are working and can identify and focus on their technical work that matters most to create the best outcomes. Previously uninformed conversations now turn into debate-free data-driven discussions. And the results speak for themselves. Flow exceeded our internal billings expectations for the year, growing well over 100%. In the short time since the acquisition, the team has increased the number of Flow customers by over 40%. We fully integrated our go-to-market teams in January and we are excited to sell Skills and Flow globally in 2020. We already have several seven-figure deals in the pipeline.

Before I close, I'd like to provide a brief update on something I'm very passionate about, our social enterprise, Pluralsight One. We now have over 25% of the top 15 non-profits and NGOs as Pluralsight One customers. In total, over 500 non-profit NGOs and K-12 organizations around the world are learning through Pluralsight's platform. We're proud of the impact Pluralsight One is creating in providing underserved communities the opportunity to acquire skills critical to the current and future economy.

To close, I'm pleased with the progress we made at the Company in 2019, particularly with the learnings from Q2 applied to the second half that made us a better and stronger Company. We've now been public for about 20 months, and all the trends we saw at the time of the IPO are accelerating. The market continues to grow and companies understand that it's easier to rescale and upscale their existing team members than to hire from the outside. The bottom line is this. There is still a massive global skills gap and it's widening. The January 2020 Assessing Online Learning Platforms for Technical Skills Development report by Gartner states that renewing technical proficiency is essential to reduce the digital disparity gap between the rapid influx of new technology and the ability to exploit it. Pluralsight remains committed to helping our customers close this critical gap, which should fuel durable long-term growth. And I'm as excited as ever to kickoff a new decade as CEO.

And with that, I'll turn the call back over to the operator for some Q&A.

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from the line of Saket Kalia with Barclays.

Saket Kalia -- Barclays -- Analyst

Hey, guys. How you doing?

James Budge -- Chief Financial Officer

Hey, Saket.

Saket Kalia -- Barclays -- Analyst

Hey, James. Hey, Aaron. Thanks for taking my questions here.

Aaron Skonnard -- Co-Founder and Chief Executive Officer

Yeah.

Saket Kalia -- Barclays -- Analyst

Hey, Aaron, maybe 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 -- Co-Founder and Chief Executive Officer

Yeah. You bet. In almost every large enterprise account, we see a horizontal solution like the LinkedIn Learning or Skillsoft, etc., 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 solution. So we're very compatible and complementary to those horizontal product offerings, and it doesn't end up 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 progression metrics, we can now also measure the application of those skills in their actual work.

Saket Kalia -- Barclays -- Analyst

Got it. That makes a lot of sense. Maybe for my follow-up for James. The pipeline was mentioned a couple of times during the prepared remarks, [Technical Issues] 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 do -- that you can provide just on the quality of the pipeline, just the diversity of pipeline would be helpful?

James Budge -- Chief Financial Officer

Yeah. Sure. 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 1 million continues to increase. Aaron mentioned the Flow and Skills 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 the small market it continues to expand. So, I'd say, we're doing quite well as we go into 2020 on all fronts.

Saket Kalia -- Barclays -- Analyst

Got it. Very helpful. Thanks, guys.

James Budge -- Chief Financial Officer

Yeah. Thank you.

Operator

Your next question comes from Brad Sills with BoA Security.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Oh, hey. Great. Thanks, guys. 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 use cases?

Aaron Skonnard -- Co-Founder and Chief Executive Officer

Yeah. You bet. 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.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, Aaron. 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 -- Chief Financial Officer

That's great. Feel 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 are really fantastic sales pick up. As Aaron mentioned, unlike last year they have their territory, they have their accounts, they have their quoted plans, 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 -- Co-Founder and Chief Executive Officer

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.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, guys.

Aaron Skonnard -- Co-Founder and Chief Executive Officer

Yeah.

James Budge -- Chief Financial Officer

You bet.

Operator

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

Terry Tillman -- SunTrust Robinson Humphrey -- Analyst

Gentlemen, can you hear me OK?

James Budge -- Chief Financial Officer

Yeah.

Aaron Skonnard -- Co-Founder and Chief Executive Officer

Yes, Terry.

Terry Tillman -- SunTrust Robinson Humphrey -- Analyst

Hey, Aaron, James and Mark. 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 the 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 expansions 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 -- Co-Founder and Chief Executive Officer

Yeah. Sure. I'll start out and then James can follow-up. Look, 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 continual 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 -- Chief Financial Officer

Yeah. Maybe the only thing I'd add there Terry is, from a -- 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 that -- 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 -- SunTrust Robinson Humphrey -- Analyst

Awesome. 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 -- Co-Founder and Chief Executive Officer

Hey, you bet. Yeah. Look, 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 we just choose another partner who we've been doing similar experiments with, I think 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 vendors or these SIs delivers the bigger impacts, but both are very promising.

Operator

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

Sterling Auty -- J.P. Morgan -- Analyst

Yeah. Thanks. Hi, guys. I want to follow-up on the -- on your comment about the all-in on hunter/farmer. Can you give us 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 -- Chief Financial Officer

Yeah. 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'll 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 had in 2019 and we'll be even more, on a percentage basis, higher on the hunter side.

Sterling Auty -- J.P. Morgan -- Analyst

Got it. 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 -- Chief Financial Officer

Yeah. It's a few things. One, the cadence and the frequency is -- 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 talk about the upsides and the downsides of the each area, where executives can get involved, and hit all the big accounts, as well as spend plenty of energy on the mid-size as well and 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 else to add?

Aaron Skonnard -- Co-Founder and Chief Executive Officer

Yeah. 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 forecast. The more we look at the deals, talk about the deals, between Ross and his leaders and eventually the frontline reps, the more 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.

Sterling Auty -- J.P. Morgan -- Analyst

Got it. Thank you.

Operator

Your next question from Brian Peterson with Raymond James.

Brian Peterson -- Raymond James -- Analyst

Hi, gentlemen. Thanks for taking the question. 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 the systems or processes you put in place, and how we should think about that impacting retention numbers next year?

James Budge -- Chief Financial Officer

Yeah. Sure. 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 -- Raymond James -- Analyst

It's good hear. 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 -- Chief Financial Officer

Yeah, yeah. 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 said 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 yeah, $25 million to $30 million is what you should expect from that part of our business from Flow billings in 2020.

Brian Peterson -- Raymond James -- Analyst

Great. Thank you.

James Budge -- Chief Financial Officer

Yeah.

Operator

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

Scott Berg -- Needham & Company -- Analyst

Hi, Aaron and James, congrats on a good quarter. And thanks for taking my question. 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 going to hire about a third of your capacity this year or increase capacity by a third. But can we see some productivity increases during that time frame? Thanks.

Aaron Skonnard -- Co-Founder and Chief Executive Officer

Yeah. 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 -- First Analysis Corp. -- Analyst

Hey, good afternoon. Congratulations on the quarter. I just had a couple of questions. Apologize for the background noise. I'm in an airport. But 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 -- Co-Founder and Chief Executive Officer

No. Great question. Thanks for bringing that out. You're right. It is down a little bit. 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 -- First Analysis Corp. -- Analyst

Great. And other question is just on -- 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 changed management involved than potentially implementing just stand-alone Pluralsight. Does that mean there are more decision makers involved in a longer sale cycle?

James Budge -- Chief Financial Officer

Yeah. It's not a bad way to think about 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 -- Co-Founder and Chief Executive Officer

And just a reminder, Corey, that when we sell in the enterprise at scale with our Skills product, we're selling to 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 stand-alone.

Corey Greendale -- First Analysis Corp. -- Analyst

Great. Looking forward to seeing a bunch of other companies like [Indecipherable] having a better R&D efficiency after they adopt Flow?

James Budge -- Chief Financial Officer

Yeah.

Aaron Skonnard -- Co-Founder and Chief Executive Officer

That's true. Feel free to reference us in there.

Operator

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

Jeffrey Meuler -- Robert W. Baird -- Analyst

Yeah. Thanks. 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 those 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 -- Co-Founder and Chief Executive Officer

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.

Jeffrey Meuler -- Robert W. Baird -- Analyst

Okay. 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 -- Chief Financial Officer

Definitely not change in payment terms. But you're right, the DSOs and probably went through and calculated in the accounts receivable increases 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. 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, there is a -- 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.

Jeffrey Meuler -- Robert W. Baird -- Analyst

Got it. Thank you.

James Budge -- Chief Financial Officer

Yeah.

Operator

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

Stephen Sheldon -- William Blair -- Analyst

Hi, thanks. 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 -- Co-Founder and Chief Executive Officer

Yeah. 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 have 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 -- William Blair -- Analyst

Got it. 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 or flowing through IT departments versus HR, and just the general trend there?

James Budge -- Chief Financial Officer

Yeah. I'd say, the trend if I go back three years, it was probably 70-30 HR versus tech leader, that slipped to where prior to Flow or GitPrime, how you want to think about it, started thinking about more as Flow going forward with, 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 toward the tech leader, because Flow is a solution for a tech leader. So, we -- I think as you get to the end of 2020, it'll probably start to look like 70-30, maybe even 75-25 tech leader versus HR leader and that will just continue to expand rolling into the following years.

Stephen Sheldon -- William Blair -- Analyst

Great. Thank you.

James Budge -- Chief Financial Officer

Yeah.

Operator

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

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Hi, guys. Thanks for taking my question. 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 -- Co-Founder and Chief Executive Officer

Yeah. Great question. There is -- 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, OK, if I'm investing more dollars in engineers, how does that produce more impact? Am I actually producing faster progress toward our product outcomes? Am I producing less churn in my code base? Are we actually developing more efficient and more effective work styles? 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 exist around these things that make it easy to quantify.

So, 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, etc. These are different styles of how teams work. And there's really no way for leaders to look at those 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 -- Berenberg Capital Markets -- Analyst

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

James Budge -- Chief Financial Officer

Yeah. 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 -- Berenberg Capital Markets -- Analyst

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

James Budge -- Chief Financial Officer

No, no. It'd be $300 for one and $300 for the other and if you wanted to combine, it would be closer to double.

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Okay. 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 -- Chief Financial Officer

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

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Okay, great. Thanks, guys.

James Budge -- Chief Financial Officer

Yeah.

Operator

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

Joshua Baer -- Morgan Stanley -- Analyst

Thanks for the question. On B2C, I've noticed heavier 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 -- Co-Founder and Chief Executive Officer

Yeah. I think I got it, Josh. But if I missed it here, then please come back. But generally B2C, so -- 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 toward the middle of the fourth quarter around Black Friday kind of events is pretty common for us.

Joshua Baer -- Morgan Stanley -- Analyst

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

Aaron Skonnard -- Co-Founder and Chief Executive Officer

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 some of the opportunities we see in front of us, we would see goodness to the model, for sure. I don't know if Josh liked that answer or not. But anyway, I think...

Joshua Baer -- Morgan Stanley -- Analyst

Thank you. Yes. It makes sense. Thanks.

Aaron Skonnard -- Co-Founder and Chief Executive Officer

Okay, thanks.

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 -- Co-Founder and Chief Executive Officer

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

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Mark McReynolds -- Director of Investor Relations

Aaron Skonnard -- Co-Founder and Chief Executive Officer

James Budge -- Chief Financial Officer

Saket Kalia -- Barclays -- Analyst

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Terry Tillman -- SunTrust Robinson Humphrey -- Analyst

Sterling Auty -- J.P. Morgan -- Analyst

Brian Peterson -- Raymond James -- Analyst

Scott Berg -- Needham & Company -- Analyst

Corey Greendale -- First Analysis Corp. -- Analyst

Jeffrey Meuler -- Robert W. Baird -- Analyst

Stephen Sheldon -- William Blair -- Analyst

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Joshua Baer -- Morgan Stanley -- Analyst

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