United States securities and exchange commission logo
April 1, 2021
Hardeep Gulati
Chief Executive Officer
PowerSchool Holdings, Inc.
150 Parkshore Dr.
Folsom, CA 95630
Re: PowerSchool
Holdings, Inc.
Amendment No. 2 to
Draft Registration Statement on Form S-1
Submitted March 18,
2021
CIK No. 0001835681
Dear Mr. Gulati:
We have reviewed your amended 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.
Amendment No. 2 to Draft Registration Statement on Form S-1
Non-GAAP Financial Measures, page 87
1. We note that your
calculations of Adjusted Gross Profit and Adjusted EBITDA include
adjustments identified
as restructuring and acquisition-related expenses for 2019 and
2020. Please clarify
how the acquisition related expenses adjustments to Adjusted
EBITDA differ from the
acquisition costs presented on your income statement. Please tell
us how you considered
Item 10(e)(1)(ii)(B) of Regulation S-K and Question 100.01 of the
Division's C&DI on
non-GAAP financial measures in determining it was appropriate to
include both the
restructuring and acquisition-related adjustments in your calculations of
Adjusted Gross Profit
and Adjusted EBITDA.
Hardeep Gulati
FirstName LastNameHardeep
PowerSchool Holdings, Inc. Gulati
Comapany
April NamePowerSchool Holdings, Inc.
1, 2021
April 21, 2021 Page 2
Page
FirstName LastName
2. Please accompany your presentations of Adjusted Gross Profit Margin
with an equally
prominent presentation of a comparable ratio calculated using GAAP
amounts. Refer to
Item 10(e)(1)(i)(A) of Regulation S-K and footnote 27 of non-GAAP
adopting Release
No. 33-8176.
Unaudited Consolidated Pro Forma Balance Sheet, page 94
3. We note that Class B shares together with LLC Units are exchangeable
on a one-for-one
basis into Class A common stock or cash. Please tell us how you
considered ASC 480-10-
S99-3 in determining that the Class B shares should be presented as
pro forma permanent
equity. Please ensure that your response addresses who makes the
decision to redeem in
cash rather than Class A shares and how you determined that redemption
is within control
of the Company.
Our Business Model, page 102
4. Both the annual recurring revenue figures and growth rate you disclose
on page 102 do
not seem consistent with ARR figures and growth rates disclosed on
pages 2, 23, 126 and
elsewhere throughout the filing. Please revise accordingly.
Net Revenue Retention Rate, page 105
5. Please revise to more clearly explain what is meant by your disclosure
that the EAB
reseller agreement will not affect your Net Revenue Retention Rate in
2021 and beyond.
Total Cost of Revenue, page 109
6. You indicate that the increase in subscription and support cost of
revenues was offset by a
decrease in cost related to pausing cloud hosting migration efforts.
Please revise to more
fully explain the reasons for the pause in cloud hosting migration
efforts and the extent to
which you expect this trend to continue in future periods.
Liquidity and Capital Resources, page 111
7. Please revise to discuss the liquidity implications of both your March
2021 stock purchase
agreement to acquire Hobsons for $319 million and the related $320
million bridge loan
that matures in May 2022. We note from your disclosures on page 80
that you intend to
use the proceeds from this offering to pay off the Bridge Loan. Please
revise to address
how the outcome of this offering will impact your ability to repay
and/or refinance the
bridge loan. Please refer to Item 303(a)(1) and (2) of Regulation S-K.
Contractual Obligations and Commitments, page 114
8. Please revise footnote 4 on page 114 to include both the interest rate
and maturity date
of the bridge loan.
Hardeep Gulati
FirstName LastNameHardeep
PowerSchool Holdings, Inc. Gulati
Comapany
April NamePowerSchool Holdings, Inc.
1, 2021
April 31, 2021 Page 3
Page
FirstName LastName
Forum Selection, page 184
9. Please expand your risk factor to address that Section 22 of the
Securities Act provides
concurrent jurisdiction for Securities Act claims to both state and
federal courts. Since
your exclusive forum provision provides for federal courts to have
exclusive jurisdiction
over Securities Act claims, please briefly discuss the uncertainty as
to whether this
provision is enforceable and the investors cannot waive compliance
with the federal
securities laws and the rules and regulations thereunder.
Audited Financial Statements of Severin Holdings, LLC
18. Subsequent Events, page F-40
10. Please revise your footnote to address the following:
Disclose any related party relationships between the Company, its
Principal
Stockholders, DMGT, Hobsons and EAB. For example, we note on page
178 that
EAB is a portfolio company of one of your Principal Stockholders.
Describe the Starfish solution more clearly and disclose the
material terms of the
transition services agreement between the Company and EAB.
Clarify the material terms of the reseller agreement with EAB such
as the yearly
minimum commitments and remedies if EAB does not meet those
commitments.
Please confirm, if true, that the terms of the reseller and
transition
services agreements with EAB are equivalent to those that would
prevail in an arms's
length transaction.
Exhibits
11. Please file your $320 million bridge loan credit agreement as an
exhibit pursuant to Item
601(b)(10) of Regulation S-K.
General
12. Please revise so that your financial statement periods are presented
on a consistent
chronological basis from left to right throughout the filing.
You may contact Lisa Etheredge, Senior 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 Larry Spirgel, Office Chief, at (202) 551-3815
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology