United States securities and exchange commission logo
January 19, 2021
Hardeep Gulati
Chief Executive Officer
PowerSchool Holdings, Inc.
150 Parkshore Dr.
Folsom, CA 95630
Re: PowerSchool
Holdings, Inc.
Draft Registration
Statement on Form S-1
Submitted December
22, 2020
CIK No. 0001835681
Dear Mr. Gulati:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary
Company Overview, page 1
1. You state that you
serve 90 of the 100 "top districts in the United States." Please clarify
your reference to "top
district."
Market Opportunity, page 4
2. You reference a Frost
and Sullivan report on page 4 and then indicate that based on that
report, you estimate
the global total available market for PowerSchool s current set of
solutions to be
approximately $25 billion. Please clarify that you commissioned the
Frost and Sullivan
report here and clarify the basis for your belief that your global market
Hardeep Gulati
PowerSchool Holdings, Inc.
January 19, 2021
Page 2
opportunity is $25 billion. Clarify and provide any material
assumptions used to
determine this figure.
Our Sponsors, page 10
3. Please describe the certain conditions for the board designation
rights for your Sponsors
and clarify the circumstances in which the Sponsors will be able to
designate all of the
nominees to the Board. Further, disclose whether the Sponsors must
mutually agree for
each director or if each Sponsor may designate a set number of
directors.
Ownership and Organizational Structure, page 11
4. Your pre-IPO organizational chart refers to Other Investors and
Management
Coinvestors. Please clarify the percentage of ownership these
persons have pre-IPO and
clarify whether they will be public Class A common stock investors or
cashed out at the
close of the IPO.
5. Please consider adding an illustrative table that shows the ownership
interest of each
category of investor in the Class A, Class B, and LLC Units.
6. Please identify the Blocker Entities. We note that the Blocker
Entities will receive Class A
common stock and their proportionate share of cash pursuant to the Tax
Receivable
Agreement. Please clarify the purpose of the additional
consideration being paid to the
Sponsors for the Blocker Contribution.
7. Please clarify the ownership of Severin TopCo, LLC ("TopCo LLC") after
the IPO and
Organizational Transactions. Advise us whether the beneficial
ownership tables will
reflect the pre-IPO and current ownership of the TopCo LLC.
Non-GAAP Financial Measures
Adjusted EBITDA, page 87
8. Please remove the adjustment identified as "Purchase Accounting" from
your calculation
of Adjusted EBITDA. We refer you to the guidance in Question 100.04 of
the Division's
Compliance & Disclosure Interpretations on the use of non-GAAP
financial measures.
Unaudited Consolidated Pro Forma Financial Information, page 90
9. Please revise your pro forma financial statements to separately present
adjustments related
to the Organizational Transactions and adjustments related to the
offering. Please also
FirstName LastNameHardeep Gulati
include a sub-totaled column showing the historical financial
information adjusted for the
Comapany NamePowerSchool
Organizational Holdings,
Transactions Inc. the effects of the offering.
Refer to the
but before
Januaryinstructions to Rule
19, 2021 Page 2 11-02(b)(6) of Regulation S-X.
FirstName LastName
Hardeep Gulati
FirstName LastNameHardeep
PowerSchool Holdings, Inc. Gulati
Comapany
January 19,NamePowerSchool
2021 Holdings, Inc.
January
Page 3 19, 2021 Page 3
FirstName LastName
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Revenues, page 104
10. Please supplementally quantify your 2019 and 2020 revenues from
partner royalty fees. If
material, please revise here and on page F-16 to more fully describe
what these fees
represent and how you account for them. Please also revise to explain
what is meant by a
"consistent stream" of opportunities that result in "continued
one-time revenue streams."
Liquidity and Capital Resources, page 110
11. Please revise your liquidity disclosures to address the fact that you
are a holding company
with no operations of your own and that you will depend on your
subsidiaries for cash.
Please also disclose any restrictions or other factors that could
inhibit your subsidiaries
ability to pay dividends or make other distributions to the parent
company. Please refer to
Item 303(a)(1) of Regulation S-K. Please also tell us what
consideration was given to
disclosing within your liquidity discussion the information required
in Rule 4-08 (e) of
Regulation S-X.
Contractual Obligations and Commitments, page 112
12. Please revise to disclose that the payments you may be required to
make under the Tax
Receivable Agreement may be significant, and are not reflected in the
table.
Goodwill and Intangible Assets, page 116
13. Please revise to provide a more comprehensive analysis of the specific
qualitative and
quantitative factors you considered in evaluating the recoverability
of both your goodwill
and intangible assets as of December 31, 2019. Please tell us how you
considered both
your significant accumulated deficit and operating losses during 2019.
Please also revise
to provide greater context that will help investors understand how you
determined the 13.5
year amortization period for your customer relationship intangibles.
Our Growth Strategies, page 126
14. You indicate that growth plans include growing internationally and in
non-English
speaking markets. Please describe the extent your solutions are
provided to international
and non-English speaking markets. On page F-25, it appears less than
2% of your
revenues are derived from customers outside of the United States and
Canada. Further, on
page 102, you disclose that you solutions are primarily provided to
American international
schools outside of North America. Accordingly, please expand your
disclosure to explain
how you would grow outside of the United States and Canada given your
limited
operations and overseas customer base.
15. Your growth plans include expanding your partnerships to build a
larger ecosystem where
third-party vendors may provide additional solutions through your
Unified Platform.
Please describe the nature and scope of these partnerships. Clarify
the extent that your
Hardeep Gulati
PowerSchool Holdings, Inc.
January 19, 2021
Page 4
Unified Platform may be customized through such partners. We note, for
example, that
you mention difficulties with customization on page 37 due to the
closed nature of your
code and platform.
Our Technology Offerings, page 128
16. You disclose that your customers are dependent on high quality
customer support. Please
provide a description of your customer support services and staff and
their operations. To
the extent that you rely on third party support or consultants, please
clarify.
Facilities, page 139
17. Please file any material lease agreements for your facilities,
including your corporate
headquarters, or advise us why you are not substantially dependent
upon them pursuant to
Item 601(b)(10) of Regulation S-K.
Corporate Governance, page 154
18. You indicate that you may utilize the closed company exemptions for
certain corporate
governance provisions of your exchange. Please clarify which
exemptions you intend to
utilize after the close of your IPO. Further, please clarify on your
prospectus cover page
the voting control over Severin Holdings, LLC ("Holdings LLC") that
your sponsors will
hold.
Description of Certain Indebtedness, page 170
19. In light of your business strategy of acquiring new businesses to
complement your
existing software and technology capabilities, please provide more
details of any
restrictions that your credit agreements have on your ability to
acquire, merge or enter into
business combination with other entities.
Description of Capital Stock, page 173
20. We note that your Corporation Opportunity provision of your
certificate will include your
shareholders and sponsors, and their respective affiliates. Please add
a risk factor that
addresses the potential conflicts that may arise due the Corporation
Opportunity
provision. Further, please clarify whether Vista or Onex, or their
respective affiliates,
have substantial investments or portfolio companies that compete in
the SIS industry.
21. Please briefly describe the LLC Units of Holdings, LLC and your ability
to exchange the
LLCLastNameHardeep
FirstName Units and related Class
GulatiB common stock into Class A common stock.
Comapany
22. NamePowerSchool
Disclose Holdings,
the circumstances in whichInc.
the holders of Class A common
stock will be entitled
Januaryto19,
a separate class
2021 Page 4 vote under the law or your certificate of
incorporation.
FirstName LastName
Hardeep Gulati
FirstName LastNameHardeep
PowerSchool Holdings, Inc. Gulati
Comapany
January 19,NamePowerSchool
2021 Holdings, Inc.
January
Page 5 19, 2021 Page 5
FirstName LastName
Underwriting, page 189
23. Please provide a brief description of the certain exceptions to
your lock-up agreement.
Audited Consolidated Financial Statements - Severin Holdings, LLC
14. Unit-Based Compensation, page F-32
24. Please revise to describe the nature of the performance conditions
associated with your
Management Incentive Units and Long Term Incentive Plan Units that
were not
considered probable as of December 31, 2019. For example, it is
unclear if the
performance conditions are related to this offering. To the extent
that you anticipate a
significant increase in stock-based compensation expense in connection
with this offering,
please revise to disclose the potential impact to your results from
operations in MD&A. If
these units vest upon the completion of this offering, please also
tell us how you
considered the need to give effect to the vesting of these units in
your pro forma financial
statements.
Recent Sales of Unregistered Securities, page II-2
25. We note that you provided disclosure of your recent sales of
unregistered securities for
PowerSchool Holdings, Inc., which is currently a shell corporation.
Please provide
disclosure of the sales of unregistered securities for TopCo, LLC and
Holdings, LLC from
January 1, 2018.
General
26. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized
to do so on your
behalf, present to potential investors in reliance on Section 5(d) of
the Securities Act,
whether or not they retain copies of the communications.
You may contact Lisa Etheredge, Staff Accountant, at (202) 551-3424 or
Robert
Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact Edwin
Kim, Staff
Attorney, at (202) 551-3297 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Robert M. Hayward, P.C.